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 certiorari1 the challenge to the November 29, 2007 decision2
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 decision4 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 decision6 of the Labor Arbiter (LA). The LAs 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
URSUMCOs 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 attorneys 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 URSUMCOs several projects that were not at all directly related to the latters
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 LAs 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 LAs 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 NLRCs 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--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 URSUMCOs 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 URSUMCOs 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 reconsideration15
in the CAs January 22, 2009 resolution.16
The Issues

The petition essentially presents the following issues for the Courts 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 LAs decision.17
The Courts 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 employees engagement and the desirability or necessity of the
employees 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
companys 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
URSUMCOs business. Hence, under the above-stated legal parameters, they are regular
employees.
We disagree with the petitioners position. We find the respondents to be regular seasonal
employees of URSUMCO.
1wphi1

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 employees 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 employees engagement has lasted for at least one year,
regardless of the engagements 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 employees
engagement.22 The services of the project employees are legally and automatically terminated upon
the end or completion of the project as the employees 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" employees 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 employees engagement, which is to
perform an activity usually necessary or desirable in the employers 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 employees 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 employees] 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 duties31 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 employers 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 URSUMCOs 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 URSUMCOs 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 URSUMCOS regular employees.
Third, while the petitioners assert that the respondents were free to work elsewhere during the offseason, 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 employers 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.
Natl Fed. of Sugarcane Workers-Food and Gen. Trade36 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 Courts 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 CAs 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 CAs 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 URSUMCOs 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 decisions dispositive portion, thus:
WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants are declared
regular employees of respondent. As such, they are entitled to the monetary 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
1w phi1

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 NLRCs 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

G.R. No. 74246 January 26, 1989

MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor and
Employment judgment, and JOAQUIN A. DEQUILA, respondents.
Cruz, Agabin, Atienza & Alday for petitioners.
The Solicitor General of public respondent.
Norberto M. Alensuela, Sr. for private respondent.

NARVASA, J.:
There is no dispute about the facts in this case, and the only question for the Court is whether or not,
Article 282 of the Labor Code notwithstanding, probationary employment may validly be extended
beyond the prescribed six-month period by agreement of the employer and the employee.
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner Mariwasa
Manufacturing, Inc. (hereafter, Mariwasa only) as a general utility worker on January 10, 1979. Upon
the expiration of the probationary period of six months, Dequila was informed by his employer that
his work had proved unsatisfactory and had failed to meet the required standards. To give him a
chance to improve his performance and qualify for regular employment, instead of dispensing with
his service then and there, with his written consent Mariwasa extended his probation period for
another three months from July 10 to October 9, 1979. His performance, however, did not improve
and on that account Mariwasa terminated his employment at the end of the extended period. 1
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its Vice-President for
Administration, Angel T. Dazo, a complaint for illegal dismissal and violation of Presidential Decrees
Nos. 928 and 1389. 2 His complaint was dismissed after hearing by Director Francisco L. Estrella,
Director of the Ministry's National Capital Region, who ruled that the termination of Dequila's employment
was in the circumstances justified and rejected his money claims for insufficiency of evidence. 3 On
appeal to the Office of the Minister, however, said disposition was reversed. Respondent Deputy Minister
Vicente Leogardo, Jr. held that Dequila was already a regular employee at the time of his dismissal,
therefore, could not have been lawfully dismissed for failure to meet company standards as a
probationary worker. He was ordered reinstated to his former position without loss of seniority and with
full back wages from the date of his dismissal until actually reinstated. 4 This last order appears later to
have been amended so as to direct payment of Dequila's back wages from the date of his dismissal to
December 20, 1982 only. 5

Mariwasa and Dazo, now petitioners, thereafter be sought this Court to review Hon. Leogardo's
decision on certiorari and prohibition, urging its reversal for having been rendered with grave abuse
of discretion and/or without or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all underscore the fact that
the threshold issue here is, as first above stated, the legal one of whether employer and employee
may by agreement extend the probationary period of employment beyond the six months prescribed
in Art. 282 of the Labor Code, which provides that:

Art. 282. 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 to the employee at the time of his
engagement. An employee who is allowed to work after probationary period shall be
considered a regular employee.'
The Court agrees with the Solicitor General, who takes the same position as the petitioners, that
such an extension may lawfully be covenanted, notwithstanding the seemingly restrictive language
of the cited provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating longer probationary
periods as constituting lawful exceptions to the statutory prescription limiting such periods to six months,
when it upheld as valid an employment contract between an employer and two of its employees that
provided for an eigthteen-month probation period. This Court there held:

'It is petitioners' submission that probationary employment cannot exceed six (6)
months, the only exception being apprenticeship and learnership agreements as
provided in the Labor Code; that the Policy Instruction of the Minister of Labor and
Employment nor any agreement of the parties could prevail over this mandatory
requirement of the law; that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-guaranteed security of tenure
of workers; and that the law does not allow any discretion on the part of the Minister
of Labor and Employment to extend the probationary period for a longer period
except in the aforecited instances. Finally, petitioners maintain that since they are
regular employees, they can only be removed or dismissed for any of the just and
valid causes enumerated under Article 283. of the Labor Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6) months. The
exception to this general rule is when the parties to an employment contract may
agree otherwise, such as when the same is established by company policy or when
the same is required by the nature of work to be performed by the employee. In the
latter case, there is recognition of the exercise of managerial prerogatives in
requiring a longer period of probationary employment, such as in the present case
where the probationary period was set for eighteen (18) months, i.e. from May, 1980
to October, 1981 inclusive, especially where the employee must learn a particular
kind of work such as selling, or when the job requires certain qualifications, skills
experience or training.
xxx
We therefore, hold and rule that the probationary employment of petitioners set to
eighteen (18) months is legal and valid and that the Regional Director and the
Deputy Minister of Labor and Employment committed no abuse of discretion in ruling
accordingly.
The single difference between Buiser and the present case: that in the former involved an eighteenmonth probationary period stipulated in the original contract of employment, whereas the latter refers
to an extension agreed upon at or prior to the expiration of the statutory six-month period, is hardly
such as to warrant or even suggest a different ruling here. In both cases the parties' agreements in

fact resulted in extensions of the period prescribed by law. That in this case the inability of the
probationer to make the grade became apparent only at or about the end of the six-month period,
hence an extension could not have been pre-arranged as was done in Buiser assumes no adverse
significance, given the lack, as pointed out by the Solicitor General, of any indication that the
extension to which Dequila gave his agreement was a mere stratagem of petitioners to avoid the
legal consequences of a probationary period satisfactorily completed.
For aught that appears of record, the extension of Dequila's probation was ex gratia, an act of
liberality on the part of his employer affording him a second chance to make good after having
initially failed to prove his worth as an employee. Such an act cannot now unjustly be turned against
said employer's account to compel it to keep on its payroll one who could not perform according to
its work standards. The law, surely, was never meant to produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in effect waived any
benefit attaching to the completion of said period if he still failed to make the grade during the period
of extension. The Court finds nothing in the law which by any fair interpretation prohibits such a
waiver. And no public policy protecting the employee and the security of his tenure is served by
prescribing voluntary agreements which, by reasonably extending the period of probation, actually
improve and further a probationary employee's prospects of demonstrating his fitness for regular
employment.
Having reached the foregoing conclusions, the Court finds it unnecessary to consider and pass upon
the additional issue raised in the Supplemental Petition 8 that the back wages adjudged in favor of
private respondent Dequila were erroneously computed.

WHEREFORE, the petition is granted. The orders of the public respondent complained of are
reversed and set aside. Private respondent's complaint against petitioners for illegal dismissal and
violation of Presidential Decrees 928 and 1389 is dismissed for lack of merit, without pronouncement
as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

FIRST DIVISION

[G.R. No. 150660. July 30, 2002]

CALS POULTRY SUPPLY CORPORATION and DANILO YAP, petitioners, vs. ALFREDO ROCO and
CANDELARIA ROCO, respondents.
RESOLUTION
KAPUNAN, J.:
For our resolution is the motion for reconsideration of the Courts minute Resolution dated April 1,
2002, denying the petition for review filed by CALS Poultry Supply Corporation (hereinafter referred to as
CALS) of the Court of Appeals decision in favor of herein private respondents Alfredo Roco and
Candelaria Roco. The Court of Appeals reversed the decision of the National Labor Relations
Commission affirming the Labor Arbiters decision which dismissed private respondents complaint for
illegal dismissal against CALS. Private respondents filed a comment on the motion for reconsideration as
required by the Court.
CALS Poultry Supply Corporation is engaged in the business of selling dressed chicken and other
i
related products and managed by Danilo Yap.
On March 15, 1984, CALS hired Alfredo Roco as its driver. On the same date, CALS hired Edna
ii
Roco, Alfredos sister, as a helper in the dressing room of CALS. On May 16, 1995, it hired Candelaria
iii
Roco, another sister, as helper, also at its chicken dressing plant on a probationary basis.
On March 5, 1996, Alfredo Roco and Candelaria Roco filed a complaint for illegal dismissal against
CALS and Danilo Yap alleging that Alfredo and Candelaria were illegally dismissed on January 20, 1996
iv
v
and November 5, 1996, respectively. Both also claimed that they were underpaid of their wages. Edna
Roco, likewise, filed a complaint for illegal dismissal, alleging that on June 26, 1996, she was reassigned
to the task of washing dirty sacks and for this reason, in addition to her being transferred from night shift
to day time duties, which she considered as management act of harassment, she did not report for
vi
work.
According to Alfredo Roco, he was dismissed on January 20, 1996 when he refused to accept
P30,000.00 being offered to him by CALS lawyer, Atty. Myra Cristela A. Yngcong, in exchange for his
executing a letter of voluntary resignation. On the part of Candelaria Roco, she averred that she was
terminated without cause from her job as helper after serving more than six (6) months as probationary
employee.
The Labor Arbiter on April 16, 1998, issued a decision dismissing the complaints for illegal dismissal
for lack of merit. The Labor Arbiter found that Alfredo Roco applied for and was granted a leave of
absence for the period from January 4 to 18, 1996. He did not report back for work after the expiration of
his leave of absence, prompting CALS, through its Chief Maintenance Officer to send him a letter on
March 12, 1996 inquiring if he still had intentions of resuming his work. Alfredo Roco did not respond to
the letter despite receipt thereof, thus, Alfredo was not dismissed; it was he who unilaterally severed his
vii
relation with his employer.
In the case of Candelaria Roco, the Labor Arbiter upheld CALS decision not to continue with her
probationary employment having been found her unsuited for the work for which her services were
engaged. She was hired on May 16, 1995 and her services were terminated on November 15, 1995.
Edna Roco, according to the Labor Arbiter, began absenting herself on June 25, 1996. She was
viii
sent a memo on July 1, 1996 requiring her to report for work immediately, but she did not respond.

In their position papers, the complainants claimed that they were not given their overtime pay,
th
premium pay for holidays, premium pay for rest days, 13 month pay, allowances. They were also not
given their separation pay after their dismissal. The Labor Arbiter, however, denied their claims, stating
that they had not substantiated the same; on the other hand, CALS presented evidence showing that
complainants received the correct salaries and related benefits.
The National Labor Relations Commission (NLRC), in a decision promulgated on January 17, 2000,
affirmed the judgment of the Labor Arbiter.
On appeal by Alfredo, Candelaria and Edna Roco to the Court of Appeals, the appellate court set
aside the NLRCs decision and ordered reinstatement of Alfredo and Candelaria Roco to their former
positions without loss of seniority of rights and benefits, with full payment of backwages. However, in the
case of Edna Roco, the Court of Appeals found that her appeal cannot be favorably considered as she
actually abandoned her work without justification.
In holding that Alfredo Roco did not abandon his employment, but was illegally dismissed, the Court
of Appeals ratiocinated:
xxx (P)etitioner Alfredo can not be said to have abandoned his employment. The failure of
Alfredo to report for work was justified under the circumstances. The positive assertion of
petitioner that when he reported for work on January 20, 1996, he was told that his services
were already terminated is more convincing than the mere denial of respondent Danilo Yap.
Petitioner Alfredos failure to inquire from private respondent as to the cause of his dismissal
should not be taken against him. It should be noted that when the secretary of respondent
Danilo Yap conveyed the order of dismissal, Alfredo took steps to verify the same from the
companys Chief Maintenance Officer Rolando Sibugan who confirmed said order. The filing of
the illegal dismissal case against CALS by petitioner Alfredo negates the charge of
abandonment. Private respondent failed to show that Alfredo clearly and unequivocably
performed overt acts to sever the employer-employee relationship.
xxx
In termination cases, the burden of proving just and valid cause for dismissing an
employee from his employment rests upon the employer, and the latters failure to do so would
result in a finding that the dismissal is unjustified. Abandonment as a just and valid ground for
termination means the deliberate, unjustified refusal of the employee to resume his
employment, and the burden of proof is on the employer to show a clear, deliberate and
unequivocal intent on the part of the employee to discontinue employment without any intention
of returning. Other than its self-serving claim that petitioner Alfredo did not report for work,
private respondent failed to adduce other evidence of any overt act of Alfredo showing an intent
to abandon his work. In short, private respondent failed to discharge the burden.
Moreover, not only was there a lack of a valid cause for the dismissal of petitioner Alfredo;
the record of the case is devoid of any evidence that Alfredo was afforded his right to due
process. If Alfredo was dismissed because of his abandonment of work, CALS should have
given him a written notice of termination in accordance with Section 2, Rule XVI, Book V of the
Omnibus Rules Implementing the Labor Code which provides:
Section 2. Notice of Dismissal. Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of work, the notice shall be
served at the workers last known address.
In the instant case, private respondent failed to present as evidence such notice despite
every companys standard policy to record and file every transaction including notices of
termination.
CALS contention that the letter of Rolando Sibugan inquiring from Alfredo whether he still
had intention of resuming work is a manifestation of its willingness to reinstate the latter to his
former position, thereby negating any intention on its part to dismiss Alfredo, is not well-taken.

The fact that the employer later made an offer to re-employ Alfredo did not cure the vice of his
earlier arbitrary dismissal. The wrong had been committed and the harm done. Notably, it was
only after the complaint had been filed that CALS, in a belated gesture of good will, sought to
invite Alfredo back to work. CALS sincerity is suspect. Its offer of reinstatement is doubtful
since the same could not have been made if Alfredo had not complained against it. Whether
the offer was sincere or not, the same could not correct the earlier illegal dismissal of Alfredo. It
must be borne in mind that CALS offer to reinstate Alfredo was obviously an attempt to escape
liability from having illegally terminated the latters services. Hence, CALS incurred liability
under the Labor Code from the moment Alfredo was illegally dismissed, and the liability was not
ix
abated as a result of CALS offer to reinstate.
In ruling in favor of Candelaria Roco, the appellate court held that when her employment was
terminated on November 15, 1995 (she was hired on May 16, 1995), it was four (4) days after she ceased
to be a probationary employee and became a regular employee within the ambit of Article 281 of the
Labor Code, which provides:
ART. 281. Probationary employment. - Probationary employment shall not exceed six
months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged 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.
Not satisfied with the decision of the Court of Appeals, CALS and Danilo Yap brought before us the
petition for review on certiorari claiming that said court erred in ruling that respondents Alfredo Roco and
Candelaria Roco were illegally dismissed and that they are entitled to any money claims.
In considering that Alfredo Roco was illegally dismissed, the Court of Appeals relied on his
allegation that on January 20, 1996 when he reported for work, following his leave of absence from
January 10 to 18, 1996, he learned from Elvie Acantelado, a secretary of Danilo Yap that he was already
separated from his employment.
Yet, as observed in the decision of the NLRC, he did not even attempt to verify from Danilo Yap, the
owner and general manager of CALS, if his employment was being terminated and the cause of the
termination. Elvie Acantelado denied vehemently having told Alfredo that he was being dismissed.
Private respondents also stated in their position paper that Alfredo was told by CALS lawyer to sign
a resignation letter in consideration of P30,000.00. Strangely, apart from this bare allegation, which finds
no corroboration, there is no explanation when, where and how was the offer made. Alfredo did not
advance any theory why CALS wanted him to resign. Atty. Myra Cristela Yngcong, counsel for CALS
categorically denied having offered Alfredo Roco P30,000.00 in exchange for his resignation. She
explained that, in fact, she met Alfredo for the first time when he appeared before the Labor Arbiter on
April 23, 1996.
On Alfredos assertion that CALS letter dated March 12, 1996 asking him to report for duty was just
an afterthought because it was sent after Alfredo filed his complaint for illegal dismissal on March 5, 1996.
CALS maintains that it came to know of the complaint filed by the Rocos with the Labor Arbiter only on
April 4, 1996 when it received the Notification and Summons dated March 25, 1996 from the Labor
Arbiter.
On the other hand, CALS imputed an ulterior motive for the complaint filed by the Rocos against it. It
said it was manipulated by their relatives Domingo Roco against whom CALS filed several criminal cases
for violation of B.P. Blg. 22 on account of Domingo Rocos failure to fund the checks he issued as
payment for CALS products he had purchase.
From the facts established, we are of the view that Alfredo Roco has not established convincingly
that he was dismissed. No notice of termination was given to him by CALS. There is no proof at all,
except his self-serving assertion, that he was prevented from working after the end of his leave of

absence on January 18, 1996. In fact, CALS notified him in a letter dated March 12, 1996 to resume his
work. Both the Labor Arbiter and the NLRC found that Alfredo, as well as Candelaria Roco, was not
dismissed. Their findings of fact are entitled to great weight.
x

In Chong Guan Trading v. NLRC, et al., we held:

After a careful examination of the events that gave rise to the present controversy as
shown by the records, the Court is convinced that private respondent was never dismissed by
the petitioner. Even if it were true that Mariano Lim ordered private respondent to go and that at
that time he intended to dismiss private respondent, the record is bereft of evidence to show
that he carried out this intention. Private respondent was not even notified that he had been
dismissed. Nor was he prevented from returning to his work after the October 28 incident. The
only thing that is established from the record, and which is not disputed by the parties, is that
private respondent Chua did not return to his work after his heated argument with the Lim
brothers.
xxx
In this case, private respondents failure to work was due to the misunderstanding between
the petitioners management and private respondent. As correctly observed by the Labor
Arbiter, private respondent must have construed the October 28 incident as his dismissal so
that he opted not to work for many days thereafter and instead filed a complaint for illegal
dismissal. On the other hand, petitioner interpreted private respondents failure to report for
work as an intentional abandonment. However, there was no intent to dismiss private
respondent since the petitioner is willing to reinstate him. Nor was there an intent to abandon
on the part of private respondent since he immediately filed a complaint for illegal dismissal
soon after the October 28 incident. It would be illogical for private respondent to abandon his
work and then immediately file an action seeking his reinstatement xxx. Under these
circumstances, it is but fair that each party must bear his own loss, thus placing the parties on
equal footing.
xxx.
With respect to Candelaria Roco, there is no dispute that she was employed on probationary basis.
She was hired on May 16, 1995 and her services were terminated on November 15, 1995 due to poor
work performance. She did not measure up to the work standards on the dressing of chicken. The Labor
Arbiter sustained CALS in terminating her employment. The NLRC affirmed the Labor Arbiters ruling.
The Court of Appeals did not disagree with the NLRCs finding that Candelaria was dismissed
because she did not qualify as a regular employee in accordance with the reasonable standards made
xi
known by the company to her at the time of her employment.
The standards required by the National Meat Inspection Commission for dressing plants with Double
AA Rating to which CALS employee were brief and with regard to which Candelaria failed to comply are
stated in part in the affidavit dated March 7, 1997 of Rolly Villaeba, Cold Storage Supervisor of CALS
Dressing Plant:
xxx
2. As Cold Storage Supervisor of Cals; Dressing Plant, I am responsible among others, for
briefing the new employee on the workflow in the dressing plant, the nature of their respective
jobs pursuant to the said workflow, and the work standards required of them by Cals, as well as
seeing to it that Cals work standards are complied with/followed by the employees.
xxx
4. It is the NMIC standard that the dressing of chickens and its parts must stricly (sic) observe
the chronological order of the following workflow, to wit:
1.
2.

Depinning
Detoing

3.
4.
5.
6.
7.
8.

Removals of entrails/cecum/liver/
Gizzard/heart/ Bile
Removal of Lungs
First Wash
Second Wash
Third Wash
Carcass Quality Control
a.
b.
c.
d.
e.

Selection of Carcass
Leg Bonding
Weighing
First Chilling
Final Chilling
xxx

9. For the duration of Candelaria Rocos probationary employment, she failed to comply with
Cals standards in the work assigned to her. First, she frequently failed to observe the allowable
inches to be cut, which must only be 1.5 inches, in performing the surgical incision of the
chicken butt, either she cuts it too long, thereby distorting the appearance of the chickens or she
cuts it too short, thereby making it difficult to remove the chicken parts without damaging these
parts; Second, she frequently mishandles the pull-out of chicken parts, such that, she damaged
said parts; Third, she frequently completes her assigned tasks in twenty (20) to even twenty-five
(25) seconds, over and above the required time limit, which is only eight (8) to ten (10) seconds.
Resultantly, the chickens/parts which passed through her hands frequently suffer from
premature decomposition/bacterial or salmonella contamination;
10.
By reason of the foregoing, Cals management deemed it best to terminate her
probationary employment.
xii

xxx

However, the Court of Appeals set aside the NLRC ruling on the ground that at the time Candelarias
services were terminated, she had attained the status of a regular employee as the termination on
November 15, 1995 was effected four (4) days after the 6-month probationary period had expired, hence,
she is entitled to security of tenure in accordance with Article 281 of the Labor Code.
CALS argues that the Court of Appeals computation of the 6-month probationary period is erroneous
as the termination of Candelarias services on November 15, 1995 was exactly on the last day of the 6month period.
We agree with CALS contention as upheld by both the Labor Arbiter and the NLRC that
Candelarias services was terminated within and not beyond the 6-month probationary period. In Cebu
xiii
Royal v. Deputy Minister of Labor, our computation of the 6-month probationary period is reckoned from
th
the date of appointment up to the same calendar date of the 6 month following. Thus, we held:
The original findings were contained in a one-page order reciting simply that complainant
was employed on a probationary period of employment for six (6) months. After said period, he
underwent medical examination for qualification as regular employee but the results showed
that he is suffering from PTB minimal. Consequently, he was informed of the termination of his
employment by respondent. The order then concluded that the termination was justified. That
was all.
As there is no mention of the basis of the above order, we may assume it was the
temporary payroll authority submitted by the petitioner showing that the private respondent was
employed on probation on February 16, 1978. Even supposing that it is not self-serving, we find
nevertheless that it is self-defeating. The six-month period of probation started from the said
date of appointment and so ended on August 17, 1978, but it is not shown that the private
respondents employment also ended then; on the contrary, he continued working as usual.
Under Article 282 of the Labor Code, an employee who is allowed to work after a probationary

period shall be considered a regular employee.' Hence, Pilones was already on permanent
status when he was dismissed on August 21, 1978, or four days after he ceased to be a
probationer.
WHEREFORE, our Resolution of April 1, 2002 denying the petition is hereby SET ASIDE and
another one entered REVERSING the decision of the Court of Appeals insofar as it ruled in favor of
herein respondents and the decisions of the Labor Arbiter and the National Labor Relations Commission
REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Austria-Martinez, JJ., concur.

THIRD DIVISION[G.R. No. 149859. June 9, 2004]

RADIN C. ALCIRA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MIDDLEBY
PHILIPPINES CORPORATION/FRANK THOMAS, XAVIER G. PEA and TRIFONA F.
MAMARADLO, respondents.
DECISION
CORONA, J.:
xiii

xiii

Before us on appeal is the decision of the Court of Appeals dated June 22, 2001 affirming the
xiii
xiii
decision of the National Labor Relations Commission dated March 23, 1999 which, in turn, affirmed
xiii
the decision of labor arbiter Pedro Ramos dated May 19, 1998 dismissing petitioner Radin Alciras
complaint for illegal dismissal with prayer for reinstatement, backwages, moral damages, exemplary
damages and attorneys fees.
The facts follow.
Respondent Middleby Philippines Corporation (Middleby) hired petitioner as engineering support
services supervisor on a probationary basis for six months. Apparently unhappy with petitioners
performance, respondent Middleby terminated petitioners services. The bone of contention centered on
whether the termination occurred before or after the six-month probationary period of employment.
The parties, presenting their respective copies of Alciras appointment paper, claimed conflicting
starting dates of employment: May 20, 1996 according to petitioner and May 27, 1996 according to
respondent. Both documents indicated petitioners employment status as probationary (6 mos.) and a
remark that after five months (petitioners) performance shall be evaluated and any adjustment in salary
xiii
shall depend on (his) work performance.
Petitioner asserts that, on November 20, 1996, in the presence of his co-workers and subordinates,

a senior officer of respondent Middleby in bad faith withheld his time card and did not allow him to work.
Considering this as a dismissal after the lapse of his probationary employment, petitioner filed on
November 21, 1996 a complaint in the National Labor Relations Commission (NLRC) against respondent
Middleby contending that he had already become a regular employee as of the date he was illegally
dismissed. Included as respondents in the complaint were the following officers of respondent Middleby:
Frank Thomas (General Manager), Xavier Pea (Human Resources Manager) and Trifona Mamaradlo
(Engineering Manager).
In their defense, respondents claim that, during petitioners probationary employment, he showed
poor performance in his assigned tasks, incurred ten absences, was late several times and violated
company rules on the wearing of uniform. Since he failed to meet company standards, petitioners
application to become a regular employee was disapproved and his employment was terminated.
On May 19, 1998, the labor arbiter dismissed the complaint on the ground that: (1) respondents were
able to prove that petitioner was apprised of the standards for becoming a regular employee; (2)
respondent Mamaradlos affidavit showed that petitioner did not perform well in his assigned work and
his attitude was below par compared to the companys standard required of him and (3) petitioners
dismissal on November 20, 1996 was before his regularization, considering that, counting from May 20,
xiii
1996, the six-month probationary period ended on November 20, 1996.
On March 23, 1999, the NLRC affirmed the decision of the labor arbiter.
On June 22, 2001, the Court of Appeals affirmed the judgment of the NLRC. According to the
appellate court:
Even assuming, arguendo, that petitioner was not informed of the reasonable standards
required of him by Middleby, the same is not crucial because there is no termination to speak of
but rather expiration of contract. Petitioner loses sight of the fact that his employment was
probationary, contractual in nature, and one with a definite period. At the expiration of the period
stipulated in the contract, his appointment was deemed terminated and a notice or termination
letter informing him of the non-renewal of his contract was not necessary.
While probationary employees enjoy security of tenure such that they cannot be removed
except for just cause as provided by law, such protection extends only during the period of
probation. Once that period expired, the constitutional protection could no longer be invoked.
xiii
Legally speaking, petitioner was not illegally dismissed. His contract merely expired.
Hence, this petition for review based on the following assignment of errors:
I
THE COURT OF APPEALS GRAVELY ERRED, BLATANTLY DISREGARDED THE LAW AND
ESTABLISHED JURISPRUDENCE, IN UPHOLDING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION.
II
THE COURT OF APPEALS GRAVELY ERRED AND BLATANTLY DISREGARDED THE LAW
IN HOLDING THAT PROBATIONARY EMPLOYMENT IS EMPLOYMENT FOR A DEFINITE
PERIOD.
III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT AN EMPLOYER CAN BE
PRESUMED TO HAVE COMPLIED WITH ITS DUTY TO INFORM THE PROBATIONARY
EMPLOYEE OF THE STANDARDS TO MAKE HIM A REGULAR EMPLOYEE.
IV
THE COURT OF APPEALS GRAVELY ERRED AND FAILED TO AFFORD PROTECTION TO

LABOR IN NOT APPLYING TO THE INSTANT CASE THE DOCTRINE LAID DOWN BY THIS
HONORABLE COURT IN SERRANO VS. NLRC, ET. AL., G.R. NO. 117040, JANUARY 27,
xiii
2000.
Central to the matter at hand is Article 281 of the Labor Code which provides that:
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 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.
The first issue we must resolve is whether petitioner was allowed to work beyond his probationary
period and was therefore already a regular employee at the time of his alleged dismissal. We rule in the
negative.
Petitioner claims that under the terms of his contract, his probationary employment was only for five
months as indicated by the remark Please be informed that after five months, your performance shall be
evaluated and any adjustment in salary shall depend on your work performance. The argument lacks
merit. As correctly held by the labor arbiter, the appointment contract also stated in another part thereof
that petitioners employment status was probationary (6 mos.). The five-month period referred to the
xiii
evaluation of his work.
Petitioner insists that he already attained the status of a regular employee when he was dismissed
on November 20, 1996 because, having started work on May 20, 1996, the six-month probationary period
ended on November 16, 1996. According to petitioners computation, since Article 13 of the Civil Code
provides that one month is composed of thirty days, six months total one hundred eighty days. As the
appointment provided that petitioners status was probationary (6 mos.) without any specific date of
th
termination, the 180 day fell on November 16, 1996. Thus, when he was dismissed on November 20,
1996, he was already a regular employee.
xiii

Petitioners contention is incorrect. In CALS Poultry Supply Corporation, et. al. vs. Roco, et. al.,
this Court dealt with the same issue of whether an employment contract from May 16, 1995 to November
15, 1995 was within or outside the six-month probationary period. We ruled that November 15, 1995 was
still within the six-month probationary period. We reiterate our ruling in CALS Poultry Supply:
(O)ur computation of the 6-month probationary period is reckoned from the date of
appointment up to the same calendar date of the 6th month following.(italics supplied)
In short, since the number of days in each particular month was irrelevant, petitioner was still a
probationary employee when respondent Middleby opted not to regularize him on November 20, 1996.
The second issue is whether respondent Middleby informed petitioner of the standards for
regularization at the start of his employment.
Section 6 (d) of Rule 1 of the Implementing Rules of Book VI of the Labor Code (Department Order
No. 10, Series of 1997) provides that:
xxx

xxx

xxx

(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.
xxx

xxx

xxx

We hold that respondent Middleby substantially notified petitioner of the standards to qualify as a

regular employee when it apprised him, at the start of his employment, that it would evaluate his
supervisory skills after five months. In Orient Express Placement Philippines vs. National Labor Relations
xiii
Commission, we ruled that an employer failed to inform an employee of the reasonable standards for
becoming a regular employee:
Neither private respondent's Agency-Worker Agreement with ORIENT EXPRESS nor his
Employment Contract with NADRICO ever mentioned that he must first take and pass a Crane
Operator's License Examination in Saudi Arabia before he would be allowed to even touch a
crane. Neither did he know that he would be assigned as floorman pending release of the
results of the examination or in the event that he failed; more importantly, that he would be
subjected to a performance evaluation by his superior one (1) month after his hiring to
determine whether the company was amenable to continuing with his employment. Hence,
respondent Flores could not be faulted for precisely harboring the impression that he was hired
as crane operator for a definite period of one (1) year to commence upon his arrival at the worksite and to terminate at the end of one (1) year. No other condition was laid out except that he
was to be on probation for three (3) months.(emphasis supplied)
Conversely, an employer is deemed to substantially comply with the rule on notification of standards
if he apprises the employee that he will be subjected to a performance evaluation on a particular date
after his hiring. We agree with the labor arbiter when he ruled that:
In the instant case, petitioner cannot successfully say that he was never informed by
private respondent of the standards that he must satisfy in order to be converted into regular
status. This rans (sic) counter to the agreement between the parties that after five months of
service the petitioners performance would be evaluated. It is only but natural that the evaluation
should be made vis--vis the performance standards for the job. Private respondent Trifona
Mamaradlo speaks of such standard in her affidavit referring to the fact that petitioner did not
perform well in his assigned work and his attitude was below par compared to the companys
xiii
standard required of him.
The third issue for resolution is whether petitioner was illegally dismissed when respondent Middleby
opted not to renew his contract on the last day of his probationary employment.
It is settled that even if probationary employees do not enjoy permanent status, they are accorded
the constitutional protection of security of tenure. This means they may only be terminated for just cause
or when they otherwise fail to qualify as regular employees in accordance with reasonable standards
xiii
made known to them by the employer at the time of their engagement.
xiii

But we have also ruled in Manlimos, et. al. vs. National Labor Relations Commission that this
constitutional protection ends on the expiration of the probationary period. On that date, the parties are
free to either renew or terminate their contract of employment. Manlimos concluded that (t)his
development has rendered moot the question of whether there was a just cause for the dismissal of the
xiii
petitioners xxx. In the case at bar, respondent Middleby exercised its option not to renew the contract
when it informed petitioner on the last day of his probationary employment that it did not intend to grant
him a regular status.
Although we can regard petitioners severance from work as dismissal, the same cannot be deemed
illegal. As found by the labor arbiter, the NLRC and the Court of Appeals, petitioner (1) incurred ten
absences (2) was tardy several times (3) failed to wear the proper uniform many times and (4) showed
inferior supervisory skills. Petitioner failed to satisfactorily refute these substantiated allegations. Taking
all this in its entirety, respondent Middleby was clearly justified to end its employment relationship with
petitioner.
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED.

Vitug, J., (Chairman), Sandoval-Gutierrez, and Carpio Morales, JJ., concur.

SECOND DIVISION

MITSUBISHI MOTORS PHILIPPINES

CORPORATION,
Petitioner,

G.R. No. 148738

Present:
PUNO, J., Chairman,
QUISUMBING,
MARTINEZ,*
CALLEJO, SR., and
TINGA, JJ.

- versus -

CHRYSLER PHILIPPINES LABOR UNION

and
NELSON PARAS,
Respondents.

Promulgated:

June 29, 2004

X--------------------------------------------------X
DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision

xiii

of the Court of Appeals in CA-GR SP

No. 46030 and the Resolution denying the motion for reconsideration filed by petitioner Mitsubishi Motors
Philippines Corporation.

The Antecedents

Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation engaged in the

assembly and distribution of Mitsubishi motor vehicles. Chrysler Philippines Labor Union (CPLU) is a
legitimate labor organization and the duly certified bargaining agent of the hourly-paid regular rank and
file employees of MMPC. Nelson Paras was a member of CPLU. His wife, Cecille Paras, was the
President of the Chrysler Philippines Salaried Employees Union (CPSU).

Nelson Paras was first employed by MMPC as a shuttle bus driver on March 19, 1976.

He

resigned on June 16, 1982. He applied for and was hired as a diesel mechanic and heavy equipment
operator in Saudi Arabia from 1982 to 1993. When he returned to the Philippines, he was re-hired as a
welder-fabricator at the MMPC tooling shop from October 3, 1994 to October 31, 1994.
1994, his contract was renewed from November 1, 1994 up to March 3, 1995.

xiii

On October 29,

xiii

Sometime in May of 1996, Paras was re-hired on a probationary basis as a manufacturing trainee
at the Plant Engineering Maintenance Department. He and the new and re-hired employees were given
an orientation on May 15, 1996

xiii

by Emma P. Aninipot, respecting the companys history, corporate

philosophy, organizational structure, and company rules and regulations, including the company
standards for regularization, code of conduct and company-provided benefits.

xiii

Paras started reporting for work on May 27, 1996. He was assigned at the paint ovens, air makeup and conveyors. As part of the MMPCs policy, Paras was evaluated by his immediate supervisors Lito
R. Lacambacal

xiii

and Wilfredo J. Lopez

xiii

after six (6) months, and received an average rating. Later,

Lacambacal informed Paras that based on his performance rating, he would be regularized.

xiii

However, the Department and Division Managers, A.C. Velando and H.T. Victoria,
Dante Ong,

xiii

xiii

including Mr.

reviewed the performance evaluation made on Paras. They unanimously agreed, along

with Paras immediate supervisors, that the performance of Paras was unsatisfactory.

xiii

As a

consequence, Paras was not considered for regularization. On November 26, 1996, he received a Notice
of Termination dated November 25, 1996, informing him that his services were terminated effective the
said date since he failed to meet the required company standards for regularization.

xiii

Utilizing the grievance machinery in the collective bargaining agreement, the CPLU demanded
the settlement of the dispute which arose from Paras termination.

xiii

The dispute was thereafter

submitted for voluntary arbitration, as the parties were unable to agree on a mutually acceptable solution.
rd

CPLU posited that Paras was dismissed on his one hundred eighty third (183 ) day of employment, or
three (3) days after the expiration of the probationary period of six (6) months. It was contended that
Paras was already a regular employee on the date of the termination of his probationary employment.
According to CPLU and Paras, the latters dismissal was an offshoot of the heated argument
during the CBA negotiations between MMPC Labor Relations Manager, Atty. Carlos S. Cao, on the one
hand, and Cecille Paras, the President of the Chrysler Philippines Salaried Employees Union (CPSU) and
Paras wife, on the other.

On November 3, 1997, the Voluntary Arbitrator (VA) rendered a decision finding the dismissal of
Paras valid for his failure to pass the probationary standards of MMPC.

The dispositive portion of the

decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered finding

the termination of Mr. Paras was valid for cause his failure to pass the probationary
xiii
period.

The VA declared that hiring an employee on a probationary basis to determine his or her fitness
for regular employment was in accord with the MMPCs exercise of its management prerogative. The VA
pointed out that MMPC had complied with the requirement of apprising Paras of the standards of
performance evaluation and regularization at the inception of his probationary employment. The VA

agreed with the MMPC that the termination of Paras employment was effected prior to the expiration of
the six-month probationary period.

As to Paras contention that he was already a regular employee

before he was dismissed in 1994 considering that he had an accumulated service of eleven (11) months,
the VA ruled that Paras delay in filing a complaint for regularization only in 1996, for services rendered in
October 1994 to March 1995, militated against him. The VA stated that Paras dismissal was based on
the unsatisfactory performance rating given to him by his direct supervisors Lito Lacambacal and Wilfredo
Lopez. The VA also found that the alleged heated argument between Atty. Carlos S. Cao, the Labor
Relations Manager of MMPC, and Cecille Paras, the President of CPSU, was irrelevant in the termination
of Paras services.

xiii

The Case Before the Court of Appeals

Aggrieved, Paras and CPLU filed a petition for review under Rule 43 of the Rules of Court before
the Court of Appeals, docketed as C.A.-G.R. SP No. 46030. They assigned the following errors:

I
THE VOLUNTARY ARBITRATOR COMMITTED A SERIOUS ERROR OF LAW IN
FAILING TO HOLD THAT THE NOTICE OF TERMINATION WAS SERVED UPON
PETITIONER NELSON PARAS AFTER HE HAS ALREADY BECOME A REGULAR
EMPLOYEE, HIS PERIOD FOR PROBATION HAVING EXPIRED.
II
THE VOLUNTARY ARBITRATOR SERIOUSLY ERRED AND GRAVELY ABUSED HIS
DISCRETION IN HOLDING THAT PETITIONER NELSON PARAS SUPPOSED DELAY
IN FILING THE ILLEGAL DISMISSAL CASE WORKED AGAINST HIM.
III
THE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF DISCRETION AND
COMMITTED SERIOUS ERRORS OF FACT AND LAW IN NOT HOLDING THAT THE
PERFORMANCE OF NELSON PARAS WAS SATISFACTORY AND THAT HIS
xiii
DISMISSAL WAS POLITICALLY MOTIVATED.

Therein, Paras and CPLU asserted that pursuant to Article 13 of the New Civil Code, the period
of May 27, 1996 to November 26, 1996 consisted of one hundred eighty-three (183) days. They asserted
that the maximum of the probationary period is six (6) months, which is equivalent to 180 days; as such,
Paras, who continued to be employed even after the 180
provided for in Article 282 of the Labor Code.

th

day, had become a regular employee as

They averred that as a regular employee, Paras

employment could be terminated only for just or authorized causes as provided for under the Labor Code,
and after due notice.

They posited that in the Letter of Termination dated November 25, 1996, the

ground for Paras termination was not among those sanctioned by the Labor Code; hence, his dismissal
was illegal.

Paras and CPLU also stressed that he had already been in the employ of MMPC from October 3,
1994 to March 3, 1995 as a welder-fabricator in the production of jigs and fixtures, a function necessary
and desirable to the usual business of MMPC. Such period, in addition to the six-month probationary
period, amounted to eleven (11) months of service, which is sufficient for him to be considered as a
regular employee.
Paras and CPLU averred that the filing of an illegal dismissal complaint only after his termination
in 1996 did not make Paras claim for regularization specious, since an illegally dismissed employee, like
him, has four (4) years within which to file a complaint.

xiii

They emphasized that Paras performance evaluation was changed to unsatisfactory as an offshoot of the arguments between the latters wife, the President of the CPSU, and Atty. Carlos S. Cao, one
of MMPCs negotiators, over the provisions in the CBA.

xiii

The MMPC, for its part, averred that under Article 13 of the New Civil Code, Paras probationary
employment which commenced on May 27, 1996 would expire on November 27, 1996.

Since he

received the notice of termination of his employment on November 25, 1996, the same should be
considered to have been served within the six-month probationary period.
The MMPC asserted that the VA acted correctly in not considering the five-month period of Paras
contractual employment as a welder-fabricator to qualify him for regularization. It argued that his rating
showed that his immediate supervisors, in tandem with his department head, found his performance
unsatisfactory. Thus, his failure to meet a satisfactory performance rating justified the termination of his
probationary employment.

For its part, the Office of the Solicitor General (OSG), in representation of Voluntary Arbitrator
Danilo

Lorredo,

agreed

that

and CPLUs allegation, that the notice of termination was served on Paras 183

Paras
rd

day, was erroneous.

The OSG opined that the six-month probationary period was to expire on November 27, 1996 and since
Paras was served such notice on November 25, 1996, his employment was deemed terminated within the
six-month probationary period. It posited that the failure of Paras to get a satisfactory performance rating
justified the termination of his probationary employment, and that the inclusion of his five-month
contractual employment as welder-fabricator did not qualify him for regular employment.

Finally, the OSG contended that the appointment of a probationary employee to a regular status
is voluntary and discretionary on the part of the employer.

In a Decision promulgated on September 13, 2000, the CA reversed the ruling of the Voluntary
Arbitrator, the dispositive portion of which is herein quoted:

WHEREFORE, the petition is GRANTED. The Decision of public respondent,

dated November 3, 1997, is REVERSED and SET ASIDE. In lieu thereof, judgment is
hereby entered declaring Mitsubishi Motors Phils. Corporations dismissal of Nelson
Paras as ILLEGAL and ORDERING the former to reinstate Paras to his former position
without loss of seniority rights and other privileges. Conformably with the latest
pronouncement of the Supreme Court on backwages, supra, Mitsubishi Motors Phils.
Corporation is further ORDERED to pay Paras full backwages (without qualifications or
deductions), inclusive of allowances, and 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. Petitioners claims for attorneys fees, moral and exemplary
xiii
damages are, nevertheless, DENIED for lack of sufficient basis. No costs.

The CA agreed with Paras and CPLUs interpretation that six (6) months is equivalent to one
hundred eighty (180 days) and that computed from May 27, 1996, such period expired on November 23,
1996. Thus, when Paras received the letter of termination on November 26, 1996, the same was
rd

served on the 183 day or after the expiration of the six-month probationary period. The CA stated that
since he was allowed to work beyond the probationary period, Paras became a regular employee.
Hence, his dismissal must be based on the just and authorized causes under the Labor Code, and in
accordance with the two-notice requirement provided for in the implementing rules. The appellate court

concluded that for MMPCs failure to show that Paras was duly notified of the cause of his dismissal, the
latter was illegally dismissed; hence, his actual reinstatement without loss of seniority rights and the
payment of backwages up to the time of his reinstatement were in order.

Dissatisfied, the MMPC filed a motion for reconsideration of the decision, alleging that the CA
erred in holding that the six-month probationary period which commenced on May 27, 1996, expired on
November 23, 1996.

The MMPC contended that the reinstatement of Paras to his former position had become moot
and academic because it had retrenched approximately seven hundred (700) employees as a result of its
financial losses in 1997. It posited that the payment of full backwages should only be computed up to
February 1998, the date when MMPC effected the first phase of its retrenchment program.

The CA denied the motion in a Resolution dated June 18, 2001.

xiii

The Present Petition

Undaunted, the MMPC, now the petitioner, filed this instant petition, alleging as follows:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE 3
NOVEMBER 1997 DECISION OF THE HONORABLE VA DANILO LORREDO, AND IN
FINDING THAT RESPONDENT PARAS (WAS) ILLEGALLY DISMISSED AND
ORDERING HIS REINSTATEMENT.
B.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ORDERING THE
REINSTATEMENT OF PARAS WITH FULL BACKWAGES DESPITE THE CHANGE IN
THE FINANCIAL CIRCUMSTANCES OF THE COMPANY.
C.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE
SIX-MONTH PROBATIONARY PERIOD OF PARAS WHICH STARTED ON 27 MAY
xiii
1996 HAD EXPIRED 23 NOVEMBER 1996.

The petitioner asserts that the CA erred in ruling that respondent Paras was already a regular
employee when he was served the notice of termination. Citing Article 13 of the New Civil Code, the
petitioner argued that the six-month probationary period should be computed as follows:

May 27-31
Jun(e) 1-30
July 1-31
Aug(.) 1-31
Sept(.) 1-30
Oct(.) 1-31
Nov(.) 1-26

=
=
=
=
=

4 days
1 month (30 days)
1 month (30 days)
1 month (30 days)
=
1 month (30 days)
1 month (30 days)
xiii
=
26 days

Hence, according to the petitioner, when the termination letter was served on November 26,
1996,

Paras

was

still

probationary

employee.

Considering that he did not qualify for regularization, his services were legally terminated. As such, the
CA erred in ordering his reinstatement and the payment of his backwages.

According to the petitioner, even assuming that respondent Paras was a regular employee when
he was dismissed, his reinstatement had already become moot and academic because of the
retrenchment program effected as a result of the business losses it had suffered in the year 1997.
Respondent Paras, who was employed only in May 27, 1996, would have been included in the first batch
of employees retrenched in February of 1998, in accordance with the last in first out policy embedded in
the CBA. The

petitioner further contends that Paras backwages should be computed only

up to February of 1998.

In their comment on the petition, the respondents argue that the CA was correct in concluding
rd

that the termination letter was served on respondent Paras one hundred eighty third (183 ) day of
employment with the petitioner, asserting that six (6) months is equivalent to one hundred eighty (180)
days.

Since respondent Paras was employed on May 27, 1996, the 180

th

day fell on November 23,

1996. Thus, respondent Paras was already a regular employee when the termination letter was served
on him. Consequently, his dismissal should be based on the just or authorized causes provided for by
the Labor Code, and after proper notice.

The respondents, likewise, contend that the petitioner cannot raise new and unsubstantiated
allegations in its petition at bar.

The Issues

The issues for resolution are the following: (a) whether or not respondent Paras was already a
regular employee on November 26, 1996; (b) whether or not he was legally dismissed; (c) if so, whether
or not his reinstatement had been rendered moot and academic; and, (d) whether or not his backwages
should be computed only up to February of 1998.

The Courts Ruling

The petition is partially granted.

At the outset, we must stress that only errors of law are generally reviewed by this Court in
petitions for review on certiorari of CA decisions.

xiii

Questions of fact are not entertained.

xiii

This Court is

not a trier of facts and, in labor cases, this doctrine applies with greater force. Factual questions are for
labor tribunals to resolve.

xiii

The findings of fact of quasi-judicial bodies like the National Labor Relations

Commission (NLRC), are accorded with respect, even finality, if supported by substantial evidence.
Particularly when passed upon and upheld by the Court of Appeals, such findings are binding and
conclusive upon the Supreme Court and will not normally be disturbed.

xiii

However, when the findings of the NLRC and the Court of Appeals are inconsistent with each
other, there is a need to review the records to determine which of them should be preferred as more
conformable to the evidentiary facts.

xiii

Considering that the CAs findings of fact clash with those of the

Voluntary Arbitrator, this Court is compelled to go over the records of the case, as well as the
submissions of the parties.

xiii

Regularization of
Employment

Indeed, an employer, in the exercise of its management prerogative, may hire an employee on a
probationary basis in order to determine his fitness to perform work.

xiii

Under Article 281 of the Labor

Code, the employer must inform the employee of the standards for which his employment may be
considered for regularization. Such probationary period, unless covered by an apprenticeship agreement,
shall not exceed six (6) months from the date the employee started working. The employees services
may be terminated for just cause or for his failure to qualify as a regular employee based on reasonable
xiii

standards made known to him.

Respondent Paras was employed as a management trainee on a probationary basis. During the
orientation conducted on May 15, 1996, he was apprised of the standards upon which his regularization
would be based.

He reported for work on May 27, 1996.

As per the companys policy, the

probationary period was from three (3) months to a maximum of six (6) months.

Applying Article 13 of the Civil Code,

hundred eighty (180) days.

xiii

xiii

the probationary period of six (6) months consists of one

This is in conformity with paragraph one, Article 13 of the Civil Code, which

provides that the months which are not designated by their names shall be understood as consisting of
thirty (30) days each. The number of months in the probationary period, six (6), should then be multiplied
by the number of days within a month, thirty (30); hence, the period of one hundred eighty (180) days.

As clearly provided for in the last paragraph of Article 13, in computing a period, the first day shall
be excluded and the last day included. Thus, the one hundred eighty (180) days commenced on May 27,
1996, and ended on November 23, 1996. The termination letter dated November 25, 1996 was served
on

respondent

Paras

only

at

3:00

a.m.

of

November 26, 1996. He was, by then, already a regular employee of the petitioner under Article 281 of
the Labor Code.

The Legality of
The Dismissal

An employee cannot be dismissed except for just or authorized cause as found in the Labor Code
and after due process.

xiii

The following grounds would justify the dismissal of an employee:

(a)

Serious misconduct or willful disobedience by the employee of the lawful orders of

the employer or representative in connection with his work;

(b)

Gross and habitual neglect by the employee of his duties;

(c)

Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;

(d)

Commission of a crime or offense by the employee against the person of his

employer or of any immediate member of his family or his duly authorized
representative; and

(e)

Other causes analogous to the foregoing.

xiii

The basis for which respondent Paras services were terminated was his alleged unsatisfactory
rating arising from poor performance. It is a settled doctrine that the employer has the burden of proving
the lawfulness of his employees dismissal. The validity of the charge must be clearly established in a
manner consistent with due process.

xiii

Under Article 282 of the Labor Code, an unsatisfactory rating can be a just cause for dismissal
only if it amounts to gross and habitual neglect of duties. Gross negligence has been defined to be the
want or absence of even slight care or diligence as to amount to a reckless disregard of the safety of
person or property. It evinces a thoughtless disregard of consequences without exerting any effort to
avoid them.

xiii

A careful perusal of the records of this case does not show that respondent Paras was

grossly negligent in the performance of his duties.

The company policy provides the following rule in performance evaluation:

The performance rating sheet must be accomplished by the immediate

supervisor, then reviewed by the Department Head, and concurred by the Division Head.
The Personnel Manager likewise must note all submitted performance sheets.
Once the rating sheet has gone through this standard procedure, the immediate
supervisor shall discuss the results of the performance rating with the employee. The
discussion/conference may be done in the presence of the Department Head. This is to
emphasize the point that the employee is given due importance especially in matters
xiii
pertaining to his development as a person and employee.

In the present case, the immediate supervisor of respondent Paras gave him an average
performance rating and found him fit for regularization.

xiii

Thereafter, his immediate supervisor and the

department head reviewed the said rating, which was duly noted by the personnel manager. However, in
a complete turn around, the petitioner made it appear that after the performance evaluation of respondent
Paras was reviewed by the department and division heads, it was unanimously agreed that the
respondents performance rating was unsatisfactory, making him unfit for regularization.

There is no showing that respondent Paras was informed of the basis for the volte face of the
management

group

tasked

to

review

his

performance rating. His immediate supervisor even told him that he had garnered a satisfactory rating
and was qualified for regularization, only to later receive a letter notifying him that his employment was
being terminated.

Considering that respondent Paras was not dismissed for a just or authorized cause, his
dismissal from employment was illegal. Furthermore, the petitioners failure to inform him of any charges
against him deprived him of due process. Clearly, the termination of his employment based on his alleged
unsatisfactory performance rating was effected merely to cover up and deodorize the illegality of his
dismissal.

Reinstatement and
Backwages

The normal consequences of illegal dismissal are reinstatement without loss of seniority rights
and the payment of backwages computed from the time the employees compensation was withheld from
xiii

him.

Since

respondent

Paras

dismissal

from

employment

is

illegal,

he

is

entitled

to

reinstatement and to be paid backwages from the time of his dismissal up to the time of his actual
reinstatement.

The petitioner asserts that assuming respondent Paras was illegally dismissed, his reinstatement
had become moot and academic because of its retrenchment program which was effected beginning

February 1998. The petitioner posits that even if respondent Paras had become a regular employee by
November 26, 1996, he would have been included in the first phase of its retrenchment program,
pursuant to the last in first out policy embedded in the CBA. Hence, the petitioner concludes, the
payment of backwages should be computed up to February of 1998.

The respondents, for their part, aver that the petitioner is proscribed from alleging new
circumstances and allegations of fact, particularly on financial reverses, before the Court of Appeals and
the Voluntary Arbitrator.

We do not agree with the respondents.

A cursory examination of the records shows that the petitioner could not raise its retrenchment
program as an issue before the VA, because it was implemented only in February 1998, when the case
was already in the CA. However, we note that the petitioner did not raise the same in its comment to the
petition. The petitioner asserted the matter only in its October 20, 2000 motion for reconsideration of the
decision of the CA, where it alleged that the retrenchment program was effected to arrest the continuing
business losses resulting from the financial reverses it experienced in 1997.
Nevertheless, it is not denied that because of the petitioners losses, it retrenched seven hundred
(700) employees.

Business reverses or losses are recognized by law as an authorized cause for

termination of employment. Still, it is an essential requirement that alleged losses in business operations
must be proven convincingly. Otherwise, such ground for termination would be susceptible to abuse by
scheming employers, who might be merely feigning business losses or reverses in their business
ventures to ease out employees.

xiii

Retrenchment is an authorized cause for termination of employment

which the law accords an employer who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save
a financially ailing business establishment from eventually collapsing.

xiii

In this case, the petitioner submitted in the CA its financial statements for 1996, 1997 and 1998

xiii

as well as its application for retrenchment. In its Statements of Income and Unappropriated Retained

Earning, it was shown that in 1996, the parent company of the petitioner had a net income of
P467,744,285. In 1997, it had a net loss of

P29,253,511.

xiii

In 1998, its net loss, after effecting

retrenchment and closing several plants, was arrested and dropped to P8,156,585.

xiii

This shows that

even after the retrenchment, the petitioner MMPC still suffered net losses.
In 1996, the petitioners current assets amounted to P5,381,743,576; it increased to
P8,033,932,745

xiii

in 1997, while in 1998, it was reduced to P5,053,874,359.

xiii

This shows that the

petitioners assets acquired in 1997 diminished in 1998. The figures for Current Liabilities are consistent
with the movement of current assets for 1997 and 1998.

In 1996, the petitioner incurred current liabilities of P1,966,445,401 which increased to

P5,088,990,117

xiii

in 1997 and decreased to P2,880,259,811

xiii

in 1998.

To reduce its losses, the

petitioner had to dispose of some of its current assets to cover the increased liability incurred in 1997, and
had to resort to borrowings in 1998. The continuity of losses which started in 1997 is further illustrated in
the figures on retained earnings for 1996, 1997 and 1998. In 1996, retained earnings stood at
P1,838,098,175,

xiii

which decreased to P994,942,628

xiii

in 1997 and further decreased to P592,614,548

xiii

in 1998.
The petitioners losses in 1997 and 1998 are not insignificant. It is beyond cavil then, that the
serious and actual business reverses suffered by the petitioner justified its resort to retrenchment of
seven hundred (700) of its employees.

The records show that the petitioner informed the Department of Labor and Employment of its
plight and intention to retrench employees as a result of the shutdown of its plants.

xiii

The termination of

the five hundred thirty-one (531) affected employees were made effective a month from receipt of the
termination letter mailed on February 25, 1998.

xiii

In accordance with the CBA between MMPC and CPLU, employees who were recently hired
were the ones retrenched. Considering that respondent Paras had just been regularized on November

24, 1996, he would have been included among those who had been retrenched had he not been
dismissed.

The unfavorable financial conditions of the petitioner may not justify reinstatement. However, it is
not a sufficient ground to deny backwages to respondent Paras who was illegally dismissed.

xiii

Considering that notices of retrenchment were mailed on February 25, 1998 and made effective one
month therefrom, respondent Paras should be paid full backwages from the date of his illegal dismissal
up to March 25, 1998. Pursuant to Article 283 of the Labor Code, he should be paid separation pay
equivalent to one (1) month salary, or to at least one-half month pay for every year of service, whichever
is higher, a fraction of at least six months to be considered as one (1) year.

xiii

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The September
13, 2000 Decision of the Court of Appeals in CAGR SP No. 46030 is hereby AFFIRMED WITH
MODIFICATIONS.

The petitioner is ORDERED to pay respondent Nelson Paras separation pay

equivalent to one (1) month, or to at least one-half (1/2) month pay for every year of service, whichever is
higher, a fraction of at least six (6) months to be considered as one year; and to pay full

backwages,

computed from the time of his dismissal up to March 25, 1998. That portion of the decision of the
Court of Appeals directing the reinstatement of the respondent Paras is DELETED.

No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and
DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.

NARVASA, J.:
1

The question presented by the proceedings at bar is whether or not the provisions of the Labor Code,
3
as amended, have anathematized "fixed period employment" or employment for a term.

The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was
4
engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. The contract
fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the
agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973,
and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as those
5
contained in the original contract of July 18, 1971.

Some three months before the expiration of the stipulated period, or more precisely on April 20,1976,
Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the
termination of his services effective on July 16, 1976. The stated ground for the termination was
"completion of contract, expiration of the definite period of employment." And a month or so later, on May
26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase,
"in full payment of services for the period May 16, to July 17, 1976 as full payment of contract."
However, at the investigation conducted by a Labor Conciliator of said report of termination of his
services, Alegre protested the announced termination of his employment. He argued that although his
contract did stipulate that the same would terminate on July 17, 1976, since his services were necessary
and desirable in the usual business of his employer, and his employment had lasted for five years, he had
6
acquired the status of a regular employee and could not be removed except for valid cause. The
Regional Director considered Brent School's report as an application for clearance to terminate
employment (not a report of termination), and accepting the recommendation of the Labor Conciliator,
refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent
employee," to his former position without loss of seniority rights and with full back wages. The Director
pronounced "the ground relied upon by the respondent (Brent) in terminating the services of the
complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No.
7
8, series of 1969, of the Bureau of Private Schools.
Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded
8
9
the case to the Secretary of Labor for review. The latter sustained the Regional Director. Brent
appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of
merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who
could not be dismissed except for just cause, and expiration of the employment contract was not one of
10
the just causes provided in the Labor Code for termination of services.
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time
when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did
not come into effect until November 1, 1974, some three years after the perfection of the employment
contract, and rights and obligations thereunder had arisen and been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of
term employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law, R.A.
11
12
1052, as amended by R.A. 1787. Basically, this statute provided that
In cases of employment, without a definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just cause in the case of an
employee by serving written notice on the employer at least one month in advance, or in
the case of an employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee, whichever is
longer, a fraction of at least six months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause, may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause, shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.

There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also
enumerated what it considered to be just causes for terminating an employment without a definite period,
either by the employer or by the employee without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also
implicitly acknowledged the propriety of employment with a fixed period. Its Article 302 provided that
In cases in which the contract of employment does not have a fixed period, any of the
parties may terminate it, notifying the other thereof one month in advance.
The factor or shop clerk shall have a right, in this case, to the salary corresponding to
said month.
The salary for the month directed to be given by the said Article 302 of the Code of Commerce to
the factor or shop clerk, was known as the mesada (from mes, Spanish for "month"). When
Article 302 (together with many other provisions of the Code of Commerce) was repealed by the
Civil Code of the Philippines, Republic Act No. 1052 was enacted avowedly for the precise
purpose of reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on
August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and
with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of
Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is
otherwise deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and Alegre on July
18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof
Stipulations for a term were explicitly recognized as valid by this Court, for instance, in Biboso v. Victorias
13
Milling Co., Inc., promulgated on March 31, 1977, and J. Walter Thompson Co. (Phil.) v. NLRC,
14
promulgated on December 29, 1983. The Thompson case involved an executive who had been
engaged for a fixed period of three (3) years. Biboso involved teachers in a private school as regards
whom, the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the time that their
tenure was for a limited duration. Upon its termination, both parties to the employment
relationship were free to renew it or to let it lapse. (p. 254)
15

Under American law the principle is the same. "Where a contract specifies the period of its duration, it
16
terminates on the expiration of such period." "A contract of employment for a definite period terminates
17
by its own terms at the end of such period."
The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor
Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained
explicit references to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment began to take place at about
this time
Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of
employment of probationary employees and those employed WITH A FIXED PERIOD shall be subject to
such regulations as the Secretary of Labor may prescribe." The asserted objective to was "prevent the
circumvention of the right of the employee to be secured in their employment as provided . . . (in the
Code)."

Article 321 prescribed the just causes for which an employer could terminate "an employment without a
definite period."
And Article 319 undertook to define "employment without a fixed period" in the following manner:

18

An employment shall be deemed to be without a definite period for purposes of this

Chapter where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee
or where the work or service to be performed is seasonal in nature and the employment
is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement
on a fixed term or period would be valid where the employee "has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer." The definition
seems a non sequitur. From the premise that the duties of an employee entail "activities which are
usually necessary or desirable in the usual business or trade of the employer the" conclusion does not
necessarily follow that the employer and employee should be forbidden to stipulate any period of time for
the performance of those activities. There is nothing essentially contradictory between a definite period of
an employment contract and the nature of the employee's duties set down in that contract as being
"usually necessary or desirable in the usual business or trade of the employer." The concept of the
employee's duties as being "usually necessary or desirable in the usual business or trade of the
employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities that the employee is called upon to perform,
but the day certain agreed upon by the parties for the commencement and termination of their
employment relationship, a day certain being understood to be "that which must necessarily come,
19
although it may not be known when." Seasonal employment, and employment for a particular project
are merely instances employment in which a period, where not expressly set down, necessarily implied.
Of course, the term period has a definite and settled signification. It means, "Length of existence;
duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound;
conclusion; termination. A series of years, months or days in which something is completed. A time of
20
definite length. . . . the period from one fixed date to another fixed date . . ." It connotes a "space of time
which has an influence on an obligation as a result of a juridical act, and either suspends its
21
demandableness or produces its extinguishment." It should be apparent that this settled and familiar
notion of a period, in the context of a contract of employment, takes no account at all of the nature of the
duties of the employee; it has absolutely no relevance to the character of his duties as being "usually
necessary or desirable to the usual business of the employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite period" and "regular"
employment were amended by Presidential Decree No. 850, effective December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the
reference to persons "employed with a fixed period," and was renumbered (becoming Article 271). The
22
article now reads:
. . . Probationary employment.Probationary employment shall not exceed six months
from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been
engaged in a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards made known by

the employer to the employee at the time of his engagement. An employee who is
allowed to work after a probationary period shall be considered a regular employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a)
deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause
declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat
23
exclusively of "regular" and "casual" employment. As revised, said article, renumbered 270, now reads:
. . . Regular and Casual Employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to he casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.
The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been
added, to wit: "The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties . . ." The clause would appear to be addressed
inter alia to agreements fixing a definite period for employment. There is withal no clear indication
of the intent to deny validity to employment for a definite period. Indeed, not only is the concept of
regular employment not essentially inconsistent with employment for a fixed term, as above
pointed out, Article 272 of the Labor Code, as amended by said PD 850, still impliedly
acknowledged the propriety of term employment: it listed the "just causes" for which "an employer
may terminate employment without a definite period," thus giving rise to the inference that if the
employment be with a definite period, there need be no just cause for termination thereof if the
ground be precisely the expiration of the term agreed upon by the parties for the duration of such
employment.
Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa
24
Bilang 130, to eliminate altogether reference to employment without a definite period. As lastly
amended, the opening lines of the article (renumbered 283), now pertinently read: "An employer may
terminate an employment for any of the following just causes: . . . " BP 130 thus completed the elimination
of every reference in the Labor Code, express or implied, to employment with a fixed or definite period or
term.
It is in the light of the foregoing description of the development of the provisions of the Labor Code
bearing on term or fixed-period employment that the question posed in the opening paragraph of this
opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment
contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy
and should not on this account be accorded legitimacy?
On the one hand, there is the gradual and progressive elimination of references to term or fixed-period
25
employment in the Labor Code, and the specific statement of the rule that

. . . Regular and Casual Employment. The provisions of written agreement to the

contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the
validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints
on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or
services, except the general admonition against stipulations contrary to law, morals, good customs, public
26
order or public policy. Under the Civil Code, therefore, and as a general proposition, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those by nature
seasonal or for specific projects with pre-determined dates of completion; they also include those to which
the parties by free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contracts which may be neither for seasonal work
nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas
employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular
employment will all that it implies does not appear ever to have been applied, Article 280 of the Labor
Code not withstanding; also appointments to the positions of dean, assistant dean, college secretary,
principal, and other administrative offices in educational institutions, which are by practice or tradition
rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable
rotation would be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the
27
Minister of Labor implicitly recognize that certain company officials may be elected for what would
amount to fixed periods, at the expiration of which they would have to stand down, in providing that these
officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because
the stockholders or the board of directors for one reason or another did not re-elect them."
There can of course be no quarrel with the proposition that where from the circumstances it is apparent
that periods have been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where
it is indeed the employee himself who insists upon a period or where the nature of the engagement is
such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non,
would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an
agreement come within the scope of Article 280 which admittedly was enacted "to prevent the
circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code, under
a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which
the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement,
it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given
a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's

using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose
to spite the face or, more relevantly, curing a headache by lopping off the head.
It is a salutary principle in statutory construction that there exists a valid presumption that
undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all
28
objecionable mischievous, undefensible, wrongful, evil and injurious consequences.
Nothing is better settled than that courts are not to give words a meaning which would
lead to absurd or unreasonable consequences. That s a principle that does back to In re
Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be
rejected if it would be unjust or lead to absurd results. That is a strong argument against
its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the
construction placed upon the statute by the appellants would lead to an absurdity is
29
another argument for rejecting it. . . ."
. . . We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the
statute, since adherence to the letter would result in absurdity, injustice and
30
contradictions and would defeat the plain and vital purpose of the statute.
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.
31

Such interpretation puts the seal on Bibiso upon the effect of the expiry of an agreed period of
employment as still good rulea rule reaffirmed in the recent case of Escudero vs. Office of the President
(G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her
school a notice of termination following the expiration of the last of three successive fixed-term
employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her
employment was probationary, contractual in nature, and one with a definitive period. At
the expiration of the period stipulated in the contract, her appointment was deemed
terminated and the letter informing her of the non-renewal of her contract is not a
condition sine qua non before Reyes may be deemed to have ceased in the employ of
petitioner UST. The notice is a mere reminder that Reyes' contract of employment was
due to expire and that the contract would no longer be renewed. It is not a letter of
termination. The interpretation that the notice is only a reminder is consistent with the
32
court's finding in Labajo supra. ...

Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last
contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written
advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending
expiration of his contract, not a letter of termination, nor an application for clearance to terminate which
needed the approval of the Department of Labor to make the termination of his services effective. In any
case, such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE.
Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by
reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement
and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as to
costs.
SO ORDERED.
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Corts, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Fernan, C.J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 78693 January 28, 1991

ZOSIMO CIELO, petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HENRY LEI and/or HENRY LEI
TRUCKING respondents.
Francisco D. Alas for petitioner.
Mateo G. Delegencia for private respondent.

CRUZ, J.:p
The petitioner is a truck driver who claims he was illegally dismissed by the private respondent, the Henry
1
Lei Trucking Company. The Labor Arbiter found for him and ordered his reinstatement with back wages.
On appeal, the decision was reversed by the National Labor Relations Commission, which held that the
2
petitioner's employment had expired under a valid contract. The petitioner then came to us on certiorari
under Rule 65 of the Rules of Court.
Required to submit a Comment (not to file a motion to dismiss), the private respondent nevertheless
moved to dismiss on the ground that the petition was filed sixty-eight days after service of the challenged

decision on the petitioner, hence late. The motion was untenable, of course. Petitions for certiorari under
Rule 65 may be instituted within a reasonable period, which the Court has consistently reckoned at three
months.**
In his own Comment, the Solicitor General defended the public respondent and agreed that the contract
between the petitioner and the private respondent was a binding agreement not contrary to law, morals or
public policy. The petitioner's services could be legally terminated upon the expiration of the period
agreed upon, which was only six months. The petitioner could therefore not complain that he had been
illegally dismissed.
As an examination of the claimed agreement was necessary to the resolution of this case, the Court
required its production by the petitioner. But he could not comply because he said he had not been given
a copy by the private respondent. A similar requirement proved fruitless when addressed to the private
respondent, which explained it could not locate the folder of the case despite diligent search. It was only
on October 15, 1990, that the records of the case, including the subject agreement, were finally received
3
by the Court from the NLRC, which had obtained them from its Cagayan de Oro regional office.
The said agreement reads in full as follows:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and executed by and between:
HENRY LEI, of legal age, Filipino citizen, married, and a resident of Digos, Davao del
Sur, now and hereinafter called the FIRST PARTY,
a n d
ZOSIMO CIELO, of legal age, married, Filipino citizen, and a resident of Agusan,
Canyon, Camp Philipps, now and hereinafter called the SECOND PARTY,
WITNESSETH
That the FIRST PARTY is an owner of some cargo trucks.
WHEREAS, the SECOND PARTY desires to operate one of the said cargo trucks which
he himself shall drive for income;
NOW, THEREFORE, for the foregoing premises, the FIRST PARTY does hereby assign
one cargo truck of his fleet to the SECOND PARTY under the following conditions and
stipulations:
1. That the term of this Agreement is six (6) months from and after the execution hereof,
unless otherwise earlier terminated at the option of either party;
2. That the net income of the said vehicle after fuel and oil shall be divided by and
between them on ninety/ten percent (90/10%) basis in favor of the FIRST PARTY;

3. That there is no employer/employee relationship between the parties, the nature of this
Agreement being contractual;
4. In the event the SECOND PARTY needs a helper the personnel so employed by him
shall be to his personal account, who shall be considered his own employee;
5. That the loss of or damage to the said vehicle shall be to account of the SECOND
PARTY; he shall return the unit upon the expiration or termination of this contract in the
condition the same was received by him, fair wear and tear excepted.
IN WITNESS WHEREOF, the parties hereunto affixed their signature on this 30th day of
June, 1984, at Digos, Davao del Sur, Philippines.
(Sgd.) HENRY LEI (Sgd.) ZOSIMO CIELO
First Party Second Party
SIGNED IN THE PRESENCE OF:
(Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG
The agreement was supposed to have commenced on June 30, 1984, and to end on December 31, 1984.
On December 22, 1984, however, the petitioner was formally notified by the private respondent of the
termination of his services on the ground of expiration of their contract. Soon thereafter, on January 22,
1985, the petitioner filed his complaint with the Ministry of Labor and Employment.
In his position paper, the petitioner claimed he started working for the private respondent on June 16,
1984, and having done so for more than six months had acquired the status of a regular employee. As
such, he could no longer be dismissed except for lawful cause. He also contended that he had been
removed because of his refusal to sign, as required by the private respondent, an affidavit reading as
follows:
AFFIDAVIT
That I, ZOSIMO CIELO, Filipino, of legal age, married/single and a resident of Agusan
Canyon, Camp Philipps, after having been duly sworn to in accordance with law, hereby
depose and say:
That I am one of the drivers of the trucks of Mr. HENRY LEI whose hauling trucks are
under contract with the Philippine Packing Corporation;
That I have received my salary and allowances from Mr. HENRY LEI the sum of
P1,421.10 for the month of October 1984. That I have no more claim against the said Mr.
Henry Lei.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 15th day of
November 1984.

The private respondent rests its case on the agreement and maintains that the labor laws are not
applicable because the relations of the parties are governed by their voluntary stipulations. The contract
having expired, it was the prerogative of the trucking company to renew it or not as it saw fit.
The writ will issue.
While insisting that it is the agreement that regulates its relations with the petitioner, the private
respondent is ensnared by its own words. The agreement specifically declared that there was no
employer-employee relationship between the parties. Yet the affidavit the private respondent prepared
required the petitioner to acknowledge that "I have received my salary and allowances from Mr. Henry
Lei," suggesting an employment relationship. According to its position paper, the petitioner's refusal to
sign the affidavit constituted disrespect or insubordination, which had "some bearing on the renewal of his
contract of employment with the respondent." Of this affidavit, the private respondent had this to say:
. . . Since October 1984, respondent adopted a new policy to require all their employees
to sign an affidavit to the effect that they received their salaries. Copy of which is hereto
attached as Annex "C," covering the months of October and November 1984. All other
employees of the respondent signed the said affidavit, only herein complainant refused to
do so for reasons known only to him. . . .
It appears from the records that all the drivers of the private respondent have been hired on a fixed
contract basis, as evidenced by the mimeographed form of the agreement and of the affidavit. The private
respondent merely filled in the blanks with the corresponding data, such as the driver's name and
address, the amount received by him, and the date of the document. Each driver was paid through
4
individual vouchers rather than a common payroll, as is usual in companies with numerous employees.
The private respondent's intention is obvious. It is remarkable that neither the NLRC nor the Solicitor
General recognized it. There is no question that the purpose behind these individual contracts was to
evade the application of the labor laws by making it appear that the drivers of the trucking company were
not its regular employees.
Under these arrangements, the private respondent hoped to be able to terminate the services of the
drivers without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements,
which, significantly, were uniformly limited to a six-month period. No cause had to be established because
such renewal was subject to the discretion of the parties. In fact, the private respondent did not even have

to wait for the expiration of the contract as it was there provided that it could be "earlier terminated at the
option of either party."
By this clever scheme, the private respondent could also prevent the drivers from becoming regular
employees and thus be entitled to security of tenure and other benefits, such as a minimum wage, costof-living allowances, vacation and sick leaves, holiday pay, and other statutory requirements. The private
respondent argues that there was nothing wrong with the affidavit because all the affiant acknowledged
therein was full payment of the amount due him under the agreement. Viewed in this light, such
acknowledgment was indeed not necessary at all because this was already embodied in the vouchers
signed by the payee-driver. But the affidavit, for all its seeming innocuousness, imported more than that.
What was insidious about the document was the waiver the affiant was unwarily making of the statutory
rights due him as an employee of the trucking company.
And employee he was despite the innocent protestations of the private respondent. We accept the factual
finding of the Labor Arbiter that the petitioner was a regular employee of the private respondent. The
private respondent is engaged in the trucking business as a hauler of cattle, crops and other cargo for the
Philippine Packing Corporation. This business requires the services of drivers, and continuously because
the work is not seasonal, nor is it limited to a single undertaking or operation. Even if ostensibly hired for a
fixed period, the petitioner should be considered a regular employee of the private respondent,
conformably to Article 280 of the Labor Code providing as follows:
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 necessarily 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)
In Brent School, Inc. vs. Zamora, the Court affirmed the general principle that "where from the
circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc."
Such circumstances have been sufficiently established in the case at bar and justify application of the
following conclusions:
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.
The agreement in question had such a purpose and so was null and void ab initio.

The private respondent's argument that the petitioner could at least be considered on probation basis only
and therefore separable at will is self-defeating. The Labor Code clearly provides as follows:
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 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.
There is no question that the petitioner was not engaged as an apprentice, being already an experienced
truck driver when he began working for the private respondent. Neither has it been shown that he was
informed at the time of his employment of the reasonable standards under which he could qualify as a
regular employee. It is plain that the petitioner was hired at the outset as a regular employee. At any rate,
even assuming that the original employment was probationary, the Labor Arbiter found that the petitioner
had completed more than six month's service with the trucking company and so had acquired the status
of a regular employee at the time of his dismissal.
Even if it be assumed that the six-month period had not yet been completed, it is settled that the
probationary employee cannot be removed except also for cause as provided by law. It is not alleged that
the petitioner was separated for poor performance; in fact, it is suggested by the private respondent that
he was dismissed for disrespect and insubordination, more specifically his refusal to sign the affidavit as
required by company policy. Hence, even as a probationer, or more so as a regular employee, the
petitioner could not be validly removed under Article 282 of the Labor Code, providing as follows:
Art. 282. Termination by employer. An employer may terminate an employment for any
of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer
or any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
In refusing to sign the affidavit as required by the private respondent, the petitioner was merely protecting
his interests against an unguarded waiver of the benefits due him under the Labor Code. Such willful
disobedience should commend rather than prejudice him for standing up to his rights, at great risk to his
material security, against the very source of his livelihood.
The Court looks with stern disapproval at the contract entered into by the private respondent with the
petitioner (and who knows with how many other drivers). The agreement was a clear attempt to exploit
the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the
stipulations of the parties were governed by the Civil Code as in ordinary private transactions. They were

not, to be sure. The agreement was in reality a contract of employment into which were read the
provisions of the Labor Code and the social justice policy mandated by the Constitution. It was a deceitful
agreement cloaked in the habiliments of legality to conceal the selfish desire of the employer to reap
undeserved profits at the expense of its employees. The fact that the drivers are on the whole practically
unlettered only makes the imposition more censurable and the avarice more execrable.
WHEREFORE, the petition is GRANTED. The decision of the National Labor Relations Commission is
SET ASIDE and that of the Labor Arbiter REINSTATED, with costs against the private respondents.
SO ORDERED.

FIRST DIVISION

PHILIPPINE DAILY INQUIRER, INC.,

G.R. No. 164532

Petitioner,
Present:

- versus -

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
Promulgated:

LEON M. MAGTIBAY, JR. and PHILIPPINE

DAILY INQUIRER EMPLOYEES UNION
(PDIEU),
Respondents.

July 24, 2007

x----------------------------------------------------x

DECISION

GARCIA, J.:

By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Philippine
Daily Inquirer, Inc. (PDI) seeks the reversal and setting aside of the decision

xiii

dated May 25, 2004 of the

Court of Appeals (CA) in CA G.R. SP No. 78963, affirming the resolution dated September 23, 2002 of
the National Labor Relations Commission (NLRC) in NLRC Case No. 00-03-01945-96. The affirmed
NLRC resolution reversed an earlier decision dated July 29, 1996 of the Labor Arbiter in NLRC Case No.
011800-96, which dismissed the complaint for illegal dismissal filed by the herein respondent Leon
Magtibay, Jr. against the petitioner.

The factual antecedents are undisputed:

On February 7, 1995, PDI hired Magtibay, on contractual basis, to assist, for a period of five
months from February 17, 1995, the regular phone operator. Before the expiration of Magtibays
contractual employment, he and PDI agreed to a fifteen-day contract extension, or from July 17, 1995 up
to July 31, 1995, under the same conditions as the existing contract.

After the expiration of Magtibays contractual employment, as extended, PDI announced the
creation and availability of a new position for a second telephone operator who would undergo
probationary employment. Apparently, it was PDIs policy to accord regular employees preference for
new vacancies in the company. Thus, Ms. Regina M. Layague, a PDI employee and member of
respondent PDI Employees Union (PDIEU), filed her application for the new position. However, she later

withdrew her application, paving the way for outsiders or non-PDI employees, like Magtibay in this case,
to apply.

After the usual interview for the second telephone operator slot, PDI chose to hire Magtibay on a
probationary basis for a period of six (6) months. The signing of a written contract of employment
followed.

On March 13, 1996, or a week before the end the agreed 6-month probationary period, PDI
officer Benita del Rosario handed Magtibay his termination paper, grounded on his alleged failure to meet
company standards. Aggrieved, Magtibay immediately filed a complaint for illegal dismissal and damages
before the Labor Arbiter. PDIEU later joined the fray by filing a supplemental complaint for unfair labor
practice.
Magtibay anchored his case principally on the postulate that he had become a regular employee
by operation of law, considering that he had been employed by and had worked for PDI for a total period
of ten months, i.e., four months more than the maximum six-month period provided for by law on
probationary employment. He also claimed that he was not apprised at the beginning of his employment
of the performance standards of the company, hence, there was no basis for his dismissal. Finally, he
described his dismissal as tainted with bad faith and effected without due process.

PDI, for its part, denied all the factual allegations of Magtibay, adding that his previous contractual
employment was validly terminated upon the expiration of the period stated therein. Pressing the point,
PDI alleged that the period covered by the contractual employment cannot be counted with or tacked to
the period for probation, inasmuch as there is no basis to consider Magtibay a regular employee. PDI
additionally claimed that Magtibay was dismissed for violation of company rules and policies, such as
allowing his lover to enter and linger inside the telephone operators booth and for failure to meet
prescribed company standards which were allegedly made known to him at the start through an
orientation seminar conducted by the company.

After due proceedings, the Labor Arbiter found for PDI and accordingly dismissed Magtibays
complaint for illegal dismissal. The Labor Arbiter premised his holding on the validity of the previous
contractual employment of Magtibay as an independent contract.

He also declared as binding the

stipulation in the contract specifying a fixed period of employment. According to the Labor Arbiter, upon
termination of the period stated therein, the contractual employment was also effectively terminated,
implying that Magtibay was merely on a probationary status when his services were terminated inasmuch
as the reckoning period for probation should be from September 21, 1995 up to March 31, 1996 as
expressly provided in their probationary employment contract. In fine, it was the Labor Arbiters position
that Magtibays previous contractual employment, as later extended by 15 days, cannot be considered as
part of his subsequent probationary employment.

Apart from the foregoing consideration, the Labor Arbiter further ruled that Magtibays dismissal
from his probationary employment was for a valid reason. Albeit the basis for termination was couched in
the abstract, i.e., you did not meet the standards of the company, there were three specific reasons for
Magtibays termination, to wit: (1) he repeatedly violated the company rule prohibiting unauthorized
persons from entering the telephone operators room; (2) he intentionally omitted to indicate in his
application form his having a dependent child; and (3) he exhibited lack of sense of responsibility by
locking the door of the telephone operators room on March 10, 1996 without switching the proper lines to
the company guards so that incoming calls may be answered by them.

The Labor Arbiter likewise dismissed allegations of denial of due process and the commission by
PDI of unfair labor practice.

PDIEU and Magtibay appealed the decision of the Labor Arbiter to the NLRC. As stated earlier,
the NLRC reversed and set aside said decision, effectively ruling that Magtibay was illegally dismissed.
According to the NLRC, Magtibays probationary employment had ripened into a regular one.

With the NLRCs denial of its motion for reconsideration, PDI went to the CA on a petition for
certiorari. Eventually, the CA denied due course to PDIs petition on the strength of the following
observations:

We agree with the findings of respondent NLRC.

Petitioner PDI failed to prove that such rules and regulations were included in or
form part of the standards that were supposed to be made known to respondent
Magtibay at the time of his engagement as telephone operator. Particularly, as regards
the first stated infraction xxx petitioner PDI, contrary to its assertion, stated in its position
paper, motion for reconsideration and in this petition that respondent Magtibay failed to
abide by the rules and regulations of the company issued by Ms. Benita del Rosario
regarding the entry of persons in the operators booth when respondent was already
working for petitioner PDI. Further, nowhere can it be found in the list of Basic
Responsibility and Specific Duties and Responsibilities (Annex D of the petition) of
respondent Magtibay that he has to abide by the duties, rules and regulations that he has
allegedly violated. The infractions considered by petitioner PDI as grounds for the
dismissal of respondent Magtibay may at most be classified as just causes for the
termination of the latters employment. x x x.

xxx

xxx

xxx

Finally, the three questionable grounds also relied upon by petitioner PDI in
dismissing respondent Magtibay may be considered as just causes. However, petitioner
PDI did not raise the same as an issue in the present petition because the procedure it
adopted in dismissing respondent Magtibay fell short of the minimum requirements
provided by law.

PDI filed a motion for reconsideration but to no avail.

Hence, this recourse by PDI on the following submissions:

I.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FINDING THAT A

PROBATIONARY EMPLOYEES FAILURE TO FOLLOW AN EMPLOYERS RULES
AND REGULATIONS CANNOT BE DEEMED FAILURE BY SAID EMPLOYEE TO MEET
THE STANDARDS OF HIS EMPLOYER THUS EMASCULATING PETITIONERS
RIGHT TO CHOOSE ITS EMPLOYEES.

II.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN REFUSING TO FIND

THAT PROCEDURAL DUE PROCESS AS LAID DOWN IN SECTION 2, RULE XXIII OF
THE IMPLEMENTING RULES OF THE LABOR CODE HAD BEEN OBSERVED BY THE
PETITIONER.

We GRANT the petition.

This Court, to be sure, has for a reason, consistently tended to be partial in favor of workers or
employees in labor cases whenever social legislations are involved. However, in its quest to strike a
balance between the employers prerogative to choose his employees and the employees right to
security of tenure, the Court remains guided by the gem of a holding in an old but still applicable case of
Pampanga Bus, Co. v. Pambusco Employees Union, Inc.

xiii

In it, the Court said:

The right of a laborer to sell his labor to such persons as he may choose is, in its
essence, the same as the right of an employer to purchase labor from any person whom
it chooses. The employer and the employee have thus an equality of right guaranteed by
the Constitution. If the employer can compel the employee to work against the latters
will, this is servitude. If the employee can compel the employer to give him work against
the employers will, this is oppression.

Management and labor, or the employer and the employee are more often not situated on the
same level playing field, so to speak. Recognizing this reality, the State has seen fit to adopt measures

envisaged to give those who have less in life more in law. Article 279 of the Labor Code which gives
employees the security of tenure is one playing field leveling measure:

Art. 279. Security of Tenure. In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or when
authorized by this Title. x x x.

But hand in hand with the restraining effect of Section 279, the same Labor Code also gives the
employer a period within which to determine whether a particular employee is fit to work for him or not.
This employers prerogative is spelled out in the following provision:

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 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.

In International Catholic Migration Commission v. NLRC,

xiii

we have elucidated what probationary

employment entails:

x x x. A probationary employee, as understood under Article 282 (now Article

281) of the Labor Code, is one who is on trial by an employer during which the employer
determines whether or not he is qualified for permanent employment. A probationary
appointment is made to afford the employer an opportunity to observe the fitness of a
probationer while at work, and to ascertain whether he will become a proper and efficient
employee. The word probationary, as used to describe the period of employment,
implies the purpose of the term or period but not its length.

Being in the nature of a trial period the essence of a probationary period of

employment fundamentally lies in the purpose or objective sought to be attained by
both the employer and the employee during said period. The length of time is immaterial
in determining the correlative rights of both in dealing with each other during said
period. While the employer, as stated earlier, observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the employer, that he has
the qualifications to meet the reasonable standards for permanent employment.

It is well settled that the employer has the right or is at liberty to choose who will
be hired and who will be denied employment. In that sense, it is within the exercise of
the right to select his employees that 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. x x x.

Within the limited legal six-month probationary period, probationary employees are still entitled to
security of tenure. It is expressly provided in the afore-quoted Article 281 that a probationary employee
may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee at the
xiii

time of his engagement.

PDI invokes the second ground under the premises. In claiming that it had adequately apprised
Magtibay of the reasonable standards against which his performance will be gauged for purposes of
permanent employment, PDI cited the one-on-one seminar between Magtibay and its Personnel
Assistant, Ms. Rachel Isip-Cuzio. PDI also pointed to Magtibays direct superior, Benita del Rosario, who
diligently briefed him about his responsibilities in PDI. These factual assertions were never denied nor
controverted by Magtibay. Neither did he belie the existence of a specific rule prohibiting unauthorized
persons from entering the telephone operators booth and that he violated that prohibition. This
notwithstanding, the NLRC and the CA proceeded nonetheless to rule that the records of the case are
bereft of any evidence showing that these rules and regulations form part of the so-called company
standards.

We do not agree with the appellate court when it cleared the NLRC of commission of grave abuse
of discretion despite the latters disregard of clear and convincing evidence that there were reasonable
standards made known by PDI to Magtibay during his probationary employment. It is on record that
Magtibay committed obstinate infractions of company rules and regulations, which in turn constitute
sufficient manifestations of his inadequacy to meet reasonable employment norms. The suggestion that
Magtibay ought to have been made to understand during his briefing and orientation that he is expected
to obey and comply with company rules and regulations strains credulity for acceptance. The CAs
observation that nowhere can it be found in the list of Basic Responsibility and Specific Duties and
Responsibilities of respondent Magtibay that he has to abide by the duties, rules and regulations that he
has allegedly violated is a strained rationalization of an unacceptable conduct of an employee. Common
industry practice and ordinary human experience do not support the CAs posture. All employees, be
they regular or probationary, are expected to comply with company-imposed rules and regulations, else
why establish them in the first place. Probationary employees unwilling to abide by such rules have no
right to expect, much less demand, permanent employment. We, therefore find sufficient factual and legal
basis, duly established by substantial evidence, for PDI to legally terminate Magtibays probationary
employment effective upon the end of the 6-month probationary period.

It is undisputed that PDI apprised Magtibay of the ground of his termination, i.e., he failed to
qualify as a regular employee in accordance with reasonable standards made known to him at the time of
engagement, only a week before the expiration of the six-month probationary period. Given this
perspective, does this make his termination unlawful for being violative of his right to due process of law?

It does not.

Unlike under the first ground for the valid termination of probationary employment which is for just
cause, the second ground does not require notice and hearing. Due process of law for this second
ground consists of making the reasonable standards expected of the employee during his probationary
period known to him at the time of his probationary employment. By the very nature of a probationary
employment, the employee knows from the very start that he will be under close observation and his
performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It
is in apprising him of the standards against which his performance shall be continuously assessed

where due process regarding the second ground lies, and not in notice and hearing as in the case of the
first ground.

Even if perhaps he wanted to, Magtibay cannot deny as he has not denied PDIs assertion
that he was duly apprised of the employment standards expected of him at the time of his probationary
employment when he underwent a one-on-one orientation with PDIs personnel assistant, Ms. Rachel
Isip-Cuzio. Neither has he denied nor rebutted PDIs further claim that his direct superior, Benita del
Rosario, briefed him regarding his responsibilities in PDI.

Lest it be overlooked, Magtibay had previously worked for PDI as telephone operator from
February 7, 1995 to July 31, 1995 as a contractual employee. Thus, the Court entertains no doubt that
when PDI took him in on September 21, 1995, Magtibay was already very much aware of the level of
competency and professionalism PDI wanted out of him for the entire duration of his probationary
employment.

PDI was only exercising its statutory hiring prerogative when it refused to hire Magtibay on a
permanent basis upon the expiration of the six-month probationary period. This was established during
the proceedings before the labor arbiter and borne out by the records and the pleadings before the Court.
When the NLRC disregarded the substantial evidence establishing the legal termination of Magtibays
probationary employment and rendered judgment grossly and directly contradicting such clear evidence,
the NLRC commits grave abuse of discretion amounting to lack or excess of jurisdiction. It was,
therefore, reversible error on the part of the appellate court not to annul and set aside such void judgment
of the NLRC.

WHEREFORE, the assailed decision dated May 25, 2004 of the CA in CA G.R. SP No. 78963 is
hereby REVERSED and SET ASIDE, and the earlier resolution dated September 23, 2002 of the NLRC
in NLRC Case No. 00-03-01945-96 is declared NULL and VOID. The earlier decision dated July 29, 1996
of the Labor Arbiter in NLRC Case No. 011800-96, dismissing respondent Leon Magtibay, Jr.s complaint
for alleged illegal dismissal, is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 79869 September 5, 1991
FORTUNATO MERCADO, SR., ROSA MERCADO, FORTUNATO MERCADO, JR., ANTONIO
MERCADO, JOSE CABRAL, LUCIA MERCADO, ASUNCION GUEVARA, ANITA MERCADO, MARINA
MERCADO, JULIANA CABRAL, GUADALUPE PAGUIO, BRIGIDA ALCANTARA, EMERLITA
MERCADO, ROMEO GUEVARA, ROMEO MERCADO and LEON SANTILLAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION; LABOR ARBITER
LUCIANO AQUINO, RAB-III; AURORA L. CRUZ; SPOUSES FRANCISCO DE BORJA and LETICIA
DE BORJA; and STO. NIO REALTY, INCORPORATED, respondents.
Servillano S. Santillan for petitioners.
Luis R. Mauricio for private respondents.

PADILLA, J.:p

Assailed in this petition for certiorari is the decision * of the respondent national Labor Relations
Commission (NLRC) dated 8 August 1984 which affirmed the decision of respondent Labor Arbiter
Luciano P. Aquino with the slight modification of deleting the award of financial assistance to petitioners,
and the resolution of the respondent NLRC dated 17 August 1987, denying petitioners' motion for
reconsideration.
This petition originated from a complaint for illegal dismissal, underpayment of wages, non-payment of
overtime pay, holiday pay, service incentive leave benefits, emergency cost of living allowances and 13th
month pay, filed by above-named petitioners against private respondents Aurora L. Cruz, Francisco
Borja, Leticia C. Borja and Sto. Nio Realty Incorporated, with Regional Arbitration Branch No. III,
1
National Labor Relations Commission in San Fernando, Pampanga.
Petitioners alleged in their complaint that they were agricultural workers utilized by private respondents in
all the agricultural phases of work on the 7 1/2 hectares of ace land and 10 hectares of sugar land owned
by the latter; that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private respondents
since 1949, Fortunato Mercado, Jr. and Antonio Mercado since 1972 and the rest of the petitioners since
1960 up to April 1979, when they were all allegedly dismissed from their employment; and that, during the
period of their employment, petitioners received the following daily wages:
From 1962-1963 P1.50
1963-1965 P2.00
1965-1967 P3.00
1967-1970 P4.00
1970-1973 P5.00
1973-1975 P5.00
1975-1978 P6.00
1978-1979 P7.00
Private respondent Aurora Cruz in her answer to petitioners' complaint denied that said petitioners were
her regular employees and instead averred that she engaged their services, through Spouses Fortunato
Mercado, Sr. and Rosa Mercado, their "mandarols", that is, persons who take charge in supplying the
number of workers needed by owners of various farms, but only to do a particular phase of agricultural
work necessary in rice production and/or sugar cane production, after which they would be free to render
2
services to other farm owners who need their services.
The other private respondents denied having any relationship whatsoever with the petitioners and state
that they were merely registered owners of the land in question included as corespondents in this case.

The dispute in this case revolves around the issue of whether or not petitioners are regular and
permanent farm workers and therefore entitled to the benefits which they pray for. And corollary to this,
whether or not said petitioners were illegally dismissed by private respondents.
Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private respondents and held that
petitioners were not regular and permanent workers of the private respondents, for the nature of the
terms and conditions of their hiring reveal that they were required to perform phases of agricultural work
4
for a definite period of time after which their services would be available to any other farm owner.
Respondent Labor Arbiter deemed petitioners' contention of working twelve (12) hours a day the whole
year round in the farm, an exaggeration, for the reason that the planting of lice and sugar cane does not
5
entail a whole year as reported in the findings of the Chief of the NLRC Special Task Force. Even the
sworn statement of one of the petitioners, Fortunato Mercado, Jr., the son of spouses Fortunato Mercado,
Sr. and Rosa Mercado, indubitably show that said petitioners were hired only as casuals, on an "on and
off" basis, thus, it was within the prerogative of private respondent Aurora Cruz either to take in the

petitioners to do further work or not after any single phase of agricultural work had been completed by
6
them.
Respondent Labor Arbiter was also of the opinion that the real cause which triggered the filing of the
complaint by the petitioners who are related to one another, either by consanguinity or affinity, was the
filing of a criminal complaint for theft against Reynaldo Mercado, son of spouses Fortunate Mercado, Sr.
and Rosa Mercado, for they even asked the help of Jesus David, Zone Chairman of the locality to talk to
7
private respondent, Aurora Cruz regarding said criminal case. In his affidavit, Jesus David stated under
oath that petitioners were never regularly employed by private respondent Aurora Cruz but were, on-andoff hired to work and render services when needed, thus adding further support to the conclusion that
8
petitioners were not regular and permanent employees of private respondent Aurora Cruz.
Respondent Labor Arbiter further held that only money claims from years 1976-1977, 1977-1978 and
1978-1979 may be properly considered since all the other money claims have prescribed for having
9
accrued beyond the three (3) year period prescribed by law. On grounds of equity, however, respondent
Labor Arbiter awarded petitioners financial assistance by private respondent Aurora Cruz, in the amount
of Ten Thousand Pesos (P10,000.00) to be equitably divided among an the petitioners except petitioner
Fortunato Mercado, Jr. who had manifested his disinterest in the further prosecution of his complaint
10
against private respondent.
Both parties filed their appeal with the National Labor Relations Commissions (NLRC). Petitioners
questioned respondent Labor Arbiter's finding that they were not regular and permanent employees of
private respondent Aurora Cruz while private respondents questioned the award of financial assistance
granted by respondent Labor Arbiter.
The NLRC ruled in favor of private respondents affirming the decision of the respondent Labor Arbiter,
with the modification of the deletion of the award for financial assistance to petitioners. The dispositive
portion of the decision of the NLRC reads:
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino dated March 3, 1983 is
hereby modified in that the award of P10,000.00 financial assistance should be deleted.
The said Decision is affirmed in all other aspects.
SO ORDERED.

11

Petitioners filed a motion for reconsideration of the Decision of the Third Division of the NLRC dated 8
12
August 1984; however, the NLRC denied tills motion in a resolution dated 17 August 1987.
In the present Petition for certiorari, petitioners seek the reversal of the above-mentioned rulings.
Petitioners contend that respondent Labor Arbiter and respondent NLRC erred when both ruled that
petitioners are not regular and permanent employees of private respondents based on the terms and
conditions of their hiring, for said findings are contrary to the provisions of Article 280 of the Labor Code.
13
They submit that petitioners' employment, even assuming said employment were seasonal, continued
for so many years such that, by express provision of Article 280 of the Labor Code as amended,
14
petitioners have become regular and permanent employees.
Moreover, they argue that Policy Instruction No. 12
lends support to this contention, when it states:

15

of the Department of Labor and Employment clearly

PD 830 has defined the concept of regular and casual employment. What determines
regularity or casualness is not the employment contract, written or otherwise, but the
nature of the job. If the job is usually necessary or desirable to the main business of the
employer, then employment is regular. If not, then the employment is casual.

Employment for a definite period which exceeds one (1) year shall be considered re for
the duration of the definite period.
This concept of re and casual employment is designed to put an end to casual
employment in regular jobs which has been abused by many employers to prevent socalled casuals from enjoying the benefits of regular employees or to prevent casuals from
joining unions.
This new concept should be strictly enforced to give meaning to the constitutional
16
guarantee of employment tenure.
Tested under the laws invoked, petitioners submit that it would be unjust, if not unlawful, to consider them
as casual workers since they have been doing all phases of agricultural work for so many years, activities
which are undeniably necessary, desirable and indispensable in the rice and sugar cane production
17
business of the private respondents.
In the Comment filed by private respondents, they submit that the decision of the Labor Arbiter, as aimed
by respondent NLRC, that petitioners were only hired as casuals, is based on solid evidence presented
by the parties and also by the Chief of the Special Task Force of the NLRC Regional Office and,
therefore, in accordance with the rule on findings of fact of administrative agencies, the decision should
18
be given great weight. Furthermore, they contend that the arguments used by petitioners in questioning
the decision of the Labor Arbiter were based on matters which were not offered as evidence in the case
heard before the regional office of the then Ministry of Labor but rather in the case before the Social
19
Security Commission, also between the same parties.
Public respondent NLRC filed a separate comment prepared by the Solicitor General. It submits that it
has long been settled that findings of fact of administrative agencies if supported by substantial evidence
20
are entitled to great weight. Moreover, it argues that petitioners cannot be deemed to be permanent
and regular employees since they fall under the exception stated in Article 280 of the Labor Code, which
reads:
The provisions of written agreements 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 services to be performed is seasonal in nature and the employment is for the duration
21
of the season. (emphasis supplied)
The Court resolved to give due course to the petition and required the parties to submit their respective
memoranda after which the case was deemed submitted for decision.
The petition is not impressed with merit.
The invariable rule set by the Court in reviewing administrative decisions of the Executive Branch of the
Government is that the findings of fact made therein are respected, so long as they are supported by
22
substantial evidence, even if not overwhelming or preponderant; that it is not for the reviewing court to
weigh the conflicting evidence, determine the credibility of the witnesses or otherwise substitute its own
23
judgment for that of the administrative agency on the sufficiency of the evidence; that the administrative
decision in matters within the executive's jurisdiction can only be set aside upon proof of gross abuse of
24
discretion, fraud, or error of law.

The questioned decision of the Labor Arbiter reads:

Focusing the spotlight of judicious scrutiny on the evidence on record and the arguments
of both parties, it is our well-discerned opinion that the petitioners are not regular and
permanent workers of the respondents. The very nature of the terms and conditions of
their hiring reveal that the petitioners were required to perform p of cultural work for a
definite period, after which their services are available to any farm owner. We cannot
share the arguments of the petitioners that they worked continuously the whole year
round for twelve hours a day. This, we feel, is an exaggeration which does not deserve
any serious consideration inasmuch as the plan of rice and sugar cane does not entail a
whole year operation, the area in question being comparatively small. It is noteworthy
that the findings of the Chief of the Special Task Force of the Regional Office are similar
to this.
In fact, the sworn statement of one of the petitioners Fortunato Mercado, Jr., the son of
spouses Fortunato Mercado, Sr. and Rosa Mercado, indubitably shows that said
petitioners were only hired as casuals, on-and-off basis. With this kind of relationship
between the petitioners and the respondent Aurora Cruz, we feel that there is no basis in
law upon which the claims of the petitioners should be sustained, more specially their
complaint for illegal dismissal. It is within the prerogative of respondent Aurora Cruz
either to take in the petitioners to do further work or not after any single phase of
agricultural work has been completed by them. We are of the opinion that the real cause
which triggered the filing of this complaint by the petitioners who are related to one
another, either by consanguinity or affinity was due to the filing of a criminal complaint by
the respondent Aurora Cruz against Reynaldo Mercado, son of spouses Fortunato
Mercado, Sr. and Rosa Mercado. In April 1979, according to Jesus David, Zone
Chairman of the locality where the petitioners and respondent reside, petitioner Fortunato
Mercado, Sr. asked for help regarding the case of his son, Reynaldo, to talk with
respondent Aurora Cruz and the said Zone Chairman also stated under oath that the
petitioners were never regularly employed by respondent Aurora Cruz but were on-and25
off hired to work to render services when needed.
A careful examination of the foregoing statements reveals that the findings of the Labor Arbiter in the
case are ably supported by evidence. There is, therefore, no circumstance that would warrant a reversal
of the questioned decision of the Labor Arbiter as affirmed by the National Labor Relations Commission.
The contention of petitioners that the second paragraph of Article 280 of the Labor Code should have
been applied in their case presents an opportunity to clarify the afore-mentioned provision of law.
Article 280 of the Labor Code reads in full:
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.
The first paragraph answers the question of who are 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
26
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
fan 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
27
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
28
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
29
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 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 season. The termination of their
30
employment cannot and should not constitute an illegal dismissal.
WHEREFORE, the petition is DISMISSED. The decision of the National Labor Relations Commission
affirming that of the Labor Arbiter, under review, is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

SECOND DIVISION

[G.R. No. 150478. April 15, 2005]

HACIENDA BINO/HORTENCIA STARKE, INC./HORTENCIA L. STARKE, petitioners, vs. CANDIDO

CUENCA, FRANCISCO ACULIT, ANGELINA ALMONIA, DONALD ALPUERTO, NIDA
BANGALISAN, ROGELIO CHAVEZ, ELMO DULINGGIS, MERCEDES EMPERADO, TORIBIO
EMPERADO, JULIANA ENCARNADO, REYNALDO ENCARNADO, GENE FERNANDO,
JOVEN FERNANDO, HERNANI FERNANDO, TERESITA FERNANDO, BONIFACIO GADON,
JOSE GALLADA, RAMONITO KILAYKO, ROLANDO KILAYKO, ALFREDO LASTIMOSO,
ANTONIO LOMBO, ELIAS LOMBO, EMMA LOMBO, LAURENCIA LOMBO, LUCIA LOMBO,
JOEL MALACAPAY, ADELA MOJELLO, ERNESTO MOJELLO, FRUCTOSO MOJELLO,
JESSICA MOJELLO, JOSE MOJELLO, MARITESS MOJELLO, MERLITA MOJELLO, ROMEO
MOJELLO, RONALDO MOJELLO, VALERIANA MOJELLO, JAIME NEMENZO, RODOLFO
NAPABLE, SEGUNDIA OCDEN, JARDIOLINA PABALINAS, LAURO PABALINAS, NOLI
PABALINAS, RUBEN PABALINAS, ZALDY PABALINAS, ALFREDO PANOLINO, JOAQUIN
PEDUHAN, JOHN PEDUHAN, REYNALDO PEDUHAN, ROGELIO PEDUHAN, JOSEPHINE
PEDUHAN, ANTONIO PORRAS, JR., LORNA PORRAS, JIMMY REYES, ALICIA ROBERTO,
MARCOS ROBERTO, JR., MARIA SANGGA, RODRIGO SANGGA, ARGENE SERON,
SAMUEL SERON, SR., ANGELINO SENELONG, ARMANDO SENELONG, DIOLITO
SENELONG, REYNALDO SENELONG, VICENTE SENELONG, FEDERICO STA. ANA,

ROGELIO SUASIM, EDNA TADLAS, ARTURO TITONG, JR., JOSE TITONG, JR., NANCY
VINGNO, ALMA YANSON, JIMMY YANSON, MYRNA VILLANUEVA BELENARIO,
SALVADOR MALACAPAY, and RAMELO TIONGCO, respondents.
DECISION
CALLEJO, SR., J.:
[1]

Before us is a petition for review of the Decision 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,
[2]
weeding, harvesting, and loading of harvested sugarcanes to cargo trucks.
On July 18, 1996, during the off-milling season, petitioner Starke issued an Order or Notice which
stated, thus:
To all Hacienda Employees:
Please bear in mind that all those who signed in favor of CARP are expressing
their desire to get out of employment on their own volition.
Wherefore, beginning today, July 18, only those who did not sign for CARP will
be given employment by Hda. Bino.
Hortencia Starke

(Sgd.)

[3]

The respondents regarded such notice as a termination of their employment. As a consequence,

th
they filed a complaint for illegal dismissal, wage differentials, 13 month pay, holiday pay and premium
pay for holiday, service incentive leave pay, and moral and exemplary damages with the NLRC, Regional
[4]
Arbitration Branch No. VI, Bacolod City, on September 17, 1996.
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
[5]
Comprehensive Agrarian Reform Program (CARP) over the land owned by petitioner Starke.
For her part, petitioner Starke recounted that the companys 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.
[6]

On October 6, 1997, Labor Arbiter Ray Allan T. Drilon rendered a Decision, finding that petitioner
Starkes 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; and
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.
respondents appealed the case to the CA where the following issues were raised:

[9]

Dissatisfied, the

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
[10]
BACKWAGES AND HOLIDAY PAY WITHOUT ANY BASIS.
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
[13]
ruling in Mercado, Sr. v. NLRC 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.
[14]

The CA also held that the petitioners reliance on Bacolod-Murcia Milling Co. Inc. v. NLRC
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 employeremployee 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
[15]
NLRC on this point.
On September 24, 2001, the CA denied the motion for reconsideration filed by the petitioners due to
[16]
their failure to indicate the date of the receipt of the decision to determine the timeliness of the motion.
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
[17]
RECONSIDERATION.
Petitioner Starke contends that the established doctrine that seasonal employees are regular
[18]
employees had been overturned and abandoned by Mercado, Sr. v. NLRC. 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
[19]
Purposes, which recognizes the seasonal nature of the work in the sugar industry.
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
[20]
have considered the motion for reconsideration despite such procedural lapse.
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
[21]
court must deny the motion outright.
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
[22]
adhere to that principle and apply it to all future cases in which the facts are substantially the same.
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
[23]
introduced.
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
[24]
case. In Abasolo v. NLRC, and earlier, in Philippine Tobacco Flue-Curing & Redrying Corporation v.
[25]
NLRC, 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
[26]
owners.

Recently, the Court reiterated the same observations in Hacienda Fatima v. National Federation of
[27]
Sugarcane Workers-Food and General Trade 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
[28]
particular activity performed by the employee in relation to the usual trade or business of the employer.
There is no doubt that the respondents were performing work necessary and desirable in the usual trade
or business of an employer. 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
[29]
duration of one season. While the records sufficiently show that the respondents work in the hacienda
was seasonal in nature, there was, however, no proof that they were hired for the duration of one season
[30]
only. In fact, the payrolls, 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
[31]
his employees dismissal.
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
[32]
left without any other recourse.
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.

[G.R. No.

149440. January 28, 2003]

HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS and CRISTINE SEGURA,
petitioners, vs. NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND
GENERAL TRADE, respondents.
DECISION
PANGANIBAN, J.:
Although the employers have shown that respondents performed work that was seasonal in nature,
they failed to prove that the latter worked only for the duration of one particular season. In fact,
petitioners do not deny that these workers have served them for several years already. Hence, they are
regular -- not seasonal -- employees.

The Case
Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside
xiii
the February 20, 2001 Decision of the Court of Appeals (CA) in CA-GR SP No. 51033. The dispositive
part of the Decision reads:
WHEREFORE, premises considered, the instant special civil action for certiorari is hereby
xiii
DENIED.
On the other hand, the National Labor Relations Commission (NLRC) Decision,
disposed in this wise:

xiii

upheld by the CA,

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET
ASIDE and VACATED and a new one entered declaring complainants to have been illegally
dismissed. Respondents are hereby ORDERED to reinstate complainants except Luisa
Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva to their previous position and to pay
full backwages from September 1991 until reinstated. Respondents being guilty of unfair labor
practice are further ordered to pay complainant union the sum of P10,000.00 as moral damages
xiii
and P5,000.00 as exemplary damages.

The Facts
The facts are summarized in the NLRC Decision as follows:
Contrary to the findings of the Labor Arbiter that complainants [herein respondents]
refused to work and/or were choosy in the kind of jobs they wanted to perform, the records is
replete with complainants persistence and dogged determination in going back to work.
Indeed, it would appear that respondents did not look with favor workers having organized
themselves into a union. Thus, when complainant union was certified as the collective
bargaining representative in the certification elections, respondents under the pretext that the
result was on appeal, refused to sit down with the union for the purpose of entering into a
collective bargaining agreement. Moreover, the workers including complainants herein were not
given work for more than one month. In protest, complainants staged a strike which was
however settled upon the signing of a Memorandum of Agreement which stipulated among
others that:
a)
The parties will initially meet for CBA negotiations on the 11th day of
January 1991 and will endeavor to conclude the same within thirty (30) days.
b)
The management will give priority to the women workers who are
members of the union in case work relative x x x or amount[ing] to gahit and [dipol]
arises.
c)
Ariston Eruela Jr. will be given back his normal work load which is six
(6) days in a week.
d)
The management will provide fifteen (15) wagons for the workers and
that existing workforce prior to the actual strike will be given priority. However, in case
the said workforce would not be enough, the management can hire additional workers
to supplement them.
e)
The management will not anymore allow the scabs, numbering about
eighteen (18) workers[,] to work in the hacienda; and
f)
agreement.

The union will immediately lift the picket upon signing of this

However, alleging that complainants failed to load the fifteen wagons, respondents
reneged on its commitment to sit down and bargain collectively. Instead, respondent employed
all means including the use of private armed guards to prevent the organizers from entering the
premises.
Moreover, starting September 1991, respondents did not any more give work assignments
to the complainants forcing the union to stage a strike on January 2, 1992. But due to the
conciliation efforts by the DOLE, another Memorandum of Agreement was signed by the
complainants and respondents which provides:

Whereas the union staged a strike against management on January 2, 1992

grounded on the dismissal of the union officials and members;
Whereas parties to the present dispute agree to settle the case amicably once
and for all;
Now therefore, in the interest of both labor and management, parties herein
agree as follows:
1.
That the list of the names of affected union members hereto attached
and made part of this agreement shall be referred to the Hacienda payroll of 1990 and
determine whether or not this concerned Union members are hacienda workers;
2.
That in addition to the payroll of 1990 as reference, herein parties will
use as guide the subjects of a Memorandum of Agreement entered into by and
between the parties last January 4, 1990;
3.
That herein parties can use other employment references in support of
their respective claims whether or not any or all of the listed 36 union members are
employees or hacienda workers or not as the case may be;
4.
That in case conflict or disagreement arises in the determination of the
status of the particular hacienda workers subject of this agreement herein parties
further agree to submit the same to voluntary arbitration;
5.
To effect the above, a Committee to be chaired by Rose Mengaling is
hereby created to be composed of three representatives each and is given five
working days starting Jan. 23, 1992 to resolve the status of the subject 36 hacienda
workers. (Union representatives: Bernardo Torres, Martin Alas-as, Ariston Arulea
Jr.)
Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation
Meeting showed as follows:
The meeting started at 10:00 A.M. A list of employees was submitted by Atty.
th
Tayko based on who received their 13 month pay. The following are deemed not
considered employees:
1.

Luisa Rombo

2.

Ramona Rombo

3.

Bobong Abrega

4.

Boboy Silva

The name Orencio Rombo shall be verified in the 1990 payroll.

The following employees shall be reinstated immediately upon availability of
work:
1.

Jose Dagle

7.

Alejandro Tejares

2.

Rico Dagle

8.

Gaudioso Rombo

3.

Ricardo Dagle

9.

Martin Alas-as Jr.

4.

Jesus Silva

10.

Cresensio Abrega

5.

Fernando Silva 11.

Ariston Eruela Sr.

6.

Ernesto Tejares 12.

Ariston Eruela Jr.

When respondents again reneged on its commitment, complainants filed the present
complaint.
But for all their persistence, the risk they had to undergo in conducting a strike in the face
of overwhelming odds, complainants in an ironic twist of fate now find themselves being
xiii
accused of refusing to work and being choosy in the kind of work they have to perform.
(Citations omitted)

Ruling of the Court of Appeals

The CA affirmed that while the work of respondents was seasonal in nature, they were considered to
be merely on leave during the off-season and were therefore still employed by petitioners. Moreover, the
workers enjoyed security of tenure. Any infringement upon this right was deemed by the CA to be
tantamount to illegal dismissal.
The appellate court found neither rhyme nor reason in petitioners argument that it was the workers
themselves who refused to or were choosy in their work. As found by the NLRC, the record of this case
xiii
is replete with complainants persistence and dogged determination in going back to work.
The CA likewise concurred with the NLRCs finding that petitioners were guilty of unfair labor
practice.
Hence this Petition.

xiii

Issues
Petitioners raise the following issues for the Courts consideration:
A. Whether or not the Court of Appeals erred in holding that respondents, admittedly seasonal
workers, were regular employees, contrary to the clear provisions of Article 280 of the Labor
Code, which categorically state that seasonal employees are not covered by the definition of
regular employees under paragraph 1, nor covered under paragraph 2 which refers
exclusively to casual employees who have served for at least one year.
B. Whether or not the Court of Appeals erred in rejecting the ruling in Mercado, xxx, and relying
instead on rulings which are not directly applicable to the case at bench, viz, Philippine
Tobacco, Bacolod-Murcia, and Gaco, xxx.
C. Whether or not the Court of Appeals committed grave abuse of discretion in upholding the
NLRCs conclusion that private respondents were illegally dismissed, that petitioner[s were]
guilty of unfair labor practice, and that the union be awarded moral and exemplary
xiii
damages.
Consistent with the discussion in petitioners Memorandum, we shall take up Items A and B as the
first issue and Item C as the second.

The Courts Ruling

The Petition has no merit.

First Issue:
Regular Employment
At the outset, we must stress that only errors of law are generally reviewed by this Court in petitions
xiii
xiii
for review on certiorari of CA decisions. Questions of fact are not entertained. The Court is not a trier
xiii
of facts and, in labor cases, this doctrine applies with greater force. Factual questions are for labor
xiii
tribunals to resolve. In the present case, these have already been threshed out by the NLRC. Its
findings were affirmed by the appellate court.
Contrary to petitioners contention, the CA did not err when it held that respondents were regular
employees.
Article 280 of the Labor Code, as amended, 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 exist. (Italics supplied)
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 also been employed only for
the duration of one season. The evidence proves the existence of the first, but not of the second,
condition. The fact that respondents -- with the exception of Luisa Rombo, Ramona Rombo, Bobong
Abriga and Boboy Silva -- repeatedly worked as sugarcane workers for petitioners for several years is not
denied by the latter. Evidently, petitioners employed respondents for more than one season. Therefore,
the general rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission,

xiii

the Court issued this clarification:

[T]he test of whether or not an employee is a regular employee has been laid down in De
Leon v. NLRC, in which this Court held:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former
is usually necessary or desirable in the usual trade or business of the employer. The
connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least a year, even if the performance is
not continuous and merely intermittent, the law deems repeated and continuing need
for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with
respect to such activity and while such activity exists.
xxx

xxx

xxx

x x x [T]he fact that [respondents] do not work continuously for one whole year but only for
the duration of the x x x 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
xiii
service in said period, but merely considered on leave until re-employed.
xiii

The CA did not err when it ruled that Mercado v. NLRC was not applicable to the case at bar. In
the earlier case, the workers were required to perform phases of agricultural work for a definite period of
time, after which their services would be available to any other farm owner. They were not hired regularly
and repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof. On
the other hand, herein respondents, having performed the same tasks for petitioners every season for
several years, are considered the latters regular employees for their respective tasks. Petitioners
eventual refusal to use their services -- even if they were ready, able and willing to perform their usual
duties whenever these were available -- and hiring of other workers to perform the tasks originally
assigned to respondents amounted to illegal dismissal of the latter.
The Court finds no reason to disturb the CAs dismissal of what petitioners claim was their valid
exercise of a management prerogative. The sudden changes in work assignments reeked of bad faith.
These changes were implemented immediately after respondents had organized themselves into a union
and started demanding collective bargaining. Those who were union members were effectively deprived
of their jobs. Petitioners move actually amounted to unjustified dismissal of respondents, in violation of
the Labor Code.
Where 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
xiii
termination was for a valid and authorized cause. In the case at bar, petitioners failed to prove any
such cause for the dismissal of respondents who, as discussed above, are regular employees.

Second Issue:
Unfair Labor Practice
The NLRC also found herein petitioners guilty of unfair labor practice. It ruled as follows:
Indeed, from respondents refusal to bargain, to their acts of economic inducements
resulting in the promotion of those who withdrew from the union, the use of armed guards to
prevent the organizers to come in, and the dismissal of union officials and members, one cannot
but conclude that respondents did not want a union in their haciendaa clear interference in
xiii
the right of the workers to self-organization.
We uphold the CAs affirmation of the above findings. Indeed, factual findings of labor officials, who
are deemed to have acquired expertise in matters within their respective jurisdictions, are generally
xiii
accorded not only respect but even finality. Their findings are binding on the Supreme Court. Verily,
their conclusions are accorded great weight upon appeal, especially when supported by substantial
xiii
evidence. Consequently, the Court is not duty-bound to delve into the accuracy of their factual findings,
xiii
in the absence of a clear showing that these were arbitrary and bereft of any rational basis.
The finding of unfair labor practice done in bad faith carries with it the sanction of moral and
xiii
exemplary damages.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. Nos. 82643-67 August 30, 1990
PHILIPPINE GEOTHERMAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TEODULO C. CUEBILLAS, ARMANDO CILOT,
MARIANO CORULLO, YOLANDA CAL, EFREN CLERIGO, FELICISSIMO VARGAS, et al.,
respondents.
Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles for petitioner.
Napoleon Banzuela, Jr. for private respondents.

PARAS, J.:
This is a petition for review on certiorari seeking to annul and set aside; (a) the Resolution of the National
Labor Relations Commission * dated November 9, 1987 in Labor Cases Nos. RAB-403-85 to 427-85 and

RAB Nos. 0392-85 to 0393-85 entitled Teodulo C. Cuebillas, et. al. vs. Philippine Geothermal, Inc. et al.
and Efren N. Clerigo et. al. vs. Phil. Geothermal Inc. respectively which declared respondent employees
as regular and permanent employees of petitioner company and ordered their reinstatement and (b) the
Resolution dated March 9,1988 which denied the Motion for Reconsideration.
The facts of the case are as follows:
Petitioner Philippine Geothermal, Inc. is a U.S. corporation engaged in the exploration and development
of geothermal energy resources as an alternative source of energy. It is duly authorized to engage in
business in the Philippines and at present is the prime contractor of the National Power Corporation at the
1
latter's operation of the Tiwi, Albay and the Makiling-Banahaw Geothermal Projects.
Private respondents, on the other hand, are employees of herein petitioner occupying various positions
ranging from carpenter to Clerk II who had worked with petitioner company under individual contracts,
categorized as contractual employment, for a period ranging from fifteen (15) days to three (3) months.
These contracts were regularly renewed to the extent that individual private respondents had rendered
service from three (3) to five (5) years until 1983 and 1984 when petitioner started terminating their
employment by not renewing their individual contracts. Subsequently petitioner entered into job
contracting agreement with Dra. Generosa Gonzales who supplies it with skilled
2
manpower.
Sometime in July 1983, herein private respondents organized a separate labor union in view of their
exclusion in the bargaining unit of the regular rank and file employees represented by the Federation of
Free Workers. In August 1983, they filed a petition for certification election with the Ministry of Labor and
Employment, NCR, docketed as Case No. NCD-LRD-8-242-84. Because of this, herein petitioner
allegedly started harassing them and replaced them with so called "contract workers". Thus, complainant
union and herein respondent employees filed a case for illegal lock-out and unfair labor practice,
docketed as Case No. 1420-83 and the instant consolidated cases RAB Case Nos. 0403-85 to 427-85
and RAB Cases Nos. 0392-85 to 0393-85, involving 26 workers, for unfair labor practice and/or illegal
3
dismissal, reinstatement backwages and service incentive.
On March 3, 1987, Labor Arbiter Voltaire A. Balitaan rendered a decision in favor of the respondents the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioners and they are
hereby declared regular and permanent employees of the respondent and finding their
dismissal from the service illegal, respondent is ordered to reinstate them to their former
positions without loss of seniority rights and with one year backwages without
qualification or deduction in the amount of P590,021.76.
SO ORDERED.

On Appeal, the National Labor Relations Commission on November 9, 1987 rendered a decision
5
dismissing the appeal and affirming the decision of the Labor Arbiter. A motion for reconsideration was
6
denied on March 9, 1988 for lack of merit.
Hence, this petition which was filed on April 22, 1988.
In the meantime, a writ of execution was issued by Executive Arbiter Gelacio L. Rivera, Jr. on April 11,
1988 on the ground that no appeal was interposed hence the decision of the Labor Arbiter had become
7
final and executory.

On April 20, 1988, petitioner filed a motion for the issuance of a Temporary Restraining Order as the
Sheriff tried to enforce the Writ of Execution dated April 11, 1988 against petitioner on April 18, 1988.
They further alleged that they are ready, willing and able to post a supersedeas bond to answer for
8
damages which respondents may suffer.
On June 29, 1988, this Court issued a Temporary Restraining Order enjoining respondents from
enforcing the Resolution dated November 9, 1987, any writ of execution or notice of garnishment issued
in RAB Cases Nos. 0403-85 to 427-85 and RAB Cases Nos. 0392-85 to 393-85 of the National Labor
9
Relations Commission, Department of Labor and Employment.
On April 17, 1989, this Court resolved to dismiss the petition for failure to sufficiently show that the
respondent commission had committed grave abuse of discretion in rendering the questioned judgment
10
and lifted the Temporary Restraining Order issued on June 29, 1988. A motion for reconsideration was
11
filed by petitioner on May 25, 1989.
On June 5, 1989, this Court granted the motion; and set aside the resolution dated April 17, 1989; gave
due course to the petition and required the patties to submit simultaneously, their respective memoranda.
12

13

Private respondents filed their memorandum on August 8, 1989 while public respondent filed its
14
15
memorandum on September 1, 1989. Petitioner filed its memorandum on September 8, 1989.
The main issue in the case at bar is whether or not private respondents may be considered regular and
permanent employees due to their length of service in the company despite the fact that their employment
is on contractual basis.
Petitioner alleges that it engaged the services of private respondents on a monthly basis to ensure that
manpower would be available when and where needed. Private respondents were fully aware of the
nature of their employment as this was clearly spelled out in the employment contracts. What happened
to them was not a case of unwarranted dismissal but simply one of expiration of the tenure of
employment contracts and the completion of the phase of the project for which their services were hired.
16

In the recent case of Kimberly Independent Labor Union for Solidarity, Activism, and Nationalism-Olalia
vs. Hon. Franklin M. Drilon, G.R. Nos. 77629 and 78791 promulgated last May 9, 1990, this Court
classified the two kinds of regular employees, as: 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 (1) year of service, whether continuous or broken with respect to the activity in
which they are employed. While the actual regularization of these employees entails the mechanical act
of issuing regular appointment papers and compliance with such other operating procedures, as may be
adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of
regular employment attaches to the casual employee on the day immediately after the end of his first year
of service.
Assuming therefore, that an employee could properly be regarded as a casual (as distinguished from a
regular employee) he becomes entitled to be regarded as a regular employee of the employer as soon as
he has completed one year of service. Under the circumstances, employers may not terminate the service
of a regular employee except for a just cause or when authorized under the Labor Code. It is not difficult
to see that to uphold the contractual arrangement between the employer and the employee would in
effect be to permit employers to avoid the necessity of hiring regular or permanent employees indefinitely
on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor
17
Code is precisely designed to prevent such result.

18

It is the policy of the state to assure the right of workers to "security of tenure." The guarantee is an act
of social justice. When a person has no property, his job may possibly be his only possession or means of
livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. Article 280 of the
Labor Code has construed "security of tenure" as meaning that "the employer shall not terminate the
19
services of the employee except for a just cause or when authorized by the Code."
PREMISES CONSIDERED, the decision of the National Labor Relations Commission is hereby
AFFIRMED and the Temporary Restraining Order issued on June 29, 1988 is hereby LIFTED
permanently.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-68147 June 30, 1988
AMADA RANCE, MERCEDES LACUESTA, MELBA GUTIERREZ, ESTER FELONGCO, CATALINO
ARAGONES, CONSOLACION DE LA ROSA, AMANCIA GAY, EDUARDO MENDOZA, ET AL.,
petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, POLYBAG MANUFACTURING
CORPORATION, VIRGINIA MALLARI, JOHNNY LEE, ROMAS VILLAMIN, POLYBAG WORKERS
UNION, PONCIANO FERNANDEZ, AND ANTONIO ANTIQUERA, respondents.

PARAS, J.:
A review of the records shows that a Collective Bargaining Agreement was entered into on April 30, 1981
by and between respondents Polybag Manufacturing Corporation and Polybag Workers Union which
provides among others:

ARTICLE V
UNION SECURITY
Any employee within the bargaining agreement who is a member of the union at the time
of the effectivity of this agreement or becomes a member of the UNION thereafter, shall
during the term thereof or any extention, continue to be a member in good standing of the
UNION as a condition of continued employment in the COMPANY.
Any employee hired during the effectivity of this agreement shall, within 30 days after
becoming regular join the UNION and continue to be a member in good standing thereof
as a condition of continued employment in the COMPANY.
On the basis of a board resolution of the UNION, the COMPANY shall dismiss from the
service any member of the UNION who loses his membership in good standing either by
resignation therefrom or expulsion therefrom for any of the following causes:
1. Disloyalty to the UNION;
2. Commission of acts inimical to the interest of the UNION;
3. Failure and refusal to pay UNION dues and other assessments;
4. Conviction for any offense or crime; or
5. Organizing and/or joining another labor organization claiming jurisdiction similar to that
of the UNION.
Provided, however, that in case expulsion proceedings are instituted against any member
of the UNION, pending such proceedings, the COMPANY, on the basis of a board
resolution of the UNION, shall suspend the member concerned; and provided further, that
the UNION, jointly and severally with the officers and members of the board voting for the
dismissal or suspension, shall hold and render the COMPANY, its executive, owners, and
officers free from any and all claims and liabilities. (Rollo, p. 64).
Petitioners herein were among the members of the respondent union who were expelled by the latter for
disloyalty in that they allegedly joined the NAFLU a large federation. Because of the expulsion,
petitioners were dismissed by respondent Corporation. Petitioners sued for reinstatement and backwages
stating their dismissal was without due process. Losing both in the decisions of the Labor Arbiter and the
National Labor Relations Commission (NLRC), they elevated their cause to the Supreme Court.
Respondent Polybag Workers Union as already stated expelled 125 members on the ground of disloyalty
and acts inimical to the interests of the Union (Resolution No. 84, series of 1982, Rollo, p. 16) based on
the findings and recommendations of the panel of investigators. Both the Labor Arbiter and the NLRC
found the Collective Bargaining Agreement and the "Union Security Clause" valid and considered the
termination of the petitioners justified thereunder, for having committed an act of disloyalty to the Polybag
Workers Union by having affiliated with and having joined the NAFLU, another labor union claiming
jurisdiction similar to the former, while still members of respondent union (Rollo, pp. 45-46).
Among the disputed portions of the NLRC decision is its finding that it has been substantially proven that
the petitioners committed acts of disloyalty to their union as a consequence of the filing by NAFLU for and
in their behalf of the complaint in question (Rollo, p. 46).

Petitioners insist that their expulsion from the Union and consequent dismissal from employment have no
basis whether factual or legal, because they did not in fact affiliate themselves with another Union, the
NAFLU. On the contrary, they claim that there is a connivance between respondents Company and Union
in their illegal dismissal in order to avoid the payment of separation pay by respondent company.
Petitioners' contention that they did not authorize NAFLU to file NLRC-AB Case No. 6-4275-82 for them is
borne out by the records which show that they did not sign the complaint, neither did they sign any
document of membership application with NAFLU (Rollo, p. 323). Significantly, none of private
respondents was able to present any evidence to the contrary except for one employee who admitted
having authorized NAFLU to file the complaint but only for the purpose of questioning the funds of the
Union (Rollo, p. 216).
Placed in proper perspective, the mere act of seeking help from the NAFLU cannot constitute disloyalty
as contemplated in the Collective Bargaining Agreement. At most it was an act of self-preservation of
workers who, driven to desperation found shelter in the NAFLU who took the cudgels for them.
It will be recalled that 460 employees were temporarily laid off; some were laid-off as early as March 22,
1982 although the actual official announcement and notice of the intended shutdown was made only on
May 27, 1982 (Rollo, p. 151). The laid-off employees did not receive any separation pay because as
alleged by respondent company their dismissal was due to serious business reverses suffered by it. The
only aid offered by the company which was offered when the disgruntled employees began to discuss
among themselves their plight, was a 1/2 sack of rice monthly and P 50.00 weekly. Most of the
employees did not avail themselves of the aid as those who did were allegedly made to sign blank
papers. To aggravate matters, petitioners complained that their pleas for their union officers to fight for
their right to reinstatement, fell on deaf ears. Their union leaders continued working and were not among
those laid-off, which explains the lack of positive action on the part of the latter to help or even
sympathize with the plight of the members. All they could offer was a statement "marunong pa kayo sa
may-ari ng kumpanya" ("you know more than the company owners") (Rollo, p. 80). Under the
circumutances, petitioners cannot be blamed for seeking help wherever it could be found.
In fact even assuming that petitioners did authorize NAFLU to file the action for them, it would have been
pointless because NAFLU cannot file an action for members of another union. The proper remedy would
be to drop the union as party to the action and place the names of the employees instead (Lakas v.
Marcelo Enterprises, 118 SCRA 422 [1982]) as what appears to have been done in this case before the
Court.
Petitioners claim that the NLRC erred in ruling that the expulsion proceeding conducted by the Union was
in accordance with its by-laws. Respondent Union had notified and summoned herein petitioners to
appear and explain why they should not be expelled from the union for having joined and affiliated with
NAFLU.
Petitioners contend that the requisites of due process were not complied with in that, there was no
impartial tribunal or union body vested with authority to conduct the disciplinary proceeding under the
union constitution and by-laws, and, that complainants were not furnished notice of the charge against
them, nor timely notices of the hearings on the same (Rollo, p. 48).
According to the minutes of the special meeting of the Board of Directors of respondent Union held on
September 14, 1982, the Chairman of the Board of Directors showed the members of the board, copies of
the minutes of the investigation proceedings of each individual member, together with a consolidated list
of Union members found guilty as charged and recommended for expulsion as members of the
respondent Union. The Board members examined the minutes and the list (Rollo, p. 219).

It is to be noted, however, that only two (2) of the expelled petitioners appeared before the investigation
panel (Rollo, pp. 203, 235). Most of the petitioners boycotted the investigation proceedings. They alleged
that most of them did not receive the notice of summons from respondent Union because they were in the
provinces. This fact was not disproved by private respondents who were able to present only a sample
copy of proof of service, Annex "14" (Rollo, p. 215). Petitioners further claim that they had no Idea that
they were charged with disloyalty; those who came were not only threatened with persecution but also
made to write the answers to questions as dictated to them by the Union and company representatives.
These untoward incidents prompted petitioners to request for a general investigation with all the
petitioners present but their request was ignored by the panel of investigators (Rollo, pp. 280, 307).
Again, these allegations were not denied by private respondents.
In any event, even if petitioners who were complainants in NLRC-AB Case No. 6-4275-82 appeared in
the supposed investigation proceedings to answer the charge of disloyalty against them, it could not have
altered the fact that the proceedings were violative of the elementary rule of justice and fair play. The
Board of Directors of respondent union would have acted as prosecutor, investigator and judge at the
same time. The proceeding would have been a farce under the circumstances (Lit Employees Association
v. Court of Industrial Relations, 116 SCRA 459 [1982] citing Kapisanan ng Mga Manggagawa sa MRR v.
Rafael Hernandez, 20 SCRA 109). The filing of the charge of disloyalty against petitioners was instigated
by the Chairman of the Board of Directors and Acting Union President, Ponciano Fernandez, in the
special meeting of the members of the Board of Directors as convened by the Union President on August
16, 1982 (Rollo, p. 213). The Panel of Investigators created under the Board's Resolution No. 83, s. 1982
was composed of the Chairman of the Board, Ponciano Fernandez, and two (2) members of the Board,
Samson Yap and Carmen Garcia (Rollo, p. 214). It is the same Board that expelled its 125 members in its
Resolution No. 84, s. of 1982 (Rollo, p. 219).
All told, it is obvious, that in the absence of any full blown investigation of the expelled members of the
Union by an impartial body, there is no basis for respondent Union's accusations.
It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of the
New Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice.
When a person has no property, his job may possibly be his only possession or means of livelihood.
Therefore, he should be protected against any arbitrary deprivation of his job. Article 280 of the Labor
Code has construed security of tenure as meaning that "the employer shall not terminate the services of
an employee except for a just cause or when authorized by" the code (Bundoc v. People's Bank and Trust
Company, 103 SCRA 599 [1981]). Dismissal is not justified for being arbitrary where the workers were
denied due process (Reyes v. Philippine Duplicators, Inc., 109 SCRA 489 [1981] and a clear denial of
due process, or constitutional right must be safeguarded against at all times, (De Leon v. National Labor
Relations Commission, 100 SCRA 691 [1980]). This is especially true in the case at bar where there were
125 workers mostly heads or sole breadwinners of their respective families.
Time and again, this Court has reminded employers that while the power to dismiss is a normal
prerogative of the employer, the same is not without limitations. The employer is bound to exercise
caution in terminating the services of his employees especially so when it is made upon the request of a
labor union pursuant to the Collective Bargaining Agreement, as in the instant case. Dismissals must not
be arbitrary and capricious. Due process must be observed in dismissing an employee because it affects
not only his position but also his means of livelihood. Employers should, therefore, respect and protect
the rights of their employees, which include the right to labor (Liberty Cotton Mills Workers Union v.
Liberty Cotton Mills, Inc., 90 SCRA 393 [1979], Resolution).
In the case at bar, the scandalous haste with which respondent corporation dismissed 125 employees
lends credence to the claim that there was connivance between respondent corporation and respondent
Union. It is evident that private respondents were in bad faith in dismissing petitioners. They, the private
respondents, are guilty of unfair labor practice.

PREMISES CONSIDERED, (1) the decision of respondent National Labor Relations Commission in
NLRC-NCR-11-6881-82 dated April 26, 1984 is REVERSED and SET ASIDE; and (2) respondent
corporation is ordered: (1) to reinstate petitioners to their former positions without reduction in rank,
seniority and salary; (b) to pay petitioners three-year backwages, without any reduction or qualification,
jointly and solidarily with respondent Union; and (c) to pay petitioners exemplary damages of P500.00
each. Where reinstatement is no longer feasible, respondent corporation and respondent union are
solidarily ordered to pay, considering their length of service their corresponding separation pay and other
benefits to which they are entitled under the law.
SO ORDERED.

THIRD DIVISION

[G.R. No. 112096. January 30, 1996]

MARCELINO B. AGOY, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, EUREKA

PERSONNEL MANAGEMENT SERVICES, INC., ET. AL., respondents.
SYLLABUS
1.

REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE BODIES; RULE;

EXCEPTION. - This Court has consistently adhered to the rule that in reviewing administrative
decisions such as those rendered by the NLRC, the findings of fact made therein are to be accorded
not only great weight and respect, but even finality, for as long as they are supported by substantial
evidence. It is not the function of the Court to once again review and weigh the conflicting evidence,
determine the credibility of the witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of the evidence. Nevertheless, when the inference made or
the conclusion drawn on the basis of certain state of facts is manifestly mistaken, the Court is not
estopped from exercising its power of review.

2.

LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; PROBATIONARY

EMPLOYEES; ENTITLED TO SECURITY OF TENURE; GROUNDS FOR TERMINATION. Probationary employees, notwithstanding their limited tenure, are also entitled to security of tenure.
Thus, except for just cause as provided by law or under the employment contract, a probationary

employee cannot be terminated. As explicitly provided under Article 281 of the Labor Code, a
probationary employee may be terminated on two grounds: (a) for just cause or (b) when he fails to
qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement.
3.

ID.; ID.; ID.; EMPLOYERS OBLIGATION TO INFORM THE PROBATIONARY EMPLOYEE

REGARDING THE STANDARDS OR REQUIREMENTS THAT MUST BE COMPLIED WITH IN
ORDER TO BECOME A REGULAR EMPLOYEE; NOT COMPLIED WITH IN CASE AT BAR. - The
record is bereft of any evidence to show that respondent employer ever conveyed to petitioneremployee the standards or requirements that he must comply with in order to become a regular
employee. In fact, petitioner has consistently denied that he was even given the chance to qualify for
the position for which he was contracted. Private respondent Al-Khodaris general averments
regarding petitioners failure to meet its standards for regular employment, which were not even
corroborated by any other evidence, are insufficient to justify petitioners dismissal.

4.

ID.; ID.; QUITCLAIMS, WAIVERS OR RELEASES; DISFAVORED. - In our jurisprudence,

quitclaims, waivers or releases are looked upon with disfavor, particularly those executed by
employees who are inveigled or pressured into signing them by unscrupulous employers seeking to
evade their legal responsibilities. The fact that petitioner signed his notice of termination and failed to
make any outright objection thereto did not altogether mean voluntariness on his part. Neither did the
execution of a final settlement and receipt of the amounts agreed upon foreclose his right to pursue a
legitimate claim for illegal dismissal. Expounding on the reasons therefor, the following
pronouncements are in point: In labor jurisprudence, it is well established that quitclaims and/or
complete releases executed by the employees do not estop them from pursuing their claims arising
from the unfair labor practice of the employer. The basic reason for this is that such quitclaims and/or
complete releases are against public policy and therefore, null and void. The acceptance of
termination pay does not divest a laborer of the right to prosecute his employer for unfair labor
practice acts. (Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183 and other cases
cited) In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez, said:
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and
employee, obviously, do not stand on the same footing. The employer drove the employee to the
wall. The latter must have to get hold of money. Because, out of job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case
of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim.
They pressed it. They are deemed not to have waived any of their rights. Renuntiationon
praesumitur.
APPEARANCES OF COUNSEL
Prisciliano I. Casis for petitioner.
The Solicitor General for respondents.
DECISION

FRANCISCO, J.:
Initially, this suit was resolved in private respondents favor with the dismissal of petitioners
complaint for illegal dismissal against the former by the Philippine Overseas Employment Administration
(POEA) Adjudication Office [POEA Case No. (L) 90-05-516]. However, upon appeal to the National Labor
Relations Commission (NLRC), the decision of the POEA was reversed and judgment was instead
rendered in favor of petitioner [NLRC CA No. 001713-91]. Still not satisfied, both parties filed their
1
respective motions for reconsideration. In a resolution dated September 22, 1993, the NLRC decided
both motions against petitioner and in favor of private respondents.
Petitioner is now before this Court through the instant petition for certiorari, assailing the
2
aforementioned Resolution of the NLRC which set aside its previous decision dated December 9, 1992

and reinstated the decision of the POEA dated April 10, 1991 dismissing petitioners complaint for illegal
dismissal. Grave abuse of discretion is imputed to respondent NLRC consequent to the assailed
resolution which petitioner maintains was rendered with evident partiality and mental prejudice.
In his complaint filed with the POEA, petitioner Marcelino Agoy alleged that he applied for overseas
employment as civil engineer with private respondent Eureka Personnel Management Services, Inc.
(EUREKA), and was subsequently accepted to work as CE/Road Engineer for private respondent AlKhodari Establishment (AL-KHODARI) under a two year contract with a basic salary of SR1,750.00 per
month and food allowance of SR200.00 with free accommodation.
On January 28, 1990, petitioner was deployed by respondent Eureka to Jubail, Saudi Arabia through
Exit Pass No. 2310220 P, mistakenly issued in the name of Belleli Saudi Heavy Industries Ltd. as
employer, under the category of Foreman at a basic monthly salary of US$460.00, which terms were
allegedly different from the original contract.
Thereafter, petitioner was deployed to Al-Khodaris maintenance project with the Royal Commission
in Jubail, Saudi Arabia as Road Foreman and not as CE/Road Engineer as initially agreed upon. Left
with no other choice, petitioner was forced to accept the position and started to work on February 7, 1990.
Petitioner, having been accepted by the Royal Commission to work only as a Road Foreman, was
later asked by respondent Al-Khodari to sign a new contract at a reduced salary rate of SR1,200.00 or
suffer termination and repatriation. Complainants refusal to sign the new contract eventually resulted in
his dismissal from employment on March 26, 1990. After being paid the remaining balance of his salary,
4
petitioner executed a Final Settlement releasing respondent Al-Khodari from all claims and liabilities. On
April 5, 1990, petitioner received a letter dated April 2, 1990 with subject Termination of Services Within
5
the Probation Period which he was forced to sign and consent to.
Petitioner was finally repatriated to Manila on April 6, 1990. Thereafter, he filed a complaint for illegal
dismissal with claims for payment of salary for the unexpired portion of his contract, salary differential and
damages against respondents Eureka and Al-Khodari.
Denying petitioners claim of illegal dismissal, respondent Eureka alleged that petitioner was actually
hired by respondent Al-Khodari only as Road Foreman with a monthly salary of SR1,750.00 equivalent
to $460.00 because petitioner failed to qualify as Road Engineer during his interview. Moreover,
according to respondent Eureka, upon request of petitioner, respondent Al-Khodari gave petitioner two
chances to qualify for the position of Road Engineer, both of which he failed. As petitioner refused to
work as a Road Foreman, Al-Khodari terminated his services in accordance with paragraph 14 of the
contract stipulating that the employer has the right to dismiss the employee during the probationary
period. Respondent agency maintained that petitioner made no objection to his dismissal as evidenced by
the Final Settlement that he executed and the Letter of Termination dated April 2, 1990 to which he
6
affixed his signature.
In its decision dated April 10, 1991, the POEA dismissed petitioners complaint after finding that the
evidence on record clearly indicated that petitioner himself voluntarily consented to his termination and
repatriation. It also found as self-serving and hardly credible petitioners allegation that he was merely
forced by his employer to indicate agreed to his notice of termination, absent any clear and convincing
proof to corroborate the same. Moreover, the POEA upheld respondent employers right to dismiss
7
petitioner within the probationary period on the ground that he failed to meet its performance standard.
Petitioner appealed to the NLRC which reversed the decision of the POEA and held private
respondents liable for illegal dismissal. According to the NLRC, petitioners termination from service
during the probationary period has no factual and legal basis on account of the following:
x x x In the first place, it was not proven what are the standards being used to determine
the performance of the complainant as not satisfactory. Secondly, there is a presumption that
complainant is qualified to the position since he was hired by Eureka and interviewed by a
representative of Al-Khodari. Thirdly, complainant should have passed the necessary trade test,
or else, he will not be hired. All these show that complainant possessed all the qualifications to

the job and in the absence of showing how he really failed to the standards required to the
position, the act of relegating him to a lower position with a lower salary other than what is
8
provided for in the contract is considered already as illegal dismissal.
The NLRC also ruled that contrary to the findings of the POEA, petitioner was forced to resign and
execute all the necessary documents for his repatriation as he was helpless in a foreign land because of
threats to his freedom or life in case he disagreed with his employer. Thus, the NLRC declared as a nullity
all documents releasing respondents from all liabilities and claims for not having been voluntarily
executed by petitioner, and held respondents liable for the sum of SR39,674.00 representing petitioners
9
unpaid salaries under his contract.
As earlier mentioned, both parties filed their respective Motions for Reconsideration with private
respondents assailing the reversal of the POEAs decision, while petitioner, not content with the monetary
award granted by the NLRC, further claimed salary differentials, overtime pay, moral damages, temperate
damages, exemplary damages, nominal damages, refund of placement fees, attorneys fees, cost of suit,
fines for alleged illegal exaction, misrepresentation and other recruitment violations.
Resolving both motions, the NLRC set aside its decision and held in favor of private respondents.
The NLRC backtracked on its conclusion that petitioner was presumed competent on the basis of a trade
test and declared that the same was without factual basis. After reviewing the records, the NLRC found
that no trade test was ever administered to petitioner because he was hired as a licensed professional
engineer and not as an ordinary skilled worker to whom the trade test is normally applied. Thus, it was
ruled that petitioners competence could be determined only during the probationary period, and as it
turned out, petitioner failed to meet respondent employers standard during the said period thereby
10
leading to his dismissal.
The NLRC also discarded petitioners allegation that he was merely forced to agree to his dismissal
as the record is bereft of any evidence of force and intimidation perpetrated by respondent employer.
According to the NLRC, petitioner failed to raise any objection to his dismissal despite being given the
opportunity to do so in the letter of termination dated April 2, 1990, and instead simply acknowledged
receipt of the same and affixed his signature thereto. The NLRC found merit in private respondents claim
that as a civil engineer with outstanding credentials, it was doubtful that petitioner would be intimidated
and forced to sign his notice of termination without making any objections. In arriving at this conclusion,
the NLRC took into account the additional documentary evidence submitted by petitioner attesting to his
claim of professional excellence which should entitle him to the additional monetary awards prayed for in
11
his motion for reconsideration.
In assailing the NLRC resolution reversing its earlier decision in his favor, petitioner asserts that its
conclusion with respect to his competence is clearly the result of a biased negative emotional conception
12
of the totality of the facts.
This Court has consistently adhered to the rule that in reviewing administrative decisions such as
those rendered by the NLRC, the findings of fact made therein are to be accorded not only great weight
13
and respect, but even finality, for as long as they are supported by substantial evidence. It is not the
function of the Court to once again review and weigh the conflicting evidence, determine the credibility of
the witnesses or otherwise substitute its own judgment for that of the administrative agency on the
14
sufficiency of the evidence. Nevertheless, when the inference made or the conclusion drawn on the
basis of certain state of facts is manifestly mistaken, the Court is not estopped from exercising its power
15
of review.
Public respondent NLRC premised the reversal of its decision and the affirmation of the validity of
petitioners dismissal on the latters alleged failure to qualify for the position of Road Engineer as
contracted for during the probationary period.
Probationary employees, notwithstanding their limited tenure, are also entitled to security of tenure.
Thus, except for just cause as provided by law or under the employment contract, a probationary
16
employee cannot be terminated. As explicitly provided under Article 281 of the Labor Code, a
probationary employee may be terminated on two grounds: (a) for just cause or (b) when he fails to

qualify as a regular employee in accordance with reasonable standards made known by the employer to
17
the employee at the time of his engagement.
Respondents attempt to justify petitioners dismissal based on the aforecited second ground is
unwarranted. The record is bereft of any evidence to show that respondent employer ever conveyed to
petitioner-employee the standards or requirements that he must comply with in order to become a regular
employee. In fact, petitioner has consistently denied that he was even given the chance to qualify for the
18
position for which he was contracted. Private respondent Al-Khodaris general averments regarding
petitioners failure to meet its standards for regular employment, which were not even corroborated by
any other evidence, are insufficient to justify petitioners dismissal.
Neither do we subscribe to the conclusion that petitioner voluntarily consented to his dismissal
despite his signature in the letter of termination dated April 2, 1990, indicating assent to his termination
from service for failing to qualify for the position and releasing private respondents from all claims and
liabilities. In our jurisprudence, quitclaims, waivers or releases are looked upon with disfavor, particularly
those executed by employees who are inveigled or pressured into signing them by unscrupulous
19
employers seeking to evade their legal responsibilities. The fact that petitioner signed his notice of
termination and failed to make any outright objection thereto did not altogether mean voluntariness on his
part. Neither did the execution of a final settlement and receipt of the amounts agreed upon foreclose his
right to pursue a legitimate claim for illegal dismissal. Expounding on the reasons therefor, the following
pronouncements are in point:
In labor jurisprudence, it is well established that quitclaims and/or complete releases
executed by the employees do not estop them from pursuing their claims arising from the unfair
labor practice of the employer. The basic reason for this is that such quitclaims and/or complete
releases are against public policy and therefore, null and void. The acceptance of termination
pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts.
(Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183; Philippine Sugar Institute vs.
CIR, L-13475, September 29, 1960, 109 Phil. 452; Mercury Drug Co., Inc. vs. CIR, L-23357,
April 30, 1974, 56 SCRA 694, 704).
In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez, said:
Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get hold of money. Because,
out of job, he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not of choice.
One thing sure, however, is that petitioners did not relent their claim. They pressed it.
They are deemed not to have waived any of their rights. Renuntiationon praesumitur.
20
(Italics supplied)
Moreover, it is noteworthy that petitioner lost no time in immediately pursuing his claim against
private respondents by filing his complaint for illegal dismissal a month after being repatriated on April 2,
1990. This is hardly expected from someone who voluntarily consented to his dismissal, thus, completely
negating the conclusion that petitioners consent was given freely and bolstering the claim that the same
was obtained through force and intimidation.
It must be emphasized that in termination cases like the one at bench, the burden of proof rests on
the employer to show that the dismissal is for just cause, and failure to discharge the same would mean
21
that the dismissal is not justified and therefore illegal.
As already elaborated above, private respondents failed to justify petitioners dismissal, thereby
rendering it illegal. Resultingly, it was grave abuse of discretion on the part of the NLRC to reverse its
previous decision and uphold petitioners dismissal despite convincing evidence to the contrary.
Consequent to his illegal dismissal, petitioner is therefore entitled to the amount of SR39,674.00 22
representing his salary for the unexpired portion of his employment contract - as adjudged in the

NLRCs December 9, 1992 decision. However, anent petitioners claim for additional compensation
(detailed and prayed for in his motion for reconsideration), we find no reason to award the same for being
speculative and without any proper legal and factual basis.
ACCORDINGLY, the petition is hereby GRANTED. The assailed Resolution of respondent NLRC
dated September 22, 1993 is hereby SET ASIDE and the Decision dated December 9, 1992 is
REINSTATED.
SO ORDERED.

SECOND DIVISION

[G.R. No. 158232. March 31, 2005]

FUJITSU COMPUTER PRODUCTS CORPORATION OF THE PHILIPPINES and ERNESTO

ESPINOSA, petitioners, vs. THE HONORABLE COURT OF APPEALS, VICTOR DE GUZMAN
and ANTHONY P. ALVAREZ, respondents.
DECISION
CALLEJO, SR., J.:
[1]

This is a petition for review under Rule 45 of the Rules of court assailing the Decision of the Court
of Appeals in CA-G.R. SP No. 71324 reversing the decision of the National Labor Relations Commission
(NLRC) in NLRC NCR CA NO. 024541-00 dismissing respondents Victor De Guzman and Anthony P.
Alvarez from employment, and the Resolution dated May 14, 2003 denying the motion for reconsideration
thereof.

The Facts of the Case

Petitioner Fujitsu Computer Products Corporation of the Philippines (FCPP) is a corporation

organized and existing under Philippine laws with business address at the Special Export Processing
Zone, Carmelray, Canlubang, Calamba, Laguna. It is engaged in the manufacture of hard disc drives,
[2]
MR heads and other computer storage devices for export.
Respondent Victor de Guzman began working for FCPP on September 21, 1997 as Facilities
Section Manager. As of 1999, he was also holding in a concurrent capacity the position of Coordinator
[3]
ISO 14000 Secretariat and was receiving a monthly salary of P43,100.00
Respondent Allan Alvarez, on the other hand, was employed as a Senior Engineer on April 21,
1998. He was assigned at the Facilities Department under the supervision of respondent De Guzman,
[4]
and was then earning P16,800.00.
The garbage and scrap materials of FCPP were collected and bought by the Saros Trucking
Services and Enterprises (Saros). On January 15, 1999, respondent De Guzman as Facilities Section
[5]
Manager, for and in behalf of FCPP, signed a Garbage Collection Agreement with Saros, and the
latters signatory therein was its owner and general manager, Larry Manaig.
Sometime in the third week of July 1999, petitioner Ernesto Espinosa, HRD and General Affairs
Director of FCPP, received a disturbing report from Manaig. Manaig reported that respondent De
[6]
[7]
Guzman had caused the anomalous disposal of steel [purlins] owned by FCPP. Two of Manaigs
[8]
[9]
employees, Roberto Pumarez and Ma. Theresa S. Felipe, executed written statements detailing how
respondent De Guzman had ordered the steel purlins to be brought out.
Thereafter, petitioner Espinosa sent a two-page Inter-Office Memorandum dated July 24, 1999 to
respondent De Guzman, effectively placing him under preventive suspension. He was likewise directed
to submit his written explanation on the charges against him. The Memorandum is worded as follows:
This refers to the report we have received from Mr. Larry Manaig, owner of Saros Trucking Services,
FCPPs garbage/scrap contractor.
It was disclosed to us that sometime in the first week of July 1999, you personally approached Mr.
Roberto Pumarez, Supervisor of Saros, and intimated to him your interest in the scrap metals which
were taken from Building B which at present is undergoing renovation. You allegedly told him that since
Saros is paying FCPP P2.50 per kilo of metal, you will buy it from Saros for P3.00 per kilo. Thereafter,
on July 10, 1999, Mr. Adrian Camcaman, one of your staff in the Facilities Section, ordered Mr.
[Pumarez] to send a truck to pick up the scrap metals which you had earlier pointed to Mr. [Pumarez].
These assorted metals were covered by Scrap/Garbage Gate Pass Receipt No. 3413.
From these assorted metals, it was revealed to us that approximately 2,800 kgs. were delivered by
Saros, per your instruction, to Sta. Rosa Baptist Church. After this, on July 12, 1999, the remaining
scrap metals were again picked up by Saros. This time, the assorted metals were covered by
Scrap/Garbage Pass NO. 3419. From these assorted [metals] 1,230 kgs. were purposely excluded from
the gross weight to be reported and paid to FCPP. Again, these excluded metals were delivered to the
same Baptist Church, per your instruction. According to Mr. Manaig, despite several demands from you,
you have not yet remitted to him the payment for those assorted scrap metals which you caused to be
delivered to Sta. Rosa Baptist Church.
In addition to the foregoing, it was likewise reported by Mr. Manaig that there were previous occasions in
the past where you solicited from him empty drums, pails, and corrugated cartons, which were all part of
those picked up from FCPP. Attached hereto are the statements given by the concerned employees of
Saros.
Clearly, your above actions constitute qualified theft, grave abuse of authority, and willful breach of trust
and confidence.
In view of the foregoing, you are hereby directed to submit your written explanation within forty-eight (48)
hours from your receipt hereof why no disciplinary sanction should be imposed against you, including
dismissal from the service. Should you fail to do so, as hereby directed, we shall be compelled to assess

and evaluate your case based on available records. In the meantime, you are hereby placed under
[10]
preventive suspension effective immediately, pending further investigation of your case.
Thereafter, Cesar Picardal, the Security Manager of FCPP, interviewed employees of SNK
Philippines, Inc. (SNK), a building contractor then working in the premises of FCPP. Rolando P.
[11]
[12]
[13]
Astillero, Maurice Victoriano and Nat Balayan voluntarily executed handwritten statements on the
matter.
According to their respective accounts of what transpired on July 10, 1999, a 10-wheeler truck
arrived at the company warehouse at around 1:00 p.m. Assorted scrap materials were then hauled into
the truck, including steel purlins. Knowing that they could still be used as braces for hepa-filter box
hangers, SNK Mechanical Supervisor Balayan asked his superior, Nobuaki Machidori, if the hauling could
be stopped, to which the latter consented. Balayan approached the driver of the truck and told him not to
include the steel purlins; the warehouse helpers then began separating the steel purlins from the other
scrap materials to be hauled.
Astillero had also requested the men to stop the hauling. SNK Engineer Victoriano had apparently
told him that the steel purlins would still be used for construction. At around 2:00 p.m., respondent De
Guzman called Victoriano and asked whether the scrap materials at the Fuji Electric Warehouse could
already be collected by the scrap dealer. Victoriano assented, but requested that the existing c-purlins
be dismantled and that 20 lengths would be used as additional bracket support for heap box/FCU
[14]
installation.
Adrian Camcaman, an employee of the Facilities Department under respondent De Guzman, then
arrived and informed Astillero that Victoriano had already given permission for the hauling to
[15]
[16]
commence. Camcaman also executed a written statement regarding the matter.
In his Explanation
defense:

[17]

dated July 26, 1999, respondent De Guzman alleged the following in his

Sometime in the first week of July 1999, I came to know from Rev. Mario de Torres, Pastor of St. Rosa
Bible Baptist Church that they are in need of some steel [purlins] to be used by the church for its roof
deck construction. I told him that I know a scrap dealer where he could possibly buy the said materials. I
told him that Saros Trucking Services is the regular buyer of FCPPs scrap materials and they can buy
from them. I referred the matter therefore to Mr. Roberto [Pumarez], Supervisor of Saros and told him of
the intension of the Sta. Rosa Bible Baptist Church (SRBBC) to buy scrap metal. I further told him that
since Saros is paying FCPP P2.60 of scrap metal, Sta. Rosa Bible Baptist Church can buy it from Saros
at P3.00 per kilo a price higher than FCPP. The statement of Mr. [Pumarez] which says that I will buy it
from Saros was not correct which I strongly object. Acknowledging that Mr. [Pumarez] is amenable to
sell the scrap to Sta. Rosa Bible Baptist Church after consultation from his boss I advised the Pastor of
Sta. Rosa Bible Baptist Church that Saros agreed. My part of the transaction ended there. Thereafter,
as reported by my staff the scrap metals were delivered to the church by the Saros Trucking Services on
July 10, 1999 covering the net weight of 2,860 kilos based on the submitted weighing scale ticket
numbers 37830 and 37844 from ANGLO-WATSONS PHILS., INC., the weighing bridge company.
These were covered by gate pass number 3413. On July 12, 1999, it was reported that the remaining
scrap metals were again delivered to the Sta. Rosa Bible Baptist Church covered by gate pass number
3419 but the exact weight could not be determined yet pending the scale ticket submission. As of July
24, 1999 the weight scale ticket of the last delivery was not yet confirmed [or] submitted to FCPP.
It is not true that Mr. Larry Manaig demanded to me several times the payment of the scrap because
his secretary followed up to me only once and I told her that the church is still awaiting for the actual
quantity and value of the metal scrap. When my staff Mr. Camcaman returned from his two weeks
nightshift duty and reported for dayshift duty he submitted to me the scale ticket of the first delivery (see
Exhibit I). Please note that the scale ticket of the second delivery was not yet submitted by Saros and
only verbally communicated that the weight delivered to the Sta. Rosa Bible Baptist Church is
[18]
approximately 1,230 kgs.

Respondent De Guzman also pointed out that he could not be charged for qualified theft since he
merely issued gate passes to Saros after the scrap metals were declared ready for disposal by SNK, the
company in charge thereof. The scrap metals in question were all accounted fro and collected by Saros,
and upon collection would be considered sold to the latter. Respondent De Guzman theorized that the
latter initiated the complaint against him since he was now in charge and had recently implemented
measures to monitor and confirm the actual weighing of all the scrap materials which had not been done
before. Saros had apparently been previously free to haul all the scrap materials without field
supervision from petitioner FCPP.
On July 28, 1999, respondent Alvarez sent an e-mail message to his co-employees, expressing
sympathy for the plight of respondent De Guzman. Respondent Alvarez used a different computer, but
the event viewer system installed in the premises of petitioner FCPP was able to trace the e-mail
message to him. Thus, on even date, petitioner Espinosa issued an Inter-Office Memorandum addressed
to respondent Alvarez, worded as follows:
TO
FROM
SUBJECT

:
:
:

MR. ALLAN ALVAREZ

HRD and General Affairs Department
SENDING OF E-MAIL MESSAGE SYMPATHETIC
TO MR. DE GUZMAN
DATE
:
July 28, 1999
___________________________________________________________
This is in reference to the July 28, 1999 E-mail message sent to all E-mail users from R. Sato
this morning.
Upon investigation, records reveal that you used the computer assigned to Shirley Bagnes and
sent a message hi to yourself. Moreover, the event viewer-system showed that you logged at
7:19:58 (also using the computer of Shirley Bagnes).
Please explain in writing within 48 hours why no disciplinary action should be filed against you,
including dismissal, for grossly presenting information which [is] highly confidential while an
investigation on Mr. De Guzman is going on. Moreover, your action of obtaining the sympathy of
employees through the use of the E-mail goes against your role as a key person holding a highly
responsible position in the Facilities Section.
(Sgd.)
ERNESTO G. ESPINOSA
[19]
HRD and General Affairs Director
Respondent Alvarez submitted a written Explanation dated September 29, 1999 where he
apologized, readily admitted that he was the sender of the e-mail message in question, and claimed that
he acted alone with his own conviction. He alleged, however, that he was only expressing his
sentiments, and that he was led by his desire to help a friend in distress. He further explained:
Im not [meddling] with the case of our boss but as Facilities member, we are sympathetic to the case
against him. If the hearsay (sic) is true, that he is [charged] on the ground of manipulating the scrap
management, then we totally disagree. It was said that he was charged with qualified theft due to
pull-out of metal scrap for his church.
Our basis is pure hearsay but in all indication, we feel that the case is going against our boss. It was
frustrating for us to be kept on dark side, helplessly waiting to defend him. We are afraid that one day,
the case is already closed and we even have not said what we have to say. Sorry to have [caused] the
e-mail just to be heard (I regret but the damage has been done and could not do anything about it).
We [believe] that the action of the hauler is premeditated and hastily done to pin down our boss. The
transaction between the Hauler and the Church has been transparent to us. Though the action has been
immediate due to request of hauler to get the metal scrap, verbal agreement has been made. We had
arranged hastily the hauling with the consent of Construction Contractor and know about the request of
the Church. As agreed by the Church and [Hauler], the payment will be P3.00/kg plus hauling fee.

Hence, the Hauler will profit P0.40/kg (already deducted their normal payment to our company of
P2.60/kg). However, for an obvious reason, the hauler had not accepted the payment to make it look
that he asked for the favor. And as hearsay, the case filed against him is very strong with [pre-arranged]
evidence. We believe that the evidence has no merit at all. In fact, the Hauler had to pay the company
on its entirety as we had recorded the full scale of scrap. It is the business and full responsibility of
Hauler to sell its [goods] or donate [them] for free. The church has no liability to our company but only
the Hauler who have to settle all its account. The timing of these charges as we believe could be
attributed to the improved waste management of our company. Beginning June, the hauler had to pay a
bigger amount for scrap (P0.25 million/month) against its previous billing of P15,000/month. As ISO
14001 Promotion Secretariat, we are mandated [to continuously improve] our Environmental
Management System. Aside from the direction of our President to cut cost, it is our small way of
[20]
helping on this objective.
Respondent Alvarez was informed that his services were terminated on the ground of serious
misconduct effective August 13, 1999 through a Memorandum of even date, worded as follows:
After a careful evaluation of your case, it is our well discerned view, as supported by competent and
strong evidences, that you are guilty of serious misconduct.
Ordinarily, while an innocent and responsible expression of concern or opinion over the probable
innocence or guilt of a co-employee, who is under administrative investigation, may not be considered as
an infraction of company rules and regulations, the same consideration does not obtain in your case.
The following environmental circumstances which surrounded your E-mail message of concern over the
preventive suspension upon Mr. Victor de Guzman, your superior, and whose case is still undergoing
further impartial investigation, do not speak well of your true motive behind the action you have taken.
Firstly, to hide your identity as the source of the E-mail message, you intentionally used the computer of
another employee, Shirley Bagnes. But before you actually sent the E-mail message, you tried to test
the communication line between Shirley Bagnes computer and your assigned computer by using Ms.
Bagnes computer in sending your computer the message hi. Fortunately, however, our viewer-system
was able to record you as the author of the E-mail message.
To further compound the situation, you timed-in at 7:46 a.m. (which you would later admit), in
anticipation of a possible inquiry from the management as to the source of the message, to show that it
was not possible for you to have sent the message just about the same time because you just arrived. It
was later confirmed, however, that you were already using your computer as early as 7:21 a.m.
Moreover, we do not share your justification as contained in your July 29, 1999 written explanation,
where you also readily admitted your culpability, that the reason why you were compelled to send an Email message was simply to show your support to Mr. De Guzman, who according to your premature and
unsupported conclusion is innocent of the charges lodged against him. Nobody can say so at this point
because the matter is still under investigation. Your explanation is contrary to the fact that, with malice
and afterthought, you deliberately sent the E-mail message to almost 150 Filipino and Japanese officers
and employees, who are almost entirely and officially not privy to the ongoing investigation.
Obviously, your foregoing actions at that time, as well as the tenor of your E-mail message, were
evidently and maliciously premeditated to undermine the result of the ongoing administrative
investigation involving Mr. De Guzman, and therefore, constitute serious misconduct. Moreover, your
actions do not speak well of a ranking Senior Engineer in the Facilities Section especially in
consideration of the fact that you have several employees reporting to you and should in fact, serve as
their role model.
In view of the foregoing ineluctable facts, you are hereby terminated from the service, effective
immediately. Please proceed to the Finance and Accounting Department to clear yourself from any
accountability and to claim whatever unpaid salaries and benefits which are still due you as of this date.
For your information and guidance.

[21]

Respondent De Guzmans employment was thereafter terminated effective August 23, 1999 through
[22]
an Inter-Office Memorandum of even date.
The respondents then filed a complaint for illegal dismissal against the petitioners with prayer for
reinstatement, full backwages, damages and attorneys fees before the NLRC, Regional Arbitration
Branch, Region IV. The case was docketed as NLRC Case No. RAB-IV-9-11426-99-L. After the
mandatory conciliation proceedings failed, the parties were required to submit their respective position
papers.

The Ruling of the Labor Arbiter

On April 17, 2000, Labor Arbiter Antonio R. Macam ruled in favor of FCPP, stating that it was
justified in terminating the employment of the respondents. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the instant complaint is hereby dismissed for lack of merit. Ernesto
Espinosas counterclaim is likewise dismissed under the same reason.
SO ORDERED.

[23]

According to the Labor Arbiter, respondent De Guzman, a managerial employee, was validly
[24]
dismissed for loss of trust and confidence. Citing a number of cases, the Labor Arbiter stressed that
where an employee holds a position of trust and confidence, the employer is given wider latitude of
discretion in terminating his services for just cause.
According to the Labor Arbiter, the systematic and calculated manner by which respondent Alvarez
sent e-mail messages to his co-employees could not be disregarded. Thus, respondent Alvarezs
reliance on his freedom to express his opinion was misplaced, and to condone such infraction would
erode the discipline which FCPP, as the employer, requires its employees to observe for orderly conduct
in the company premises.
The Labor Arbiter likewise ruled that as borne out by the records, the respondents were not denied
due process since they were sufficiently accorded an opportunity to be heard.
Unsatisfied, the respondents appealed the Labor Arbiters decision to the NLRC.

The Ruling of the NLRC

The NLRC sustained the ruling of the Labor Arbiter and dismissed the respondents appeal for lack
of merit. According to the Commission, the Labor Arbiters assessment an evaluation of the facts of the
case, as well as the evidence adduced by both parties, had been quite thorough. Considering that the
decision appealed from was supported by substantial evidence, there was no reason to deviate from the
findings of the Labor Arbiter.
The NLRC also affirmed the Labor Arbiters finding that respondent De Guzman, a managerial
employee who was routinely charged with custody and care of the petitioners property, was validly
[25]
dismissed on the ground of willful breach of trust and confidence. Citing Caete v. NLRC,
the
Commission pointed out that the right of the employer to dismiss an employee on the ground of loss of
confidence or breach of trust has been recognized by no less than the Supreme Court. Moreover,
respondent De Guzman abused his position as Facilities Manager of petitioner FCPP when he
prematurely declared the steel purlins as scrap materials. The Commission also considered against
respondent De Guzman his belated [and] unsuccessful attempt to cover up his misdeeds.

In so far as the dismissal of respondent Alvarez was concerned, the Commission held that the
circumstances surrounding the sending of the clearly malicious and premeditated e-mail message
constituted no less than serious misconduct. Hence, respondent Alvarezs dismissal was also justified
under the circumstances.
The NLRC also concluded that the respondents were not denied due process, since they were
adequately informed of the charges against them and were required to explain thereon.
The respondents filed a motion for reconsideration of the said decision, which the NLRC denied in a
Resolution dated April 9, 2002. The respondents then elevated their case to the Court of Appeals (CA).

The Ruling of the CA

The CA reversed the ruling of the NLRC and held that the respondents were illegally dismissed.
According to the appellate court, the non-payment of the scrap steel purlins by the Sta. Rosa Bible Baptist
Church (Sta. Rosa) to Saros was not a valid cause for the dismissal of respondent De Guzman. Contrary
to the findings of the Labor Arbiter, respondent De Guzman did not betray the trust reposed on him by his
employer, as the transaction involving the sale of scrap steel purlins was between Sta. Rosa and Saros.
The CA further ruled that the burden of proving just cause for termination of employment rests on the
employer, which in this case, petitioner FCPP was unable to prove by substantial evidence. Considering
that respondent De Guzmans dismissal was not founded on clearly established facts sufficient to warrant
his separation from work, the petitioners act of dismissing him primarily for the sale of scrap metal purlins
was unjustified.
Anent the dismissal of respondent Alvarez, the CA ruled that his act of sympathizing and believing
in the innocence of respondent De Guzman and expressing his views was not of such grave character
as to be considered serious misconduct which warranted the penalty of dismissal. The appellate court
also stressed that in determining the penalty to be imposed on an erring employee, due consideration
must be given to the length of service and the number of violations committed during employment.
According to the CA, the petitioners failed to take these factors into consideration in dismissing
respondent Alvarez; hence, the latter was illegally dismissed. Thus, they were entitled to reinstatement to
their respective positions without loss of seniority rights, full backwages, and other benefits corresponding
to the period from their illegal dismissal up to actual reinstatement. The dispositive portion reads:
WHEREFORE, the petition is given due course; the assailed decision of respondent NLRC affirming the
Labor Arbiters judgment is hereby REVERSED and SET ASIDE, and another one entered ordering the
reinstatement of petitioners to their respective positions, without loss of seniority rights, and with full
backwages.
SO ORDERED.

[26]

The petitioners filed a motion for reconsideration of the said decision, which the appellate court
denied in a Resolution dated May 14, 2003.
Aggrieved, the petitioners now come to this Court, ascribing the following errors committed by the
CA:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN IT TOTALLY IGNORED THE WELL ENTRENCHED RULE
BEING FOLLOWED IN THIS JURISDICTION THAT FACTUAL FINDINGS OF THE NLRC AFFIRMING
THOSE OF THE LABOR ARBITER, WHEN SUFFICIENTLY SUPPORTED BY EVIDENCE ON
RECORD, ARE ACCORDED RESPECT AND FINALITY BY THE APPELLATE COURT.
II.

THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCE WHEN IT RULED

THAT THE DISMISSAL OF PRIVATE RESPONDENTS VICTOR DE GUZMAN AND ALLAN ANTHONY
ALVAREZ WERE ILLEGAL, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND
NATIONAL LABOR RELATIONS COMMISSION.
III.
THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCE WHEN IT
COMPLETELY DISREGARDED THE FINDINGS OF BOTH THE LABOR ARBITER AND THE
NATIONAL LABOR RELATIONS COMMISSION THAT PRIVATE RESPONDENT VICTOR DE GUZMAN
HAD WILLFULLY BREACHED THE TRUST AND CONFIDENCE REPOSED ON HIM BY PETITIONERS
WHEN HE PREMATURELY DECLARED THE METAL [PURLINS] AS SCRAP MATERIALS.
IV.
THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCE WHEN IT ACCEPTED
HOOK [LINE] AND SINKER THE CONTENTION OF RESPONDENT VICTOR DE GUZMAN THAT THE
TRANSACTION TO BUY THE STEEL [PURLINS] WAS BETWEEN STA. ROSA BIBLE BAPTIST
CHURCH AND SAROS TRUCKING SERVICES.
V.
THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCE WHEN IT DID NOT
GIVE PROBATIVE VALUE TO THE UNCONTROVERTED TESTIMONIES OF THE WITNESSES FOR
THE PETITIONERS WHO ALL GAVE THE DETAILS AND CIRCUMSTANCES ON HOW PRIVATE
RESPONDENT VICTOR DE GUZMAN ABUSED HIS POSITION AS FACILITIES MANAGER AND ISO
COORDINATOR.
VI.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT IGNORED THE
HOST OF JURISPRUDENTIAL TENETS CITED BY BOTH THE LABOR ARBITER AND THE
NATIONAL LABOR RELATIONS [COMMISSION] SUPPORTING THE TERMINATION OF VICTOR DE
GUZMAN, A MANAGERIAL EMPLOYEE, FOR WILLFULL BREACH OF TRUST AND CONFIDENCE.
VII.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF ITS DISCRETION WHEN IT
DISREGARDED THE FINDINGS OF BOTH THE LABOR ARBITER AND THE NATIONAL LABOR
RELATIONS COMMISSION THAT PETITIONER ALLAN ANTHONY ALVAREZ COMMITTED SERIOUS
[27]
MISCONDUCT.
According to the petitioners, the conclusions of the Labor Arbiter should be respected, considering
that he is in a better position to assess and evaluate the evidence presented by the contending parties.
Thus, the CA, in ruling for the respondents, ignored a basic jurisprudential precept. The petitioners add
that since the respondents themselves admitted their culpability, such principle should all the more be
applied strictly in this case.
The petitioners also point out that the appellate court ignored the positive and incontrovertible
testimonies of their witnesses, which firmly established the culpability of respondent De Guzman in
prematurely declaring the steel purlins as scrap materials. Furthermore, the SNK employees confirmed
that the steel purlins were still needed for the construction of a building; in fact, Astillero and Balayan
stated that they even prevented the employees of Saros from loading them onto the truck. More
damaging is the statement of Victoriano, who narrated that it was only at around 2:00 p.m. of July 10,
1999 that he received a phone call from respondent De Guzman.
Contrary to the ruling of the appellate court, the witnesses for respondent De Guzman, specifically
the representative of Sta. Rosa, failed to prove that they were the ones who personally transacted with
Saros. The petitioners stress that as the evidence would show, it was through respondent De Guzman
that the delivery of steel purlins to Sta. Rosa was made possible. They reiterate that the respondent

wanted to buy the steel purlins, since it was his precise intention to sell them to Sta. Rosa. The
petitioners point out that as shown by his application for employment, respondent De Guzman is an active
member of the said Church.
The petitioners also point out that respondent De Guzman is not an ordinary rank-and-file employee;
he was the Facilities Manager, and concurrently, the Coordinator of the ISO 14000 Secretariat. As such,
respondent De Guzman had the sensitive and confidential duty of managing the scrap disposal of
petitioner FCPP, and his actuations justified his dismissal based on willful breach of trust.
Anent the case of respondent Alvarez, the petitioners assert that when he sent the e-mail message
to more than 150 Filipino and Japanese officers and employees, there was a willful and malicious intent
on his part to undermine the on-going investigation of his superior, respondent De Guzman.
The petitioners conclude that the penalty imposed upon the respondents is justified under the
circumstances in the instant case.
In their comment, the respondents countered that as correctly held by the appellate court, their
dismissal from employment has no valid and just cause. They stress that all the scrap metals were
placed in the premises of petitioner FCPP, and it was not respondent De Guzman who had determined
whether they could already be considered ready for disposal, but Machidori of SNK. Moreover, it was
Saros which sold the scrap materials to Sta. Rosa, and respondent De Guzman had no participation
therein. The respondents point out that the issue raised before the Court is factual in nature, and as
such, contrary to the Rules of Court.
The primary issue for resolution in the present case is whether respondents De Guzman and Alvarez
were illegally dismissed from employment.

The Courts Ruling

The rule is that factual findings of quasi-judicial agencies such as the NLRC are generally accorded
[28]
not only respect, but at times, even finality. However, when it can be shown that administrative bodies
grossly misappreciated evidence of such nature as to compel a contrary conclusion, the Court will not
hesitate to reverse its factual findings. Factual findings of administrative agencies are not infallible and
[29]
will be set aside if they fail the test of arbitrariness. Thus, in this case where the findings of the CA differ
from those of the Labor Arbiter and the NLRC, the Court, in the exercise of its equity jurisdiction, may look
into the records of the case and re-examine the questioned findings. As a corollary, this Court is clothed
with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds
[30]
that their consideration is necessary to arrive at a just decision of the case.
It is settled that to constitute a valid dismissal from employment, two requisites must concur: (a) the
[31]
dismissal must be for any of the causes provided for in Article 282
of the Labor Code; and (b) the
employee must be afforded an opportunity to be heard and defend himself. This means that an employer
can terminate the services of an employee for just and valid causes, which must be supported by clear
and convincing evidence. It also means that, procedurally, the employee must be given notice, with
[32]
adequate opportunity to be heard, before he is notified of his actual dismissal for cause.
After a careful and painstaking study of the records of the case, the Court rules that the respondents
dismissal from employment was not grounded on any of the just causes enumerated under Article 282 of
the Labor Code.
[33]

The term trust and confidence is restricted to managerial employees.

In this case, it is
undisputed that respondent De Guzman, as the Facilities Section Manager, occupied a position of
responsibility, a position imbued with trust and confidence. Among others, it was his responsibility to see
to it that the garbage and scrap materials of petitioner FCPP were adequately managed and disposed of.
Thus, respondent De Guzman was entrusted with the duty of handling or taking care of the property of his

employer, i.e., the steel purlins which the petitioners allege the respondent prematurely declared as scrap
materials.
However, to be valid ground for dismissal, loss of trust and confidence must be based on a willful
breach of trust and founded on clearly established facts. A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly, or inadvertently. It must rest on substantial grounds and not on the employers
arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy
[34]
of the employer.
Loss of confidence must not be indiscriminately used as a shield by the employer
against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause
for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit
[35]
to continue working for the employer.
The Court had the occasion to reiterate in Nokom v. National Labor Relations Commission
guidelines for the application of the doctrine of loss of confidencea.
b.
c.
d.

[36]

the

loss of confidence should not be simulated;

it should not be used as a subterfuge for causes which are improper, illegal or unjustified;
it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and
[37]
it must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

In the case at bar, the grounds relied upon by petitioner FCPP in terminating the employment of
respondent De Guzman are contained in the Inter-Office Memorandum dated August 23, 1999 which
effectively terminated the latters employment:
We have carefully evaluated your case and we are convinced that you have committed grave abuse of
authority amounting to serious misconduct and willful breach of trust and confidence.
Based on our findings, as supported by strong and competent evidences, and contrary to your
explanation per your Letter dated July 26, 1999, the following facts were satisfactorily established:
1.
That sometime in the first week of July 1999, you intimated to Mr. Roberto Pumarez, Supervisor of
Saros Trucking Services, your intention to buy from Saros the metals which were then piled up and kept
inside the Fuji Electric Philippines compound;
2.
Thereafter, you ordered the metals to be sold to Saros Trucking Services so that you can buy
them (metals) later from Saros at the price of P3.00 per kg., which price you yourself imposed on them;
3.
However, it turned out later some pieces of metals which you have earlier declared as scraps and
ordered to be sold to Saros were still to be used in the construction of FCPPs Building B. Thus, on July
10, 1999, while Saros employees were initially loading the metals, an Engineer of SNK Philippines, Inc.,
FCPPs building contractor, stopped them. It was only later after they were prevented from further
loading the metals that you checked with the SNK personnel if the metals can already be disposed of as
scraps which prove that you have prematurely declared the metals as scrap;
4.
That through Mr. [Adrian] Camcaman, your subordinate Technician, you instructed the personnel
of Saros to deliver the metals to Sta. Rosa Baptist Church, where you are an active Church member;
5.
That, as of this date, you have not yet settled/paid your obligation to Saros. That immediately
after you were placed under preventive suspension and to support your explanation that the transaction
was between Saros and Sta. Rosa Baptist Church, you caused, through some people representing to be
members of the Baptist Church and who are unknown to Saros, to issue a check in favor of Saros.
When this failed, another person, representing to be a member of the Baptist church and who appeared
for the first time, went to the office of Saros and tried to serve a letter addressed to Mr. Larry Manaig,
Saros Proprietor, allegedly inquiring about the total obligation of the Baptist Church to Saros but, which
was again not accepted as, in truth and in fact, there was really no transaction between Saros and the
Sta. Rosa Baptist Church. All along, it was you and Mr. Camcaman who dealt directly with Saros.
6.
That in previous occasions, it was reported by Mr. Manaig that you solicited from him empty
drums, pails and corrugated cartons which were all part of those scraps picked up from FCPP and you

never paid any of them, a fact which you never denied in your explanation which is tantamount to
admission.
Based on the foregoing, it is our well-discerned view that the transaction was exclusively limited between
you and Saros. Except for your self-serving explanation, you failed miserably to present direct evidence
that it was the Sta. Rosa Baptist church which bought the subject metals from Saros, as what you want
us to believe. At best, your explanation is a mere afterthought desperately concocted to exculpate
yourself.
As Facilities Manager, a very sensitive and confidential position, the nature of your work demands of you
that your actions should not be tainted with any suspicion or impropriety. However, you failed in this
regard and abused your position to advance your self-interest.
In view of the foregoing, you are hereby terminated from the service, retroactive July 24, 1999, the date
you were placed under preventive suspension. Please proceed to the Finance and Accounting
Department to clear yourself from any accountability and to claim whatever unpaid salaries and benefits
which are still due you as of this date.
For your information and guidance.

[38]

Based on the foregoing, the Court finds and so holds that indeed, the petitioners reliance on the
foregoing facts to justify the dismissal of respondent De Guzman from employment is misplaced.
First. The scrap metals, including the steel purlins, were already classified as scrap materials and
ready for disposal. No less than the written statements of the witnesses for the petitioners confirm this.
SNK Mechanical Supervisor Nat Balayan stated that the 10-wheeler truck was about to load scrap irons,
which includes c-[purlins]. Knowing that c-[purlins] could be used for braces of heap-filter box hangers, I
immediately informed Mr. Machidori if I would stop the hauling, to which he consented. On the other
hand, SNK Engineer Maurice Victoriano stated that when respondent De Guzman called him and inquired
whether the scrap materials at the Fuji Electric Warehouse Area could already be disposed of, he
(Victoriano) replied that everything was [okay] for disposal considering that this is [FCPPs] scope. The
report of Machidori is particularly revealing:
I went to Fuji Electric Warehouse last July 10 (rainy day) to check [out] Warehouse situation. I noticed
that scrap materials are being carried out by a truck. I met Mr. Adrian Fujitsu Facilities Staff and asked
me that they will take out those scrap materials. SNK Staff suggested using those scrap materials for
BIF Hepa Box steel supports. So I requested Mr. Adrian [Camcaman] to separate some materials that
we want to use and take out [the] others.
During our Construction meeting, Facilities explained that they controlled scrap and unpacked materials
for disposal. Earlier I thought that taking out those materials are good for maintaining Fuji Electric
[39]
Warehouse Area. So I requested them to take out those unrecycled materials.
Thus, the Court agrees with the following ratiocination of the appellate court when it denied the
petitioners motion for reconsideration of its decision:
[T]his Court would like to stress, as borne out by the pleadings submitted by both parties, that the subject
scrap metal [purlins] were already in the scrap yard ready for hauling. It was the building contractor and
not petitioner Victor de Guzman who determined whether the metals are scrap metals. Hence, the
assertion of the private respondents that petitioner Victor de Guzman prematurely declared the metal
[40]
[purlins] as scrap materials is without basis.
In fine then, the materials at the said warehouse were already considered scrap and ready for
disposal. The hauling was stopped by the SNK employees because their superiors felt that pieces of
steel purlins could still be used in the construction of a building in the company premises. Thus,
Victoriano and Balayan, with the conformity of their superior Machidori, requested that some pieces be
left behind for the purpose.
Second. No fraud or bad faith could be attributed to respondent De Guzman, as evinced by his
readiness to disclose his participation in the transaction between Saros and Sta. Rosa.

Third. Respondent De Guzman was never charged with qualified theft as earlier alluded to by the
petitioner FCPP in its Inter-Office Memorandum dated August 28, 1999.
Fourth. The focal point of the cause of respondent De Guzmans dismissal from employment is his
alleged involvement in the purchase of the steel purlins from petitioner FCPPs warehouse. Whether
respondent De Guzman was the buyer of the steel purlins or merely facilitated the sale thereof to Sta.
Rosa is of no moment. The fact is that as per the Garbage Collection Agreement dated January 15,
1999, the scrap metals in the premises of petitioner FCPP were regularly bought by Saros. Hence, after
such scrap materials are weighed, loaded onto a truck and carried out of the company premises, the
petitioner FCPP can no longer be considered the owner thereof, and ceases to exercise control over such
[41]
property. Loss of trust and confidence as a just cause for termination of employment is premised on the
fact that the employee concerned is invested with delicate matters, such as the handling or care and
[42]
protection of the property and assets of the employer. In this case however, Saros, as the new owner
of the scrap materials in question, including the steel purlins, was free to contract with anyone as it
wished. At most, respondent De Guzman was merely recommending a buyer for such scrap materials,
an act which could hardly be considered as deserving of such a harsh penalty as dismissal from
employment.
What strikes the Court as odd in this case is that petitioner FCPP willingly believed the testimony of
third persons, non-employees, rather than the account of its own employee. There has been no
allegation that respondent De Guzman had been previously found guilty of any misconduct or had
violated established company rules. Moreover, it is difficult to believe that respondent De Guzman would
[43]
jeopardize his job for something as measly as steel purlins.
The Court thus concludes that respondent De Guzmans actuations do not amount to willful breach
of trust and confidence. It bears stressing that in termination cases, the employer bears the onus of
[44]
proving that the dismissal was for just cause.
Indeed, a condemnation of dishonesty and disloyalty
[45]
cannot arise from suspicions spawned by speculative inferences. Because of its subjective nature, this
Court has been very scrutinizing in cases of dismissal based on loss of trust and confidence because the
same can easily be concocted by an abusive employer. Thus, when the breach of trust or loss of
confidence theorized upon is not borne by clearly established facts, as in this case, such dismissal on the
[46]
ground of loss of confidence cannot be allowed. Moreover, the fact that one is a managerial employee
[47]
does not by itself exclude him from the protection of the constitutional guarantee of security of tenure.
The Court likewise rules that the dismissal of respondent Alvarez from employment for gross
misconduct was illegal.
The Court has had varied rulings in cases involving gross misconduct as a ground for dismissal,
depending on the circumstances of each case. In Zenco Sales, Inc. v. National Labor Relations
[48]
Commission,
the Court affirmed the NLRC and the Labor Arbiter in finding the dismissed employee
guilty of misfeasance for his failure to closely monitor and control the sales transactions of salesman
Chua and malfeasance because he used the respondent corporations properties, equipment and
personnel in connection with his personal business of buy and sale of used sacks. The Court ruled that
when brought within the ambit of Article 282 of the Labor Code, it constitutes gross neglect in the
[49]
performance of duty and serious misconduct resulting to loss of trust and confidence.
In Philippine
[50]
National Construction Corporation v. NLRC,
the dismissed employees were caught in the act of
accepting a bribe in the form of cash and a dog from a motorist who was suspected of illegally
transporting dogs. The Court held that by yielding to bribery, the said employees violated their very duty
to maintain peace and order in the North Luzon Expressway, and to ensure that all tollway rules and
regulations were followed. Such act was classified as serious misconduct which warranted the penalty of
[51]
[52]
dismissal from employment. In another case, the Court considered a dismissed faculty members act
of exerting influence and pressure to change a failing grade to a passing one and the misrepresentation
that a student was his nephew as serious misconduct, and a valid ground for dismissal.
[53]

However, in the old case of Radio Communications of the Philippines, Inc. v. NLRC,
the Court
considered the dismissed employees act of hurling invectives at a co-employee as a minor offense. The
Court therein ruled that the termination of an employee on account of a minor misconduct is illegal

because Article 282 of the Labor Code mentions serious Misconduct as a cause for cessation of
[54]
employment.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
[55]
implies wrongful intent and not mere error of judgment. The misconduct to be serious must be of such
grave and aggravated character and not merely trivial and unimportant. Such misconduct, however
serious, must nevertheless be in connection with the employees work to constitute just cause for his
[56]
separation . Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be
serious; (b) must relate to the performance of the employees duties; and (c) must show that the
[57]
employee has become unfit to continue working for the employer.
Indeed, an employer may not be
compelled to continue to employ such person whose continuance in the service would be patently inimical
[58]
to his employers interest.
In this case, the Court finds that respondent Alvarezs act of sending an e-mail message as an
expression of sympathy for the plight of a superior can hardly be characterized as serious misconduct as
to merit the penalty of dismissal. This can be gleaned from a perusal of the e-mail message itself, to wit:
Question:

Where is Mr. De Guzman, Facilities Manager?

Answer: He was framed-up by Saros Trucking (FCPP garbage hauler) and [accused] of
manipulating scrap metal which is not true since the church buyer and Saros agreed for a fee of
P3.00/kg. [where] Saro will profit P0.40/kg plus hauling fee.
Question: WHY?
Answer: Mr. De Guzman was able to improve the waste management wherein Saro have to pay
close to P0.25 million pesos for June scrap alone against Saros previous collection of around
P15,000/month only.
THE PLOT IS OBVIOUS BUT IS IT JUST TO SUSPEND A GOOD MAN LIKE MR. DE
GUZMAN THAN A GARBAGE HAULER WHO DEVILISHLY [PROFITED] FROM FCPP
[59]
WITHOUT SWEAT? PLS. HELP US
There is no showing that the sending of such e-mail message had any bearing or relation on
respondent Alvarezs competence and proficiency in his job. To reiterate, in order to consider it a serious
misconduct that would justify dismissal under the law, the act must have been done in relation to the
[60]
performance of his duties as would show him to be unfit to continue working for his employer.
Moreover, while allegations of a frame-up were made against Saros, the e-mail message does not
contain a single malicious imputation or charge against petitioner FCPP, or petitioner Espinosa.
Instructive on this point is the discussion of the Court in Samson v. National Labor Relations
[61]
Commission, viz.:
The instant case should be distinguished from the previous cases where we held that the use of insulting
and offensive language constituted gross misconduct justifying an employees dismissal. In De la Cruz
v. NLRC (177 SCRA 626 [1989]), the dismissed employee shouted sayang and pagka-professional mo!
and putang ina mo at the company physician when the latter refused to give him a referral slip. In
Autobus Workers Union (AWU) v. NLRC (291 SCRA 219 [1998]), the dismissed employee called his
supervisor gago ka and taunted the latter by saying bakit, anong gusto mo, tang ina mo. In these
cases, the dismissed employees personally subjected their respective superiors to the foregoing verbal
abuses. The utter lack of respect for their superiors was patent. In contrast, when petitioner was heard
to have uttered the alleged offensive words against respondent companys president and general
manager, the latter was not around.
In Asian Design and Manufacturing Corporation v. Deputy Minister of Labor (142 SCRA 79 [1986]), the
dismissed employee made false and malicious statements against the foreman (his superior) by telling
his co-employees: If you dont give a goat to the foreman you will be terminated. If you want to remain
in this company, you have to give a goat. The dismissed employee therein likewise posted a notice in
the comfort room of the company premises which read: Notice to all Sander Those who want to

remain in this company, you must give anything to your foreman. Failure to do so will be terminated
Alice 80. In Reynolds Philippine Corporation v. Eslava (137 SCRA 259 [1985]), the dismissed employee
circulated several letters to the members of the companys board of directors calling the executive vicepresident and general manager a big fool, anti-Filipino and accusing him of mismanagement,
inefficiency, lack of planning and foresight, petty favoritism, dictatorial policies, one-man rule,
contemptuous attitude to labor, anti-Filipino utterances and activities. In this case, the records do not
[62]
show that petitioner made any such false and malicious statements against any of his superiors.
In fine, the petitioners failed to show that the respondents acts were sufficient to warrant their
dismissal from employment, for loss of trust and confidence on one hand for respondent De Guzman, and
for gross misconduct as against respondent Alvarez on the other. To reiterate, it has not been shown that
the respondents had been previously found guilty of any infraction of company rules and regulations
during the period of their employment.
Under Article 279 of the Labor Code, and employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges, and to the payment of 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 (which, as a rule, is from the time of his illegal
[63]
dismissal) up to the time of his actual reinstatement.
These remedies give life to the workers
[64]
constitutional right to security of tenure.
The Court is wont to reiterate that while an employer has its own interest to protect, and pursuant
thereto, it may terminate a managerial employee for a just cause, such prerogative to dismiss or lay-off an
employee must be exercised without abuse of discretion. Its implementation should be tempered with
compassion and understanding. The employer should bear in mind that, in the execution of the said
[65]
prerogative, what is at stake is not only the employees position, but his very livelihood.
The
Constitution does not condone wrongdoing by the employee; nevertheless, it urges a moderation of the
[66]
sanction that may be applied to him. Where a penalty less punitive would suffice, whatever missteps
may have been committed by the worker ought not be visited with a consequence so severe as dismissal
[67]
from employment. Indeed, the consistent rule is that if doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer
[68]
must affirmatively show rationally adequate evidence that the dismissal was for justifiable cause.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals in CAG.R. SP No. 71324 and the Resolution dated May 14, 2003 are AFFIRMED. Costs against the
petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitioner
vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE
COLLECTORS UNION-BAGUIO (SIMACUB), respondents.
Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.
Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the
resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying
the motion for reconsideration in the case entitled "In Re: Petition for Direct Certification as the Sole and

Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine
Collectors Union-Baguio (SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).
On February 15, 1989, the respondent union filed a petition for direct certification as the sole and
exclusive bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City branch
(hereinafter referred to as "the Company").
The Company opposed the petition mainly on the ground that the union members are actually not
employees but are independent contractors as evidenced by the collection agency agreement which they
signed.
The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the
union members and the Company, granted the petition for certification election. On appeal, Secretary of
Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretary's resolution was
denied. Hence, this petition in which the Company alleges that public respondents acted in excess of
jurisdiction and/or committed grave abuse of discretion in that:
a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the
existence of employer-employee relationship is at issue;
b) the right of petitioner to due process was denied when the evidence of the union members' being
commission agents was disregarded by the Labor Secretary;
c) the public respondents patently erred in finding that there exists an employer-employee relationship;
d) the public respondents whimsically disregarded the well-settled rule that commission agents are not
employees but are independent contractors.
The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie
the Company's position that the union members are independent contractors. To prove that union
members are employees, it is asserted that they "perform the most desirable and necessary activities for
the continuous and effective operations of the business of the petitioner Company" (citing Article 280 of
the Labor Code). They add that the termination of the agreement by the petitioner pending the resolution
of the case before the DOLE "only shows the weakness of petitioner's stand" and was "for the purpose of
frustrating the constitutionally mandated rights of the members of private respondent union to selforganization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of
the Omnibus Rules Implementing the Labor Code, which defines job-contracting, they cannot legally
qualify as independent contractors who must be free from control of the alleged employer, who carry
independent businesses and who have substantial capital or investment in the form of equipment, tools,
and the like necessary in the conduct of the business.
The present case mainly calls for the application of the control test, which if not satisfied, would lead us to
conclude that no employer-employee relationship exists. Hence, if the union members are not employees,
no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be
recognized. The following elements are generally considered in the determination of the employeremployee relationship; "(1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee's conduct although the latter is the
most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank
of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc.
v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor
Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).

The Collection Agency Agreement defines the relationship between the Company and each of the union
members who signed a contract. The petitioner relies on the following stipulations in the agreements: (a)
a collector is designated as a collecting agent" who is to be considered at all times as an independent
contractor and not employee of the Company; (b) collection of all payments on installment accounts are
to be made monthly or oftener; (c) an agent is paid his compensation for service in the form of a
commission of 6% of all collections made and turned over plus a bonus on said collections; (d) an agent
is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance
and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and
conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and
renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the
minimum monthly collection performance required, failure to post a cash bond, or cancellation of the
agreement at the instance of either party unless the agent has a pending obligation or indebtedness in
favor of the Company.
Meanwhile, the respondents rely on other features to strengthen their position that the collectors are
employees. They quote paragraph 2 which states that an agent shall utilize only receipt forms authorized
and issued by the Company. They also note paragraph 3 which states that an agent has to submit and
deliver at least once a week or as often as required a report of all collections made using report forms
furnished by the Company. Paragraph 4 on the monthly collection quota required by the Company is
deemed by respondents as a control measure over the means by which an agent is to perform his
services.
The nature of the relationship between a company and its collecting agents depends on the
circumstances of each particular relationship. Not all collecting agents are employees and neither are all
collecting agents independent contractors. The collectors could fall under either category depending on
the facts of each case.
The Agreement confirms the status of the collecting agent in this case as an independent contractor not
only because he is explicitly described as such but also because the provisions permit him to perform
collection services for the company without being subject to the control of the latter except only as to the
result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the
petitioner.
The requirement that collection agents utilize only receipt forms and report forms issued by the Company
and that reports shall be submitted at least once a week is not necessarily an indication of control over
the means by which the job of collection is to be performed. The agreement itself specifically explains that
receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with
the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the
regular time within which to submit a report of collection are intended to facilitate order in office
procedures. Even if the report requirements are to be called control measures, any control is only with
respect to the end result of the collection since the requirements regulate the things to be done after the
performance of the collection job or the rendition of the service.
The monthly collection quota is a normal requirement found in similar contractual agreements and is so
stipulated to encourage a collecting agent to report at least the minimum amount of proceeds. In fact,
paragraph 5, section b gives a bonus, aside from the regular commission every time the quota is reached.
As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the
other contracting party does not accede to it, he can choose not to sign it. From the records, it is clear
that the Company and each collecting agent intended that the former take control only over the amount of
collection, which is a result of the job performed.

The respondents' contention that the union members are employees of the Company is based on
selected provisions of the Agreement but ignores the following circumstances which respondents never
refuted either in the trial proceedings before the labor officials nor in its pleadings filed before this Court.
1. The collection agents are not required to observe office hours or report to Singer's
office everyday except, naturally and necessarily, for the purpose of remitting their
collections.
2. The collection agents do not have to devote their time exclusively for SINGER. There
is no prohibition on the part of the collection agents from working elsewhere. Nor are
these agents required to account for their time and submit a record of their activity.
3. The manner and method of effecting collections are left solely to the discretion of the
collection agents without any interference on the part of Singer.
4. The collection agents shoulder their transportation expenses incurred in the collections
of the accounts assigned to them.
5. The collection agents are paid strictly on commission basis. The amounts paid to them
are based solely on the amounts of collection each of them make. They do not receive
any commission if they do not effect any collection even if they put a lot of effort in
collecting. They are paid commission on the basis of actual collections.
6. The commissions earned by the collection agents are directly deducted by them from
the amount of collections they are able to effect. The net amount is what is then remitted
to Singer." (Rollo, pp. 7-8)
If indeed the union members are controlled as to the manner by which they are supposed to perform their
collections, they should have explicitly said so in detail by specifically denying each of the facts asserted
by the petitioner. As there seems to be no objections on the part of the respondents, the Court finds that
they miserably failed to defend their position.
A thorough examination of the facts of the case leads us to the conclusion that the existence of an
employer-employee relationship between the Company and the collection agents cannot be sustained.
The plain language of the agreement reveals that the designation as collection agent does not create an
employment relationship and that the applicant is to be considered at all times as an independent
contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations
in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of
Bureau of Labor, Relations, 123 SCRA 679 [1983]). No such words as "to hire and employ" are present.
Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation
is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v.
Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security
System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule,
thus:
We are convinced from the facts that the work of petitioner's agents or registered
representatives more nearly approximates that of an independent contractor than that of
an employee. The latter is paid for the labor he performs, that is, for the acts of which
such labor consists the former is paid for the result thereof . . . .
xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its
investment plans he would not necessarily be entitled to compensation therefor. His right
to compensation depends upon and is measured by the tangible results he produces."
Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily
time frame imposed on him (Investment Planning Corporation of the Philippines v. Social Security
System, supra; See also Social Security System v. Court of Appeals, 30 SCRA 210 [1969]).
The grounds specified in the contract for termination of the relationship do not support the view that
control exists "for the causes of termination thus specified have no relation to the means and methods of
work that are ordinarily required of or imposed upon employees." (Investment Planning Corp. of the Phil.
v. Social Security System, supra)
The last and most important element of the control test is not satisfied by the terms and conditions of the
contracts. There is nothing in the agreement which implies control by the Company not only over the end
to be achieved but also over the means and methods in achieving the end (LVN Pictures, Inc. v.
Philippine Musicians Guild, 1 SCRA 132 [1961]).
The Court finds the contention of the respondents that the union members are employees under Article
280 of the Labor Code to have no basis. The definition that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not determinative in this
case. Any agreement may provide that one party shall render services for and in behalf of another for a
consideration (no matter how necessary for the latter's business) even without being hired as an
employee. This is precisely true in the case of an independent contractorship as well as in an agency
agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for
determining the existence of an employment relationship because it merely distinguishes between two
kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right
of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not
apply where the existence of an employment relationship is in dispute.
Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to
this case. Respondents assert that the said provision on job contracting requires that for one to be
considered an independent contractor, he must have "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." There is no showing that a collection agent needs tools and machineries. Moreover, the
provision must be viewed in relation to Article 106 of the Labor Code which provides:
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.
xxx xxx xxx
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." (p. 20)
It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether
the employer is solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid
wages in case it is proven that there is a job-contracting situation.
The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal
by the petitioner itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the
union members are not its employees. Hence, the petitioner submitted itself as well as the issue of
existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute
on an application for certification election.
The Court finds that since private respondents are not employees of the Company, they are not entitled to
the constitutional right to join or form a labor organization for purposes of collective bargaining.
Accordingly, there is no constitutional and legal basis for their "union" to be granted their petition for direct
certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of
Bureau of Labor Relations, supra:
. . . The question of whether employer-employee relationship exists is a primordial
consideration before extending labor benefits under the workmen's compensation, social
security, medicare, termination pay and labor relations law. It is important in the
determination of who shall be included in a proposed bargaining unit because, it is the
sine qua non, the fundamental and essential condition that a bargaining unit be
composed of employees. Failure to establish this juridical relationship between the union
members and the employer affects the legality of the union itself. It means the ineligibility
of the union members to present a petition for certification election as well as to vote
therein . . . . (At p. 689)
WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the
Resolution and Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989,
respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered
dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made
permanent.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 71664 February 28, 1992

BAGUIO COUNTRY CLUB CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR UNION (ALU) and JIMMY
CALAMBA, respondents.
Guillermo B. Bandonill and A.N. Bolinao, Jr. for petitioner.
Jose C. Evangelista for Jimmy Calamba.

MEDIALDEA, J.:

This petition for certiorari seeks to annul and set aside the resolution issued by the respondent National
Labor Relations Commission dated June 10, 1985 dismissing the appeal of petitioner for lack of merit and
affirming in toto the decision of the Executive Labor Arbiter dated September 15, 1982 declaring private
respondent Calamba as a regular employee entitled to reinstatement to the position of gardener without
loss of seniority and with full backwages, benefits and privileges from the time of his dismissal up to
reinstatement including 13th month pay.
The antecedent facts are as follows:
Petitioner Baguio Country Club Corporation (corporation) is a recreational establishment certified by the
Ministry of Labor and Employment as an" entertainment-service" establishment. Respondent National
Labor Relations Commission (Commission) is a government instrumentality created by law, impleaded in
its official capacity, while private respondent Associated Labor Union (union) is a duly registered labor
organization and private respondent Jimmy Calamba is an employee of the petitioner corporation as
laborer, dishwasher, and gardener.
Private respondent Jimmy Calamba was employed on a day to day basis in various capacities as laborer
and dishwasher for a period of ten (10) months from October 1, 1979 to July 24, 1980. On September 1,
1980 to October 1, 1980, private respondent Calamba was hired as a gardener and rehired as such on
November 15, 1980 to January 4, 1981 when he was dismissed by the petitioner corporation. (see Rollo,
pp. 28-36)
On August 3, 1981, private respondent Jimmy Calamba assisted by private respondent union instituted a
complaint against petitioner corporation with the Ministry of Labor (now Department of Labor and
Employment), Baguio District Office, Baguio City for unfair labor practice, illegal dismissal and nonpayment of 13th month pay for 1979 and 1980.
The Executive Labor Arbiter Sotero L. Tumang rendered a decision on September 15, 1982 declaring
private respondent Calamba as a regular employee and ordering petitioner to reinstate private
respondent to the position of gardener without loss of seniority and with full backwages, benefits and
privileges from the time of his dismissal up to reinstatement including 13th month pay.
Labor Arbiter Tumang found as follows:
After a careful perusal of the facts presented by the parties, we find the complaint for
illegal dismissal and non-payment of thirteenth (13th) month pay, meritorious for the
following reasons:
1. Complainant Jimmy Calamba has attained regular status as an employee of the Club
on account of the nature of the job he was hired, to perform continuously and on
staggered basis for a span of thirteen months. True that there were employment
contracts executed between the Club and the complainant indicating the period or the
number of days the complainant is being needed but what is to be considered is not the
agreement, written or otherwise, of the parties in determining the regularity or casualness
of job but it should be the nature of the job. Clearly, the work of a gardener is not a
seasonal or for a specific period undertaking but it is a whole year round activity. We
must not lose sight of the fact that the Baguio Country Club Corporation is an exclusive
Club with sustaining members who avails (sic) of its facilities the whole year round and it
is necessary, is has been observed and of common knowledge, that the gardens
including the green of its golf course where the complainant was assigned must be
properly kept and maintained.

2. Being a regular employee with more than one (1) year length of service with the
respondent, Jimmy Calamba could not be terminated without a just or valid cause. This is
so explicit in our Constitution that the security of tenure of a worker must be safeguarded
and protected and Jimmy Calamba should enjoy no less protection.
3. Jimmy Calamba was dismissed without any written clearance from the Ministry of
Labor and Employment prior to his termination. Worse, the respondent fired the
complainant from his job due to the a (sic) alleged expiration of his employment contract
ten (10) times but not even a single report of his dismissal as mandated by law was
submitted to the Ministry of Labor and Employment.
4. The Company did not refute the claim of Jimmy Calamba for payment of his thirteenth
(13th) month pay under P.D. 851 nor presented any report of compliance to that effect
with the Ministry of Labor and Employment and, therefore, he must be paid
correspondingly. (Rollo, pp. 39-40)
Hence, the petitioner interposed an appeal to the respondent Commission.
On June 10, 1985, after finding that there existed no sufficient justification to disturb the appealed
decision, the respondent Commission rendered a resolution dismissing the appeal for lack of merit.
Hence, this present petition raising four (4) assignments of errors, which are as follows:
I
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT
PRIVATE RESPONDENT JIMMY CALAMBA WAS A "CASUAL" EMPLOYEE AND HAD
ATTAINED THE STATUS OF A REGULAR EMPLOYEE, DESPITE THE
INCONTROVERTIBLE FACT THAT SAID PRIVATE RESPONDENT WAS A
CONTRACTUAL AND SEASONAL EMPLOYEE.
II
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT THE
CONCLUSIONS OF THE EXECUTIVE LABOR ARBITER WERE FULLY SUPPORTED
BY THE EVIDENCE AND IN UPHOLDING THE REINSTATEMENT OF PRIVATE
RESPONDENT JIMMY CALAMBA.
III
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT THE
DISMISSAL OF PRIVATE RESPONDENT JIMMY CALAMBA REQUIRED PRIOR
CLEARANCE FROM THE MINISTRY OF LABOR AND EMPLOYMENT EACH TIME HIS
CONTRACT OF EMPLOYMENT EXPIRED.
IV
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN NOT HOLDING THAT
PRIVATE RESPONDENT ASSOCIATED LABOR UNION HAS NO LEGAL
PERSONALITY TO FILE THIS CASE FOR PRIVATE RESPONDENT JIMMY CALAMBA
BEFORE THE REGIONAL OFFICE OF THE NATIONAL LABOR RELATIONS
COMMISSION, AS SAID PRIVATE RESPONDENT BEING A CONTRACTUAL

EMPLOYEE IS EXPRESSLY EXCLUDED FROM THE BARGAINING UNIT UNDER THE

COLLECTIVE BARGAINING AGREEMENT (Rollo, pp. 98-99)
Petitioner maintains that private respondent Calamba was a contractual employee whose employment
was for a fixed and specific period as set forth and evidenced by the private respondent's contracts of
employment, the pertinent portions of which are quoted as follows:
xxx xxx xxx
. . . the employment may be terminated any time without liability to the Baguio Country
Club other than for salary actually earned up to and including the date of last service.
His/her employment shall be on a day to day BASIS for a temporary period . . . subject to
termination at any time at the discretion of the Baguio Country Club Corporation.
xxx xxx xxx
(Rollo, p. 7)
In addition, petitioner stresses that there was absolutely no oral or documentary evidence to support the
conclusion of the Executive Labor Arbiter which was subsequently affirmed by the respondent
Commission that private respondent Calamba has rendered thirteen (13) months of continuous service.
On the contrary, respondent Commission through the Solicitor General argues that private respondent
Calamba, having rendered services as laborer, gardener and dishwasher for more than one (1) year, was
a regular employee at the time his employment was terminated.
Moreover, the nature of private respondent Calamba's employment as laborer, gardener, and dishwasher
pertains to a regular employee because they are necessary or desirable in the usual business of
petitioner as a recreational establishment.
The pivotal issue therefore in whether or not the private respondent Jimmy Calamba has acquired the
status of a regular employee at the time his employment was terminated.
After a careful review of the records of this case the Court finds no merit in the petition and holds that the
respondent Commission did not gravely abuse its discretion when it affirmed in toto the decision of the
labor arbiter.
The law on the matter is Article 280 of the Labor Code which defines regular and casual employment as
follows:
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 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.
This provision reinforces the Constitutional mandate to protect the interest 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. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual business or trade of the
employer. Not considered regular are the so-called "project employment" the completion
or termination of which is more or less determinable at the time of employment, such as
those employed in connection with a particular construction project, and seasonal
employment which by its nature is only desirable for a limited period of time. However,
any employee who has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity he performed and while such
activity actually exits.
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. (De Leon v. National Labor Relations
Commission, G.R. No. 70705, August 21, 1989. 176 SCRA 615, 620-621)
In the case at bar, the petitioner corporation, which is certified by the Ministry of Labor and Employment
as an "entertainment-service" establishment, claims that private respondent was contracted for a fixed
and specific period. However, the records are that the private respondent was repeatedly re-hired to
perform tasks ranging from dishwashing and gardening, aside from performing maintenance work.
Such repeated rehiring and the continuing need for his service are sufficient evidence of the necessity
and indispensability of his service to the petitioner's business or trade.
The law demands that the nature and entirety of the activities performed by the employee be considered.
It is not tenable to argue that the aforementioned tasks of private respondent are not necessary in
petitioner's business as a recreational establishment, just as it cannot be said that only those who are
directly involved in providing entertainment service may be considered as necessary employees.
Otherwise, there would have been no need for the regular maintenance section of petitioner corporation.
Furthermore, the private respondent performed the said tasks which lasted for more than one year, until
early January, 1981 when he was terminated. Certainly, by this fact alone he is entitled by law to be
considered a regular employee.
Owing to private respondent's length of service with the petitioner corporation, he became a regular
employee, by operation of law, one year after he was employed. It is more in consonance with the intent
and spirit of the law to rule that the status of regular employment attaches to the casual employee on the

day immediately after the end of his first year of service. To rule otherwise is to impose a burden on the
employee which is not sanctioned by law. (see Kimberly Independent Labor Union for Solidarity, Activism
and Nationalism in Line Industries and Agriculture v. Drilon, G.R. No. 77629, May 9, 1990, 185 SCRA
190, 203-204)
It is of no moment that private respondent was told when he was hired that his employment would only be
"on a day to day basis for a temporary period" and may be terminated at any time subject to the
petitioner's discretion. Precisely, the law overrides such conditions which are prejudicial to the interest of
the worker. Evidently, the employment contracts entered into by private respondent with the petitioner
have the purpose of circumventing the employee's security of tenure. The Court therefore, rigorously
disapproves said contracts which demonstrate a clear attempt to exploit the employee and deprive him of
the protection sanctioned by the Labor Code.
It is noteworthy that what determines whether a certain employment is regular or casual is not the will and
word of the employer, to which the desperate worker often accedes. It is the nature of the activities
performed in relation to the particular business or trade considering all circumstances, and in some cases
the length of time of its performance and its continued existence. (see De Leon v. NLRC, Ibid)
All premises considered, the Court is convinced that the assailed resolution of the respondent
Commission is not tainted with arbitrariness that would amount to grave abuse of discretion or lack of
jurisdiction and therefore, We find no reason to disturb the same.
ACCORDINGLY, the petition is DISMISSED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70705 August 21, 1989
MOISES DE LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LA TONDE;A INC., respondents.
Amorito V. Canete for petitioner.
Pablo R. Cruz for private respondent.

FERNAN, C.J.:
This petition for certiorari seeks to annul and set aside: (1) the majority decision dated January 28, 1985
of the National Labor Relations Commission First Division in Case No. NCR- 83566-83, which reversed
the Order dated April 6,1984 of Labor Arbiter Bienvenido S. Hernandez directing the reinstatement of
petitioner Moises de Leon by private respondent La Tonde;a Inc. with payment of backwages and other
benefits due a regular employee; and, (2) the Resolution dated March 21, 1985 denying petitioner's
motion for reconsideration.

It appears that petitioner was employed by private respondent La Tonde;a Inc. on December 11, 1981,
1
at the Maintenance Section of its Engineering Department in Tondo, Manila. His work consisted mainly
of painting company building and equipment, and other odd jobs relating to maintenance. He was paid on
a daily basis through petty cash vouchers.
In the early part of January, 1983, after a service of more than one (1) year, petitioner requested from
respondent company that lie be included in the payroll of regular workers, instead of being paid through
petty cash vouchers. Private respondent's response to this request was to dismiss petitioner from his
employment on January 16, 1983. Having been refused reinstatement despite repeated demands,
petitioner filed a complaint for illegal dismissal, reinstatement and payment of backwages before the
Office of the Labor Arbiter of the then Ministry now Department of Labor and Employment.
Petitioner alleged that he was dismissed following his request to be treated as a regular employee; that
his work consisted of painting company buildings and maintenance chores like cleaning and operating
company equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and that weeks after his
dismissal, he was re-hired by the respondent company indirectly through the Vitas-Magsaysay Village
Livelihood Council, a labor agency of respondent company, and was made to perform the tasks which he
2
used to do. Emiliano Tanque Jr. corroborated these averments of petitioner in his affidavit.
On the other hand, private respondent claimed that petitioner was not a regular employee but only a
casual worker hired allegedly only to paint a certain building in the company premises, and that his work
as a painter terminated upon the completion of the painting job.
3

On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision finding the complaint
meritorious and the dismissal illegal; and ordering the respondent company to reinstate petitioner with full
backwages and other benefits. Labor Arbiter Hernandez ruled that petitioner was not a mere casual
employee as asserted by private respondent but a regular employee. He concluded that the dismissal of
petitioner from the service was prompted by his request to be included in the list of regular employees
and to be paid through the payroll and is, therefore, an attempt to circumvent the legal obligations of an
employer towards a regular employee.
Labor Arbiter Hernandez found as follows:
After a thorough examination of the records of the case and evaluation of the evidence
and versions of the parties, this Office finds and so holds that the dismissal of
complainant is illegal. Despite the impressive attempt of respondents to show that the
complainant was hired as casual and for the work on particular project, that is the
repainting of Mama Rosa Building, which particular work of painting and repainting is not
pursuant to the regular business of the company, according to its theory, we find
differently. Complainant's being hired on casual basis did not dissuade from the cold fact
that such painting of the building and the painting and repainting of the equipment and
tools and other things belonging to the company and the odd jobs assigned to him to be
performed when he had no painting and repainting works related to maintenance as a
maintenance man are necessary and desirable to the better operation of the business
company. Respondent did not even attempt to deny and refute the corroborating
statements of Emiliano Tanque Jr., who was regularly employed by it as a maintenance
man doing same jobs not only of painting and repainting of building, equipment and tools
and machineries or machines if the company but also other odd jobs in the Engineering
and Maintenance Department that complainant Moises de Leon did perform the same
odd jobs and assignments as were assigned to him during the period de Leon was
employed for more than one year continuously by Id respondent company. We find no
reason not to give credit and weight to the affidavit and statement made therein by
Emiliano Tanque Jr. This strongly confirms that complainant did the work pertaining to

the regular business in which the company had been organized. Respondent cannot be
permitted to circumvent the law on security of tenure by considering complainant as a
casual worker on daily rate basis and after working for a period that has entitled him to be
4
regularized that he would be automatically terminated. ... .
On appeal, however, the above decision of the Labor Arbiter was reversed by the First Division of the
5
National Labor Relations Commission by virtue of the votes of two members which constituted a
majority. Commissioner Geronimo Q. Quadra dissented, voting "for the affirmation of the well-reasoned
6
decision of the Labor Arbiter below." The motion for reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and gravely abuse its discretion in reversing the
Order of the Labor Arbiter in view of the uncontroverted fact that the tasks he performed included not only
painting but also other maintenance work which are usually necessary or desirable in the usual business
of private respondent: hence, the reversal violates the Constitutional and statutory provisions for the
protection of labor.
The private respondent, as expected, maintains the opposite view and argues that petitioner was hired
only as a painter to repaint specifically the Mama Rosa building at its Tondo compound, which painting
work is not part of their main business; that at the time of his engagement, it was made clear to him that
he would be so engaged on a casual basis, so much so that he was not required to accomplish an
application form or to comply with the usual requisites for employment; and that, in fact, petitioner was
7
never paid his salary through the regular payroll but always through petty cash vouchers.
The Solicitor General, in his Comment, recommends that the petition be given due course in view of the
evidence on record supporting petitioner's contention that his work was regular in nature. In his view, the
dismissal of petitioner after he demanded to be regularized was a subterfuge to circumvent the law on
regular employment. He further recommends that the questioned decision and resolution of respondent
Commission be annulled and the Order of the Labor Arbiter directing the reinstatement of petitioner with
8
payment of backwages and other benefits be upheld.
After a careful review of the records of this case, the Court finds merit in the petition as We sustain the
position of the Solicitor General that the reversal of the decision of the Labor Arbiter by the respondent
Commission was erroneous.
The law on the matter is Article 281 of the Labor Code which defines regular and casual employment as
follows:
Art. 281. Regular and casual employment. The provisions of a 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 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.

This provision reinforces the Constitutional mandate to protect the interest 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. Thus,
contrary agreements notwithstanding, an employment is deemed regular when the activities performed by
the employee are usually necessary or desirable in the usual business or trade of the employer. Not
considered regular are the so-called "project employment" the completion or termination of which is more
or less determinable at the time of employment, such as those employed in connection with a particular
9
construction project and seasonal employment which by its nature is only desirable for a limited period
of time. However, any employee who has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity he performed and while such activity actually
exists.
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.
In the case at bar, the respondent company, which is engaged in the business of manufacture and
distillery of wines and liquors, claims that petitioner was contracted on a casual basis specifically to paint
a certain company building and that its completion rendered petitioner's employment terminated. This
may have been true at the beginning, and had it been shown that petitioner's activity was exclusively
limited to painting that certain building, respondent company's theory of casual employment would have
been worthy of consideration.
However, during petitioner's period of employment, the records reveal that the tasks assigned to him
included not only painting of company buildings, equipment and tools but also cleaning and oiling
machines, even operating a drilling machine, and other odd jobs assigned to him when he had no
painting job. A regular employee of respondent company, Emiliano Tanque Jr., attested in his affidavit
that petitioner worked with him as a maintenance man when there was no painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company did not even
attempt to negate the above averments of petitioner and his co- employee. Indeed, the respondent
company did not only fail to dispute this vital point, it even went further and confirmed its veracity when it
expressly admitted in its comment that, "The main bulk of work and/or activities assigned to petitioner was
painting and other related activities. Occasionally, he was instructed to do other odd things in connection
with maintenance while he was waiting for materials he would need in his job or when he had finished
10
early one assigned to him.
The respondent Commission, in reversing the findings of the Labor Arbiter reasoned that petitioner's job
cannot be considered as necessary or desirable in the usual business or trade of the employer because,
"Painting the business or factory building is not a part of the respondent's manufacturing or distilling
11
process of wines and liquors.
The fallacy of the reasoning is readily apparent in view of the admitted fact that petitioner's activities
included not only painting but other maintenance work as well, a fact which even the respondent
Commission, like the private respondent, also expressly recognized when it stated in its decision that,
'Although complainant's (petitioner) work was mainly painting, he was occasionally asked to do other odd

12

jobs in connection with maintenance work. It misleadingly assumed that all the petitioner did during his
more than one year of employment was to paint a certain building of the respondent company, whereas it
is admitted that he was given other assignments relating to maintenance work besides painting company
building and equipment.
It is self-serving, to say the least, to isolate petitioner's painting job to justify the proposition of casual
employment and conveniently disregard the other maintenance activities of petitioner which were
assigned by the respondent company when he was not painting. The law demands that the nature and
entirety of the activities performed by the employee be considered. In the case of petitioner, the painting
and maintenance work given him manifest a treatment consistent with a maintenance man and not just a
painter, for if his job was truly only to paint a building there would have been no basis for giving him other
work assignments In between painting activities.
It is not tenable to argue that the painting and maintenance work of petitioner are not necessary in
respondent's business of manufacturing liquors and wines, just as it cannot be said that only those who
are directly involved in the process of producing wines and liquors may be considered as necessary
employees. Otherwise, there would have been no need for the regular Maintenance Section of
respondent company's Engineering Department, manned by regular employees like Emiliano Tanque Jr.,
whom petitioner often worked with.
Furthermore, the petitioner performed his work of painting and maintenance activities during his
employment in respondent's business which lasted for more than one year, until early January, 1983
when he demanded to be regularized and was subsequently dismissed. Certainly, by this fact alone he is
entitled by law to be considered a regular employee. And considering further that weeks after his
dismissal, petitioner was rehired by the company through a labor agency and was returned to his post in
the Maintenance Section and made to perform the same activities that he used to do, it cannot be denied
that as activities as a regular painter and maintenance man still exist.
It is of no moment that petitioner was told when he was hired that his employment would only be casual,
that he was paid through cash vouchers, and that he did not comply with regular employment procedure.
Precisely, the law overrides such conditions which are prejudicial to the interest of the worker whose
weak bargaining position needs the support of the State. That determines whether a certain employment
is regular or casual is not the will and word of the employer, to which the desperate worker often accedes,
much less the procedure of hiring the employee or the manner of paying his salary. It is the nature of the
activities performed in relation to the particular business or trade considering all circumstances, and in
some cases the length of time of its performance and its continued existence.
Finally, considering its task to give life and spirit to the Constitutional mandate for the protection of labor,
to enforce and uphold our labor laws which must be interpreted liberally in favor of the worker in case of
doubt, the Court cannot understand the failure of the respondent Commission to perceive the obvious
attempt on the part of the respondent company to evade its obligations to petitioner by dismissing the
latter days after he asked to be treated as a regular worker on the flimsy pretext that his painting work
was suddenly finished only to rehire him indirectly weeks after his dismissal and assign him to perform the
same tasks he used to perform. The devious dismissal is too obvious to escape notice. The inexplicable
disregard of established and decisive facts which the Commission itself admitted to be so, in justifying a
conclusion adverse to the aggrieved laborer clearly spells a grave abuse of discretion amounting to lack
of jurisdiction.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the National Labor
Relations Commission are hereby annulled and set aside. The Order of Labor arbiter Bienvenido S.
Hernandez dated April 6, 1984 is reinstated. Private respondent is ordered to reinstate petitioner as a
regular maintenance man and to pay petitioner 1) backwages equivalent to three years from January

16,1983, in accordance with the Aluminum Wage Orders in effect for the period covered, 2) ECOLA 3)
13th Month Pay, 4) and other benefits under pertinent Collective Bargaining Agreements, if any.
SO ORDERED.

SECOND DIVISION

[G. R. No. 123769. December 22, 1999]

E. GANZON, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Third Division),
RENE PERMARAN, NERIO VALENZUELA, RODRIGO PRADO, MARIO PLAQUIA, ERNESTO
MATEO, ROMMEL NAADAT, ARTEMIO AGOSTO, SALVADOR URBANOZO, CESAR
*
CASTILLO and PONCIANO DEL ROSARIO, respondents.
DECISION
BELLOSILLO, J.:
TWENTY-TWO (22) EMPLOYEES of petitioner E. Ganzon, Inc. - Rolando Reyes, Rene Permaran,
Jonathan Sayco, Ernesto Guerra, Nerio Valenzuela, Henry Sayco, Emiliano Telacas, Rodrigo Prado,
Mario Plaquia, Gildardo Migabon, Ernesto Mateo, Felix Nicolasora, Joven Jordan, Alberto Bellingan,
Rommel Naadat, Vidal Gumanad, Jimmy Caete, Carlito Moril, Artemio Agosto, Salvador Urbanozo,
Cesar Castillo and Ponciano del Rosario filed on 9 January 1991 a complaint against the company for
illegal deduction, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day,
service incentive leave pay, vacation/sick leave pay and 13th month pay. On 25 January 1991 all the
complainants, many of whom are private respondents herein, were dismissed from employment thus
prompting them to amend their complaint to include the charge of illegal dismissal.
Subsequently however, eight (8) of the complainants, namely, Rolando Reyes, Jonathan Sayco,

Joven Jordan, Carlito Moril, Vidal Gumandad, Alberto Bellingan, Henry Sayco and Felix Nicolasora
signed a Release and Quitclaim; consequently, they moved for the dismissal of the complaint insofar as
they were concerned. Their motion was granted.
Petitioner E. Ganzon, Inc., is engaged in the construction business. It manufactures its own building
materials, e.g., slab runners, acropos, jack bases, window grills, pulleys, sliding doors and all kinds of
aluminum products, hollow blocks and all kinds of concrete products. It has its own machine shop, five
(5) mixer trucks, tower cranes, alimak, elevator shaft, and others.
The remaining fourteen (14) complainants who did not sign the Release and Quitclaim were hired on
various dates for different positions and salaries thus Complainant

Date Hired

Position

Latest Salary

Rene Permaran

04-14-'89

Machinist

P18.75/hr.

Ernesto Guerra

11-00-'87

Elec. Engr.

P18.25/hr.

Nerio Valenzuela

05-09 -'89

Welder/
Fabricator/
Installer

13.75/hr.

Aluminum
Fabricator/
Installer

12.50/hr.

Emiliano Telacas

10-18-'89

Rodrigo Prado

06-00-'87

Aluminum
Installer/
Fabricator

89.00/day/
10 hrs work
/day

Mario Plaquia

10-03-'89

Laborer/
Trainer

100.00/day

Gildardo Migabon 09-10-'87

Aluminum
Installer/
Fabricator

15.00/hr.

Ernesto Mateo

Laborer

13.75/hr./
10 hrs work
/day

Aluminum
Installer/
Helper

13.75/hr.

Laborer then
Marble Setter
in Jan. '85

16.25/hr.

Helper-Welder
then Warehouseman, 17 July '88

125.00/day
10 hrs/day

Laborer then
MachinistOperator,
Oct. '90
Laborer
Trainee

76.00/day

Laborer then

12.50/hr.

Rommel Naadat

Jimmy Caete

Artemio Agosto

03-09-'87

05-16-'87

07-20-'84

05-11-'88

Salvador Urbanozo

01-18-'90

Cesar Castillo

10-19-'89

Ponciano del

01-19-'89

125.00/day
10 hrs/day

Rosario

Machine
Operator,
July '89

Complainants claimed that during the period of their employment insurance premiums were
deducted from their salaries without their consent, and they were not given overtime pay for work
performed ten (10) hours a day, legal holiday pay, premium pay for holiday and rest day, five (5) days
incentive leave pay despite having rendered services for more than a year, vacation/sick leave pay and
13th month pay. They claimed further that when they reported for work on 25 January 1991 the security
guards of petitioner informed them: "Hindi na kayo puedeng pumasok/magtrabaho dito, yan ang order
galing sa itaas.
Petitioner countered that the complainants were all contractual, project, temporary or casual
employees as evidenced by their employment contracts expressly providing that the acceptance of their
services was based on the need for their skill such that upon completion of the project and/or when
reduction of the workforce was necessary, their services would be terminated. Their employment
contracts were renewed every three (3) months. Petitioner denied having dismissed the complainants
from employment but that their employment contracts expired on 25 January 1991. Petitioner then
disputed their money claims as exaggerated, baseless and/or that they had already prescribed.
On 24 June 1994 the Labor Arbiter ruled as follows: (a) the remaining complainants were declared
regular employees of petitioner; (b) petitioner was declared guilty of illegal dismissal; (c) petitioner was
ordered to reinstate the remaining complainants to their former or equivalent positions without loss of
seniority rights and privileges, either physically or in the payroll, at the option of petitioner under the same
terms and conditions obtaining at the time of their illegal dismissal; (d) petitioner was ordered to pay the
remaining complainants back wages and benefits, overtime pay, legal holiday pay, service incentive leave
pay and 13th month pay partially computed as amounting to P1,902,681.90; and, (e) the claims for illegal
deduction, premium pay for holiday and rest day and vacation/sick leave benefits were dismissed for lack
xiii
of merit.
On appeal, Emiliano Telacas, Gildardo Migabon and Jimmy Caete moved for the dismissal of their
complaint on account of their having subsequently executed a Release and Quitclaim. Public respondent
National Labor Relations Commission granted the motion; consequently, the number of complainants was
further reduced to eleven (11).
On 24 October 1995 the decision of the Labor Arbiter was affirmed subject to the modification that
the awards of overtime pay to Ernesto Mateo, Artemio Agosto and Cesar Castillo were deleted for being
xiii
xiii
unsubstantiated. On 21 December 1995 reconsideration was denied.
Petitioner insists that private respondents were contractual and/or project employees, as borne by
their respective employment contracts, the durations of their employments being coterminous with the
projects to which they were assigned.
Petitioner likewise insists that illegal dismissal is no longer an issue because what obtains herein is
the expiration of their contracts on 25 January 1991. But assuming that petitioner is liable to private
respondents for their monetary claims, it assails the computation thereof as contrary to law which
provides that money claims prescribe in three (3) years, i.e., the Labor Arbiter awarded forty (40)-day
holiday pay to Ernesto Mateo and Rommel Naadat, thirty-six (36) to Rodrigo Prado and thirty-four (34) to
Ernesto Guerra although they were entitled to only thirty (30)-day holiday pay for three (3) years there
being ten (10) legal holidays per year. Moreover the Labor Arbiter granted 19.48 days of service
incentive leave pay to Ernesto Mateo, 19.42 to Rommel Naadat and 18.34 to Rodrigo Prado
notwithstanding that they were only entitled to a maximum of fifteen (15)-day service incentive leave pay
for three (3) years at five (5)-day service incentive leave per year.
We conclude that the NLRC did not commit grave abuse of discretion. 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.
This provision classifies regular employees into two (2) kinds: (a) regular employees by nature of
work, and (b) regular employees by years of service. Expounding thereon the Court said in De Leon v.
xiii
NLRC 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.
Petitioner is engaged, as heretofore mentioned, in the construction business and manufactures its
own building materials. It has its own machine shop and construction equipment. In this kind of
integrated business respondents were hired, some as early as 1987, as Machinist, Machinist-Operator,
Electrical Engineer, Aluminum Installer/Fabricator, Aluminum Installer/Helper, Welder, Warehouseman,
Marble Setter, Fabricator/Welder or Laborer/Helper until their dismissal on 25 January 1991. Private
respondents were made to sign employment contracts purportedly as project employees but which were
renewed every three (3) months. With this backdrop, we agree with the finding of the Labor Arbiter that x x x x with the successive contracts of employment where the complainants continued to perform
the same kind of work throughout the entire period of their employment, which was for more than one
year, it is clear that complainants tasks were usually necessary or desirable in the usual business or
trade of the respondent company. There can be no escape from the conclusion that the complainants
xiii
were regular employees of the respondent as provided by Article 280 of the Labor Code x x x x
xiii

We likewise agree with the Labor Arbiter, citing Magante v. NLRC, that if petitioners submission
that respondents were hired as project employees were to be taken as true, then it 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 as required by Policy Instruction No. 20 of the
Department of Labor and Employment Stabilizing Employer-Employee Relations in the Construction
Industry x x x x the company is not required to obtain a clearance from the Secretary of Labor in connection
with such termination. What is required of the company is a report to the nearest Public Employment
Office for statistical purposes.
Moreover, the Labor Arbiter correctly ruled that the supposed fixed periods of employment of private
respondents as stated in their employment contracts precluded their acquisition of tenurial security.
xiii
Caramol v. NLRC is authoritative There is no question that a stipulation on an employment contract providing for a fixed period of
employment such as project-to-project contract is valid provided the period 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. However, where from the
circumstances it is apparent that periods have been imposed to preclude the acquisition of tenurial
security by the employee, they should be struck down as x x x contrary to public policy, morals, good
custom or public order.
As in Caramol, sufficiently established in the present case are circumstances showing that the
alleged fixed periods of employment by way of project-to-project contracts were imposed to preclude
acquisition of tenurial security by private respondents. We reiterate that private respondents performed
activities necessary or desirable in the usual business or trade of petitioner and that they rendered
services for more than a year. Accordingly, the arrangement on fixed periods of employment must be
struck down as contrary to public policy.
Petitioner submitted the employment contracts of some of the private respondents to show, inter alia,
the duration thereof and in the process prove that their services were terminated due to expiration of their
respective contracts: Rene Permaran, 6 November 1990; Ernesto Guerra, 29 September 1990; Ernesto
Mateo, 26 October 1990; Artemio Agosto, 20 July 1990 and Rommel Naadat, 3 March 1991.
Considering our finding however that private respondents are regular employees of petitioner, the
expiry dates of their employment as shown in their respective contracts are rendered meaningless. We
also note that the employment contract of private respondent Naadat was yet to expire on 3 March 1991
so that particular circumstance cannot, by any stretch of the imagination, justify his termination on 25
January 1991 based on the expiration of his contract. Clearly, there was no legal cause for private
respondents termination from employment. Neither were they accorded due process since petitioners
security guards simply prevented them from reporting for work as it appears their termination was
triggered off by their having sought relief from the labor tribunal on 9 January 1999 regarding money
claims. Petitioner received the notification and summons on 18 January 1991. It must have resented
their move such that after only a week they were eased out from its employ under the pretext of expiration
of their employment contracts.
All money claims arising from employer-employee relationship shall be filed within three (3) years
xiii
from the time the cause of action accrued, otherwise, they shall be forever barred. And so petitioner
assails the award of holiday pay for more that thirty (30) days to Ernesto Mateo, Rommel Naadat, Rodrigo
Prado and Ernesto Guerra, and more than fifteen (15) days of service incentive leave pay to the same
employees except Ernesto Guerra. We agree with petitioner in this regard that the Labor Arbiter should
not have awarded such money claims that went beyond three (3) years. There are ten (10) regular
xiii
holidays and five (5) days of service incentive leave in a year. At most, private respondents can only
claim thirty (30)-day holiday pay and fifteen (15)-day service incentive leave pay with respect to their
amended complaint of 25 January 1991. Any other claim is now barred by prescription.
WHEREFORE, the petition is PARTIALLY GRANTED. The questioned Decision of respondent
National Labor Relations Commission of 24 October 1995, which sustained with modification the decision
of the Labor Arbiter, and its Resolution of 21 December 1995 denying reconsideration are AFFIRMED
with MODIFICATION.
Private respondents Rene Permaran, Ernesto Guerra, Nerio Valenzuela, Rodrigo Prado, Mario
Plaquia, Ernesto Mateo, Rommel Naadat, Artemio Agosto, Salvador Urbanozo, Cesar Castillo and
Ponciano del Rosario are declared regular employees of petitioner E. Ganzon, Inc. They are likewise
declared to have been illegally dismissed by petitioner E. Ganzon, Inc.; consequently, petitioner is
ordered to reinstate them without loss of seniority rights and other privileges and to grant them full back
wages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time
xiii
compensation was withheld from them up to actual reinstatement. In addition, petitioner is ordered to
pay private respondents their overtime pay, except as to Ernesto Mateo, Cesar Castillo and Artemio
Agosto who, as found by public respondent NLRC, were not entitled thereto, as well as legal holiday pay,
service incentive leave pay and 13th month pay.

The assailed Decision of the NLRC is MODIFIED in that with respect to the amended complaint of 25
January 1991 the entitlement to legal holiday pay of private respondents Ernesto Mateo, Rommel Naadat,
Rodrigo Prado and Ernesto Guerra and to service incentive leave pay of the same private respondents,
except Ernesto Guerra, is limited to three (3) years from the date of the amended complaint.
SO ORDERED.

SECOND DIVISION

ROSITA PANGILINAN, YOLANDA LAYOLA,

SALLY GOLDE, AIDA QUITE, FERDINAND
CALE, RAUL ARUITA, MANUEL ERIFUL,
ARNEL PAULO, ROSEMARIE GEOTINA,
SAMUELA KUMAR, REBECCA PEREZ,
EDGAR BELLO, JOSEPH SORIANO, DANILO
AMPULLER,
TOLENTINO
CALLAO,
MANOLITA MANALANG, TORIBIO LETIM,
NANCY BELGICA, ALFREDO ARELLANO,
JOSEFA CEBUJANO, JUN DEL ROSARIO,
AVELINO AGUILAR, MILAROSA TIAMSON,
EDNA
DICHOSO,
JASMIN
BOLISAY,
JULIETA
DIDAL,
GERARDO
BARISO,
ANGELITO PEAFLOR, NERISSA LETIM,
ALEXANDER
BARBOSA,
ELIZABETH
SAENS,
NYMPHA
LUGTU,
MYRNA
MORALES, LIZA CRUZ, ELENA FANG, EDNA
CRUZA,
GORGONIO
PALMA,
JOSE
VERGARA, ALDRIN REMORQUE, RUDY
BLANCO, MARIO BUENVIAJE, MA. CRISTY
CEA, REYNALDO GUELAS VILLASENOR,
RHOY TADO, LYDIA SALIPOT, ANGELITO
PEREZ VERGARA, RODOLFO
GACHO,
JESSIE

SAN PEDRO, MARINAO ORCA, JR.,

PEBELITO LERONA, PEPE CONGRESO,
NIMFA NAPAO, WILHELMINA
BAGUISA,
OLIVIA
CAINCAY,
JERRY
MANUEL
NICOLAS, CARLOS ABRATIQUE, JESUS
LIM, JR., AND GERRY ROXAS,
Petitioners,

G.R. No. 149329

Present:

PUNO, J., Chairman,

QUISUMBING,
MARTINEZ,
CALLEJO, SR., and
TINGA, JJ.

Promulgated:
- versus -

July 12, 2004

GENERAL MILLING CORPORATION,
Respondent.
x-------------------------------------------------- x

DECISION

CALLEJO, SR., J.:

Before this Court is a petition for review on certiorari of the Decision

xiii

of the Court of Appeals in

CA-G.R. SP No. 51678 and its Resolution denying the motion for reconsideration thereon.

The Antecedents

The respondent General Milling Corporation is a domestic corporation engaged in the

production and sale of livestock and poultry.

xiii

It is, likewise, the distributor of dressed chicken to

various restaurants and establishments nationwide.

xiii

As such, it employs hundreds of

employees, some on a regular basis and others on a casual basis, as emergency workers.

The petitioners

xiii

were employed by the respondent on different dates as emergency

workers at its poultry plant in Cainta, Rizal, under separate temporary/casual contracts of
employment for a period of five months.
others served as packers or helpers.
services were terminated.
payment of holiday pay, 13

xiii

xiii

Most of them worked as chicken dressers, while the

Upon the expiration of their respective contracts, their

They later filed separate complaints for illegal dismissal and nonth

month pay, night-shift differential and service incentive leave pay

against the respondent before the Arbitration Branch of the National Labor Relations
Commission, docketed as NLRC Case No. RAB-IV-9-4519-92-RI; NLRC Case No. RAB-IV-9-4520-92-

RI; NLRC Case No. RAB-IV-9-4521-92-RI; NLRC Case No. RAB-IV-9-4541-92-RI; NLRC Case No.
RAB-IV-10-4552-92-RI; NLRC Case No. RAB-IV-10-4595-92-RI and NLRC Case No. RAB-IV-11-459992-RI.

xiii

The petitioners alleged that their work as chicken dressers was necessary and desirable in
the usual business of the respondent, and added that although they worked from 10:00 p.m. to
6:00 a.m., they were not paid night-shift differential.

xiii

They stressed that based on the nature of

their work, they were regular employees of the respondent; hence, could not be dismissed from
their employment unless for just cause and after due notice. In support thereof, the petitioners
cited the decision of the Honorable Labor Arbiter Perlita B. Velasco in NLRC Case No. NCR-62168-86, entitled Estelita Jayme, et al. vs. General Milling Corporation; and NLRC Case No. NCR9-3726-86, entitled Marilou Carino, et al. vs. General Milling Corporation.

xiii

They asserted that the

respondent GMC terminated their contract of employment without just cause and due notice.
They further argued that the respondent could not rely on the nomenclature of their employment
as temporary or casual.

On August 18, 1997, Labor Arbiter (LA) Voltaire A. Balitaan rendered a decision in favor of
the petitioners declaring that they were regular employees. Finding that the termination of their
employment was not based on any of the just causes provided for in the Labor Code, the LA
declared that they were allegedly illegally dismissed. The decretal portion of the decision reads:

WHEREFORE, judgment is hereby rendered in these cases, as follows:

1.

Declaring respondent corporation guilty of illegally dismissing

complainants, except Rosalina Basan and Filomena Lanting whose
complaints are hereby dismissed on ground of prescription, and as a
consequence therefor ordering the said respondent corporation to
reinstate them to their former positions without loss of seniority
rights and other privileges and with full backwages from the time they
were illegally dismissed in the aggregate amount of P15,328,594.04;

2.

Ordering respondent corporation to pay the said complainants their

13th month pay, holiday pay and service incentive leave pay in the
aggregate amount of P1,979,148.23;

3.

Ordering respondent corporation to pay said complainants the

amount of P1,730,744.22 by way of attorneys fees, representing ten
(10%) percentum of the total judgment awards.

The case against individual respondent Medardo Quiambao is hereby

xiii
dismissed.

A copy of the decision was sent by registered mail to the respondent on October 23, 1997
under Registered Mail No. 004567 addressed to Atty. Emmanuel O. Pacsi, counsel for GMC, 6
Floor, Corinthian Plaza Bldg., 121 Paseo de Roxas, Makati City.

xiii

th

However, Beth Cacal, a clerk of

the respondent GMC received the said decision on October 28, 1997.

xiii

Contending that a copy

thereof was received only on November 3, 1997, the respondent filed an appeal on November 12,
1997, before the National Labor Relations Commission (NLRC), docketed as NLRC NCR CA No.
The petitioners filed a Motion to Dismiss Respondents Notice of Appeal/Appeal

014462-98.

Memorandum on the ground that the appeal was filed five days late, considering that the August
18, 1997 Decision was received by the respondent through its employee, Beth Cacal, on October
28, 1997.

xiii

The respondent opposed the motion, contending that Cacal was a mere clerk, and was not
a member of the staff of its Legal Department. It further contended that the Legal Department was
th

located at the sixth (6 ) floor of Corinthian Plaza and had its own staff, including the legal
secretary who served as the Legal Departments receiving clerk.

xiii

Invoking Section 10, Rule 13 of

the Rules of Court, in relation to Section 2 thereof, the respondent alleged that Cacals receipt of
the mail and/or decision was not equivalent to receipt by its counsel. In support thereof, the
respondent cited the cases of Adamson University v. Adamson University Faculty and Employees
Association,

xiii

and PLDT vs. NLRC.

xiii

On May 25, 1998, the NLRC rendered a decision reversing that of the Labor Arbiter, the
dispositive portion of which is herein quoted:
th

WHEREFORE, except for its award of 13 month pay, holiday pay and
service incentive leave pay in the aggregate amount of P1,979,148.23 which is
hereby affirmed, the appealed decision is set aside for being contrary to settled
xiii
jurisprudence.

The NLRC ruled that the respondent GMC filed its appeal within the reglementary period.
Citing the case of Caete v. NLRC
Placement International v. NLRC,

xiii

xiii

which, in turn, cited Adamson v. Adamson

xiii

and United

the NLRC held that service by registered mail is completed

only upon actual receipt thereof by the addressee.

Since the addressee of the mail is the

respondents counsel and the person who received it was a non-member of the Legal Staff, the
decision cannot be said to have been validly served on the respondents counsel on October 28,
1997.

The NLRC also held that the petitioners, who were temporary or contractual employees of
the respondent, were legally terminated upon the expiration of their respective contracts. Citing
the case of Brent School, Inc. vs. Zamora,

xiii

the NLRC explained that while the petitioners work

was necessary and desirable in the usual business of GMC, they cannot be considered as regular
employees since they agreed to a fixed term.
The petitioners motion for reconsideration of the decision having been denied by the
NLRC on October 12, 1998,

xiii

they filed a petition for certiorari before the Court of Appeals and

assigned the following errors:

I
THE RESPONDENT COMMISSION SERIOUSLY ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR IN EXCESS OF ITS
JURISDICTION IN ENTERTAINING AND GIVING DUE COURSE TO RESPONDENT
COMPANYS APPEAL WHICH WAS UNDENIABLY FILED OUT OF TIME AND
CONSEQUENTLY SETTING ASIDE THE FINAL DECISION OF THE LABOR
ARBITER.
II
THE RESPONDENT COMMISSION SERIOUSLY ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN HOLDING THAT PETITIONERS DISMISSAL WAS
LEGAL ON THE GROUND OF EXPIRATION OF EMPLOYMENT CONTRACT WHICH
IS NOT A STATUTORY CAUSE UNDER THE LABOR CODE.
III
THE RESPONDENT COMMISSION [S]ERIOUSLY ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN NOT FINDING THAT PETITIONERS, AS REGULAR
EMPLOYEES, CANNOT BE DISMISSED WITHOUT JUST CAUSE AND THE
xiii
REQUIRED DUE PROCESS.

On September 29, 2000, the CA rendered a decision affirming with modification the
decision of the NLRC, the decretal portion of which reads:

WHEREFORE, the appealed decision of the NLRC is hereby AFFIRMED,

th
with the MODIFICATION that the award of 13 month pay, holiday pay, and service
incentive leave pay shall cover only the year or years when petitioners were
xiii
actually employed with herein respondent General Milling Corporation.

The CA ruled that no grave abuse of discretion could be imputed to the NLRC, considering
that the ten-day period to appeal began to run only from the date the decision of the LA was
validly served on the respondents counsel. The appellate court also ruled that even assuming
arguendo that the respondent GMCs appeal was filed late, in view of the substantial amount
involved, giving due course to the appeal did not amount to grave abuse of discretion.

On the merits of the petition, the CA ruled that where the duties of the employee consist of
activities usually necessary or desirable in the usual business of the employer, it does not
necessarily follow that the parties are forbidden from agreeing on a period of time for the
performance of such activities, and cited the case of St. Theresas School of Novaliches
xiii

Foundation v. NLRC.

The CA affirmed the entitlement of the petitioners to a proportionate

th

thirteenth (13 ) month pay for the particular year/s the petitioners were employed. As to the
awards of holiday pay and service incentive leave pay, the CA ruled that they should be limited to
the year/s of actual service.

xiii

The petitioners filed a motion for reconsideration of the said decision, which was denied
on July 24, 2001.

xiii

The Present Petition

The petitioners filed the instant petition, ascribing the following errors to the appellate
court:

I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND ACTED WITHOUT
JURISDICTION WHEN IT MODIFIED THE LABOR ARBITERS JUDGMENT THAT
HAS BECOME FINAL AND EXECUTORY FOR FAILURE OF THE RESPONDENT TO
APPEAL WITHIN THE REGLEMENTARY PERIOD.

II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE
DECISION OF THE LABOR ARBITER WAS DEEMED SERVED NOT ON THE DATE
WHEN THE DECISION WAS DELIVERED BY THE POSTMASTER TO THE OFFICE
OF THE RESPONDENTS LAWYER, BUT ON THE DATE WHEN THE RECEIVING
CLERK GAVE THE DECISION TO THE LAWYER.
III
THE RESPONDENTS PRACTICE OF HIRING CHICKEN DRESSERS ON A 5-MONTH
CONTRACT AND REPLACING THEM WITH ANOTHER SET OF 5-MONTH
CONTRACT WORKERS, OBVIOUSLY TO PREVENT THEM FROM ATTAINING
REGULAR STATUS, IS VIOLATIVE OF THE CONSTITUTION AND ARTICLES 279
xiii
AND 280 OF THE LABOR CODE.
The issues for resolution are (a) whether or not the respondents appeal from the Labor
Arbiters decision was filed within the reglementary period therefor; and, (b) whether or not the
petitioners were regular employees of the respondent GMC when their employment was
terminated.

In petitions for review on certiorari of the decision of the CA, only errors of law are
generally reviewed.

xiii

Normally, the Supreme Court is not a trier of facts.

xiii

In the absence of any

showing that the NLRC committed grave abuse of discretion, or otherwise acted without or in
excess of jurisdiction, the Court is bound by its findings.

xiii

Such findings are not infallible,

however, particularly when there is a showing that they were arrived at arbitrarily or in disregard
of the evidence on record. In such case, they may be re-examined by the Court.

Hence, when the factual findings of the NLRC are contrary to those of the Labor Arbiter, the
evidentiary facts may be reviewed by the appellate court.

xiii

Considering that the NLRCs findings

clash with those of the Labor Arbiters, this Court is compelled to go over the records of the case
as well as the submissions of the parties.

xiii

The Ruling of the Court

The petition is bereft of merit.

Anent the first issue, we agree with the CA that the NLRC did not act with grave abuse of
discretion when it gave due course to the appeal of the respondent.

Decisions of the Labor

Arbiter are final and executory, unless appealed to the Commission, within ten (10) calendar days
from receipt thereof.

xiii

Copies of decisions or final awards are served on both parties and their

counsel by registered mail,

xiii

and such service by registered mail is completed upon actual

receipt by the addressee or five (5) days from receipt of the first notice of the postmaster,
whichever is earlier.

xiii

The records show that the August 18, 1997 Decision of the Labor Arbiter was served via
registered mail, addressed to the respondent GMCs counsel, Atty. Emmanuel O. Pacsi, at the
th

sixth (6 ) Floor, Corinthian Plaza Bldg., 121 Paseo de Roxas, Makati City.

xiii

It was received by

Beth Cacal, a clerk of the respondent, on October 28, 1997. The petitioners insist that Cacal is a
person with authority to receive legal and judicial correspondence for the respondents Legal
Department. They point out that such authority to receive mail for and in behalf of the
respondents Legal Department is bolstered by the certification from the Makati Post Office that
she received the copy of their motion to dismiss the appeal, addressed to the said department.
The respondent GMC counters that the service of the LAs decision to a person not
connected to its Legal Department is not a valid service, and that it is only when a copy of such
decision is actually given to such department that a valid service of the decision is deemed to
have been made. Stressing that factual issues are not proper in a petition for certiorari under Rule
45, the respondent no longer discussed Cacals authority to receive legal and judicial
communications for the respondent.
A review of the records reveal that Cacal was a clerk at the respondents office and was
assigned at the sixth floor of

the Corinthian Plaza Bldg.

She was not assigned at the

respondents Legal Department, which has its own office staff, including a secretary who serves

as the departments receiving clerk.

xiii

The Court has ruled that a service of a copy of a decision

on a person who is neither a clerk nor one in charge of the attorneys office is invalid.

xiii

Thus,

there was no grave abuse of discretion on the part of the NLRC in giving due course to the
respondents appeal.
On the second issue, we agree that the petitioners were employees with a fixed period,
and, as such, were not regular employees.

Article 280 of the Labor Code comprehends three kinds of employees: (a) regular
employees or those whose work is necessary or desirable to the usual business 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 or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season; and, (c) casual employees or those who are
neither regular nor project employees.

xiii

A regular employee is one who is engaged to perform activities which are necessary and
desirable in the usual business or trade of the employer as against those which are undertaken
for a specific project or are seasonal.

xiii

There are two separate instances whereby it can be

determined that an employment is regular: (1) if the particular activity performed by the employee
is necessary or desirable in the usual business or trade of the employer; and, (2) if the employee
has been performing the job for at least a year.

xiii

In the case of St. Theresas School of Novaliches Foundation vs. NLRC,

xiii

we held that

Article 280 of the Labor Code does not proscribe or prohibit an employment contract with a fixed
period. We furthered that 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 employees duties.

Indeed, in the leading case of Brent School Inc. v. Zamora,

xiii

we laid down the guideline

before a contract of employment may be held as valid, to wit:

[S]tipulations in employment contracts providing for term employment or fixed
period employment are valid when the period were agreed upon knowingly and
voluntarily by the parties without 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
xiii
former over the latter.

An examination of the contracts entered into by the petitioners showed that their
employment was limited to a fixed period, usually five or six months, and did not go beyond such
period.

TEMPORARY/CASUAL CONTRACT OF EMPLOYMENT

KNOW ALL MEN BY THESE PRESENTS:
That the GENERAL MILLING CORPORATION, hereby temporarily hires ________________ as Emergency worker for a period beginning from
____________ to _____________, inclusive, at the rate of _____________ per day,
payable every 15th [day] and end of each month.
________________ hereby binds and obligates himself/herself to perform
his/her assigned work diligently and to the best of his/her ability, and promise to
obey all lawful orders of his/ her superior and/or representatives made in
connection with the work for which he/she is employed.
IT IS CLEARLY STIPULATED THAT
EMPLOYMENT SHALL BE AS FOLLOWS:

THE

CONDITION

OF

THIS

1.
This employment contract shall be on a DAY-TO-DAY BASIS and
shall not extend beyond the period specified above;
2.
The employee aforementioned may be laid off or separated from
the Firm, EVEN BEFORE THE EXPIRY DATE OF THIS CONTRACT, if his/her
services are no longer needed, or if such
services are found to be
unsatisfactory, or if she/he has violated any of the established rules and
regulations of the Company;
3.
In any case, the period of employment shall not go beyond the
duration of the work or purpose for which the aforementioned employee has
been engaged;
4.
That the employee hereby agrees to work in any work shift
schedule that may be assigned to him by the Firm during the period of this
contract; and

This Temporary/Casual Employment contract, unless sooner terminated

for any of the causes above-cited, shall then automatically cease on its expiry
xiii
date, without the necessity of any prior notice to the employee concerned.

The records reveal that the stipulations in the employment contracts were knowingly and
voluntarily agreed to by the petitioners without force, duress or improper pressure, or any
circumstances that vitiated their consent. Similarly, nothing therein shows that these contracts
were used as a subterfuge by the respondent GMC to evade the provisions of Articles 279 and 280
of the Labor Code.
The petitioners were hired as emergency workers and assigned as chicken dressers,
packers and helpers at the Cainta Processing Plant.

The respondent GMC is a domestic

corporation engaged in the production and sale of livestock and poultry, and is a distributor of
dressed chicken. While the petitioners employment as chicken dressers is necessary and
desirable in the usual business of the respondent, they were employed on a mere temporary
basis, since their employment was limited to a fixed period. As such, they cannot be said to be
regular employees, but are merely contractual employees. Consequently, there was no illegal
dismissal when the petitioners services were terminated by reason of the expiration of their
contracts.

xiii

Lack of notice of termination is of no consequence, because when the contract

specifies the period of its duration, it terminates on the expiration of such period. A contract for
employment for a definite period terminates by its own term at the end of such period.

xiii

In sum, we rule that the appeal was filed within the ten (10)-day reglementary period.
Although the petitioners who mainly worked as chicken dressers performed work necessary and
desirable in the usual business of the respondent, they were not regular employees therein.
Consequently, the termination of their employment upon the expiry of their respective contracts
was valid.

IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED DUE COURSE. The
Decision of the Court of Appeals in CA-G.R. SP No. 51678 is AFFIRMED. No costs.

THIRD DIVISION
[G.R. No. 114290. September 9, 1996]
RAYCOR AIRCONTROL SYSTEMS, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION AND ROLANDO LAYA, et al., respondents.
DECISION
PANGANIBAN, J.:
Were private respondents, employed by petitioner in its business of installing airconditioning systems in
buildings, project employees or regular employees? And were their dismissals "due to (petitioner's)
present business status" and effective the day following receipt of notice legal? Where both the petitioner
and the respondents fail to present sufficient and convincing evidence to prove their respective claims,
how should the case be decided?
This Court answers the foregoing questions in resolving this petition for certiorari assailing the Decisionxiii
promulgated November 29, 1993 by the National Labor Relations Commission,xiii which set aside and
reversed the decision of the labor arbiterxiii dated 22 January 1993, as well as the subsequent order of
respondent Commission denying petitioner's motion for reconsideration.
The Facts
Petitioner's sole line of business is installing airconditioning systems in the buildings of its clients. In
connection with such installation work, petitioner hired private respondents Roberto Fulgencio, Rolando
Laya, Florencio Espina, Romulo Magpili, Ramil Hernandez, Wilfredo Brun, Eduardo Reyes, Crisostomo
Donompili, Angelito Realingo, Hernan Delima, Jaime Calipayan, Jorge Cipriano, Carlito de Guzman,
Susano Atienza, and Gerardo de Guzman, who worked in various capacities as tinsmith, leadman, aircon
mechanic, installer, welder and painter. Private respondents insist that they had been regular employees
all along, but petitioner maintains that they were project employees who were assigned to work on
specific projects of petitioner, and that the nature of petitioner's business -- mere installation (not
manufacturing) of aircon systems and equipment in buildings of its clients -- prevented petitioner from
hiring private respondents as regular employees. As found by the labor arbiter, their average length of
service with petitioner exceeded one year, with some ranging from two to six years (but private
respondents claim much longer tenures, some allegedly exceeding ten years).
In 1991, private respondent Laya and fourteen other employees of petitioner filed NLRC NCR Case No.
00-03-02080-92 for their "regularization". This case, was dismissed on May 20, 1992 for want of cause of
action.xiii
On different dates in 1992, they were served with uniformly-worded notices of "Termination of
Employment" by petitioner "due to our present business status", which terminations were to be effective
the day following the date of receipt of the notices. Private respondents felt they were given their walking
papers after they refused to sign a "Contract Employment" providing for, among others, a fixed period of
employment which "automatically terminates without necessity of further notice" or even earlier at
petitioner's sole discretion.
Because of the termination, private respondents filed three cases of illegal dismissal against petitioner,
alleging that the reason given for the termination of their employment was not one of the valid grounds
therefor under the Labor Code. They also claimed that the termination was without benefit of due
process.

The three separate cases filed by private respondents against petitioner, docketed as NLRC-NCR 00-0305930-92, NLRC NCR 00-05-02789-92, and NLRC NCR 00-07-03699-92, were subsequently
consolidated. The parties were given opportunity to file their respective memoranda and other
supplemental pleadings before the labor arbiter.
On January 22, 1993, the Labor Arbiter issued his decision dismissing the complaints for lack of merit.
He reasoned that the evidence showed that the individual complainants (private respondents) were
project employees within the meaning of Policy Instructions No. 20 (series of 1977)xiii of the Department
of Labor and Employment, having been assigned to work on specific projects involving the installation of
air-conditioning units as covered by contracts between their employer and the latter's clients.
Necessarily, the installation of airconditioning systems "must come to a halt as projects come and go",
and "(o)f consequence, the [petitioner] cannot hire workers in perpetuity. And as project employees,
private respondents would not be entitled to termination pay, separation pay, holiday premium pay, etc.;
and neither is the employer required to secure a clearance from the Secretary of Labor in connection with
such termination.
Private respondents appealed to the respondent NLRC, which in its November 29, 1993 Decision
reversed the arbiter and found private respondents to have been regular employees illegally dismissed.
The respondent Commission made the following four-paragraph disquisition:
"From the above rules, it can easily be- gleaned that complainants belong to a work pool from which the
respondent company drew its manpower requirements. This is buttressed by the fact that many of the
complainants have been employed for long periods of time already.
We doubt respondent's assertion that complainants were really assigned to different projects. The
'Contract Employment' which it submitted (see pp. 32-38, record) purporting to show particular projects
are not reliable nay even appears to have been contrived. The names of the projects clearly appear to
have been recently typewritten. In the 'Contract Employment' submitted by complainants (see p. 65,
record), no such name of project appears. Verily, complainants were non-project employees.
Anent the dismissal of complainants, suffice it to state that the same was capricious and whimsical as
shown by the vague reason proffered by respondent for said dismissal which is 'due to our present
business states' (should read 'status') is undoubtedly not one of the valid causes for termination of an
employment. We are thus inclined to give credence to complainants' allegation that they were eased out
of work for their refusal to sign the one-sided 'Contract Employment.'
The fact that complainants were dismissed merely to spite them is made more manifest by respondent's
failure to make a report of dismissal or secure a clearance from the Department of Labor (see pp. 196
and 197, record) as required under P.I. No. 20 and their publication of an advertisement for replacements
for the same positions held by complainants (see p. 298, record). Even assuming that complainants were
project employees, their unceremonious dismissal coupled with the attempt to replace them via the
newspaper advertisement entitles them to reinstatement with backwages under P.I., No. 20."
The dispositive portion followed immediately and read:
"WHEREFORE, the appealed Decision is hereby SET ASIDE and a new one entered ordering
respondent to:
1.
Immediately reinstate complainants (private respondents) to their former positions without loss of
seniority rights and privileges; and
2.
Pay them full backwages from the time they were dismissed up to the time they are actually
reinstated."

Petitioner's motion for reconsideration was denied by public respondent on February 23, 1994 for lack of
merit. Hence, this petition.
Issues
Petitioner charges public respondent NLRC with grave abuse of discretion in finding private respondents
to have been non-project employees and illegally dismissed, and in ordering their reinstatement with full
backwages.
For clarity's sake, let us re-state the pivotal questions involved in the instant case as follows: whether
private respondents were project employees or regular (non-project) employees, and whether or not they
were legally dismissed.
In support of its petition, petitioner reiterates the same points it raised before the tribunals below: that it is
engaged solely in the business of installation of airconditioning units or systems in the buildings of its
clients. It has no permanent clients with continuous projects where its workers could be assigned; neither
is it a manufacturing firm. Most of its projects last from two to three months. (The foregoing matters were
never controverted by private respondents.) Thus, for petitioner, work is "not done in perpetuity but
necessarily comes to a halt when the installation of airconditioning units is completed."
On the basis of the foregoing, petitioner asserts that it could not have hired private respondents as
anything other than project employees. It further insists that "(a)t the incipience of hiring, private
respondents were appraised (sic) that their work consisted only in the installation of airconditioning units
and that as soon as the installation is completed, their work ceases and that they have to wait for another
installation projects (sic)." In other words, their work was co-terminous with the duration of the project,
and was not continuous or uninterrupted as claimed by them. Petitioner also claims that the private
respondents signed project contracts of employment indicating the names of the projects or buildings they
are working on. And when between projects, there project employees were free to work elsewhere with
other establishments.
Private respondents controverted these assertions of petitioner, claiming that they had worked
continuously for petitioner for several years, some of them as long as ten years, and thus, by operation of
law had become regular employees.
The Court's Ruling

Ordinarily, the findings made by the NLRC are entitled to great respect and are even clothed with finality
and deemed binding on this Court, except that when such findings are contrary to those of the labor
arbiter, this Court may choose to re-examine the same, as we hereby do in this case nor.
The First Issue: Project Employees or Regular Employees?
An Unfounded Conclusion

We scoured the assailed Decision for any trace of arbitrariness, capriciousness or grave abuse of
discretion, and noted that the respondent Commission first cited the facts of the case, then quoted part of
the arbiter's disquisition along with relevant portions of Policy Instructions No. 20, after which it
immediately leapt to the conclusion that "(F)rom the above rules, it can easily be gleaned that
complainants belong to a work pool from which the respondent company drew its manpower
requirements. This is buttressed by the fact that many of the complainants have been employed for long
periods of time already." (underscoring supplied) By reason of such "finding", respondent NLRC

concluded that private respondents were regular (not project) employees, but failed to indicate the basis
for such finding and conclusion. For our part, we combed the Decision in search of such basis. However,
repeated scrutiny of the provisions of Policy Instructions No. 20 pertaining to work pools merely raised
further questions.
"Members of a work pool from which a construction company draws its project employees, if considered
employees of the construction company while in the work pool, are non-project employees or employees
for an idefinite period. If they are employed in a particular project, the completion of the project or of any
phase thereof will not mean severance of employer-employee relationship.
However, if the workers in the workpool are free to leave anytime and offer their services to other
employers then they are project employees employed by a construction company in a particular project or
in a phase thereof."
A careful reading of the aforequoted and preceding provisions establishes the fact that project
employees may or may not be members of a workpool, (that is, the employer may or may not have
formed a work pool at all), and in turn, members of a work pool could be either project employees
or regular employees. In the instant case, respondent NLRC did not indicate how private respondents
came to be considered members of a work pool as distinguished from ordinary (non-work pool)
employees. It did not establish that a work pool existed in the first place. Neither did it make any finding
as to whether the herein private respondents were indeed free to leave anytime and offer their services to
other employers, as vigorously contended by petitioner, despite the fact that such a determination would
have been critical in defining the precise nature of private respondents' employment. Clearly, the NLRC's
conclusion of regular employment has no factual support and is thus unacceptable.
Conclusion Based on Unwarranted Assumption of Bad Faith

Immediately thereafter, respondent Commission determined -- without sufficient basis -- that

complainants were non-project employees. We quote:
"We doubt respondent's (petitioner's) assertion that complainants (private respondents) were really
assigned to different projects. The "Contract Employment" which it submitted (see pp. 32-38, record)
purporting to show particular pojects are not reliable nay even appears to have been contrived. The
names of the projects clearly appear to have been recently typewritten. In the 'Contract Employment'
submitted by complainants (see p. 65, record), no such name of project appears. Verily, complainants
were non-project employees." (underscoring supplied)
The basis for respondent NLRC's statement that the contracts were contrived was the fact that the names
of projects clearly appeared to have been typed in only after the contracts had been prepared. However,
our examination of the contracts (presented by petitioner as Annexes "A", "B", "B-1", "C", "D", "E" and
"F"xiii to its Position Paper dated July 30, 1992 filed with the labor arbiter) did not lead inexorably to the
conclusion that these were "contrived". Said Annexes were photocopies of photocopies of the original
"Contract Employments",xiii and the names of projects had been typed onto these photocopies, meaning
that the originals of said contracts probably did not indicate the project names. But this alone did not
automatically or necessarily mean that petitioner had committed any falsehood or fraud, or had any intent
to deceive or impose upon the tribunals below, because the names of the projects could have been
typed/filled in good faith, nunc pro tunc, in order to supply the data which ought to have been indicated in
the originals at the time those were issued, but which for some reason or other were omitted. In short,
the names of projects could have been filled in simply in order to make the contracts speak the truth more
clearly or completely. Notably, no reason was advanced for not according the petitioner the presumption
of good faith. Respondent NLRC, then, made an unwarranted assumption that bad faith and fraudulent
intent attended the filling in of the project names in said Annexes. In any event, it can be easily and

clearly established with the use of the naked eye that the dates and durations of the projects and/or work
assignments had been typed into the original contracts, and therefore, petitioner's failure to indicate in the
originals of the contracts the name(s) of the project(s) to which private respondents were assigned does
not necessarily mean that they could not have been project employees. (Incidentally, we should make
mention here that what is or is not stated in a contract does not control nor change the Juridical nature of
an employment relationship since the same is determined and fixed by law. As a matter of fact, we note
that there is no requirement in Policy Instructions No. 20 that project employees should be issued written
contracts of employment, let alone that a written contract should indicate the name of the project to which
the employee concerned is being assigned.)
Statutory Basis for Determining Nature of Employment

The parties and their respective counsel, as well as respondent Commission and the Solicitor General,
should have re-read and carefully studied ALU-TUCP vs. National Labor Relations Commission,xiii which
is highly instructional on this question:
"The law on the matter is Article 280 of the Labor Code which reads in full:
'Article 280. Regular and Casual Employment -- The provisions of the 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.' xxx
xxx

xxx

xxx

x x x 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. (underscoring ours)
In the realm of business and industry, we note that 'project' could refer to x x x 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 x x x type of project is
a particular construction job or project of a construction company. A construction company ordinarily
carried out two or more discrete identifiable construction projects: e.g., a twenty-five.story 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 same decision goes on to say:xiii

"x x x The simple fact that the employment of petitioners as project employees had gone beyond one (1)
year, does not detract from, or legally dissolve, their status as project employees. The second paragraph
of Article 280 of the Labor Code, quoted above, providing that an employee who has served for at least
one (1) year, shall be considered a regular employee, relates to casual employees, not to project
employees.
In the case of Mercado, Sr. vs. National Labor Relations Commission (201 SCRA 332 [1991]), this Court
ruled that the proviso in the second paragraph of Article 280 relates only to casual employees and is not
applicable to those who fall within the definition of said Article's first paragraph, i.e.. project employees. x
x x"
Incidentally, we should mention that both respondent Commission and the Solicitor General were in error
in concluding based on private respondents' claimed length of employment (allegedly for over ten years)
that they were regular employees. Sad to state, the Solicitor General in his arguments tried to "force-fit"
private respondents into the "regular employee" category and completedly disregarded the critical
distinctions set forth in ALU-TUCP and earlier cases.
Inconclusive Evidence

Based on the foregoing considerations, it is patent that, in the instant case, there needs to be a finding as
to whether or not the duration and scope of the project or projects were determined or specified and
made known to herein private respondents at the time of their engagement. The labor arbiter tried to do
this, relying heavily on the "Contract(s) Employment" presented in petitioner's Annexes as well as on
private respondents' own Annex "A"xiii attached to their Position Paper, and citing the fact that the said
contracts of employment indicated the duration of the projects to which the private respondents had been
assigned. He then held that "(t)here is no denial that complainants were assigned to work in these
projects,"xiii and concluded that they were indeed project employees.
But the arbiter completed ignored the fact that all the "Contract(s) Employment" presented in evidence by
both petitioner and private respondents had been signed only by petitioner's president and general
manager, Luis F. Ortega, but not by the employees concerned, who had precisely refused to sign them.
The said contracts therefore could in no wise be deemed conclusive evidence. Thus, private respondents
faulted the labor arbiter for giving credence and probative value to said contracts. Besides, they claimed,
only seven contracts in all were presented in evidence, pertaining to seven individual employees, while
there are fifteen employees involved in the complaints. Moreover, these contracts, purportedly issued
either in July or December of 1991, except for one dated May 1992), were all one-shot contracts of short
duration, the longest being for about five months. Now, inasmuch as petitioner had not denied nor
rebutted private respondents' allegations that they had each worked several years for the petitioner, the
obvious question is, why didn't petitioner produce in evidence similar contracts for all the other years that
private respondents had worked as project employees? To these points, petitioner offered no explanation
whatsoever.
Failure to Discharge Burden of Proof
For that matter, it seems self-evident to this Court that, even if the contracts presented by petitioner had
been signed by the employees concerned, still, they would not constitute conclusive proof of petitioner's
claim. After all, in the usual scheme of things, contract terms are normally dictated by the employer and
simply acceded to and accepted by the employee, who may be desperate for work and therefore in no
position to bargain freely or negotiate terms to his liking.
In any event, petitioner in this case undoubtedly could have presented additional evidence to buttress its
claim. For instance, petitioner could have presented copies of its contracts with its clients, to show the

time, duration and scope of past installation projects. The data from these contracts could then have
been correlated to the data which could be found in petitioner's payroll records for, let us say, the past
three years or so,xiii to show that private respondents had been working intermittently as and when they
were assigned to said projects, and that their compensation had been computed on the basis of such
work. But petitioner did not produce such additional evidence, and we find that it failed to discharge its
burden of proof.
It is not so much that this Court cannot appreciate petitioner's contentions about the nature of its business
and its inability to maintain a large workforce on its permanent payroll. Private respondents have
admitted that petitioner is engaged only in the installation (not manufacture) of aircon systems or units in
buildings, and since such a line of business would obviously be highly (if not wholly) dependent on the
availability of buildings or projects requiring such installation services, which factor no businessman, no
matter how savvy, can accurately forecast from year to year, it can be easily surmised that petitioner,
aware that its revenues and income would be unpredictable, would always try to keep its overhead costs
to a minimum, and would naturally want to engage workers on a per-project or per-building basis only,
retaining very few employees (if any) on its permanent payroll. It would also have been more than glad if
its employees found other employment elsewhere, in between projects. To our mind, it appears rather
unlikely that petitioner would keep private respondents -- all fifteen of them -- continuously on its
permanent payroll for, say, ten or twelve years, knowing fully well that there would be periods (of
uncertain duration) when no project can be had. To illustrate, let us assume that private respondents
(who were each making about P118.00 to P119.50 per day in 1991) were paid only P100.00 per day. If
the fifteen were, as they claimed, regular employees entitled to their wages regardless of whether or not
they were assigned to work on any project, the overhead for their salaries alone -- computed at
P100.00/day for 30 days in a month -- would come to no less than P45,000.00 a month, or P540,000.00 a
year, not counting 13th month pay, Christmas bonus, SSS/Medicare premium payments, sick leaves and
service incentives leaves, and so forth. Even if petitioner may have been able to afford such overhead
costs, it certainly does not make business sense for it or anyone else to do so, and is in every sense
contrary to human nature, not to mention common business practice. On this score alone, we believe
that petitioner could have made out a strong case. Which is why we have difficulty understanding its
failure to present clear and convincing evidence on this point, it being doctrinal that in illegal dismissal
cases, the employer always has the burden of proof.xiii
Petitioner's problem of weak evidence was further compounded by certain documentary evidence in the
records below which controverted petitioner's position, or, at the very least, tended to confuse rather than
clarify matters. For instance, we noted that in their Memorandum of Appeal dated February 17, 1993 filed
with the respondent Commission, herein private respondents had attached as annexes thereto the
following documents:
1. As Annex "B" thereof, a Certification dated January 28, 1992, signed by one Flora P. Perez,
Administrative/Accountant of Raycor, certifying that "x x x Mr. Roberto B. Fulgencio (one of the private
respondents) has been connected with the undersigned corporation (Raycor) from August 22, 1986 to
May 18, 1991 and September 01, 1990 to January 25, 1992 as Aircon Installer";
2. As Annex "C" thereof, a Certification dated May 7, 1985, signed by Luis F. Ortega, President and
General Manager of herein petitioner corporation, to the effect that "x x x Mr. Jaime Calipayan (another
one of the private respondents) has been connected with the undersigned corporation from June 18,
1982 up to present as a Mechanical Installer ; and
3. As Annex "D" thereof, a Certification dated June 06, 1991, likewise signed by Luis G. Ortega, president
and general manager of Raycor, certifying that "x x x Mr. Susano A. Atienza (still another of the private
respondents) has been connected with the undersigned corporation from October 10, 1983 up to present
as Aircon Mechanic/Technician".

Understandably, private respondents made big capital out of these certifications. But, while petitioner
failed utterly to offer rebutting evidence, still and all, we are not prepared to conclude on the basis of
these certifications alone that private respondents were indeed regular employees. First of all, said
certifications refer only to three out of the fifteen private respondents, so what could be true of them may
not necessarily apply with respect to the other twelve. Moreover, the certifications do not categorically
state that the three employees had been permanent employees of Raycor. In other words, they do not
necessarily overturn petitioner's contention that private respondents were project employees, since it is
still possible to read the documents a saying that the named employees were working as project
employees during the periods therein specified. This is especially so since the said certifications were
prepared by non-lawyers who in all likelihood were not aware of the potential legal implications and
ramifications of what were ostensibly innocuous certifications. As held in one recent case, "x x x it is
however not difficult to understand that ordinary business activities are performed in the normal course
without anticipation nor foreknowledge of litigation, often with dispatch and usually with a minimum of
documentation.xiii Nonetheless, all things considered, the certifications, issued by petitioner itself, tend to
put its claims in serious doubt.
The situation was still further aggravated by the manner in which petitioner dismissed private
respondents. As found by respondent Commission, the reason given for the dismissals, i.e., "due to our
present business status," is vague, to say the least, and unarguably is not one of the valid or just causes
provided by law for termination of an employment, whatever its classification. But more significantly -- if
indeed private respondents were project employees, there would have been no need to terminate them
by sending them notices of termination, inasmuch as their employment ceases "as a result of the
completion of the project or any phase thereof in which they are employed," per Policy Instruction No. 20
itself. Thus, if petitioner resorted to such dismissals, there is the unavoidable inference that petitioner
regarded the private respondents as regular employees after all. But again, this is inconclusive, since the
notices of termination were signed, and in all likelihood prepared, by the president and general manager
of petitioner, probably sans any legal advice or awareness of the implications of such a move.
All the aforesaid conflicting data have the net effect of casting doubt upon and clouding the real nature of
the private respondents' employment status. And we are mandated by law to resolve all doubts in favor of
labor. For which reason, we hereby hold that private respondents were regular employees of the
petitioner.
Having arrived at basically the same results as respondent NLRC with respect to private respondents'
employment status, did this Court waste its time and effort in re-examining the instant case? The answer
is in the negative, this Court cannot affirm a decision or judgment based on erroneous findings and
conclusions, for justice can never be adequately dispensed to all parties if a judgment is not grounded on
the truth.
Second Issue: Terminations Illegal

On the second issue of alleged illegality of the subject dismissals, we agree with respondent Commission
when it held, as mentioned above, that "the same was capricious and whimsical as shown by the vague
reason proffered by respondent for said dismissal which is 'due to our present business states' (should
read 'status') is undoubtedly not one of the valid causes for termination of an employment." True indeed,
for neither trhe Labor Code nor Policy Instructions No. 20 allows termination on such ground. Even Art.
283 of the Labor Code as amended, which treats of retrenchments and closures due to business losses,
requires that the employer first serve written notice on the workers and the Department of Labor at least
one month before the intended date thereof; and in certain cases, separation pay must be paid. And it
cannot be denied that in the instant case, petitioner did not afford them due process thru the twin
requirements of notice and hearing,xiii as the terminations took effect the day following receipt of the
notices of termination. Ineluctably, the said terminations are not in accordance with law and therefore
illegal.

On top of that, there is evidence of the bad faith of petitioner in terminating the private respondents.
Petitioner placed an adxiii in the classified ads section of the People's Journal, sometime in June 1992xiii
which read:
"WANTED IMMEDIATELY
MECHANICAL INSTALLERS
TINSMITHS
WELDERS/PIPEFITTERS
APPLY IN PERSON:
RAYCOR AIR CONTROL
SYSTEMS, INC.
RM 306 20TH CENTURY BLDG.
632 SHAW BLVD., MAND.
METRO MANILA"
Unmistakably, petitioner, in placing the ad, must have had at least one project, maybe more, "in the
pipeline" at that time, and was clearly in need of replacements for private respondents whom it had just
fired. Thus, the dismissals could hardly have been due to a valid cause, not even due to petitioner's
alleged "present business status". On this count as well, the dismissals were illegal.
And lastly, we should mention that an order for reinstatement with payment of backwages must be based
on the correct premises. This point is best illustrated by considering the last ratiocination utilized by
public respondent: "Even assuming that complainants were project employees, their unceremonious
dismissal coupled with the attempt to replace them via the newspaper advertisement entitles them to
reinstatement with backwages under P.I. No. 20." There is a world of difference between reinstatement as
project employees and reinstatement as regular employees, but the difference was obviously lost on the
respondent NLRC.
Conclusion
We reiterate that this Court waded through the records of this case searching for solid evidence upon
which to decide the case either way. But all told, neither party managed to make out a clear case.
Therefore, considering that in illegal dismissal cases, the employer always has the burden of proof, and
considering further that the law mandates that all doubts, uncertainties, ambiguities, and insufficiencies
be resolved in favor of labor, we perforce rule against petitioner and in favor of private respondents.
WHEREFORE, the foregoing considered, the assailed Decision is hereby SET ASIDE and a new one
rendered holding that petitioner had failed to discharge its burden of proof in the instant case and
therefore ORDERING the reinstatement of private respondents as regular employees of petitioner,
without loss of seniority rights and privileges and with payment of backwages from the day they were
dismissed up to the time they are actually reinstated. No costs.
SO ORDERED.

SECOND DIVISION

ABESCO CONSTRUCTION AND

G.R. No. 141168

DEVELOPMENT CORPORATION
and MR. OSCAR BANZON,
General Manager,
Petitioners,

Present:

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
-versus-

CORONA,
AZCUNA and
GARCIA, JJ.

ALBERTO RAMIREZ, BERNARDO

DIWA, MANUEL LOYOLA,
REYNALDO P. ACODESIN,
ALEXANDER BAUTISTA,
EDGAR TAJONERA and
GARY DISON,

Respondents. Present:

April 10, 2006

x------------------------------------------x

RESOLUTION

CORONA, J.:

Petitioner company was engaged in a construction business where respondents were hired on
different dates from 1976 to 1992 either as laborers, road roller operators, painters or drivers.

In 1997, respondents filed two separate complaints

xiii

for illegal dismissal against the company

and its General Manager, Oscar Banzon, before the Labor Arbiter (LA). Petitioners allegedly dismissed
them without a valid reason and without due process of law. The complaints also included claims for nonth

payment of the 13 month pay, five days service incentive leave pay, premium pay for holidays and rest
days, and moral and exemplary damages. The LA later on ordered the consolidation of the two
complaints.

xiii

Petitioners denied liability to respondents and countered that respondents were project
employees since their services were necessary only when the company had projects to be completed.
Petitioners argued that, being project employees, respondents employment was coterminous with the
project to which they were assigned. They were not regular employees who enjoyed security of tenure
and entitlement to separation pay upon termination from work.

After trial, the LA declared respondents as regular employees because they belonged to a work
pool from which the company drew workers for assignment to different projects, at its discretion. He ruled
that respondents were hired and re-hired over a period of 18 years, hence, they were deemed to be
regular employees. He likewise found that their employment was terminated without just cause. In a
decision dated January 7, 1998, he stated:

WHEREFORE, judgment is hereby rendered declaring respondents guilty of

illegal dismissal and ordering the latter to reinstate complainants to their former positions
with backwages and other benefits from the time their compensation was withheld from

them up to the time their actual reinstatement which as of the date of this decision
amounted to:

NAME
1. Alberto Ramirez

P49,764.00

2. Manuel B. Loyola

46,695.22

3. Hernando Diwa

49,764.00

4. Reynaldo Acodesin

46,695.22

5. Alexander Bautista

45,285.24

6. Edgar Tajonera

62,985.00

7. Gary Dison

53,911.00
TOTAL

P 355,099.68

However, if reinstatement is no longer feasible, a one-month salary shall be awarded as

a form of separation pay, in addition to the aforementioned award.

Respondents are likewise ordered to pay complainants the following:

UNPAID
SALARY
SALARY DIFFERENTIAL

NAME

1.Hernando
Diwa

P765.00

2.Alexander
Bautista

4.Manuel
Loyola
5.Reynaldo
Acodesin

B.

5 DAYS SEPARATION
SERVICE
PAY
INCENTIVE
LEAVE

P1,274.00

P23,088.00

3.Alberto
Ramirez

TH

13
MONTH
PAY

P4,147.00

11,141.00

P2,005.00

45,617.00

11,141.00

2,005.00

74,646.00

11,141.00

2,020.00

41,170.00

11,141.00

2,020.00

20,735.00

6.Edgardo
Tajonera

19,500.00

3,750.00

130,000.00

7.Gary Dison

11,141.00

2,020.00

29,029.00

P23,088.00 P76,479.00 P13,820.00

P345,344.00

P765.00

xxx

All other claims are hereby dismissed for lack of merit.

xiii

Petitioners appealed to the National Labor Relations Commission (NLRC) which affirmed the LAs
decision.

xiii

Subsequently, petitioners filed a petition for review in the Court of Appeals (CA) arguing that they
were not liable for illegal dismissal since respondents services were merely put on hold until the
resumption of their business operations. They also averred that they had paid respondents their full
wages and benefits as provided by law, hence, the latter had no more right to further benefits.

The CA was not convinced and dismissed petitioners appeal. It held:

We note that the petitioners are taking a new tack in arguing, for the first time,
that the [respondents] were not dismissed but their employment was merely suspended.
Previous to this, their defense was that the [respondents] were project employees who
were not entitled to security of tenure. The petitioners are barred from raising a new
defense at this stage of the case.

xxx

xxx

xxx

WHEREFORE, the petition for certiorari is hereby DISMISSED, for lack of

xiii

merit.

Petitioners filed a motion for reconsideration but it was dismissed by the CA.

xiii

In this petition for review under Rule 45 of the Rules of Court, petitioners raise the
following issues for resolution: (1) whether respondents were project employees or regular employees
and (2) whether respondents were illegally dismissed.

On the first issue, we rule that respondents were regular employees. However, we take exception
to the reasons cited by the LA (which both the NLRC and the CA affirmed) in considering respondents as
regular employees and not as project employees.

Contrary to the disquisitions of the LA, employees (like respondents) who work under different
project employment contracts for several years do not automatically become regular employees; they can
xiii

remain as project employees regardless of the number of years they work.

controlling factor in determining the nature of ones employment.

Length of service is not a

xiii

Moreover, employees who are members of a work pool from which a company (like petitioner
corporation) draws workers for deployment to its different projects do not become regular employees by
reason of that fact alone. The Court has enunciated in some cases
either be project employees or regular employees.

xiii

that members of a work pool can

The principal test for determining whether employees are project employees or regular
employees is whether they are assigned to carry out a specific project or undertaking, the duration and
scope of which are specified at the time they are engaged for that project.

xiii

Such duration, as well as the

particular work/service to be performed, is defined in an employment agreement and is made clear to the
employees at the time of hiring.

xiii

In this case, petitioners did not have that kind of agreement with respondents. Neither did they
inform respondents of the nature of the latters work at the time of hiring. Hence, for failure of petitioners
to substantiate their claim that respondents were project employees, we are constrained to declare them
as regular employees.

Furthermore, petitioners cannot belatedly argue that respondents continue to be their employees
(so as to escape liability for illegal dismissal). Before the LA, petitioners staunchly postured that
respondents were only project employees whose employment tenure was coterminous with the projects
they were assigned to. However, before the CA, they took a different stance by insisting that respondents
continued to be their employees. Petitioners inconsistent and conflicting positions on their true relation
with respondents make it all the more evident that the latter were indeed their regular employees.

On the issue of illegal dismissal, we hold that petitioners failed to adhere to the two-notice rule
which requires that workers to be dismissed must be furnished with: (1) a notice informing them of the
particular acts for which they are being dismissed and (2) a notice advising them of the decision to
terminate the employment.

xiii

Respondents were never given such notices.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 102973 August 24, 1993

ROGELIO CARAMOL, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF and PACIFIC CO. OF MANILA,
INC., respondents.
Ricardo C. Valmonte for petitioner.
Arturo A. Alafriz & Associates for respondent Atlantic Gulf & Pacific Company of Manila, Inc.

BELLOSILLO, J.:
The controversy as to whether petitioner is a regular or casual employee arises from the conflicting
interpretations by the parties of Art. 280 of the Labor Code, as amended. The article provides
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.
Petitioner Rogelio Caramol, a worker hired by respondent Atlantic Gulf and Pacific Co. of Manila, Inc.,
(ATLANTIC GULF), on a "project-to-project" basis but whose employment was renewed forty-four (44)
times by the latter, seeks the reversal of the decision of public respondent National Labor Relations
1
Commission (NLRC) dated 31 October 1991 in NLRC NCR 00-01-04703-88 which reversed and set
aside the decision of the Labor Arbiter.
The Labor Arbiter had earlier declared respondent ATLANTIC GULF guilty of unfair labor practice,
ordered it to cease and desist from further committing unfair labor practice against petitioner, declared
illegal the constructive dismissal of petitioner and directed respondent ATLANTIC GULF to immediately
reinstate petitioner to his former position without loss of seniority rights and with full back wages in the
2
amount of P68,826.94 as of 29 November 1989.

The factual findings of the Labor Arbiter show that petitioner was hired by respondent ATLANTIC GULF
on 2 June 1983 for the position of rigger. Until the occurence of the strike on 10 May 1986, his last
assignment was at respondent ATLANTIC GULF's plant in Batangas.
Petitioner claims that because of his involvement in unionism, particularly in actively manning the picket
lines, he was among those who were not re-admitted after the strike.
On the other hand, respondent ATLANTIC GULF contends that petitioner was one of the several
thousands of workers who were hired on a "project-to-project" basis and whose employment was covered
by Project Employment Contract for a particular project and for a definite period of time. On 15 May 1986
private respondent dispensed with the services of petitioner claiming as justification the completion of the
Nauru project to which petitioner was assigned and the consequent expiration of the employment
contract.
In reversing the Labor Arbiter, public respondent NLRC declared in the dispositive portion of its
questioned decision thus
WHEREFORE, based on the foregoing considerations, the decision appealed from is
hereby REVERSED and SET ASIDE, and finding the claim of complainant to be without
legal and factual basis.
According to public respondent NLRC, petitioner is a project employee falling under the exception of Art.
280 of the Labor Code, as amended, explaining that
. . . As correctly asserted by respondent-company, Mr. Caramol's services have been
fixed for a specific project shown in the contracts of employment. The principle of party
autonomy must not be interfered with absent any showing of violation of law, public policy
and jurisprudence. "A contract duly entered into should be respected, since a contract is
the law between the parties" (Pakistan International Airlines Corp. v. Ople, G.R. No.
61594, Sept. 28, 1990).
The exception under Article 280 of the Labor Code is precisely designed to meet an
exigency like in the case at bar. . . .
Under the Labor Code as well as the Civil Code of the Philippines, "the validity and
propriety of contracts and obligation with a fixed or definite period are recognized, and
imposes no restraints on the freedom of the parties to fix the duration of a contract,
whatever its object, be it specie, food or services, except the general admonition against
stipulations contrary to law, morals, good custom, public order or public policy" (Brent
School, Inc. v. Zamora, G.R. No. 48494, Feb. 5, 1990). . . .
Contract workers are not considered regular. Their services depend upon availability of a
project to be undertaken. Thus, it would be unjust to retain an employee in the payroll
while waiting for another project. . . .
Petitioner now insists that public respondent NLRC gravely abused its discretion and committed serious
errors of law and that its questioned decision is contrary to the jurisprudential doctrine enunciated in
3
Magante v. NLRC where it was held that the "project" employee therein was deemed a regular
employee considering the attendant circumstances, i.e., the employee was assigned to perform tasks
which are usually necessary or desirable in the usual business or trade of the employer; said
assignments did not end on a project to project basis, although the contrary was made to appear through
the signing of separate employment contracts; there were no reports of termination submitted to the

nearest public employment office every time employment was terminated due to the completion of the
project.
We grant the petition.
There is no question that stipulation on employment contract providing for a fixed period of employment
such as "project-to-project" contract is valid provided the period was agreed upon knowingly and
voluntarily 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
4
whatever being exercised by the former over the latter. However, where from the circumstances it is
apparent that periods have been imposed to preclude the acquisition of tenurial security by the employee,
they should be struck down as contrary tenurial security by the employee, they should be struck down as
contrary to public policy, morals, good custom or public order.
In the case before us, we find sufficiently established circumstances showing that the supposed fixed
period of employment by way of a project-to-project contract has been imposed to preclude acquisition of
tenurial security by the petitioner. Accordingly, such arrangement must be struck down as contrary to
public policy. After a careful perusal of the records, we sustain the findings of the Labor Arbiter that
. . . . The records of the case established the fact that during the employment of
complainant with the respondent company he was made to sign a project employment
contract. This practice started from the time he was hired in 1973 up to May 10, 1986
when the AG & P Workers and Employees Union staged a strike. Expressed differently
this practice of the respondent insofar as the complainant is concerned has been going
on continiously for thirteen (13) long years. This Office is of the considered belief that the
nomenclature by which he was addressed by the respondent has already attained a
regular status of employment. In addition to his length of service the documentary
evidence on record established the fact that complainant's job is both necessary and
desirable to the business engaged in by the respondent . . . .
Admittedly, the "project-to-project" employment of petitioner was renewed several times, forty-four (44)
5
project contracts according to him. Private respondent points to this successive employment as
evidence that petitioner is a project employee in its projects. It is asserted that being in the construction
industry, it is not unusual for private respondent and other similar companies to hire employees or
workers for a definite period only, or whose employment is co-terminus with the completion of a specific
project as recognized by Art. 280 of the Labor Code.
However, with the successive contracts of employment where petitioner continued to perform the same
kind of work, i.e., as rigger throughout his period of employment, it is clearly manifest that petitioner's
tasks were usually necessary or desirable in the usual business or trade of private respondent. There can
therefore be no escape from the conclusion that petitioner is a regular employee of private respondent
ATLANTIC GULF.
6

In this regard, we need only reiterate our ruling in Baguio Country Club Corporation v. NLRC that
. . . . The primary standard . . . 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" (De Leon v. National Labor Relations
Commission, G.R. No. 70705, August 21, 1989, 176 SCRA 615, 620-621) . . . .
Such repeated rehiring and the continuing need for his service are sufficient evidence of
the necessity and indispensability of his service to the petitioner's business or trade.
. . . . the private respondent performed the said task which lasted for more than one year,
. . . by this fact alone he is entitled by law to be considered a regular employee.
Owing to private respondent's length of service with the petitioner corporation, he
became a regular employee, by operation of law, one year after he was employed . . . .
It is of no moment that private respondent was told when he was hired that his
employment would only be "on a day to day basis for a temporary period" and may be
terminated at any time subject to the petitioner's discretion. Precisely, the law overrides
such conditions which are prejudicial to the interest of the worker. Evidently, the
employment contracts entered into by private respondent with the petitioner have the
purpose of circumventing the employee's security of tenure. The Court, therefore,
rigorously disapproves said contracts which demonstrate a clear attempt to exploit the
employee and deprive him of the protection sanctioned by the Labor Code.
It is noteworthy that what determines whether a certain employment is regular or casual
is not the will and word of the employer, to which the desperate worker often accedes. It
is the nature of the activities performed in relation to the particular business or trade
considering all circumstances, and in some cases the length of time of its performance
and its continued existence (See De Leon v. NLRC, ibid).
Moreover, notwithstanding its claim that petitioner was successively employed, private respondent failed
7
to present any report of termination. On this point, the pronouncement in Magante v. NLRC is of singular
relevance to the instant case:
Moreover, if petitioner were employed as a "project employee" private respondent should
have submitted a report of termination to the nearest public employment office every time
his employment is terminated due to completion of each construction project, as required
by Policy Instruction No. 20, which provides:
. . . Moreover, the company is not required to obtain a clearance from the
Secretary of Labor in connection with such termination. What is required
of the company is a report to the nearest Public Employment Office for
Statistical purposes (Emphasis Supplied).
Throughout the duration of petitioner's employment, there should have been filed as
many reports of termination as there were construction projects actually finished if it were
true that petitioner Telesforo Maganto was only a project worker.
We thus hold significant as to prejudice the cause of private respondent the absence of any such
termination reports.

In ignoring or disregarding the existing jurisprudence on regular employment, particularly the Magante
decision, by reversing the decision of the Labor Arbiter, public respondent NLRC gravely abused its
discretion.
Respondent further claims that since the appeal was filed twenty-nine (29) days from receipt of the NLRC
decision by petitioner, the same should be dismissed as having been filed out of time, alluding to the
penultimate paragraph of Art. 223 of the Labor Code which states that "[t]he decision of the Commission
shall be final and executory after ten (10) calendar days from receipt thereof by the parties."
This is not correct. On the contrary, the instant position is filed pursuant to Sec. 1, Rule 65, of the Rules of
Court which may be done within a reasonable time from receipt of the subject decision, and a period of
8
three (3) months is considered reasonable. The fact that the assailed decision becomes final and
executory after a ten day period does not preclude the adverse party from challenging it by way of an
original action for certiorari under Rule 65 of the Rules of Court. He may even further pray for the
issuance of a restraining order or a temporary injunction to prevent the immediate execution of the
assailed decision.
WHEREFORE, the petition is GRANTED. consequently, the decision of respondent National Labor
Relations Commission dated 31 October 1991 is hereby REVERSED and SET ASIDE. The decision of
the Labor Arbiter dated 29 November 1989 is AFFIRMED and REINSTATED.
SO ORDERED.

[G.R. No. 114671. November 24, 1999]

AURELIO SALINAS, JR., ARMANDO SAMULDE, ALEJANDRO ALONZO and AVELINO CORTEZ,
petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF AND
PACIFIC CO. of MANILA, INC., respondents.
DECISION
PURISIMA, J.:
This petition for review should have been properly initiated and is therefore treated as a special civil
action for certiorari under Rule 65. The herein petitioners, Aurelio Salinas, Jr., Armando Samulde,
xiii
Alejandro Alonzo and Avelino Cortez, assail the Resolution dated January 31, 1994 of the National
Labor Relations Commission (NLRC, for brevity) which dismissed their complaint, and affirming, in effect,
xiii
the Decision of the Labor Arbiter declaring them project employees and not regular employees of
respondent Atlantic Gulf and Pacific Company of Manila, Inc. (hereinafter referred to as AG & P).
Petitioner Alejandro Alonzo had been employed with AG & P in the several construction projects of
the latter from 1982 to 1989, in the course of which he essentially performed the same job, initially as a
laborer, and later as bulk cement operator, bulk cement plant/carrier operator, and crane driver. Under
similar circumstances, petitioner Avelino Cortez had been employed with AG & P from 1979 to 1988 as
carpenter/forklift operator; petitioner Armando Samulde served as lubeman/stationary operator from 1982
to 1989; while petitioner Aurelio Salinas, Jr., used to work as carpenter/finishing carpenter from 1983 to
1988.
On May 29, June 6, July 4 and July 5 of 1989, respectively, petitioners Salinas, Samulde, Alonzo
and Cortez filed against the respondent corporation separate complaints for illegal dismissal, which cases
were consolidated and jointly heard by Labor Arbiter Manuel P. Asuncion.
In his Order of dismissal, Labor Arbiter Asuncion found that petitioners are project employees whose
work contracts with AG & P indicate that they were employed in such category; that they have been
assigned to different work projects, not just to one and that their work relation with AG & P, relative to
termination, is governed by Policy Instruction No. 20.
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for
want of merit, ratiocinating thus:
In the first place, examining the contract of employment of complainants herein presented as
evidence by respondent, we found that a) they were employed for a specific project and for a specific
period; b) that they were assigned to different projects and not just one as earlier claimed by them. In
short, from the evidence adduced by respondent which complainants miserably failed to rebut with their
one page position paper containing sweeping statements, there appears to be no doubt that they are
project employees hired for a specific project. Their subsequent separation from service, therefore, as a
xiii
result of the completion of the project or its phase did not result in illegal dismissal.
Dissatisfied with the aforesaid disposition below, petitioners found their way to this Court via the
present petition posing as the sole issue whether they are regular or project employee.
xiii

Petitioners principally argue that following the ruling in the Caramol case, NLRC gravely erred in
dismissing their complaint and declaring them project employees. According to them, they had been
covered by a number of contracts renewed continuously, with periods ranging from five (5) to nine (9)
years, and they performed the same kind of work through out their employment, and such was usually
necessary and desirable in the trade or business of the respondent corporation; and their work did not

end on a project-to-project basis, although the contrary was made to appear by the employer through the
signing of separate employment contracts.
Petitioners emphatically stressed that no report even a single one, was ever submitted by the
respondent corporation to the nearest public employment office every time petitioners employment was
terminated pursuant to Policy Instruction No. 20. There being no report, NLRCs insistence that they
(petitioners) were respondents corporations project employees is without any legal basis; petitioners
maintain.
In its Manifestation and Motion in Lieu of Comment,
the contention of petitioners, to wit:

xiii

the Office of the Solicitor General agrees with

5. Thus, since petitioners had continuously performed the same kind of work during the whole
course of their employment x x x their jobs were indeed necessary and desirable to the private
respondents main line of business. And this should be the main consideration in classifying the nature of
employment afforded the herein workers.
6. Furthermore, if private respondent really employed the herein petitioners on a project-to-project
basis, it should have submitted a series of reports to the nearest public employment office every time the
employment of the workers were terminated, in line with Policy Instruction No. 20 of the Department of
Labor. (citation omitted) Private respondent miserably failed to do its obligation under the set-up. This
xiii
failure effectively belies its assertion that herein petitioners are project employees.
Respondent corporation preliminary contends that the present petition for review should have been
brought under Rule 65, Rule 45 not being the proper remedy. Assuming arguendo that the petition
should be treated under Rule 65, the petition would still fail for failure of the petitioners to present a
motion for reconsideration. It maintains that the instant petition should not be given due course due to
non-exhaustion of administrative remedies as required by Section 14, Rule VII (sic). It theorizes further
that the questioned Resolution had already become final and executory on March 20, 1994, ten days after
receipt thereof by petitioners on March 9, 1994. Respondent corporation also claims that the present
petition is insufficient in form, for failure to attach thereto a duplicate original or certified true copies of the
complainants-petitioners position paper, respondent corporations position paper, and the questioned
resolution of the public respondent.
AG & P staunchly claims that the petitioners are mere project employees; that the questioned
resolution of public respondent is supported by substantial evidence and therefore, conclusive and
binding. According to respondent corporation, factual findings of the NLRC are generally accorded not
only respect but, at times, finality as long as such findings are based on substantial evidence; that the
doctrinal cases cited by petitioners have no applicability in the case under scrutiny and that the Magante
xiii
case does not apply because it was therein established that Magante was never deployed from project
to project but had been regularly assigned to perform carpentry work; and on the other hand, the Baguio
xiii
Country Club case pertains to entertainment-service.
xiii

Meanwhile the De Leon case, claims the respondent corporation, bolsters instead, its position
since it recognizes the legality of project employment, which is not deemed regular but a separate and
distinct category, particularly in the construction business. It also attempts to create a chasm between
the doctrinal case of Caramol and the present case, allegedly due to different circumstances involved,
and citing the implementation of Department Order No. 19, amending Policy Instruction No. 20, which
allows the rehiring of project workers on a project-to-project basis (Section 2.3.b), and which considers
the report of termination of employment a mere indicator of project employment. (Section 2.2)
The petition is impressed with merit.
The present case is on all fours with the cases of Caramol vs. NLRC (penned by Justice Bellosillo)
xiii
and Samson vs. NLRC (with Justice Regalado as ponente), both of which involved the same private
respondent.
In the case of Caramol, petitioner Rogelio Caramol was hired as a rigger by AG & P on a project-to-

project basis but whose employment was renewed forty-four (44) times by the latter. In holding that
Caramol was a regular worker, the Court declared that the successive employment contracts where he
was made to perform the same kind of work as a rigger, would clearly manifest that Caramols tasks were
xiii
usually necessary or desirable in the usual trade or business of AG & P.
The Court likewise upheld the validity of a project-to-project basis contract of employment, provided
that the period was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure 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
xiii
or less equal terms with no moral dominance whatever being exercised by the former xxx. However,
this Court warned, where from the circumstances it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, they should be struck down as contrary to
xiii
public policy, morals, good custom or public order.
The case of Samson on the other hand, concerned Ismail Samson who served initially as a rigger, as
a laborer and finally as a rigger foreman for AG & P, for approximately 28 years. He was also covered by
successive employment contracts with gaps of from one (1) day up to one (1) week. Noting the
successive contracts of employment, the repeated re-hiring, and petitioners performance of essentially
the same tasks, this Court held that Samson was a regular employee, because these were sufficient
evidence that he was performing tasks usually necessary and desirable in the ordinary course of
xiii
business of AG & P. Thus the Court pronounced:
The mandate in Article 281 of the Labor Code, which pertinently prescribes that 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 and 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, should apply in the case of petitioner
xiii
(Samson).
In the case under consideration, the Court likewise rules that failure to report the termination to
Public Employment Office is a clear indication that petitioners were not and are not project employees.
When these consolidated complaints were filed in 1989, and while petitioners were serving the
respondent corporation, the rule in force then was Policy Instruction (P.I.) No. 20, which required the
employer company to report to the nearest Public Employment Office the fact of termination of project
employee as a result of the completion of the project or any phase thereof, in which he is employed.
Further, Department Order (D.O.) No. 19, which was issued on April 1, 1993, did not totally dispense with
the notice requirement but, instead, made provisions therefor, and considered it as one of the indicators
xiii
that a worker is a project employee.
It is significant to note that the notice of termination requirement has been retained under Section 6.1
xiii
of D.O. No. 19, viz:
6.1. Requirements of labor and social legislations.--(a) The construction company and the general
contractor and/or subcontractor referred to in Sec. 2.5 shall be responsible for the workers in its employ
on matters of compliance with the requirements of existing laws and regulations on hours of work, wages,
wage-related benefits, health, safety and social welfare benefits, including submission to the DOLERegional
Office
of
Work
Accident/Illness
Report,
Monthly
Report
on
Employees
Terminations/Dismissals/Suspensions and other reports. x x x (Italics supplied)
In light of the cases of Caramol and Samson and the application of P.I. No. 20 as amended by D.O.
No. 19, the retroactive or prospective effect of D.O. No. 19 is of no moment. Nevertheless, it was held in
Samson vs. NLRC that it is prospective in effect. Otherwise, it would be prejudicial to the employees and
would run counter to the constitutional mandate on social justice and protection to labor and furthermore,
xiii
such view is more in accord with the avowed purpose of said Department Order.

It is basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code
and its implementing regulations, the workingmans welfare should be the primordial and paramount
consideration. The interpretation herein made gives meaning and substance to the liberal and
compassionate spirit of the law enunciated in Article 4 of Labor Code that all doubts in the
implementation and interpretation of the provisions of the Labor Code including its implementing rules
xiii
and regulations shall be resolved in favor of labor.
It is beyond cavil that petitioners had been providing the respondent corporation with continuous and
uninterrupted services, except for a day or so gap in their successive employment contracts. Their
contracts had been renewed several times, with the total length of their services ranging from five (5) to
nine (9) years. Throughout the duration of their contracts, they had been performing the same kinds of
work (e.g., as lubeman, bulk cement operator and carpenter), which were usually necessary and
desirable in the construction business of AG& P, its usual trade or business.
Undoubtedly, periods in the present case have been imposed to preclude the acquisition of tenurial
security by petitioners, and must be struck down for being contrary to public policy, morals, good customs
or public order.
Anent the issue that the petition should have been brought under Rule 65 and not under Rule 45 of
xiii
the Revised Rules of Court, this rule is not inflexible. In the interest of justice, often the Court has
judiciously treated as special civil actions for certiorari petitions erroneously captioned as petitions for
xiii
review on certiorari.
With regard to the issue on non-exhaustion of administrative remedies, the Court hold that the failure
of petitioners to interpose a motion for reconsideration of the NLRC decision before coming to this Court
was not a fatal omission. The exhaustion of administrative remedies doctrine is not a hard and fast rule
xiii
and does not apply where the issue is purely a legal one. A motion for reconsideration as a prerequisite
for the bringing of an action under Rule 65 may be dispensed with where the issue is purely of law, as in
xiii
this case. At all events and in the interest of substantial justice, especially in cases involving the rights of
workers, procedural lapses, if any, may be disregarded to enable the Court to examine and resolve the
conflicting rights and responsibilities of the parties. This liberality is warranted in the case at bar,
especially since it has been shown that the intervention of the Court is necessary for the protection of the
xiii
herein petitioner(s).
WHEREFORE, the questioned Resolution of the NLRC in NLRC NCR Case No. 00-05-02489-89;
NLRC NCR Case No. 00-06-02621-89; NLRC NCR Case No. 00-06-02815-89; NLRC NCR Case No. 0007-03095-89; and NLRC NCR Case No. 00-07-03129-89, is SET ASIDE and another one is hereby
ENTERED ordering the respondent corporation to reinstate petitioners without loss of seniority and with
full backwages. Costs against the respondent corporation.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 96078 January 9, 1992

HILARIO RADA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILNOR CONSULTANTS
AND PLANNERS, INC., respondents.
Cabellero, Calub, Aumentado & Associates Law Offices for petitioner.

REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of respondent National
Labor Relations Commission (NLRC), dated November 19, 1990, reversing the decision of the labor
1
arbiter which ordered the reinstatement of petitioner with backwages and awarded him overtime pay.
The facts, as stated in the Comment of private respondent Philnor Consultants and Planners, Inc.
(Philnor), are as follows:
Petitioner's initial employment with this Respondent was under a "Contract of
Employment for a Definite Period" dated July 7, 1977, copy of which is hereto attached
and made an integral part hereof as Annex A whereby Petitioner was hired as "Driver" for
the construction supervision phase of the Manila North Expressway Extension, Second
Stage (hereinafter referred to as MNEE Stage 2) for a term of "about 24 months effective
July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex A specifically provides as
follows:
It is hereby understood that the Employer does not have a continuing
need for the services of the Employee beyond the termination date of
this contract and that the Employee's services shall automatically, and
without notice, terminate upon the completion of the above specified
phase of the project; and that it is further understood that the
engagement of his/her services is coterminus with the same and not with
the whole project or other phases thereof wherein other employees of
similar position as he/she have been hired. (Par. 7, emphasis supplied)
Petitioner's first contract of employment expired on June 30, 1979. Meanwhile, the main
project, MNEE Stage 2, was not finished on account of various constraints, not the least

of which was inadequate funding, and the same was extended and remained in progress
beyond the original period of 2.3 years. Fortunately for the Petitioner, at the time the first
contract of employment expired, Respondent was in need of Driver for the extended
project. Since Petitioner had the necessary experience and his performance under the
first contract of employment was found satisfactory, the position of Driver was offered to
Petitioner, which he accepted. Hence a second Contract of Employment for a Definite
Period of 10 months, that is, from July 1, 1979 to April 30, 1980 was executed between
Petitioner and Respondent on July 7, 1979. . . .
In March 1980 some of the areas or phases of the project were completed, but the bulk of
the project was yet to be finished. By that time some of those project employees whose
contracts of employment expired or were about to expire because of the completion of
portions of the project were offered another employment in the remaining portion of the
project. Petitioner was among those whose contract was about to expire, and since his
service performance was satisfactory, respondent renewed his contract of employment in
April 1980, after Petitioner agreed to the offer. Accordingly, a third contract of
employment for a definite period was executed by and between the Petitioner and the
Respondent whereby the Petitioner was again employed as Driver for 19 months, from
May 1, 1980 to November 30, 1981, . . .
This third contract of employment was subsequently extended for a number of times, the
last extension being for a period of 3 months, that is, from October 1, 1985 to December
31, 1985, . . .
The last extension, from October 1, 1985 to December 31, 1985 (Annex E) covered by an
"Amendment to the Contract of Employment with a Definite Period," was not extended
any further because Petitioner had no more work to do in the project. This last extension
was confirmed by a notice on November 28, 1985 duly acknowledged by the Petitioner
the very next day, . . .
Sometime in the 2nd week of December 1985, Petitioner applied for "Personnel
Clearance" with Respondent dated December 9, 1985 and acknowledged having
received the amount of P3,796.20 representing conversion to cash of unused leave
credits and financial assistance. Petitioner also released Respondent from all obligations
2
and/or claims, etc. in a "Release, Waiver and Quitclaim" . . .
Culled from the records, it appears that on May 20, 1987, petitioner filed before the NLRC, National
Capital Region, Department of Labor and Employment, a Complaint for non-payment of separation pay
and overtime pay. On June 3, 1987, Philnor filed its Position Paper alleging, inter alia, that petitioner was
not illegally terminated since the project for which he was hired was completed; that he was hired under
three distinct contracts of employment, each of which was for a definite period, all within the estimated
period of MNEE Stage 2 Project, covering different phases or areas of the said project; that his work was
strictly confined to the MNEE Stage 2 Project and that he was never assigned to any other project of
Philnor; that he did not render overtime services and that there was no demand or claim for him for such
overtime pay; that he signed a "Release, Waiver and Quitclaim" releasing Philnor from all obligations and
claims; and that Philnor's business is to provide engineering consultancy services, including supervision
of construction services, such that it hires employees according to the requirements of the project
3
manning schedule of a particular contract.
On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally dismissed and that
he was not paid overtime pay although he was made to render three hours overtime work form Monday to
Saturday for a period of three years.

On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed since he was a
regular employee entitled to security of tenure; that he was not a project employee since Philnor is not
engaged in the construction business as to be covered by Policy Instructions No. 20; that the contract of
employment for a definite period executed between him and Philnor is against public policy and a clear
circumvention of the law designed merely to evade any benefits or liabilities under the statute; that his
position as driver was essential, necessary and desirable to the conduct of the business of Philnor; that
he rendered overtime work until 6:00 p.m. daily except Sundays and holidays and, therefore, he was
4
entitled to overtime pay.
In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular employee pursuant
to Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just cause under
Article 280 of the Code; and that the public respondent's ruling in Quiwa vs. Philnor Consultants and
5
Planners, Inc. is not applicable to his case since he was an administrative employee working as a
company driver, which position still exists and is essential to the conduct of the business of Philnor even
6
after the completion of his contract of employment. Petitioner likewise avers that the contract of
employment for a definite period entered into between him and Philnor was a ploy to defeat the intent of
Article 280 of the Labor Code.
On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging therein that
petitioner was not a company driver since his job was to drive the employees hired to work at the MNEE
Stage 2 Project to and from the filed office at Sto. Domingo Interchange, Pampanga; that the office hours
observed in the project were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that Philnor
adopted the policy of allowing certain employees, not necessarily the project driver, to bring home project
vehicles to afford fast and free transportation to and from the project field office considering the distance
between the project site and the employees' residence, to avoid project delays and inefficiency due to
employee tardiness caused by transportation problem; that petitioner was allowed to use a project vehicle
which he used to pick up and drop off some ten employees along Epifanio de los Santos Avenue (EDSA),
on his way home to Marikina, Metro Manila; that when he was absent or on leave, another employee
living in Metro Manila used the same vehicle in transporting the same employees; that the time used by
petitioner to and from his residence to the project site from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to
6:00 p.m., or about three hours daily, was not overtime work as he was merely enjoying the benefit and
convenience of free transportation provided by Philnor, otherwise without such vehicle he would have
used at least four hours by using public transportation and spent P12.00 daily fare; that in the case of
Quiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC upheld Philnor's position that Quiwa
was a project employee and he was not entitled to termination pay under Policy Instructions No. 20 since
his employment was coterminous with the completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's Rejoinder and
Reply, submitting therewith two letters dated January 5, 1985 and February 6, 1985, signed by MNEE
Stage 2 Project employees, including herein petitioner, where they asked what termination benefits could
be given to them as the MNEE Stage 2 Project was nearing completion, and Philnor's letter-reply dated
February 22, 1985 informing them that they are not entitled to termination benefits as they are
contractual/project employees.
7

On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision with the following dispositive
portion:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:
(1) Ordering the respondent company to reinstate the complainant to his former position
without loss of seniority rights and other privileges with full backwages from the time of
his dismissal to his actual reinstatement;

(2) Directing the respondent company to pay the complainant overtime pay for the three
excess hours of work performed during working days from January 1983 to December
1985; and
(3) Dismissing all other claims for lack of merit.
SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19, 1990, setting
aside the labor arbiter's aforequoted decision and dismissing petitioner's complaint.
Hence this petition wherein petitioner charges respondent NLRC with grave abuse of discretion
amounting to lack of jurisdiction for the following reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has already become final and executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it applicable to this
case;
3. The petitioner is a regular employee with eight years and five months of continuous services for his
employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and meritorious and
should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with the facts, the law and
evidence.
The petition is devoid of merit.
1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the appeal filed by
Philnor in spite of the latter's failure to file a supersedeas bond within ten days from receipt of the labor
arbiter's decision, by reason of which the appeal should be deemed to have been filed out of time. It will
be noted, however, that Philnor was able to file a bond although it was made beyond the 10-day
reglementary period.
While it is true that the payment of the supersedeas bond is an essential requirement in the perfection of
an appeal, however, where the fee had been paid although payment was delayed, the broader interests
of justice and the desired objective of resolving controversies on the merits demands that the appeal be
given due course. Besides, it was within the inherent power of the NLRC to have allowed late payment of
the bond, considering that the aforesaid decision of the labor arbiter was received by private respondent
on October 3, 1989 and its appeal was duly filed on October 13, 1989. However, said decision did not
state the amount awarded as backwages and overtime pay, hence the amount of the supersedeas bond
could not be determined. It was only in the order of the NLRC of February 16, 1990 that the amount of the
supersedeas bond was specified and which bond, after an extension granted by the NLRC, was timely
filed by private respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the Commission or
any of the Labor Arbiters, the 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 without regard to technicalities of law or procedure, all in the interest of due process. 8 Finally,

the issue of timeliness of the appeal being an entirely new and unpleaded matter in the proceedings
9
below it may not now be raised for the first time before this Court.
2. Petitioner postulates that as a regular employee, he is entitled to security of tenure, hence he cannot
be terminated without cause. Private respondent Philnor believes otherwise and asserts that petitioner is
merely a project employee who was terminated upon the completion of the project for which he was
employed.
In holding that petitioner is a regular employee, the labor arbiter found that:
. . . There is no question that the complainant was employed as driver in the respondent
company continuously from July 1, 1977 to December 31, 1985 under various contracts
of employment. Similarly, there is no dispute that respondent Philnor Consultant &
Planner, Inc., as its business name connotes, has been engaged in providing to its
client(e)le engineering consultancy services. The record shows that while the different
labor contracts executed by the parties stipulated definite periods of engaging the
services of the complainant, yet the latter was suffered to continue performing his job
upon the expiration of one contract and the renewal of another. Under these
circumstances, the complaint has obtained the status of regular employee, it appearing
that he has worked without fail for almost eight years, a fraction of six months considered
as one whole year, and that his assigned task as driver was necessary and desirable in
the usual trade/business of the respondent employer. Assuming to be true, as spelled out
in the employment contract, that the Employer has no "continuing need for the services of
the Employe(e) beyond the termination date of this contract and that the Employee's
services shall automatically, and without notice, terminate upon completion of the above
specified phase of the project," still we cannot see our way clear why the complainant
was hired and his services engaged contract after contract straight from 1977 to 1985
which, to our considered view, lends credence to the contention that he worked as
regular driver ferrying early in the morning office personnel to the company main office in
Pampanga and bringing back late in the afternoon to Manila, and driving company
executives for inspection of construction workers to the jobsites. All told, we believe that
the complainant, under the environmental facts obtaining in the case at bar, is a regular
employee, the provisions of written agreement to the
10
contrary notwithstanding and regardless of the oral understanding of the parties . . .
On the other hand, respondent NLRC declared that, as between the uncorroborated and unsupported
assertions of petitioners and those of private respondent which are supported by documents, greater
credence should be given the latter. It further held that:
Complainant was hired in a specific project or undertaking as driver. While such project
was still on-going he was hired several times with his employment period fixed every time
his contract was renewed. At the completion of the specific project or undertaking his
employment contract was not renewed.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and Planners, Inc.,
NLRC RAB III 5-1738-84, it is being applicable in this case, viz.:
. . . While it is true that the activities performed by him were necessary or
desirable in the usual business or trade of the respondent as
consultants, planners, contractor and while it is also true that the duration
of his employment was for a period of about seven years, these
circumstances did not make him a

regular employee in contemplation of Article 281 of (the) Labor Code. . . .

11

Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al.
the case at bar. Thus:

12

is applicable to

We hold that private respondents were project employees whose work was coterminous
with the project or which they were hired. Project employees, as distinguished from
regular or non-project employees, are mentioned in section 281 of the Labor Code as
those "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."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize
employer-employee relations in the construction industry, provides:
Project employees are those employed in connection with a particular
construction project. Non-project (regular) employees are those
employed by a construction company without reference to any particular
project.
Project employees are not entitled to termination pay if they are
terminated as a result of the completion of the project or any phase
thereof in which they are employed, regardless of the number of projects
in which they have been employed by a particular construction company.
Moreover, the company is not required to obtain clearance from the
Secretary of Labor in connection with such termination.
The petitioner cited three of its own cases wherein the National Labor Relations
Commission, Deputy Minister of Labor and Employment Inciong and the Director of the
National Capital Region held that the layoff of its project employees was lawful. Deputy
Minister Inciong in TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for
Clearance to Terminate Employees, rendered the following ruling on February 26, 1979;
We feel that there is merit in the contention of the applicant corporation.
To our mind, the employment of the employees concerned were fixed for
a specific project or undertaking. For the nature of the business the
corporation is engaged into is one which will not allow it to employ
workers for an indefinite period.
It is significant to note that the corporation does not construct vessels for
sale or otherwise which will demand continuous productions of ships and
will need permanent or regular workers. It merely accepts contracts for
shipbuilding or for repair of vessels form third parties and, only, on
occasion when it has work contract of this nature that it hires workers to
do the job which, needless to say, lasts only for less than a year or
longer.
The completion of their work or project automatically terminates their
employment, in which case, the employer is, under the law, only obliged
to render a report on the termination of the employment. (139-140, Rollo
of G.R. No. 65689) (Emphasis supplied)

In Cartagenas, et al. vs. Romago Electric Company, Inc., et al.,

13

we likewise held that:

As an electrical contractor, the private respondent depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings. Since
its work depends on the availability of such contracts or "projects," necessarily the
duration of the employment's of this work force is not permanent but co-terminus with the
projects to which they are assigned and from whose payrolls they are paid. It would be
extremely burdensome for their employer who, like them, depends on the availability of
projects, if it would have to carry them as permanent employees and pay them wages
even if there are no projects for them to work on. (Emphasis supplied.)
It must be stressed herein that although petitioner worked with Philnor as a driver for eight years, the fact
that his services were rendered only for a particular project which took that same period of time to
complete categorizes him as a project employee. Petitioner was employed for one specific project.
A non-project employee is different in that the employee is hired for more than one project. A non-project
employee, vis-a-vis a project employee, is best exemplified in the case of Fegurin, et al. vs. National
14
Labor Relations Commission, et al. wherein four of the petitioners had been working with the company
for nine years, one for eight years, another for six years, the shortest term being three years. In holding
that petitioners are regular employees, this Court therein explained:
Considering the nature of the work of petitioners, that of carpenter, laborer or mason,
their respective jobs would actually be continuous and on-going. When a project to which
they are individually assigned is completed, they would be assigned to the next project or
a phase thereof. In other words, they belonged to a "work pool" from which the company
would draw workers for assignment to other projects at its discretion. They are, therefore,
actually "non-project employees."
From the foregoing, it is clear that petitioner is a project employee considering that he does not belong to
a "work pool" from which the company would draw workers for assignment to other projects at its
discretion. It is likewise apparent from the facts obtaining herein that petitioner was utilized only for one
particular project, the MNEE Stage 2 Project of respondent company. Hence, the termination of herein
petitioner is valid by reason of the completion of the project and the expiration of his employment
contract.
3. Anent the claim for overtime compensation, we hold that petitioner is entitled to the same. The fact that
he picks up employees of Philnor at certain specified points along EDSA in going to the project site and
drops them off at the same points on his way back from the field office going home to Marikina, Metro
Manila is not merely incidental to petitioner's job as a driver. On the contrary, said transportation
arrangement had been adopted, not so much for the convenience of the employees, but primarily for the
benefit of the employer, herein private respondent. This fact is inevitably deducible from the
Memorandum of respondent company:
The herein Respondent resorted to the above transport arrangement because from its
previous project construction supervision experiences, Respondent found out that project
delays and inefficiencies resulted from employees' tardiness; and that the problem of
tardiness, in turn, was aggravated by transportation problems, which varied in degrees in
proportion to the distance between the project site and the employees' residence. In view
of this lesson from experience, and as a practical, if expensive, solution to employees'
tardiness and its concomitant problems, Respondent adopted the policy of allowing
certain employees not necessarily project drivers to bring home project vehicles, so
that employees could be afforded fast, convenient and free transportation to and from the
15
project field office. . . .

Private respondent does not hesitate to admit that it is usually the project driver who is tasked with picking
up or dropping off his fellow employees. Proof thereof is the undisputed fact that when petitioner is
absent, another driver is supposed to replace him and drive the vehicle and likewise pick up and/or drop
off the other employees at the designated points on EDSA. If driving these employees to and from the
project site is not really part of petitioner's job, then there would have been no need to find a replacement
driver to fetch these employees. But since the assigned task of fetching and delivering employees is
indispensable and consequently mandatory, then the time required of and used by petitioner in going
from his residence to the field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to
around 6:00 p.m., which the labor arbiter rounded off as averaging three hours each working day, should
be paid as overtime work. Quintessentially, petitioner should be given overtime pay for the three excess
hours of work performed during working days from January, 1983 to December, 1985.
WHEREFORE, subject to the modification regarding the award of overtime pay to herein petitioner, the
decision appealed from is AFFIRMED in all other respects.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-65689 May 31, 1985
SANDOVAL SHIPYARDS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROGELIO DIAMANTE, MANUEL PACRES,
ROLANDO CERVALES, DIONISIO CERVALES and MACARIO SAPUTALO, respondents.
G.R. No. L-66119 May 31, 1985
SANDOVAL SHIPYARDS, INC., petitioner,
vs.
VICENTE LEOGARDO, JR., Deputy Minister of Labor and Employment, DANILO DE LA CRUZ,
RODRIGO VILLARUZ, RODRIGO PEREZ, AQUILINO TABILON, ARMANDO ESGLANDA, MANUEL
MEDINA, FREDDIE ABADIEZ, FELICIANO TOLANG, ALFREDO DE LA CRUZ, NICOLAS MARIANO,
VICENTE CEBUANO, ROLANDO ROLDAN, TEODORO ROLDAN, SOLOMON GEMINO, MARIO
RICAFORT, ROLANDO LOPEZ and ANGEL SAMSON, respondents.
Abad Santos, Sunga & Associates for petitioner.
Neva Blancaver for private respondents.

AQUINO, J:
These cases are about the dismissal of alleged project workers. Sandoval Shipyards, Inc. has been
engaged in the building and repair of vessels. It contends that each vessel is a separate project and that
the employment of the workers is terminated with the completion of each project.
The workers contend otherwise. They claim to be regular workers and that the termination of one project
does not mean the end of their employment since they can be assigned to unfinished projects.
In G.R. No. 65689, Rogelio Diamante, Manuel Pacres, Macario Saputalo, Rolando Cervales and Dionisio
Cervales were assigned to the construction of the LCT Catarman, Project No. 7511. After three months of
work, the project was completed on July 26, 1979. The five workers were served a termination notice.
The termination was reported to the Ministry of Labor on August 3, 1979. They filed a complaint for illegal
dismissal.
The National Labor Relations Commission affirmed the decision of the Labor Arbiter ordering the
reinstatement of the five complainants with backwages from July 27, 1979.
In G.R. No. 66119, respondents Danilo de la Cruz, et al., 17 in all, were assigned to work in Project No.
7901 for the construction of a tanker ordered by Mobil Oil Philippines, Inc. There were 55 workers in that
project. The tanker was launched on January 31, 1980. Upon the yard manager's recommendation, the
personnel manager of Sandoval Shipyards terminated the services of the welders, helpers and

construction workers effective February 4, 1980. The termination was duly reported to the Ministry of
Labor and Employment.
Three days later, or on February 7, twenty-seven out of the 55 workers were hired for a new project. The
27 included four of the 17 respondents who filed a complaint for illegal dismissal on February 6.
After hearing, the Director of the Ministry's Capital Region ordered the reinstatement of the complainants.
The Deputy Minister of Labor affirmed that order.
We hold that private respondents were project employees whose work was coterminous with the project
for which they were hired. Project employees, as distinguished from regular or non-project employees,
are mentioned in section 281 of the Labor Code as those "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."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-employee
relations in the construction industry, provides:
Project employees are those employed in connection with a particular construction
project. Non-project (regular) employees are those employed by a construction company
without reference to any particular project.
Project employees are not entitled to termination pay if they are terminated as a result of
the completion of the project or any phase thereof in which they are employed,
regardless of the number of projects in which they have been employed by a particular
construction company. Moreover, the company is not required to obtain clearance from
the Secretary of Labor in connection with such termination.
The petitioner cited three of its own cases wherein the National Labor Relations Commission, Deputy
Minister of Labor and Employment Inciong and the Director of the National Capital Region held that the
layoff of its project employees was lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re Sandoval
Shipyards, Inc. Application for Clearance to Terminate Employees, rendered the following ruling on
February 26,1979:
We feel that there is merit in the contention of the applicant corporation. To our mind, the
employment of the employees concerned were fixed for a specific project or undertaking.
For the nature of the business the corporation is engaged into is one which will not allow
it to employ workers for an indefinite period.
It is significant to note that the corporation does not construct vessels for sale or
otherwise which will demand continuous productions of ships and will need permanent or
regular workers. It merely accepts contracts for ship-building or for repair of vessels from
third parties and, only, on occasion when it has work contract of this nature that it hires
workers to do the job which, needless to say, lasts only for less than a Year or longer.
The completion of their work or project automatically terminates their employment, in
which case, the employer is, under the law, only obliged to render a report on the
termination of the employment. (139-140, Rollo of G. R. No. 65689).
In NLRC Case No. RB-IV-7743-76, Nicanor San Pedro, et. al. vs. Sandoval Shipyards, Inc., the NLRC in
its resolution of May 16, 1978 held that the layoff of the 17 complainants (which include three
respondents in G.R. No. 65689 and two respondents in G.R. No. 66119) after the construction of the

tanker, M/T Oil Queen VII, in July, 1976 was justified because they were project employees (135-138,
Rollo of G.R. No. 65689).
In Gaspar vs. Sandoval Shipyards, Inc., NCR-STF-3-184081, Director Estrella held in his order dated
June 22, 1981 that two workers of the petitioner were project workers whose employment was terminated
upon the completion of the Project eject.
Respondent Deputy Minister Leogardo, Jr. himself on October 25, 1984 affirmed that finding. He ruled
that the complainants "are project workers whose employments are coterminous with the completion of
the project, regardless of the number of projects in which they have worked, as provided under Policy
Instructions No. 20 of the Ministry of Labor and Employment" and "as their employment is one for a
definite period, they are not entitled to separation pay." (187, Rollo of G.R. No. 65689)
The public respondents in the instant two cases acted with grave abuse of discretion amounting to lack of
jurisdiction in disregarding these precedents.
WHEREFORE, the NLRC resolution dated July 29, 1983 and the order of Deputy Minister Leogardo, Jr.,
dated March 15, 1983 are reversed and set aside. The complaints for illegal layoff are dismissed. No
costs.
SO ORDERED.

SECOND DIVISION

ABESCO CONSTRUCTION AND

G.R. No. 141168

DEVELOPMENT CORPORATION
and MR. OSCAR BANZON,
General Manager,
Petitioners,

Present:

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
-versus-

CORONA,
AZCUNA and
GARCIA, JJ.

ALBERTO RAMIREZ, BERNARDO

DIWA, MANUEL LOYOLA,
REYNALDO P. ACODESIN,
ALEXANDER BAUTISTA,
EDGAR TAJONERA and
GARY DISON,

Respondents. Present:

April 10, 2006

x------------------------------------------x

RESOLUTION

CORONA, J.:

Petitioner company was engaged in a construction business where respondents were hired on
different dates from 1976 to 1992 either as laborers, road roller operators, painters or drivers.

In 1997, respondents filed two separate complaints

xiii

for illegal dismissal against the company

and its General Manager, Oscar Banzon, before the Labor Arbiter (LA). Petitioners allegedly dismissed
them without a valid reason and without due process of law. The complaints also included claims for nonth

payment of the 13 month pay, five days service incentive leave pay, premium pay for holidays and rest
days, and moral and exemplary damages. The LA later on ordered the consolidation of the two
complaints.

xiii

Petitioners denied liability to respondents and countered that respondents were project
employees since their services were necessary only when the company had projects to be completed.
Petitioners argued that, being project employees, respondents employment was coterminous with the
project to which they were assigned. They were not regular employees who enjoyed security of tenure
and entitlement to separation pay upon termination from work.

After trial, the LA declared respondents as regular employees because they belonged to a work
pool from which the company drew workers for assignment to different projects, at its discretion. He ruled
that respondents were hired and re-hired over a period of 18 years, hence, they were deemed to be
regular employees. He likewise found that their employment was terminated without just cause. In a
decision dated January 7, 1998, he stated:

WHEREFORE, judgment is hereby rendered declaring respondents guilty of

illegal dismissal and ordering the latter to reinstate complainants to their former positions
with backwages and other benefits from the time their compensation was withheld from
them up to the time their actual reinstatement which as of the date of this decision
amounted to:

NAME
1. Alberto Ramirez

P49,764.00

2. Manuel B. Loyola

46,695.22

3. Hernando Diwa

49,764.00

4. Reynaldo Acodesin

46,695.22

5. Alexander Bautista

45,285.24

6. Edgar Tajonera

62,985.00

7. Gary Dison

53,911.00
TOTAL

P 355,099.68

However, if reinstatement is no longer feasible, a one-month salary shall be awarded as

a form of separation pay, in addition to the aforementioned award.

Respondents are likewise ordered to pay complainants the following:

UNPAID
SALARY
SALARY DIFFERENTIAL

NAME

1.Hernando
Diwa

P765.00

2.Alexander
Bautista

4.Manuel
Loyola

B.

5 DAYS SEPARATION
SERVICE
PAY
INCENTIVE
LEAVE

P1,274.00

P23,088.00

3.Alberto
Ramirez

TH

13
MONTH
PAY

P4,147.00

11,141.00

P2,005.00

45,617.00

11,141.00

2,005.00

74,646.00

11,141.00

2,020.00

41,170.00

5.Reynaldo
Acodesin

11,141.00

2,020.00

20,735.00

6.Edgardo
Tajonera

19,500.00

3,750.00

130,000.00

7.Gary Dison

11,141.00

2,020.00

29,029.00

P23,088.00 P76,479.00 P13,820.00

P345,344.00

P765.00

xxx

All other claims are hereby dismissed for lack of merit.

xiii

Petitioners appealed to the National Labor Relations Commission (NLRC) which affirmed the LAs
decision.

xiii

Subsequently, petitioners filed a petition for review in the Court of Appeals (CA) arguing that they
were not liable for illegal dismissal since respondents services were merely put on hold until the
resumption of their business operations. They also averred that they had paid respondents their full
wages and benefits as provided by law, hence, the latter had no more right to further benefits.

The CA was not convinced and dismissed petitioners appeal. It held:

We note that the petitioners are taking a new tack in arguing, for the first time,
that the [respondents] were not dismissed but their employment was merely suspended.
Previous to this, their defense was that the [respondents] were project employees who
were not entitled to security of tenure. The petitioners are barred from raising a new
defense at this stage of the case.

xxx

xxx

xxx

WHEREFORE, the petition for certiorari is hereby DISMISSED, for lack of

xiii

merit.

Petitioners filed a motion for reconsideration but it was dismissed by the CA.

xiii

In this petition for review under Rule 45 of the Rules of Court, petitioners raise the
following issues for resolution: (1) whether respondents were project employees or regular employees
and (2) whether respondents were illegally dismissed.

On the first issue, we rule that respondents were regular employees. However, we take exception
to the reasons cited by the LA (which both the NLRC and the CA affirmed) in considering respondents as
regular employees and not as project employees.

Contrary to the disquisitions of the LA, employees (like respondents) who work under different
project employment contracts for several years do not automatically become regular employees; they can
xiii

remain as project employees regardless of the number of years they work.

controlling factor in determining the nature of ones employment.

Length of service is not a

xiii

Moreover, employees who are members of a work pool from which a company (like petitioner
corporation) draws workers for deployment to its different projects do not become regular employees by
reason of that fact alone. The Court has enunciated in some cases
either be project employees or regular employees.

xiii

that members of a work pool can

The principal test for determining whether employees are project employees or regular
employees is whether they are assigned to carry out a specific project or undertaking, the duration and
scope of which are specified at the time they are engaged for that project.

xiii

Such duration, as well as the

particular work/service to be performed, is defined in an employment agreement and is made clear to the
employees at the time of hiring.

xiii

In this case, petitioners did not have that kind of agreement with respondents. Neither did they
inform respondents of the nature of the latters work at the time of hiring. Hence, for failure of petitioners
to substantiate their claim that respondents were project employees, we are constrained to declare them
as regular employees.

Furthermore, petitioners cannot belatedly argue that respondents continue to be their employees
(so as to escape liability for illegal dismissal). Before the LA, petitioners staunchly postured that
respondents were only project employees whose employment tenure was coterminous with the projects
they were assigned to. However, before the CA, they took a different stance by insisting that respondents
continued to be their employees. Petitioners inconsistent and conflicting positions on their true relation
with respondents make it all the more evident that the latter were indeed their regular employees.

On the issue of illegal dismissal, we hold that petitioners failed to adhere to the two-notice rule
which requires that workers to be dismissed must be furnished with: (1) a notice informing them of the
particular acts for which they are being dismissed and (2) a notice advising them of the decision to
terminate the employment.

xiii

Respondents were never given such notices.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

THIRD DIVISION

GRANDSPAN
CORPORATION,

DEVELOPMENT
G.R. No. 141464

Petitioner,
Present:

PANGANIBAN, J., Chairman,

-

versus

SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.

RICARDO
BERNARDO,
ANTONINO
CEIDOZA and EDGARDO DEL PRADO,
surviving parent of EDGAR DEL PRADO,
Respondents.

Promulgated:

September 21, 2005

x ------------------------------------------------------------------------------------------------------------ x

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision

[1]

dated September 17, 1999 and Resolution

[2]

dated January 6, 2000

rendered by the Court of Appeals in CA-G.R. SP No. 50610, entitled Ricardo Bernardo, Antonino
Ceidoza and Edgardo Del Prado, as surviving parent of Edgar Del Prado vs. National Labor Relations
Commission, Grandspan Development Corporation and Joaquin Narag doing business under the name &
style of J. Narag Construction.

The instant controversy stemmed from a complaint for illegal dismissal and non-payment of
benefits filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceidoza and Edgar Del Prado,
respondents, against Grandspan Development Corporation, petitioner, and/or its warehouse manager,
Manuel G. Lee, docketed as NLRC Case No. RAB-IV-11-4605-92-RI.

Respondents, in their complaint, alleged that sometime in 1990, they were employed as truck
scale monitors by petitioner with a daily salary of P104.00 each. Eventually, they were assigned at its
Truck Scale Section of the Warehouse/Materials Department. They were issued identification cards
signed by Bonifacio Selmo, petitioners personnel manager. On October 28, 1992, petitioner sent them a
notice terminating their services effective October 29, 1992 for using profane or offensive language, in
violation of Article VI (2) (a) of the companys Rules and Regulations.
Petitioner denied the allegations of respondents in their complaint, claiming that they are
employees of J. Narag Construction.

Sometime in the third quarter of 1992, Canad Japan Co., Ltd.

engaged petitioners services for fabrication works of several round and rectangular steel tanks needed
for the HCMG or Sogo project due for completion in September, 1992. As a consequence, petitioner
subcontracted the services of J. Narag Construction which, in turn, assigned its 3 helpers (herein
respondents) to work for petitioners project. Sometime in October, 1992, Manuel G. Lee, manager of
petitioners Warehouse Department received a report from supervisor Robert Ong that respondents
vandalized the companys log book and chairs. This prompted petitioner to send J. Narag Construction a

memorandum terminating the services of respondents for violation of the companys Rules and
Regulations.
After the submission of the parties pleadings and position papers, the Labor Arbiter rendered a
Decision dated June 30, 1994 dismissing respondents complaint. In concluding that respondents were
validly dismissed from employment, the Labor Arbiter held that they were project employees whose
services were terminated upon completion of the project for which they were hired.
Upon appeal, the National Labor Relations Commission (NLRC) issued a Resolution dated
March 7, 1995 remanding the case to the Labor Arbiter for appropriate proceedings to determine
whether there is an employer-employee relationship between the parties.

Both parties filed their respective motions for reconsideration but were denied by the NLRC in
separate Resolutions dated April 28, 1995 and May 31, 1995.

Respondents then filed with this Court a petition for certiorari.

[3]

Martins Funeral Home vs. NLRC,

Pursuant to our ruling in St.

we referred the petition to the Court of Appeals for its appropriate

action and disposition.

Meantime, respondent Del Prado died and was substituted by his surviving parent, Edgardo Del
Prado.

On September 17, 1999, the Appellate Court rendered a Decision setting aside the NLRCs
Resolutions and ordering petitioner (1) to reinstate respondents Bernardo and Ceidoza to their former
positions and pay, jointly and severally with J. Narag Construction, their backwages and other benefits,
and (2) to pay respondent Del Prado his separation pay.
The Court of Appeals found that respondents are employees of petitioner; that they were nonproject workers; and that they were denied due process, thus:

In the instant case, petitioners were assigned to the Truck Scaling Materials
Department of Grandspan. They worked in Grandspans premises using the materials,
supplies and equipment of Grandspan. They were under the supervision of Grandspan
as to the manner and results of their work, and performed services directly connected to
the usual business of respondent Grandspan for the fabrication of heavy structural
components. The memorandum dated 28 October 1992 (p. 75 Rollo) dismissing the
petitioners in fact emanated from Grandspan Materials Manager Manuel G. Lee and is
addressed to the Personnel Department of Grandspan, albeit containing the self-serving
claim that the employees-petitioners were J. Narag Construction personnel. Under the
circumstances, We rule that J. Narag was a labor-only contractor. While petitioners
were in J. Narag Constructions payroll, such fact does not per se establish J. Narag
Construction as an independent contractor, i.e., the employer of the petitioners. x x x.

xxx

xxx

The Office of the Solicitor General opines that petitioners were non-project
employees as they were assigned at Grandspans Materials Department. We agree.
Moreover, if petitioners were truly project employees, private respondents should have
presented proof that they submitted to the nearest public employment office a report of
termination of service of their project employees upon completion of the construction
project, as required by Policy Instruction No. 20. x x x.

Going now to the issue of whether or not petitioners were illegally dismissed, We
rule in the affirmative. In the letter/memo dated 28 October 1992 (Rollo, p. 75), by which
Grandspan ostensibly requested J. Narag to terminate petitioners contract immediately,
the reason cited for the dismissal was violation of Article VI 2.a. of company Rules and
Regulations (the use of profane or offensive languages addressed to company officers)
committed, according to the petitioners, through the vandalism of logbooks and office
furniture at the Truck Scale Section of the Warehouse/Materials Department with
obscene drawings. x x x.

However, this is not supported by substantial evidence which is necessary in

order that petitioners may be dismissed for just cause. Considering that private
respondent failed to discharge the burden of proof reposed on it to show that the
dismissal was justified, the inevitable result is a finding that the dismissal was unjustified
(Uy vs. NLRC, 261 SCRA 505; Caurdanetaan Piece Workers Union vs. Laguesma, 296
SCRA 401).

Moreover, petitioners were not given ample opportunity to prepare adequately for
their defense, including legal representation (Abiera vs. NLRC, supra; Pangasinan III
Electric Cooperative, Inc. vs. NLRC, 215 SCRA 669), nor were they served notice of
investigation, nor given an opportunity to be heard. This violates the requirement of
notice and hearing in case of employee dismissal, thus petitioners dismissal was void
(Abiera vs. NLRC, 202 SCRA 7; Falguera vs. Lansangan, 251 SCRA 364).

As illegally dismissed employees, petitioners are protected by Article 279 of the

Labor Code, x x x.

In the case of petitioner Edgar del Prado, now deceased and represented in this
petition by his surviving parent Edgardo del Prado, reinstatement is no longer possible,
thus he should be paid separation pay equivalent to one month salary for every year of
service in addition to backwages (International Phamaceuticals, Inc. vs. NLRC, 287
SCRA 228).

WHEREFORE, finding merit in the petition, the same is GRANTED. The

assailed NLRC resolutions dated 7 March 1995 and 28 April 1995 are ANNULLED and
SET ASIDE.

Private respondent Grandspan is ordered to reinstate petitioners Ricardo

Bernardo and Antonino Ceidoza to their former positions without loss of seniority
rights. Grandspan and J. Narag Construction are declared jointly and severally liable to
pay said petitioners full backwages and other benefits and privileges enjoyed by
respondent Grandspan employees.

Private respondents Grandspan and J. Narag Construction are likewise ordered

to pay petitioner Edgardo del Prado, surviving parent of Edgar del Prado, the latters
separation pay at the rate of one (1) month salary for every year of service rendered by
the deceased.

SO ORDERED.

On October 8, 1999, petitioner filed a motion for reconsideration. Respondents also filed a motion
for reconsideration and/or clarification praying that the Appellate Courts Decision be modified by
awarding respondent Del Prado his backwages.

On January 6, 2000, the Court of Appeals promulgated its Resolution denying petitioners motion
for reconsideration but modifying its Decision in the sense that petitioner and J. Narag Construction are
ordered to pay respondent Del Prado his separation pay and backwages.

Hence, this petition for review on certiorari.

The issue for our resolution is whether the Court of Appeals erred in holding that respondents are
employees of petitioner.

Petitioner argues that it has no employer-employee relationship with respondents since they are
employees of J. Narag Construction, an independent contractor.
[4]

In Miguel vs. JCT Group, Inc.,

we held:

The test for determining an employer-employee relationship hinges on resolving

who has the power to select employees, who pays for their wages, who has the power to
dismiss them, and who exercises control in the methods and the results by which the
work is accomplished.

The Court of Appeals found that J. Narag Construction assigned respondents to perform activities
directly related to the main business of petitioner. They worked in petitioners premises, using its
equipment, materials and supplies. J. Narag Constructions payroll worksheets covering the period from
December 21, 1990 to July 31, 1991 show that the payment of their salaries was approved by petitioner.
The manager and supervisor of petitioners Warehouse Department supervised the manner and results of
their work. It was petitioner who terminated their services after finding them guilty of using profane or

offensive language in violation of Article VI (2) (a) of the companys Rules and Regulations.

The

Appellate Court then concluded that these circumstances confirm the existence of an employer-employee
relationship between petitioner and respondents.
We agree.

Unswayed, petitioner insists that J. Narag Construction, being a legitimate independent

contractor, is the employer of respondents.

On this point, the Court of Appeals held that J. Narag

Construction is a labor-only contractor.

Article 106 of the Labor Code, as amended, provides in part:

ART. 106. Contractor or subcontracting. x x x.

xxx

xxx

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. x x x.

On the basis of the records, we have no reason to deviate from the Appellate Courts finding that
J. Narag Construction is indeed a labor-only contractor. These are the reasons: (1) it is not registered as
a building contractor with the SEC; (2) it has no contract with petitioner; and (3) there is no proof of its
financial capability and has no list of equipment, tools, machineries and implements used in the
business.

Clearly, J. Narag Construction could not be respondents employer.

But petitioner maintains that respondents are project employees and as such, their services
ended in September, 1992 upon completion of its HCMG or Sogo project.

In Kiamco vs. NLRC,

[5]

we held:

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. As defined, project employees are those workers hired (1)
for a specific project or undertaking, and (2) the completion or termination of such project
or undertaking has been determined at the time of engagement of the employee.

Here, petitioner could not present employment contracts signed by respondents showing that
their employment was for the duration of the HCMG or Sogo project.

Likewise, as correctly observed by the Court of Appeals, petitioner failed to present any report
terminating the services of respondents when its projects were actually finished.

Section 2.2 (e) of the Labor Department Order No. 19 expressly provides that the report of
termination is one of the indications of project employment.

[6]

Time and again, we held that failure of the employer to file termination reports after every project
completion with the nearest public employment office is an indication that respondents were
not project employees.

[7]

We, therefore, uphold the finding of the Court of Appeals that respondents are petitioners regular
employees.

As such, they are entitled to security of tenure and can only be dismissed for a just or

authorized cause, as provided by Article 279 of the Labor Code, as amended, thus:

"ARTICLE 279. Security of Tenure. In cases of regular employment, the

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

[8]

In Bolinao Security and Investigation Service, Inc. vs. Toston , we emphasized that it is
incumbent upon the employer to prove by the quantum of evidence required by law that the
dismissal of an employee is not illegal, otherwise, the dismissal would be unjustified.
Here, petitioner failed to discharge its burden. In terminating respondents services, it merely
relied on the alleged completion of the HCMG or Sogo project and on the report that respondents uttered
profane or offensive language in violation of the companys Rules and Regulations.

As earlier

mentioned, they are not project employees. And as found by the Court of Appeals, there is no evidence
to substantiate the charge of uttering profane or offensive language.
It also appears that petitioner violated respondents right to due process.

In Loadstar Shipping Co., Inc. vs. Mesano,

[9]

we held:

The law requires that an employee sought to be dismissed must be served two
written notices before termination of his employment. The first notice is to apprise the
employee of the particular acts or omissions by reason of which his dismissal has been
decided upon; and the second notice is to inform the employee of the employers
decision to dismiss him. Failure to comply with the requirement of two notices makes the
dismissal illegal. The procedure is mandatory. Non-observance thereof renders the
dismissal of an employee illegal and void.

Records show that respondents were not served by petitioner with notices, verbal or written,
informing them of the particular acts for which their dismissal is sought. Neither were they required to
give their side regarding the alleged serious misconduct imputed against them.

We thus sustain the Court of Appeals ruling that respondents were deprived of both their
substantive and procedural rights to due process and, therefore, the termination of their
employment is illegal.

Since respondents were illegally dismissed from work, they are entitled to reinstatement without
loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time their compensation was withheld from them up to the time of
[10]

their actual reinstatement.

However, the circumstances obtaining in this case do not warrant the reinstatement of
respondents.

Antagonism caused a severe strain in the parties employer-employee relationship.

Thus, a more equitable disposition would be an award of separation pay equivalent to at least one month
pay, or one month pay for every year of service, whichever is higher, (with a fraction of at least six (6)
months being considered as one (1) whole year),
other benefits.

[11]

in addition to their full backwages, allowances and

[12]

Records show that respondents were employed by petitioner from 1990 to October 29, 1992, or for
two (2) years, with a daily salary of P104.00 each, hence, entitled
P4,992.00.

to

separation

pay

of

[13]

WHEREFORE, the assailed Decision dated September 17, 1999 and Resolution dated
January 6, 2000 of the Court of Appeals in CA-G.R. SP No. 50610 are hereby AFFIRMED with
MODIFICATION in the sense that petitioner is ordered to pay each respondent separation pay
equivalent to P4,992.00, plus their respective full backwages, and other privileges and benefits, or

their monetary equivalent, during the period of their dismissal up to their supposed actual
reinstatement.

Costs against petitioner.

SO ORDERED.