G.R. No.

175960 February 19, 2008

PADILLA MACHINE SHOP, RODOLFO PADILLA and LEONARDO PADILLA,
petitioners,
vs.
RUFINO A. JAVILGAS, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision1 of the Court of Appeals dated August 29,
2006 in CA-G.R. SP No. 89164 which reinstated the decision of the Labor Arbiter finding
respondent Rufino A. Javilgas to have been illegally dismissed. Also assailed is the
Resolution2 of December 21, 2006 denying the motion for reconsideration.
On December 10, 2002, Javilgas filed a Complaint3 for illegal dismissal, underpayment
of 13th month pay, separation pay and non-remittance of SSS contributions against
petitioners Padilla Machine Shop, Rodolfo Padilla and Leonardo Padilla.
Javilgas alleged that in January 1998, he was hired by Padilla Machine Shop, located at
Commonwealth Avenue, Quezon City. His work consisted of reconditioning machines
and was paid a monthly salary of P6,480.00. In July 1998, his salary was increased to
P7,200.00; and in January 1999, his salary was again increased to P8,400.00 until his
dismissal in April 2002. Petitioners made regular deductions for his SSS contributions,
but sometime in 2002, he found out that his employer was not remitting the contributions
to the SSS; as a result, he was not able to avail of the benefits thereof when his wife gave
birth. When he complained about the failure of his employer to remit his SSS
contributions, the latter transferred him to the Novaliches branch office.
Javilgas further alleged that in April 2002, Rodolfo Padilla called him by telephone and
told him to "stop working," but "without giving any reason therefor." He stopped
reporting for work and sued petitioners for illegal dismissal, with a prayer for the
payment of backwages, pro rated 13th month pay, separation pay, and moral and
exemplary damages.
On the other hand, petitioner Rodolfo Padilla (Rodolfo), proprietor of Padilla Machine
Shop, alleged that in 1999, SSS and Medicare contributions were deducted from Javilgas'
salary and remitted to the SSS; that in 2000, they (petitioners) submitted a report to the
SSS that Javilgas had voluntarily left and abandoned his work, and transferred to another
shop, Raymond Machine Shop, located within the same vicinity as Padilla Machine
Shop; that some months after, Javilgas returned and pleaded to be re-employed with
them; that Rodolfo Padilla took Javilgas back to work, but their customers were not
satisfied with the quality of his work; hence Javilgas was assigned to the Novaliches
branch; that Javilgas incurred numerous absences in the Novaliches branch; that Javilgas
had opened his own machine shop and even "pirated" the clients of petitioners; and
finally, Javilgas again voluntarily left Padilla Machine Shop without prior notice.
On March 31, 2004, the Labor Arbiter rendered a decision that Javilgas was illegally
dismissed, the dispositive portion of which reads, as follows:

WHEREFORE, judgment is hereby rendered finding Complainant to have been

illegally dismissed. Concomitantly, Respondents are ordered jointly and severally to
pay Complainant the following:
P232,065.92 representing backwages;
50,400.00 representing separation pay;
18,571.00 representing 13th month pay
P301,036.92 Total
Ten percent of the total award as attorney's fees.
The claim of non-remittance of SSS contribution is dismissed for lack of jurisdiction.
SO ORDERED.4
Petitioners appealed the decision to the National Labor Relations Commission (NLRC)
which reversed the decision of the Labor Arbiter, to wit:
WHEREFORE, premises considered, we give due course to the appeal of
respondents. Consequently, the Decision of the Labor Arbiter below is hereby
reversed and set aside and a new decision is entered dismissing the instant case for
lack of merit.
SO ORDERED.5
The NLRC found no sufficient evidence to show that Javilgas was dismissed or prevented
from reporting for work; that Javilgas could not categorically state when he was
dismissed: in his complaint, he claimed to have been dismissed on February 27, 2002, but
in subsequent pleadings he alleged he was dismissed in mid-April, 2002. Relying on the
principle enunciated in Chong Guan Trading v. National Labor Relations Commission,6 it
ruled that where Javilgas was never notified of his dismissal nor was he prevented from
returning to work, there could be no illegal dismissal. The NLRC also found the
telephone conversation between Javilgas and Rodolfo Padilla - where the latter told the
former to stop reporting to work - self-serving, conjectural and of no probative value,
especially where Javilgas himself declares that he was told by Rodolfo not to report to
work without giving any reason therefor. In fine, the NLRC held that Javilgas voluntarily
resigned, and not illegally dismissed.
On appeal, the Court of Appeals reversed the NLRC and reinstated the Decision of the
Labor Arbiter. It held that the burden of proof is on the petitioners, to show that Javilgas
was dismissed for a valid and just cause. As to the inconsistency in the dates of Javilgas'
termination, the appellate court noted that it was a case of miscommunication between
Javilgas and the person who filled up the entries in the pro forma labor complaint in his
behalf; Javilgas was found to be illiterate, as he did not even get to finish Grade School.
Likewise, the delay of eight months in the filing of the complaint should not work against
respondent because it took time for him to obtain the services of a counsel.
The appellate court did not lend credence to petitioners' claim that respondent voluntarily
resigned since the issue was only raised for the first before the NLRC. A change of theory
on appeal - from abandonment of work in the Labor Arbiter to voluntary resignation on

appeal, is prohibited. It likewise declared as without basis the petitioners' claim that
Javilgas was operating a rival machine shop, since petitioners failed to prove with
sufficient evidence the veracity of said claim. The Court of Appeals disregarded the
documents submitted by the petitioners to the NLRC for the first time (business permit
and photographs) which they claim would show that respondent was operating his own
machine shop during the period of his employment with Padilla Machine Shop.
Petitioners' motion for reconsideration was denied hence, the instant petition raising the
following issues:
1. The Court of Appeals erred in holding that upon the petitioners rested the burden of
proving that the termination of the respondent was for a valid cause, despite their
consistent position that the latter was never terminated from employment;
2. The Court of Appeals erred in holding that the said consistent position adopted by
petitioners - that they never dismissed Javilgas - is not sufficient to negate the charge
of illegal dismissal;
3. The Court of Appeals erred in disregarding documentary evidence presented for the
first time on appeal; and,
4. The Court of Appeals erred in awarding attorney's fees to the respondent who was
being represented pro bono by the Office of Legal Aid of the U.P. College of Law.
Petitioners did not offer any evidence to disprove the allegation that Rodolfo Padilla
informed Javilgas by phone to stop reporting to work. On the contrary, Rodolfo admitted
that he "advised" Javilgas to "concentrate on his (Javilgas') shop if he has no more time
for the company (Padilla Machine Shop)."7 Moreover, it was only in the NLRC that the
documents and photographs purporting to show that Javilgas was conducting business
inimical to the interests of Padilla Machine Shop were submitted.
In illegal dismissal cases, the burden of proof is on the employer to show that the
employee was dismissed for a valid and just cause. 8 Petitioners have failed to discharge
themselves of the burden. With respect to Javilgas' claim of illegal dismissal, petitioners
merely alleged that 13. From that time on, Complainant (Javilgas), did not anymore report for work and
left Respondent's (Rodolfo) business for the second time without any advance notice
of terminating his services as required by law;
14. This Complainant requested Respondent to compute all the SSS/Medicare
deductions on his weekly/daily salaries for he is planning to have a refund of these
deductions;
xxxx
Petitioner Rodolfo, however, did not elaborate or show proof of the claimed
abandonment. Instead, he concluded that Javilgas "abandoned his corresponding duties
and responsibilities x x x when he established and created his own machine shop outfit x
x x."9
For abandonment to exist, it is essential (a) that the employee must have failed to report
for work or must have been absent without valid or justifiable reason; and, (b) that there
must have been a clear intention to sever the employer-employee relationship manifested

by some overt acts.10 The establishment of his own shop is not enough proof that Javilgas
intended to sever his relationship with his employer.
Moreover, it was only in 2003 that Rodolfo allegedly confirmed his suspicion that
Javilgas was operating his own machine shop. Rodolfo admits that it was only when the
case was on appeal to the NLRC that his suspicion was confirmed. Thus, in the petition
for review on certiorari11 with this Court, petitioners claim that During the pendency of this case on appeal with the NLRC, because of the vehement
denial of complainant, Rufino Javilgas that he has never operated a machine shop
which is doing the same business with (petitioners)(,) Mr. Rodolfo Padilla and the
undersigned counsel went to the residence of (respondent), Rufino Javilgas at
Barangay Sta. Clara, Sta. Maria, Bulacan on January 3, 2003, and right then and
there, Mr. Padilla and the undersigned counsel saw personally the machine shop being
operated by Mr. Rufino Javilgas. x x x (Words in parentheses supplied)
This only proves that in April 2002, when Rodolfo allegedly "advised" Javilgas to
"concentrate on his (Javilgas') shop if he has no more time for the company (Padilla
Machine Shop)," petitioners had nothing but unfounded suspicions.
In Machica v. Roosevelt Services Center, Inc.,12 we sustained the employer's denial as
against the employees' categorical assertion of illegal dismissal. In that case, several
employees who allegedly refused to sign a memorandum 13 from their employer, detailing
the commission of alleged anomalies that resulted in the overpricing and overcharging of
customers, filed an illegal dismissal case three days after receiving the said
memorandum. They claimed that they were illegally dismissed and were told not to
report for work anymore; the employer denied this and asserted that the workers (who
appeared to be the suspects in the anomalies) were merely given three to five days off to
decide whether or not to agree to share the loss suffered by it as a result of the anomalies.
The Court, in ruling that there was no illegal dismissal, held that:
The rule is that one who alleges a fact has the burden of proving it; thus, petitioners
were burdened to prove their allegation that respondents dismissed them from their
employment. It must be stressed that the evidence to prove this fact must be clear,
positive and convincing. The rule that the employer bears the burden of proof in
illegal dismissal cases finds no application here because the respondents deny having
dismissed the petitioners.
We have reviewed the Memorandum of respondent Dizon and find nothing therein to
indicate that any of the employees of respondent corporation, including the
petitioners, would be considered terminated from employment if they refused to share
in the P23,997.58 loss. Petitioners and other employees of respondent corporation
were merely required to affix their signatures in the Memorandum on the space
opposite their respective names, to confirm that they had read and understood the
same. As elucidated by the NLRC in the assailed Resolution:
Read in its entirety, the Memorandum reflects the GOOD FAITH of the employer in
resolving a discovered anomaly. First, it is a declaration of AMNESTY and
FORGIVENESS; it did not name names; it did not state that the guilty ones will be
pursued and punished. Second, it asked for SHARING among the employees for the
loss due to the discovered anomaly. Third, it indicated a POSITIVE BUSINESS

DIRECTION as it exhorted the employees from participating in similar anomalies

henceforward.14
Petitioners, in like manner, consistently deny that Javilgas was dismissed from service;
that he abandoned his employment when he walked out after his conversation with
Rodolfo and never returned to work again. But denial, in this case, does not suffice; it
should be coupled with evidence to support it. In the Machica case, the memorandum,
among others, represented clear and convincing proof that there was no intention to
dismiss the employees; it constituted evidence in support of the employer's denial.
In the instant case, petitioners failed to adduce evidence to rebut Javilgas' claim of
dismissal and satisfy the burden of proof required.
As regards the eight-month hiatus before Javilgas instituted the illegal dismissal case, we
sustain the Court of Appeals' ruling that Javilgas filed the complaint within a reasonable
period during the three-year period provided under Article 291 of the Labor Code.
Finally, there is no merit in petitioners' claim that attorney's fees may not be awarded to
the respondent since his case was being handled pro bono by the U.P. Office of Legal
Aid, which provides free legal assistance to indigent litigants. In this jurisdiction, there
are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal services he has
rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees may
be awarded by the court as indemnity for damages to be paid by the losing party to the
prevailing party,15 and not counsel. In its extraordinary sense, attorney's fees as part of
damages is awarded only in the instances specified in Article 2208 of the Civil Code, 16
among which are the following which obtain in the instant case:
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability
laws;
xxxx
(11) In any other case where the court deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
August 29, 2006 in CA-G.R. SP No. 89164 which reinstated the Decision of the Labor
Arbiter finding that respondent Rufino Javilgas was illegally dismissed from service and
its Resolution of December 21, 2006 denying the motion for reconsideration are hereby
AFFIRMED.
No costs.
SO ORDERED.

ARTURO DE GUZMAN, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER MA.
LOURDES A. SALES, AVELINO D. VALLESTEROL, ALEJANDRO Q. FRIAS,
LINDA DE LA CRUZ, CORAZON M. DE LA FUENTE, LILIA F. FLORO, and
MARIO F. JAYME, respondents.
CRUZ, J.:
It is a fundamental principle of law and human conduct that a person "must, in
the exercise of his rights and in the performance of his duties, act with justice,
give every one his due, and observe honesty and good faith." 1 This is the principle
we shall apply in the case at bar to gauge the petitioner's motives in his dealings with the private
respondents.
Arturo de Guzman was the general manager of the Manila office of the Affiliated Machineries
Agency, Ltd., which was based in Hongkong. On June 30, 1986, he received a telex message
from Leo A. Fialla, managing director of AMAL in its main office, advising him of the closure of the
company due to financial reverses. This message triggered the series of events that are the
subject of this litigation.
Immediately upon receipt of the advise, De Guzman notified all the personnel of the Manila office.
The employees then sent a letter to AMAL accepting its decision to close, subject to the payment
to them of their current salaries, severance pay, and other statutory benefits. De Guzman joined
them in these representations.
These requests were, however, not heeded. Consequently, the employees, now herein private
respondents, lodged a complaint with the NLRC against AMAL, through Leo A. Fialla and Arturo
de Guzman, for illegal dismissal, unpaid wages or commissions, separation pay, sick and
vacation leave benefits, 13th month pay, and bonus.
For his part, the petitioner began selling some of AMAL's assets and applied the proceeds
thereof, as well as the remaining assets, to the payment of his claims against the company. He
also organized Susarco, Inc., with himself as its president and his wife as one of the incorporators
and a member of the board of directors. This company is engaged in the same line of business
and has the same clients as that of the dissolved AMAL.
With this development, Susarco and its officers were impleaded in the amended complaint of the
private respondents. Later, William Quasha and/or Cirilo Asperilla were also included in the suit
as the resident agents of AMAL of the Philippines.
On November 7, 1986, the petitioner filed his own complaint with the NLRC against AMAL for his
remaining unsatisfied claims.
On May 29, 1987, Labor Arbiter Eduardo G. Magno, to whom the petitioner's complaint was
assigned, rendered a decision ordering AMAL to pay the petitioner the amount of P371,469.59 as
separation pay, unpaid salary and commissions, after deducting the value of the assets earlier
appropriated by the petitioner. 2
On September 30, 1987, Labor Arbiter Ma. Lourdes A. Sales, who tried the private respondents'
complaint, rendered a decision
1. Ordering Respondents AMAL and Arturo de Guzman to pay jointly and severally to
each Complainant separation pay computed at one-half month pay for every year of
service, backwages for one month, unpaid salaries for June 16-30, 1986, 13th month pay
from January to June 30, 1986 and incentive leave pay equivalent to two and-a-half days
pay;
2. Dismissing the complaint against respondents Leo Fialla, William Quasha, Susarco,
Inc. and its directors Susan de Guzman, Pacita Castaneda, George Estomata and
Cynthia Serrano for lack of basis and/or merit;

3. Dismissing the claims for damages for lack of basis;

4. Ordering respondents AMAL and Arturo de Guzman to pay jointly and severally
attorney's fees to Complainants equivalent to 10% of the monetary awards herein. 3
This decision was on appeal affirmed in toto by the NLRC, which is now faulted for grave abuse
of discretion in this petition for certiorari.
The petitioner does not dispute the jurisdiction of the Labor Arbiter and NLRC over the complaint
of the private respondents against AMAL in view of their previous employment relationship. He
argues, however, that the public respondents acted without or in excess of jurisdiction in holding
him jointly and severally liable with AMAL as he was not an employer of the private respondents.
The Solicitor General and the private respondents disagree. They maintain that the petitioner,
being AMAL's highest local representative in the Philippines, may be held personally answerable
for the private respondents' claims because he is included in the term "employer" under Art. 212
(c),
(now e) of the Labor Code which provides:
Art. 212. Definitions.
xxx xxx xxx
c. "Employer" includes any person acting in the interest of an employer, directly or
indirectly. . . .
In the leading case of A.C. Ransom Labor Union-CCLU vs. NLRC, 4 as affirmed in the
5
subsequent
cases
of
Gudez
vs.
NLRC,
and
Maglutac
vs.
NLRC, 6 this Court treated the president of the employer corporation as an "employer" and held
him solidarily liable with the said corporation for the payment of the employees' money claims. So
was the vice-president of the employer corporation in the case of Chua vs. NLRC. 7
The aforecited cases will not apply to the instant case, however, because the persons who were
there made personally liable for the employees' claims were stockholders-officers of the
respondent corporation. In the case at bar, the petitioner, while admittedly the highest ranking
local representative of AMAL in the Philippines, is nevertheless not a stockholder and much less a
member of the board of directors or an officer thereof. He is at most only a managerial employee
under Art. 212 (m) of the Labor Code, which reads in relevant part as follows:
Art 212. Definitions.
xxx xxx xxx
m. Managerial employee is one who is vested with powers and prerogatives to lay down
and
execute
management
policies
and/or
to
hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. . . .
As such, the petitioner cannot be held directly responsible for the decision to close the business
that resulted in his separation and that of the private respondents. That decision came directly
and exclusively from AMAL. The petitioner's participation was limited to the enforcement of this
decision in line with his duties as general manager of the company. Even in a normal situation, in
fact, he would not be liable, as a managerial employee of AMAL, for the monetary claims of its
employees. There should be no question that the private respondents' recourse for such claims
cannot be against the petitioner but against AMAL and AMAL alone.
The judgment in favor of the private respondents could have been enforced against the properties
of AMAL located in this country except for one difficulty. The problem is that these properties have
already been appropriated by the petitioner to satisfy his own claims against the company.
By so doing, has the petitioner incurred liability to the private respondents?
The Labor Arbiter believed he had because of his bad faith and ruled as follows:
Considering that Respondent A. de Guzman is guilty of bad faith in appropriating for
himself the properties of Respondent AMAL to the prejudice of Complainants herein

whose claims are known to Respondent at the time he made the disposition of AMAL's
properties, he is held jointly and severally liable with Respondent AMAL for the award of
unpaid wages, separation pay, backwages for one month, 13th month pay and cash
value of unused vacation leave.
In Velayo v. Shell Co. of the Philippines, 8 Commercial Air Lines, Inc. (CALI), knowing that it did not
have enough assets to pay off its liabilities, called a meeting of its creditors where it announced that in case
of non-agreement on a pro-rata distribution of its assets, including the C-54 plant in California, it would file
insolvency proceedings. Shell Company of the Philippines, one of its creditors, took advantage of this
information and immediately made a telegraphic assignment of its credits in favor of its sister corporation in
the United States. The latter thereupon promptly attached the plane in California and disposed of the same,
thus depriving the other creditors of their proportionate share in its value. The Court declared that Shell had
acted in bad faith and betrayed the trust of the other creditors of CALI. The said company was ordered to
pay them compensatory damages in a sum equal to the value of the C-54 plane at the time it assigned its
credit and exemplary damages in the sum of P25,000.00.
We quote with approval the following observations of Labor Arbiter Sales in her decision:
While the legitimacy of Respondent A. de Guzman's claims against AMAL is not questioned, it must
be stated that the manner and the means by which he satisfied such claims are evidently
characterized by bad faith on his part. For one, Respondent A. de Guzman took advantage of his
position as General Manager and arrogated to himself the right to retain possession and ownership
of all properties owned and left by AMAL in the Philippines, even if he knew that Complainants
herein have similar valid claims for unpaid wages and other employee benefits from the
Respondent AMAL. . . .
Another strong indication of bad faith on the part of Respondent A. de Guzman is his filing of a
separate complaint against AMAL before the NLRC Arbitration Branch about four (4) months after
the filing of the instant case without informing this Office about the existence of said case during the
proceedings in the instant case. This case was deemed submitted for decision on May 18, 1987 but
it was only on June 2, 1987 that Respondent A. de Guzman formally notified this Office through his
Supplemental Position Paper of his pending complaint before Arbiter Eduardo Magno docketed as
NLRC Case No. 11-4441-86. Under Rule V, Section 4 of the revised rules of the NLRC, it is
provided that:
Sec. 4. CONSOLIDATION OF CASES where there are two or more cases pending
before different Labor Arbiters in the same Regional Arbitration Branch involving the same
employer and issues or the same parties with different issues, the case which was filed
last shall be consolidated with the first to avoid unnecessary costs or delay. Such cases
shall be disposed of by the Labor Arbiter to whom the first case was assigned. (Emphasis
supplied).
Had Respondent A. de Guzman given timely notice of his complaint, his case could have been
consolidated with this case and the issues in both cases could have been resolved in a manner that
would give due consideration to the rights and liabilities of all parties in interest at the least, in case
consolidation is objected to or no longer possible, the Complainants herein could have been given
a chance to intervene in the other case so that whatever disposition might be rendered by Arbiter
Magno would include consideration of Complainants' claims herein.
It is not disputed that the petitioner in the case at bar had his own claims against AMAL and consequently
had some proportionate right over its assets. However, this right ceased to exist when, knowing fully well
that the private respondents had similarly valid claims, he took advantage of his position as general
manager and applied AMAL's assets in payment exclusively of his own claims.
According to Tolentino in his distinguished work on the Civil Code:
The exercise of a right ends when the right disappears, and it disappears when it is abused,
especially to the prejudice of others. The mask of a right without the spirit of justice which gives it
life, is repugnant to the modern concept of social law. It cannot be said that a person exercises a
right when he unnecessarily prejudices another or offends morals or good customs. Over and
above the specific precepts of positive law are the supreme norms of justice which the law
develops and which are expressed in three principles: honeste vivere, alterum non laedre and just
suum quique tribuere; and he who violates them violates the law. For this reason, it is not
permissible to abuse our rights to prejudice others. 9

The modern tendency, he continues, is to depart from the classical and traditional theory, and to

grant indemnity for damages in cases where there is an abuse of rights, even when the act is not
illicit. Law cannot be given an anti-social effect. If mere fault or negligence in one's acts can make
him liable for damages for injury caused thereby, with more reason should abuse or bad faith
make him liable. A person should be protected only when he acts in the legitimate exercise of his
right, that is, when he acts with prudence and in good faith; but not when he acts with negligence
or abuse. 10
The above-mentioned principles are contained in Article 19 of the Civil Code which provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
This is supplemented by Article 21 of the same Code thus:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
Applying these provisions, we hold that although the petitioner cannot be made solidarily liable
with AMAL for the monetary demand of its employees, he is nevertheless directly liable to them
for his questionable conduct in attempting to deprive them of their just share in the assets of
AMAL.
Under Art. 2219, (10) of the Civil Code, moral damages may be recovered for the acts referred to
in Art. 21. In Bert Osmea & Associates vs. Court of Appeals, 11 we held that "fraud and bad faith
having been established, the award of moral damages is in order." And in Pan Pacific Company
(Phil.) vs. Phil. Advertising Corp., 12 moral damages were awarded against the defendant for its
wanton and deliberate refusal to pay the just debt due the plaintiff.
It is settled that the court can grant the relief warranted by the allegation and the proof even if it is
not specifically sought by the injured party. 13 In the case at bar, while the private respondents did
not categorically pray for damages, they did allege that the petitioner, taking advantage of his
position as general manager, had appropriated the properties of AMAL in payment of his own
claims against the company. That was averment enough of the injury they suffered as a result of
the petitioner's bad faith.
The fact that no actual or compensatory damages was proven before the trial court does not
adversely affect the private respondents' right to recover moral damages. We have held that
moral damages may be awarded in the cases referred to in the chapter on Human Relations of
the Civil Code (Articles 19-36) without need of proof that the wrongful act complained of had
caused any physical injury upon the complainant. 14
When moral damages are awarded, exemplary damages may also be decreed. 15 Exemplary
damages are imposed by the way of example or correction for the public good, in additional to
moral, temperate, liquidated or compensatory damages. 16 According to the Code Commission,
"exemplary damages are required by public policy, for wanton acts must be suppressed. They are
an antidote so that the poison of wickedness may not run through the body politic." 17 These
damages are legally assessible against him.
The petitioner asserts that, assuming the private respondents to have a cause of action against
him for his alleged bad faith, the civil courts and not the Labor Arbiter have jurisdiction over the
case.
In Associated Citizen Bank, et al. vs. Judge Japson, 18 this Court held:
Primarily, the issue to be resolved is whether or not the respondent court has jurisdiction
to hear and decide an action for damages based on the dismissal of the employee.
On all fours to the above issue is the ruling of this Court in Primero v. Intermediate
Appellate Court (156 SCRA 435 [1987]) which once again reiterated the doctrine that the
jurisdiction of the Labor Arbiter under Article 217 of the Labor Code is broad and
comprehensive enough to include claims for moral and exemplary damages sought to be
recovered by an employee whose services has been illegally terminated by is employer

(Ebon v. De Guzman, 113 SCRA 55 [1982]; Aguda v. Vallejos, 113 SCRA 69 [1982]; Getz
Corporation v. Court of Appeals, 116 SCRA 86 [1982]).
For the unlawful termination of employment, this Court in Primero v. Intermediate
Appellate Court, supra, ruled that the Labor Arbiter had the exclusive and original
jurisdiction over claims for moral and other forms of damages, so that the employee in
the proceedings before the Labor Arbiter should prosecute his claims not only for reliefs
specified under the Labor Code but also for damages under the Civil Code.
. . . Question of damages which arose out of or connected with the labor dispute should
be determined by the labor tribunal to the exclusion of the regular courts of justice
(Limquiaco, Jr. v. Ramolete, 156 SCRA 162 [1987]). The regular courts have no
jurisdiction over claims for moral and exemplary damages arising from illegal dismissal of
an employee (Vargas v. Akai Philippines, Inc., 156 SCRA 531 [1987]).
Although the question of damages arising from the petitioner's bad faith has not directly sprung
from the illegal dismissal, it is clearly intertwined therewith. The predicament of the private
respondents caused by their dismissal was aggravated by the petitioner's act in the arrogating to
himself all of AMAL's assets to the exclusion of its other creditors, including its employees. The
issue of bad faith is incidental to the main action for illegal dismissal and is thus properly
cognizable by the Labor Arbiter.
We agree that, strictly speaking, the determination of the amount thereof would require a remand
to the Labor Arbiter. However, inasmuch as the private respondents were separated in 1986 and
this case has been pending since then, the interests of justice demand the direct resolution of this
motion in this proceeding.
As this Court has consistently declared:
. . . it is a cherished rule of procedure for this Court to always strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of future
litigation. No useful purpose will be served if this case is remanded to the trial court only
to have its decision raised again tot the Indeterminate Appellate Court and from there to
this Court. (Alger Electric, Inc. v. Court of Appeals, 135 SCRA 37)
Remand of the case to the lower court for further reception of evidence is not necessary
where the court is in a position to resolve the dispute based on the records before it. On
many occasions, the Court, in the public interest and the expeditious administration of
justice, has resolved actions on the merits instead of remanding them to the trial court for
further proceedings, such as where the ends of justice would not be subserved by the
remand of the case or when public interest demands an early disposition of the case.
(Lianga Bay Logging Co., Inc. v. CA, 157 SCRA 357)
Sound practice seeks to accommodate the theory which avoids waste of time, effort and
expense, both to the parties and the government, not to speak of delay in the disposal of
the case (cf. Fernandez v. Garcia, 92 Phil. 592, 597). A marked characteristics of our
judicial set-up is that where the dictates of justice so demand . . . the Supreme Court
should act, and act with finality. (Li Siu Liat v. Republic, 21 SCRA 1039, 1046, citing
Samal v. CA, 99 Phil. 230 and U.S. v. Gimenez, 34 Phil. 74). In this case, the dictates of
justice do demand that this Court act, and act with finality. (Beautifont, Inc. v. CA, 157
SCRA 481)
It is stressed that the petitioner's liability to the private respondents is a direct liability in the form
of moral and exemplary damages and not a solidary liability with AMAL for the claims of its
employees against the company. He is being held liable not because he is the general manager
of AMAL but because he took advantage of his position by applying the properties of AMAL to the
payment exclusively of his own claims to the detriment of other employees.
WHEREFORE, the questioned decision is AFFIRMED but with the modification that the petitioner
shall not be held jointly and severally liable with AMAL for the private respondents' money claims
against the latter. However, for his bad faith in arrogating to himself AMAL's properties to the
prejudice of the private respondents, the petitioner is ordered: 1) to pay the private respondents

moral damages in the sum of P20,00.00 and exemplary damages in the sum of P20,00.00; and 2)
to return the assets of AMAL that he has appropriated, or the value thereof, with legal interests
thereon from the date of the appropriation until they are actually restored, these amounts to be
proportionately distributed among the private respondents in satisfaction of the judgment
rendered in their favor against AMAL.
SO ORDERED.
Grio-Aquino, Medialdea and Bellosillo, JJ., concur.

JANSSEN PHARMACEUTICA,

G.R. No. 172528

Petitioner,

Present:
- versus -

YNARES-SANTIAGO, J.,

BENJAMIN A. SILAYRO,

Chairperson,

Respondent.

AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
February 26, 2008

x-------------------------------------------------x
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing
the Decision,[1] dated 8 February 2006, promulgated by the Court of Appeals in CA-G.R.
SP No. 81983, reversing the Decision[2] dated 7 May 2003 of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000880-99. The Court of Appeals,
in its assailed Decision, adjudged the dismissal of respondent Benjamin Silayro by
petitioner Jansen Pharmaceutica as illegal for being an excessive and unwarranted
penalty. The appellate court determined that the suspension of the respondent for five
months without salary as just penalty.
Petitioner is the division of Johnson & Johnson Philippines Inc. engaged in the sale and
manufacture of pharmaceutical products. In 1989, petitioner employed respondent as
Territory/Medical Representative. During his employment, respondent received from
petitioner several awards and citations for the years 1990 to 1997, such as Territory
Representative Award, Quota Buster Award, Sipag Award, Safety Drivers Award, Ring
Club Award, and a Nomination as one of the Ten Outstanding Philippine Salesmen.[3] On
the dark side, however, respondent was also investigated for, and in some cases found

guilty of, several administrative charges.

Petitioner alleged that in 1994, respondent was found guilty of granting unauthorized
premium/free goods to and unauthorized pull-outs from customers.[4] Petitioner failed to
attach records to support its allegation and to explain the nature of and the circumstance
surrounding these infractions. Respondent, for his part, admitted to have been guilty of
granting unauthorized premium/free goods, but vehemently denied violating the rule on,
or having been charged with, unauthorized pull-outs from customers.[5]
The respondent was also investigated for dishonesty in connection with the Rewards of
Learning (ROL) test. The ROL test is a one-page take-home examination, with two
questions to be answered by an enumeration of the standards of performance by which
territory representatives are rated as well as the sales competencies expected of territory
representatives.[6] It was discovered that respondents answers were written in the
handwriting of a co-employee, Joedito Gasendo. Petitioners management then sent
respondent a Memo dated 27 July 1998 requiring an explanation for the incident.[7]
Soon thereafter, petitioner sent a subsequent Memo dated 20 August 1998 to respondent
requiring the latter to explain his delay in submitting process reports.[8]
On 8 September 1998, respondent submitted a written explanation to the petitioner
stating that the delay in the submission of reports was caused by the deaths of his
grandmother and his aunt, and the hospitalization of his mother. He also averred that he
had asked his co-employee Joedito Gasendo to write his answers to the ROL test because
at the time when the examination was due, he already needed to leave to see his father-inlaw, who was suffering from cancer and confined in a hospital in Manila.[9]
Respondent was sent a new Memorandum dated 20 October 1998 for his delayed
submission of process reports due on 14 October 1998.[10]
Respondent was issued another Memo also dated 20 October 1998 regarding the
discrepancies between the number of product samples recorded in his Daily/Weekly
Coverage Report (DCR) and the number of product samples found in his possession
during the 14 October 1998 audit.[11] The actual number of sample products found in
respondents possession exceeded the number of sample products he reported to
petitioner.
Respondent explained, through a Response Memo dated 24 October 1998, that he
failed to count the quantity of samples when they were placed in his custody. Thus, he
failed to take note of the excess samples from previous months. He, likewise, admitted to
committing errors in posting the samples that he distributed to some doctors during the
months of August and September 1998.[12]
On 20 November 1998, petitioner issued a Notice of Disciplinary Action finding
respondent guilty of the following offenses (1) delayed submission of process reports, for
which he was subjected to a one-day suspension without pay, effective 24 November
1998;[13] and (2) cheating in his ROL test, for which he was subjected again to a one-day
suspension.[14]
On the same date, petitioner likewise issued a Notice of Preventive Suspension against
respondent for Dishonesty in Accomplishing Other Accountable Documents in
connection with the discrepancy between the quantities of sample products in

respondents report and the petitioners audit for the September 1998 cycle. In addition,
the Notice directed the respondent to surrender to the petitioner the car, promotional
materials, and all other accountabilities on or before 25 November 1998. It was also
stated therein that since this was respondents third offense for the year, he could be
dismissed under Section 9.5.5(c) of petitioners Code of Conduct.[15]
Before 25 November 1998 or the date given by petitioner for respondent to surrender all
his accountabilities, a Memorandum dated 24 November 1998 was issued to respondent
for the following alleged infractions: (1) Failure to turn over company vehicles assigned
after the receipt of instruction to that effect from superiors, and (2) Refusing or neglecting
to obey Company management orders to perform work without justifiable reason.[16]
Respondent wrote a letter dated 26 November 1998 addressed to the petitioner explaining
that he failed to surrender his accountabilities because he thought that this was
tantamount to an admission that the charges against him were true and, thus, could result
in his termination from the job.[17]
An administrative investigation of the respondents case was held on 3 December 1998.
Respondent was accompanied by union representative Lyndon Lim. The parties discussed
matters concerning the discrepancy in respondents report and petitioners audit on the
number of product samples in respondents custody in September 1998. They were also
able to clarify among themselves respondents failure to return his accountabilities and,
as a consequence, respondent promised to surrender the same. They further agreed that
another administrative hearing will be set, but no further hearings were held.[18]
In line with his promise to surrender his accountabilities, respondent wrote a letter, dated
9 December 1998, asking his superiors where he should return his accountabilities.[19]
Union representative Dominic Regoro also made requests, on behalf of respondent, for
instructions, to whom petitioners District Supervisor Raymond Bernardo replied via
electronic mail on 16 December 1998. According to Bernardo, he was still in the process
of making arrangements with Ruben Cauton, petitioners National Sales Manager, in
connection with the return of respondents accountabilities.[20] Respondent maintained
that he did not receive any instructions from petitioner.
In a letter dated 28 December 1998, petitioner terminated the services of respondent.[21]
Petitioner found respondent guilty of dishonesty in accomplishing the report on the
number of product samples in his possession and failing to return the company vehicle
and his other accountabilities in violation of Sections 9.2.9 and 9.2.4 of the Code of
Conduct.[22] Petitioner also found respondent to be a habitual offender whose previous
offenses included: (1) Granting unauthorized premium/free goods to customer in 1994;
(2) Unauthorized pull-out of stocks from customer in 1994; (3) Delay in submission of
reports despite oral admonition and written reprimand in 1998; and (4) Dishonesty in
accomplishing other accountable documents or instruments (in connection with the ROL
test) in 1998.
Even after respondents termination from employment, there was still contact between
petitioner and respondent regarding the latters accountabilities still in his possession.
Sometime in early 1999, in a telephone conversation, respondent informed petitioner that
he will return his accountabilities only upon demand from the proper governmental
agency.[23] A demand letter dated 3 February 1999 was sent to respondent by petitioner

ordering the return of the company car, promotional materials, samples, a slide projector,
product manuals, product monographs, and training binders.[24]
On 14 January 1999, respondent filed a Complaint[25] against petitioner and its officers,
Rafael Besa, Rueben Cauton, Victor Lapid, and Raymond Bernardo before the SubRegional Arbitration Branch of the NLRC in Iloilo City for (a) Unfair Labor Practice; (b)
Illegal Dismissal; (c) Reimbursement of operating and representation expenses under
expense reports for October and November 1998; (d) Nonpayment of salary, bonuses and
other earned benefits for December 1998 like rice allocation, free goods allocation, etc.;
and (e) Damages and attorneys fees.
In a Decision dated 31 August 1999, the Labor Arbiter ruled that respondent committed
infractions which breached company rules, and which were sufficient grounds for
dismissal. However, the Labor Arbiter found the penalty of dismissal to be too harsh
considering the respondents circumstances and ordered his reinstatement without
payment of back wages.[26] The dispositive portion of the Decision states that:
WHEREFORE, premises considered, judgment is rendered ordering respondents firm to
reinstate complainant to his former or equivalent position without backwages.
All other claims are hereby dismissed.[27]
On appeal, the NLRC modified the Decision of the Labor Arbiter by declaring that
reinstatement was improper where respondent was dismissed for just and authorized
causes.[28] In a Decision dated 7 May 2003, it pronounced that:
WHEREFORE, premises considered, complainants appeal is hereby DISMISSED. The
decision of the Labor Arbiter is hereby AFFIRMED with MODIFICATION deleting the
award of reinstatement.[29]
Respondent filed a Petition for Certiorari under Rule 65 of the Rules of Court before the
Court of Appeals. In reversing the Decision of the NLRC, the appellate court pronounced
that the causes were insufficient for the dismissal of respondent since respondents acts
were not motivated by dishonesty, but were caused by mere inadvertence. Thus, it
concluded that the offenses committed by respondent merited only a penalty of
suspension for five months without pay. The appellate court also noted that petitioner
committed some lapses in its compliance with procedural due process. It further took into
account the successive deaths and sickness in respondents family.[30] The dispositive
part of the decision reads:
WHEREFORE, premises considered, the petition is GRANTED. Thus, the Decision and
Resolution respectively dated 7 May 2003 and 14 October 2003 are hereby SET ASIDE.
Accordingly, Judgment is hereby rendered:
a) Declaring petitioners dismissal to be illegal;
b) Reinstating petitioner to the same or equivalent position without loss of seniority rights
and other privileges;
c) Ordering the payment of backwages (inclusive of allowances and other benefits or
their monetary equivalent), computed from the time compensation was withheld up to the
time of actual reinstatement; Provided that, from such computed amount of backwages, a
deduction of five (5) months (sic) salary be made to serve as penalty; and

d) If reinstatement is no longer feasible, ordering the payment of separation pay

comprising of one month salary per year of service computed from date of employment
up to finality of this decision, in addition to the award of backwages.
Let the records of this case be remanded to the Labor Ariter a quo for the proper
computation of the foregoing.[31]
Hence, this Petition, wherein the following issues were raised:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE UNIFORM FACTUAL FINDINGS OF THE NLRC AND THE
LABOR ARBITER.
II
WHETHER OR NOT RESPONDENTS DISMISSAL FOR HIS FAILURE TO
TRUTHFULLY ACCOMPLISH REPORTS, DELIBERATE AND REPEATED
FAILURE TO SUBMIT REQUIRED REPORTS AND HIS DELIBERATE
DISREGARD OF HIS SUPERIORS ORDER TO SURRENDER HIS
ACCOUNTABILITIES TANTAMOUNT TO DISHONESTY, GROSS AND
HABITUAL NEGLECT OF DUTY, WILLFUL DISOBEDIENCE OF COMPANY
POLICY, AND BREACH OF TRUST AND CONFIDENCE REPOSED IN HIM BY
THE COMPANY UNDER THE PROVISIONS OF THE LABOR CODE WAS LEGAL,
VALID AND CARRIED OUT WITH DUE PROCESS
III
WHETHER OR NOT THE TOTALITY OF INFRACTIONS COMMITTED BY
RESPONDENT FURTHER MERITED HIS TERMINATION FROM THE
COMPANYS EMPLOY
IV
WHETHER OR NOT THE RESPONDENT HAS ANY BASIS FOR CLAIMING AN
AWARD OF REINSTATEMENT AND BACKWAGES.[32]
This petition is without merit.
The main question in this case is whether or not sufficient grounds existed for the
dismissal of the respondent. To constitute a valid dismissal from employment, two
requisites must concur: (1) the dismissal must be for any of the causes provided in Article
282 of the Labor Code; and, (2) the employee must be given an opportunity to be heard
and to defend himself.[33]
In this case, the Court must re-examine the factual findings of the Court of Appeals, as
well as the contrary findings of the NLRC and Labor Arbiter. While it is a recognized
principle that this Court is not a trier of facts and does not normally embark in the
evaluation of evidence adduced during trial, this rule allows for exceptions.[34] One of
these exceptions covers instances when the findings of fact of the trial court, or in this
case of the quasi-judicial agencies concerned, are conflicting or contradictory with those
of the Court of Appeals.[35]
In the termination letter dated 28 December 1998, respondent was dismissed on the

ground that he committed the following offenses: (1) dishonesty in accomplishing the
report on the number of product samples in his possession; and (2) his failure to return
the company vehicle and other accountabilities in violation of Sections 9.2.9 and 9.2.4 of
the Code of Conduct. In addition to these offenses, petitioner took into account that the
petitioner committed the following infractions in the past: (1) granting unauthorized
premium/free goods in 1994; (2) unauthorized pull-outs from customers in 1995; (3)
cheating during the ROL exam in 1998; and (4) three infractions of delayed process
reports in 1998.
Initially, the Court must determine whether the respondent violated the Code of Conduct
with his dishonesty in accomplishing his report on product samples and/or failure to
return the company vehicle and other such accountabilities. The records of this case
negate a finding of such culpability on the part of the respondent.
Petitioner failed to present evidence that respondent was guilty of dishonesty in
accomplishing the DCR, wherein he was supposed to indicate the number of product
samples in his possession for August and September 1998. Petitioner merely relied on the
fact that the number of product samples the respondent reported was incorrect, and the
number of product samples later found in his possession exceeded that which he reported.
Respondent admitted that when the product samples had arrived, he failed to check if the
number of product samples indicated in the DCR corresponded to the number actually
delivered and that he made mistakes in posting the product samples distributed during the
period in question.
In termination cases, the burden of proof rests with the employer to show that the
dismissal is for just and valid cause. Failure to do so would necessarily mean that the
dismissal was not justified and therefore was illegal.[36] Dishonesty is a serious charge,
which the employer must adequately prove, especially when it is the basis for
termination.
In this case, petitioner had not been able to identify an act of dishonesty,
misappropriation, or any illicit act, which the respondent may have committed in
connection with the erroneously reported product samples. While respondent was
admittedly negligent in filling out his August and September 1998 DCR, his errors alone
are insufficient evidence of a dishonest purpose. Since fraud implies willfulness or
wrongful intent, the innocent non-disclosure of or inadvertent errors in declaring facts by
the employee to the employer will not constitute a just cause for the dismissal of the
employee.[37] In addition, the subsequent acts of respondent belie a design to
misappropriate product samples. So as to escape any liability, respondent could have
easily just submitted for audit only the number of product samples which he reported.
Instead, respondent brought all the product samples in his custody during the audit and,
afterwards, honestly admitted to his negligence. Negligence is defined as the failure to
exercise the standard of care that a reasonably prudent person would have exercised in a
similar situation.[38] To this Court, respondent did not commit any willful violation,
rather he merely failed to exercise the standard care required of a territory representative
to carefully count the number of product samples delivered to him in August and
September 1998.
In the Memorandum dated 20 November 1998, petitioner ordered respondent to return
the company vehicle and all other accountabilities by 25 November 1998. Petitioner

issued its first notice on 24 November 1998, even before respondent was obligated to
return his accountabilities. Hence, respondent could not yet have committed any offense
when petitioner issued the first notice. Confused by petitioners arbitrary action,
respondent did not return his accountabilities, but immediately explained in a letter dated
26 November 1998 his reasons for failing to return his accountabilities on 25 November
1998 as previously ordered by the petitioner.
During the company hearing held on 3 December 1998, respondent offered to return his
accountabilities in accordance with the instructions to be given by the petitioner. In a
letter dated 9 December 1998 addressed to the petitioner, respondent reiterated his
request for instructions on the return of his accountabilities. There is no showing that
petitioner replied to respondents letter. The letter written by petitioners District
Supervisor Raymond Bernardo to union representative Dominic Regoro sent through
electronic mail on 16 December 1998 still provided no definite instructions to the
respondent for the return of his accountabilities. This is the last communication between
the parties on the matter until petitioner wrongfully dismissed the respondent on 28
December 1998 for deliberately refusing to surrender his accountabilities, among other
grounds. The petitioner does not refer in its pleadings to any instance after the company
hearing was held and before the respondent was dismissed wherein it had finally
instructed the respondent as to how he may turn over his accountabilities. Per petitioners
pleadings, belated demands for the surrender of respondents accountabilities were made
in January and February 1999, after respondent had already been dismissed. Clearly, the
charge against respondent of insubordination to the petitioners instructions for the
surrender of his accountabilities was unfounded since the respondent was still waiting for
said instructions when he was dismissed.
Moreover, petitioner failed to observe procedural due process in connection with the
aforementioned charge. Section 2(d) of Rule 1 of The Implementing Rules of Book VI
states that:
For termination of employment based on just causes as defined in Article 282 of the
Labor Code:
(i) A written notice served on the employee specifying the ground or grounds for
termination, and giving said employee reasonable opportunity within which to explain his
side.
(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel if he so desires is given opportunity to respond to the charge, present his
evidence, or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination. (Emphases supplied.)
From the aforecited provision, it is implicit that these requirements afford the employee
an opportunity to explain his side, respond to the charge, present his or her evidence and
rebut the evidence presented against him or her.
The superficial compliance with two notices and a hearing in this case cannot be
considered valid where these notices were issued and the hearing made before an offense
was even committed. The first notice, issued on 24 November 1998, was premature since

respondent was obliged to return his accountabilities only on 25 November 1998. As

respondents preventive suspension began on 25 November 1998, he was still performing
his duties as territory representative the day before, which required the use of the
company car and other company equipment. During the administrative hearing on 3
December 1998, both parties clarified the confusion caused by the petitioners premature
notice and agreed that respondent would surrender his accountabilities as soon as the
petitioner gave its instructions. Since petitioners ostensible compliance with the
procedural requirements of notice and hearing took place before an offense was even
committed, respondent was robbed of his rights to explain his side, to present his
evidence and rebut what was presented against him, rights ensured by the proper
observance of procedural due process.
Of all the past offenses that were attributed to the respondent, he contests having
committed the infraction involving the unauthorized pull-outs from customers, allegedly
made in 1994. Again, the records show that petitioner did not provide any proof to
support said charge. It must be emphasized at this point that the onus probandi to prove
the lawfulness of the dismissal rests with the employer,[39] and in light of petitioners
failure to discharge the same, the alleged offense cannot be given any credence by this
Court. As for the three remaining violations, it is unquestioned that respondent had
committed and had already been punished for them.
While a penalty may no longer be imposed on offenses for which respondent has already
been punished, these offenses, among other offenses, may still be used as justification for
an employees dismissal. Hence, this Court must now take into consideration all the
offenses that respondent committed during his employment and decide whether these
infractions, taken together, constitute a valid cause for dismissal.
Undoubtedly, respondent was negligent in reporting the number of product samples in his
custody for August and September 1998. He also committed three other offenses in the
past. First, he was found guilty of and penalized for granting unauthorized free goods in
1994. Secondly, he incurred delays in submitting his process reports for August,
September and October 1998, for which charge he was punished with one-day
suspension. Lastly, he cheated in an ROL test in July 1998 for which he was punished
with another one-day suspension.
Respondents offense of granting unauthorized free goods was vaguely discussed.
Petitioner did not offer any evidence in this connection; it was given credence only
because of respondents admission of the same. What acts constituted this offense and the
circumstances surrounding it were not explained. However, the records show that in the
same year it was committed, in 1994, petitioner still gave respondent two awards:
membership to the Wild Boar Society and the Five-Year Service Award.[40] Absent any
explanation which would give this offense substantial weight and importance, it can only
be presumed that petitioner did not consider the offense as sufficiently momentous to
disqualify respondent from receiving an award or to even just issue the respondent a
warning that a subsequent offense would result in the termination of his employment.
The rest of the infractions imputed to the respondent were committed during the time he
was undergoing serious family problems. His inability to comply with the deadlines for
his process reports and his lack of care in accounting for the product samples in his
custody are understandably the result of his preoccupation with very serious problems.

Added to the pressure brought about by the numerous charges he found himself facing,
his errors and negligence should be viewed in a more compassionate light.
Petitioners inability to keep up with his deadlines and his carelessness with his report on
product samples during a difficult time in his life are in no way comparable to the
transgressions in the cases cited by petitioner involving other territory representatives
Chua v. National Labor Relations Commission[41] and Gustilo v. Wyeth Philippines.[42]
In the Chua case, it was not a mere case of delay in the submission of reports and the
occasional mistakes in the DCR, but an established pattern of inattention in the
submission and accomplishing of his reports. The employee therein did not even submit
some of the DCRs, while other DCRs were belatedly submitted in batches covering two
to three months. Doctors call cards lacked either the corresponding dates or the
signatures of the doctors concerned. In the Gustillo case, the employee falsified his
application form, a gasoline receipt, a report of his trade outlet calls, and misused his
leaves. Evidently, the employee in this case misappropriated company resources by
making claims for falsified expenses and making personal calls in lieu of trade outlet
calls. In this case, respondent had not defrauded the petitioner of its property.
The gravest charge that the respondent faced was cheating in his ROL test. Although he
avers that he formulated the answers himself and that he merely allowed his co-employee
Joedito Gasendo to write down his answers for him, this Court finds this excuse to be
very flimsy. The ROL test consists of one page and two straightforward questions, which
can be answered by more or less ten sentences. Respondent could have spared the few
minutes it would take to write the examination. If he had lacked the time due to a family
emergency, a request for an extension would have been the more reasonable and honest
alternative.
Despite the disapproving stance taken by this Court against dishonesty, there have been
instances when this Court found the ultimate penalty of dismissal excessive, even for
cases which bear the stigma of deceit.
In Philippine Long Distance Telephone Company v. National Labor Relations
Commission,[43] an employee intervened in the anomalous connection of four telephone
lines. It was, likewise, established in Manila Electric Company v. National Labor
Relations Commission,[44] that the employee was involved in the illegal installation of a
power line. In both cases, the violations were clearly prejudicial to the economic activity
of his employer. Finally, in National Labor Relations Commission v. Salgarino,[45] a
school teacher tampered with the grades of her students, an act which was prejudicial to
the schools reputation. Notably, the Court stopped short of dismissing these employees
for offenses more serious than the present case.
In this case, the ROL test is a take-home examination intended to check a territory
representatives understanding of information already contained in their Sales Career
Manual, wherein the examinees are even instructed to refer to their manuals. The
improper taking of this test, while it puts into question the examinees moral character,
does not result in any potential loss of property or damage to the reputation of the
employer. Nor does respondents previous performance show lack of knowledge required
in his sales career. Additionally, the dishonesty practiced by the employee did not involve
company property that was placed in his custody. Furthermore, the gravity of this offense
is substantially diminished by the fact that petitioner itself had thought it unimportant

enough to merit only a one-day suspension. The respondents ten years of commendable
performance cannot be cancelled out by a single mistake made during a difficult period of
his life, a mistake that did not pose a potential danger to his employer.
The special circumstances of this case -- respondents family crises, the duration of his
employment, and the quality of his work during the previous years -- must necessarily
influence the penalty to be meted out to the respondent. It would be a cruel disregard of
the constitutional guarantee of security of tenure to impose the penalty of dismissal,
without giving due consideration to the ill fortune that may befall a normally excellent
employee.
In National Labor Relations Commission v. Salgarino,[46] special consideration was
given to the fact that the respondent therein had been in the employ of the petitioners
therein for 10 years and that she was a recipient of numerous academic excellence awards
and recognized by her students and some of her peers in the profession as a competent
teacher. The Court, in other cases, has repeatedly ruled that in determining the penalty to
be imposed on an erring employee, his or her length of service must be taken into
account.[47] In Brew Master International, Inc., v. National Federation of Labor Unions,
[48] the emotional, psychological, spiritual and physical stress and strain undergone by
the employee during a family crisis were regarded as special circumstances which
precluded his dismissal from service, despite his prolonged absence from work. The
Court explains the circumspection it exercises when faced with the imposition of the
extremely severe penalty of dismissal thus:
The employers prerogative to discipline its employee must be exercised without abuse of
discretion. Its implementation should be tempered with compassion and understanding.
While an employer has the inherent right to discipline its employees, we have always
held that this right must always be exercised humanely, and the penalty it must impose
should be commensurate to the offense involved and to the degree of its infraction. The
employer should bear in mind that, in the exercise of such right, what is at stake is not the
employees position but her livelihood as well. The law regards the workers with
compassion. Even where a worker has committed an infraction, a penalty less punitive
may suffice, whatever missteps may be committed by labor ought not to be visited with a
consequence so severe. This is not only the laws concern for workingman. There is, in
addition, his or her family to consider. Unemployment brings untold hardships and
sorrows upon those dependent on the wage-earner.[49]
Respondents violations of petitioners Code of Conduct, even if taken as a whole, would
not fall under the just causes of termination provided under Article 282 of the Labor
Code.[50] They are mere blunders, which may be corrected. Petitioner failed to point out
even a potential danger that respondent would misappropriate or improperly dispose of
company property placed in his custody. It had not shown that during his employment,
respondent took a willfully defiant attitude against it. It also failed to show a pattern of
negligence which would indicate that respondent is incapable of performing his
responsibilities. At any other time during his employment, respondent had shown himself
a commendable worker.
Nonetheless, the infractions committed by the respondent, while disproportionate to a
penalty of dismissal, will not be overlooked. The suspension of five months without pay,
imposed by the Court of Appeals, would serve as a sufficient and just punishment for his

violations of the companys Code of Conduct.

IN VIEW OF THE FOREGOING, the instant Petition is DISMISSED and the assailed
Decision of the Court of Appeals in CA-G.R. SP No. 81983, promulgated on 8 February
2006, is AFFIRMED. Costs against the petitioner.
SO ORDERED.

[G.R. No. 106600. March 29, 1996]

COSMOS BOTTLING CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and GIL C. CASTRO, respondents.
DECISION
KAPUNAN, J.:
Gil C. Castro was employed by Cosmos Bottling Corporation for a specific period from
September 5, 1988 to October 4, 1988. He was re-hired for another specific period from
May 30, 1989 to November 6, 1989.[1]
Having satisfactorily served the company for two (2) terms, Castro was recommended for
reemployment with the companys Maintenance Team for the Davao Project on
November 22, 1989.[2] On December 22, 1989, he was re-hired and assigned to the
Maintenance Division of the Davao Project tasked to install the private respondents
annex plant machines in its Davao plant.[3]
On May 21, 1990, Castros employment was terminated due to the completion of the
special project.
Meanwhile, on May 27, 1990, Cosmos Bottling Corporation in valid exercise of its
management prerogative terminated the services of some 228 regular employees by
reason of retrenchment.[4] For obvious reasons,[5] Castro was not among the list of those
regular employees whose services were terminated by reason of retrenchment or those
who voluntarily resigned.
On May 25, 1990, Castro filed a complaint for illegal dismissal against Cosmos Bottling
Corporation with the Labor Arbiter contending that being a regular employee, he could
not be dismissed without a just and valid cause. The case was docketed as NLRC-NCR
Case No. 00-05-02902-90.
On its part, the company alleged that Castro was a mere project employee whose
employment was co-terminous with the project for which he was hired.
After the parties submitted their respective position papers, reply and rejoinder thereto,
the Labor Arbiter rendered a decision on March 13, 1991 finding Castro a regular
employee but ruling that his employment was validly terminated because of
retrenchment. Hence, Castro was awarded 45-days separation pay, one (1) month salary
as financial assistance and proportionate 13th month pay. The dispositive portion of the

decision reads:
Premises considered, COSMOS is hereby directed to pay complainants compensation
package in the total amount of P11,231.83 by reason of the retrenchment.
The charge of illegal dismissal is hereby DISMISSED for lack of merit.
SO ORDERED.[6]
Both parties appealed the decision to the National Labor Relations Commission (NLRC)
which rendered the assailed decision dated June 10, 1992, the decretal portion of which
reads:
ACCORDINGLY, the decision appealed from is hereby modified to the effect that
respondent is declared guilty of illegal dismissal and is hereby ordered to reinstate
complainant to his former position as equivalent one without loss of seniority and other
benefits and to pay him backwages computed from the time of his dismissal up to the
time of his reinstatement.
SO ORDERED.[7]
Cosmos Bottling Corporations motion for reconsideration of the above decision having
been denied, the instant petition for certiorari was filed.
Petitioner argues that private respondent was a mere project employee and that his
services were co-terminous with the project, hence, may be terminated upon the end or
completion of the project for which he was hired. Respondent NLRC and private
respondent, on the other hand, maintain that private respondent is a regular employee of
petitioner company because his job is necessary and desirable to the petitioners main
business. The Office of the Solicitor General filed a Manifestation in Lieu of Comment
and supported petitioners contention that private respondent is not a regular employee.
The pivotal issue therefore is whether or not private respondent Gil C. Castro is a regular
employee or was a mere project employee of petitioner Cosmos Bottling Corporation.
After a careful examination of the records of the case, we find merit in the petition and
hold that respondent NLRC gravely abused its discretion when it rendered the challenged
decision finding private respondent a regular employee.
Article 280 of the Labor Code which defines regular, project and casual employment is
applicable here. The same 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 provides 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 trade or business of the employer.
A project employee, on the other hand, has been defined to be one whose employment
has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the
duration of the season.
The second paragraph of the provision defines casual employees as those who do not fall
under the definition of the first paragraph.
However, with respect to the first two kinds of employees, the principal test for
determining whether an employee is a project employee or a regular employee is whether
or not the project employee was assigned to carry out a specific project or undertaking,
the duration and scope of which were specified at the time the employee was engaged for
that period.
In a recent case[8] decided by this Court, the nature of project employment was
explained. We noted that in the realm of business and industry, project could refer to at
least two (2) distinguishable types of activities. First, a project could refer to a particular
job or undertaking that is within the regular or usual business of the employer company,
but which is distinct and separate, and identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and ends at determined or determinable
times. Second, a project could also refer to a particular job or undertaking that is not
within the regular business of the corporation. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or determinable
times.[9]
The case at bar presents what appears, to our mind, as a typical example of the first type.
Petitioner Cosmos Bottling Corporation is a duly organized corporation engaged in the
manufacture, production, bottling, sale and distribution of beverage. In the course of its
business, it undertakes distinct identifiable projects as it did in the instant case when it
formed special teams assigned to install and dismantle its annex plant machines in
various plants all over the country. These projects are distinct and separate, and are
identifiable as such, from its usual business of bottling beverage. Their duration and
scope are made known prior to their undertaking and their specified goal and purpose are
fulfilled once the projects are completed. When private respondent was initially hired for
a period of one month and re-hired for another five months, and then subsequently rehired for another five months, he was assigned to the petitioners Maintenance Division
tasked with the installation and dismantling of its annex plant machines.[10] Evidently,
these projects or undertakings, the duration and scope of which had been determined and
made known to private respondent at the time of his employment, can properly be treated
as projects within the meaning of the first kind. Considered as such, the services
rendered by private respondent hired therein for the duration of the projects may lawfully
be terminated at the end or completion of the same. In the recent case of Archbuild

Masters and Construction, Inc. v. NLRC,[11] we ruled accordingly:

It is not disputed that private respondent was a project employee of ARMACON. As such
he was employed in connection with a particular project the completion of which had
been determined at the time of his employment. Consequently, as a project employee of
ARMACON, his employment may be terminated upon the completion of the project as
there would be no further need for his services. Since a project employees work depends
on the availability of projects, necessarily the duration of his employment is not
permanent but co-terminous with the work to which he is assigned. It would be extremely
burdensome for the employer, who depends on the availability of projects, to carry him as
a permanent employee and pay him wages even if there are no projects for him to work
on. The rationale behind this is that once the project is completed it would be unjust to
require the employer to maintain these employees in their payroll. To do so would make
the employee a privileged retainer who collects payment from his employer for work not
done. This is extremely unfair and amounts to labor coddling at the expense of
management.
Another observation worthwhile noting were the appreciable gaps between the periods of
time private respondent was hired and re-hired. He was hired on September 5, 1988 for a
period of one (1) month. He was re-hired on May 30, 1989 or almost seven (7) months
after the termination of his first job. His second reemployment was no different. He was
re-hired almost two (2) months after his first reemployment.[12] Certainly, the lengthy
gaps between his employments, together with the fact that his services were contracted
for specific undertakings, convincingly show that the services of private respondent were
terminated upon completion of a particular project and were sought only when another
one was undertaken.
Moreover, the mere fact that a project employee has worked on the specific project for
more than one (1) year, does not necessary change his status as project employee[13] and
convert it to regular or permanent employment. For it is obvious that 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
only to casual employees, not to project employees.[14] Consequently, private
respondents protestation that his period of employment had exceeded one year[15] and
hence must be converted into regular employment is completely baseless because being a
project employee, he does not fall within the ambit of the pertinent provision abovestated.
Clearly, therefore, private respondent being a project employee, or to use the correct
term, seasonal employee, considering that his employment was limited to the installation
and dismantling of petitioners annex plant machines after which there was no more work
to do, his employment legally ended upon completion of the project.[16] That being so,
the termination of his employment cannot and should not constitute an illegal dismissal.
Neither should it constitute retrenchment as private respondent was a seasonal employee
whose services were already terminated on May 21, 1990 prior to the termination of the
other regular employees of Cosmos by reason of retrenchment.
WHEREFORE, premises considered the instant petition is given DUE COURSE and is
hereby GRANTED. The judgment of respondent NLRC appealed from is hereby
REVERSED and SET ASIDE. Consequently, the complaint for illegal dismissal against

petitioner Cosmos Bottling Corporation is hereby DISMISSED.

SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

G.R. No. 109902 August 2, 1994

ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely: ENGR. ALAN G.
BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H. FOOKSON, JR., ROMEO R. SARONA,
RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR., LEONIDO ECHAVEZ, BONIFACIO
MEJOS, EDGAR S. BONTUYAN, JOSE G. GARGUENA, JR., OSIAS B. DANDASAN, and GERRY I.
FETALVERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION (NSC),
respondents.
Leonard U. Sawal for petitioners.
Saturnino Mejorada for private respondent.
FELICIANO, J.:
In this Petition for Certiorari, petitioners assail the Resolution of the National Labor Relations Commission
("NLRC") dated 8 January 1993 which declared petitioners to be project employees of private respondent
National Steel Corporation ("NSC"), and the NLRC's subsequent Resolution of 15 February 1993, denying
petitioners' motion for reconsideration.
Petitioners plead that they had been employed by respondent NSC in connection with its Five Year
Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were separated from

NSC's service:
Employee Date Nature of Separated
Employed Employment
1. Alan Barinque 5-14-82 Engineer 1 8-31-91
2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92
3. Edgar Bontuyan 11-03-82 Chairman to present
4. Osias Dandasan 9-21-82 Utilityman 1991
5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92
6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91
7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized
8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91
9. Russell Gacus 1-30-85 Engineer 1 6-30-92
10. Jose Garguena 3-02-81 Warehouseman to present
11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91
12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992
13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2
On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and
monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.
The complaints were consolidated and after hearing, the Labor Arbiter in a Decision dated 7 June
1991, declared petitioners "regular project employees who shall continue their employment as
such for as long as such [project] activity exists," but entitled to the salary of a regular employee
pursuant to the provisions in the collective bargaining agreement. It also ordered payment of
salary differentials. 3

Both parties appealed to the NLRC from that decision. Petitioners argued that they were regular,
not project, employees. Private respondent, on the other hand, claimed that petitioners are
project employees as they were employed to undertake a specific project NSC's Five Year
Expansion Program (FAYEP I & II).
The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed the Labor
Arbiter's holding that petitioners were project employees since they were hired to perform work in
a specific undertaking the Five Years Expansion Program, the completion of which had been
determined at the time of their engagement and which operation was not directly related to the
business of steel manufacturing. The NLRC, however, set aside the award to petitioners of the
same benefits enjoyed by regular employees for lack of legal and factual basis.
Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed
to show any grave abuse of discretion or any act without or in excess of jurisdiction on the part of
the NLRC in rendering its questioned resolutions of 8 January 1993 and 15 February 1993.
The law on the matter is Article 280 of the Labor Code which reads in full:
Art. 280. Regular and Casual Employment The provisions of the written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, and
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 service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists. (Emphasis supplied)
Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are "necessary,
desirable and work-related to private respondent's main business, steel-making"; and (ii) they
have rendered service for six (6) or more years to private respondent NSC. 4
The basic issue is thus whether or not petitioners are properly characterized as "project
employees" rather than "regular employees" of NSC. This issue relates, of course, to an
important consequence: the services of project employees are co-terminous with the project and
may be terminated upon the end or completion of the project for which they were hired. 5 Regular
employees, in contract, are legally entitled to remain in the service of their employer until that
service is terminated by one or another of the recognized modes of termination of service under
the Labor Code. 6
It is evidently important to become clear about the meaning and scope of the term "project" in the
present context. The "project" for the carrying out of which "project employees" are hired would
ordinarily have some relationship to the usual business of the employer. Exceptionally, the
"project" undertaking might not have an ordinary or normal relationship to the usual business of
the employer. In this latter case, the determination of the scope and parameeters of the "project"
becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project
which has absolutely no relationship to the usual business of the company; thus, for instance, it
would be an unusual steel-making company which would undertake the breeding and production
of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization
problem here presented to the Court, there should be no difficulty in designating the employees
who are retained or hired for the purpose of undertaking fish culture or the production of
vegetables as "project employees," as distinguished from ordinary or "regular employees," so
long as the duration and scope of the project were determined or specified at the time of
engagement of the "project employees." 7 For, as is evident from the provisions of Article 280 of
the Labor Code, quoted earlier, the principal test for determining whether particular employees

are properly characterized as "project employees" as distinguished from "regular employees," is

whether or not the "project employees" were assigned to carry out a "specific project or
undertaking," the duration (and scope) of which were specified at the time the employees were
engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at
least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company. Such
job or undertaking begins and ends at determined or determinable times. The typical example of
this first type of project is a particular construction job or project of a construction company. A
construction company ordinarily carries out two or more discrete identifiable construction projects:
e.g., a twenty-five- storey hotel in Makati; a residential condominium building in Baguio City; and
a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their
services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within
the regular business of the corporation. Such a job or undertaking must also be identifiably
separate and distinct from the ordinary or regular business operations of the employer. The job or
undertaking also begins and ends at determined or determinable times. The case at bar presents
what appears to our mind as a typical example of this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view
of expanding the volume and increasing the kinds of products that it may offer for sale to the
public. The Five Year Expansion Program had a number of component projects: e.g., (a) the
setting up of a "Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet SteelMaking Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold
Mill Peripherals Project." 8 Instead of contracting out to an outside or independent contractor the
tasks of constructing the buildings with related civil and electrical works that would house the new
machinery and equipment, the installation of the newly acquired mill or plant machinery and
equipment and the commissioning of such machinery and equipment, NSC opted to execute and
carry out its Five Yeear Expansion Projects "in house," as it were, by administration. The carrying
out of the Five Year Expansion Program (or more precisely, each of its component projects)
constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC.
Each component project, of course, begins and ends at specified times, which had already been
determined by the time petitioners were engaged. We also note that NSC did the work here
involved the construction of buildings and civil and electrical works, installation of machinery
and equipment and the commissioning of such machinery only for itself. Private respondent
NSC was not in the business of constructing buildings and installing plant machinery for the
general business community, i.e., for unrelated, third party, corporations. NSC did not hold itself
out to the public as a construction company or as an engineering corporation.
Which ever type of project employment is found in a particular case, a common basic requisite is
that the designation of named employees as "project employees" and their assignment to a
specific project, are effected and implemented in good faith, and not merely as a means of
evading otherwise applicable requirements of labor laws.
Thus, the particular component projects embraced in the Five Year Expansion Program, to which
petitioners were assigned, were distinguishable from the regular or ordinary business of NSC
which, of course, is the production or making and marketing of steel products. During the time
petitioners rendered services to NSC, their work was limited to one or another of the specific
component projects which made up the FAYEP I and II. There is nothing in the record to show
that petitioners were hired for, or in fact assigned to, other purposes, e.g., for operating or
maintaining the old, or previously installed and commissioned, steel-making machinery and
equipment, or for selling the finished steel products.
We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the

petitioners were indeed "project employees:"

It is well established by the facts and evidence on record that herein 13 complainants
were hired and engaged for specific activities or undertaking the period of which has
been determined at time of hiring or engagement. It is of public knowledge and which this
Commission can safely take judicial notice that the expansion program (FAYEP) of
respondent NSC consist of various phases [of] project components which are being
executed or implemented independently or simultaneously from each other . . .
In other words, the employment of each "project worker" is dependent and co-terminous
with the completion or termination of the specific activity or undertaking [for which] he
was hired which has been pre-determined at the time of engagement. Since, there is no
showing that they (13 complainants) were engaged to perform work-related activities to
the business of respondent which is steel-making, there is no logical and legal sense of
applying to them the proviso under the second paragraph of Article 280 of the Labor
Code, as amended.
xxx xxx xxx
The present case therefore strictly falls under the definition of "project employees" on
paragraph one of Article 280 of the Labor Code, as amended. Moreover, it has been held
that the length of service of a project employee is not the controlling test of employment
tenure but whether or not "the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee". (See Hilario Rada v. NLRC, G.R. No. 96078, January
9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674 (1985). 9
Petitioners next claim that their service to NSC of more than six (6) years should qualify them as
regular employees. We believe this claim is without legal basis. 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. 10 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, 11 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. The familiar grammatical rule is that a proviso is to be construed with reference to the
immediately preceding part of the provision to which it is attached, and not to other sections
thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately
preceding the proviso but also earlier provisions of the statute or even the statute itself as a
whole. No such intent is observable in Article 280 of the Labor Code, which has been quoted
earlier.
ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED for lack
of merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February 1993 are hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Cruz, Padilla, Bidin, Regalado, Davide, Jr., Romero, Melo, Quiason, Puno,
Vitug, Kapunan and Mendoza, JJ., concur.
Bellosillo, J., is on leave.

FERDINAND PALOMARES and TEODULO MUTIA, petitioners, vs. NATIONAL

LABOR RELATIONS COMMISSION, (5TH DIVISION) and NATIONAL STEEL

CORPORATION, respondents.
DECISION
ROMERO, J.:
The issue presented before this Court is whether or not petitioners should be considered
regular employees of respondent corporation.
Petitioners Ferdinand Palomares and Teodulo Mutia were hired by respondent National
Steel Corporation (NSC) by virtue of contracts of employment for its Five Year
Expansion Program or FYEP, Phase I and II-A, for varying lengths of time, as follows:
Mr. FERDINAND L. PALOMARES:
DATES

PROJECT

======

======

10-03-84 to
03-03-85

03-04-85 to
09-04-85

09-05-85 to
01-15-87

09-11-87 to
02-10-88

Project
Undertaking:
Clerical jobs at
Office Svcs.

NATURE OF
WORK

POSITION /
DEPARTMENT

======

===========

Fixed-

Clerk Typist

Period

Office Svcs.

Project
ProjectUndertaking: Five- Based
Year-Expansion
Employment
Projects

Control

Project
Undertaking:
Clerical jobs
related to
dispatching of
service vehicles

- do -

Control

Project
Undertaking:

- do -

07-13-88

Project
Undertaking:
To handle cost
monitoring,
records keeping
and reporting of

=========
Expiration of
Contract
Mar 3, 1985

Employment

Clerk/Off.

Expiration of
Contract

Services

Sept 4, 1985

Termination of
Clerk/Admin.- Club Contract
House-Off. Services Jan 15, 1987

Temporary production recording

jobs at 5-Stand
Project
02-13-88 to

REMARKS

- do -

Production
Recorder/
Accounting

Accountant I Construction
Accounting

Expiration of
Contract
Feb 10, 1988

FYEP II Proj.
07-14-88 to
08-14-90

Project
Undertaking:
To handle cost
monitoring,
records keeping
and reporting of
FYEP II Projects

08-15-90 to

- do -

ProjectBased
Employment

Accountant I Project Accounting,

FYEP
Controllership

- do -

Accountant II
Currently
Project Accounting, Working
FYEP Proj.
Controllership

NATURE OF
WORK

POSITION/

REMARKS

DEPARTMENT

=========

========

============

10-14-94

Mr. TEODULO A. MUTIA:

DATES

PROJECT

======

=======

11-04-85 to
03-04-86

04-05-86 to
05-15-87

09-11-87 to
02-10-88

02-13-88 to
12-14-88

Project
ProjectUndertaking:
Based
Attesting of
shipment through Employment
National Marine

Audit Aide/ Internal Termination of

Audit
Contract

Project
- do Undertaking:
Monitoring works
for ship-breaking
of MS. ASEAN
KNOWLEDGE
and MV ASEAN
INDEPENDENCE

Monitoring
Expiration of
Aide/Ship-breaking Contract
Opns
May 15, 1987

Project
- do Undertaking:
Temporary job of
Production
Recording at 5
Stand TDM Project

Production
Recorder/

Expiration of
Contract

Accounting

Feb 10, 1988

Project
Undertaking:

Accountant I /
Acctg. &

Expiration of
Contract

- do -

Mar 4, 1986

To handle Cost
monitoring,
records keeping
and reporting of
FYEP II Project
12-15-88 to

- do -

FinanceConstruction
Accounting

- do -

08-14-90

08-15-90 to 10- Project

14-94
Undertaking: To
handle cost
monitoring,
records keeping
and reporting of
FYEP II Projects

Dec 14, 1988

Accountant &
Currently
Project Accounting Working
FYEP
Controllership

Project- Based Accountant II,

Currently
Employment
project Accounting/ Working[1]
FYEP Proj.
Controllership

Petitioners, along with other employees, filed a consolidated petition for regularization,
wage differential, CBA coverage and other benefits.[2] In his decision dated April 29,
1992, Labor Arbiter Nicodemus G. Palangan ordered the dismissal of the complaint with
respect to 26 complainants but ruled in favor of petitioners. Palomares, Mutia and four
other complainants were adjudged as regular employees of respondent corporation. The
dispositive portion of his decision reads:
WHEREFORE, premises considered, the petition for regularization as well as the
monetary benefits of the above-named complainants are hereby ordered DISMISSED for
lack of merit except six complainants stated below.
However, the respondent shall not terminate their services while the activities they
performed still exist, and to give them preference provided they are qualified in cases of
vacancies when the expansion program becomes operational.
For the complainants who were terminated during the pendency of these cases the
respondent is hereby ordered to pay them separation pay equivalent to one month salary
for those who have rendered one or two years of service and three months salary for those
who have served the company for at least 5 years.
For complainants Edgardo Pongase, Aquiles Colita, Lolinio Solatorio, Ferdinand
Palomares, Teodulo Mutia, and Rodolfo Leopoldo, this office consider (sic) them as
regular employees for reason that the activities they performed are regular, and
necessary in the usual trade or course of business of the company.
Respondent is likewise ordered to pay these regular employees their salary differential to
be computed three years back from the filing of these complaints.
All other claims are hereby ordered dismissed.
SO ORDERED.[3] (Emphasis added)
On appeal, the NLRC reversed the findings of the Labor Arbiter in a decision dated

November 23, 1994. Respondent Commission held that petitioners were project
employees and that their assumption of regular jobs were mainly due to peakloads or the
absence of regular employees during the latters temporary leave.[4] After their motion
for reconsideration was denied on March 30, 1995,[5] petitioners filed this petition.
The Court finds that petitioners failed to show any grave abuse of discretion on the part
of the NLRC in rendering its questioned decision and resolutions of November 23, 1994
and March 30, 1995, respectively.
Petitioners argue that as regards functions and duration of work, contracted employees
should, by operation of law, be considered regular employees. Respondent NSC, on the
other hand, maintains that petitioners are mere project employees, engaged to work on
the latters Five-Year Expansion Projects (FYEP), Phases I and II-A, hence, dismissible
upon the expiration of every particular project.
Article 280 of the Labor Code, the law on the subject of regular employment, reads:
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 actually exists. (Emphasis added).
The principal test for determining whether an employee is a project employee and not a
regular employee is whether he was assigned to carry out a specific project or
undertaking, the duration and scope of which were specified at the time he was engaged
for that project.[6]
It is quite evident that petitioners were employed for a specific project or projects
undertaken by respondent corporation. The component projects of the latters Five Year
Expansion Program include the setting up of a Cold Rolling Mill Expansion Project,
establishing a Billet Steel-Making Plant, installation of a Five Stand TDM and Cold Mill
Peripherals Project. In the case of ALU-TUCP v. NLRC, we held that the same Five
Year Expansion Program (or more precisely, each of its component projects) constitutes a
distinct undertaking identifiable from the ordinary business and activity of NSC, which is
the production and marketing of steel products.[7] Further:
Each component project, of course, begins and ends at specified times, which had
already been determined by the time petitioners were engaged. We also note that NSC did
the work here involved - the construction of buildings and civil and electrical works,
installation of machinery and equipment and the commissioning of such machinery - only
for itself. Private respondent NSC was not in the business of constructing buildings and
installing plant machinery for the general business community, i.e., for unrelated, third

party, corporations. NSC did not hold itself out to the public as a construction company
or as an engineering corporation.(Emphasis supplied.)[8]
Respondent corporations FYEP I was to cover years 1982 to 1988; the FYEP II to cover
the years 1989 to 1994; and FYEP III to cover succeeding years. The NLRC added that
FYEP III has not yet materialized due to financial and political difficulties.[9]
Mutia was initially assigned in the shipbreaking operations of the NSC. This venture
consists of land and sea operations - the latter consisting of breaking salvaged vessels into
chunks, while the land-based operation consists of cutting these chunks into small and
meltable sizes. The metal scraps are consequently utilized to produce billets at NSCs
Billet Steel-Making Plant (BSP), a completely new installation, and one of the
component projects in the FYEP.
Unfortunately, the operation was found to be an unreliable source of scrap metals due to
scarcity of vessels for salvaging, higher cost of operations and unsuitable raw material
mix. It was permanently phased out sometime in November 1986.[10] Consequently,
Mutia was transferred to other component projects of FYEP.
Palomares assertion, on the other hand, that he was hired even before the FYEP began is
misleading. He was actually employed on October 3, 1984, long after the FYEP began its
preparatory stages in 1982. Two years from FYEPs inception, NSC found itself in need
of more project workers. It was in this factual context that Palomares was engaged in
1984 as clerk typist detailed at the Office Services department of NSC.
The records show that petitioners were hired to work on projects for FYEP I and II-A. On
account of the expiration of their contracts of employment and/or project completion,
petitioners were terminated from their employment. They were, however, rehired for
other component projects of the FYEP because they were qualified. Thus, the Court is
convinced that petitioners were engaged only to augment the workforce of NSC for its
aforesaid expansion program.
In the case of Philippine National Oil Company - Energy Development Corporation v.
NLRC, we set forth the criteria for fixed contracts of employment which do not
circumvent security of tenure, to wit: (1) The fixed period of employment was knowingly
and voluntarily agreed upon by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent any other circumstances
vitiating his consent; or (2) It satisfactorily appears that the employer and employee dealt
with each other on more or less equal terms with no moral dominance whatever being
exercised by the former on the latter.[11]
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 public policy, morals, good customs or public order.[12] In the case at bar,
however, there is nothing in the records which reveal an attempt to frustrate petitioners
security of tenure. The fact that petitioners were required to render services necessary or
desirable in the operation of NSCs business for a specified duration did not in any way
impair the validity of their contracts of employment which stipulated a fixed duration
therefor.
It should be noted that there were intervals[13] in petitioners respective employment
contracts with NSC, thus bolstering the latters position that, indeed, petitioners are

project employees. Since its work depends on availability of such contracts or projects,
necessarily the employment of its work force is not permanent but co-terminous with the
projects to which they are assigned and from whose payrolls they are paid. It would be
extremely burdensome for their employer to retain them as permanent employees and pay
them wages even if there are no projects to work on.[14] The fact that petitioners worked
for NSC under different project employment contracts for several years cannot be made a
basis to consider them as regular employees, for they remain project employees
regardless of the number of projects in which they have worked.[15]
Even if, as admitted by the parties, petitioners were repeatedly and successively re-hired
on the basis of a contract of employment for more than one year, they cannot be
considered regularized. Length of service is not the controlling determinant of the
employment tenure of a project employee.[16] As stated earlier, it is based on whether or
not the employment has been fixed for a specific project or undertaking, the completion
of which has been determined at the time of the engagement of the employee.
Furthermore, the second paragraph of Article 280, providing that an employee who has
rendered service for at least one (1) year, shall be considered a regular employee, pertains
to casual employees and not to project employees such as petitioners.[17]
Regulation of manpower by the company clearly falls within management prerogative.
[18] Even as the law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives,[19] subject to
the constitutional requirement for the protection of labor and the promotion of social
justice which tilts the scales of justice, whenever there is doubt, in favor of the worker.
[20] In the case at bar, we conclude that NSC acted within the parameters of a valid
exercise of management prerogative.
WHEREFORE, the instant petition is DISMISSED. The decision and resolution of the
National Labor Relations Commission dated November 23, 1994 and March 23, 1995,
respectively, are AFFIRMED.
SO ORDERED.
Regalado, (Chairman), Puno, and Mendoza, concur.
Torres, Jr., J., on leave.

[G.R. No. 117043. January 14, 1998]

FELIX VILLA, ALIBANGBANG, IRENEO; ALIBANGBANG, EFREN;
ABELLANOSA ELDIE; AGARAO, SOFRONIO; ALIFANTA, JOSE; ALQUIZA,
LORENZO; ALVIOLA, HERMOQUITO; AMONDINA, NOE; ANGOT, ISIDRO;
ANDRADA, CATALINO; ARUTA, ROBERTO; AVILES, ZALDY; APAON, CESAR;
ARTAJO, EDWIN; ALCOPRA, ANTONIO, JR.; BALASE, PABLITO; BANCALE,
NEMESIO, BARICOG, GAUDENCIO; BACULIO, CIPRIANO; BATION, DOMINGO;
BAYER, FELYBERT; BENELAYO, JOVENCIO; BERIGONDO, MARIANO;
BEGORNIA, ELIZAR; BUTASLAC, APOLINAR; BONCALES, DIOLLE;
BASTATAS, ROSENDO; BLASABAS, BONIFACIO; BALDESCO, OLYMPIO;

BARICUATRO, DELFIN; BARBON, BEN; BENDONG, BERNARDO; BUTON,

ROQUE; CAHAYAG, RODRIGO; CAHAYAG, REMEGIO; CALDERON, DANILO;
CANOY, ERLITO; CABUS, ZENAS; CAPIN, JUANITO; CIMENI, ALBERTO;
CELOSIA, MONTANO; CANILLO, TITO; COLOYAN, CARLOS; CUTAD, ALIPIO;
CAPOTE, LIBRENDO; COLALJO, EDGARDO; CABILUNA, ELIAS; CABILI,
ARTHURO; COMA, ROGELIO; CASAS, RODRIGO; COLLAMAR, ROSALIM;
CABALLERO, ORLANDO; CARCELLAR, ANTONIO; DEGOMA, DEOCADIO;
DAGUISONAN, ROMEO; DE LA CRUZ, VICENTE; DELIMA, SEGUNDO;
EDAYAN, ROSITO; ELMEDULAN, RUDY; FLORES, RELENDIO; FLORES,
CRESENCIANO; FLORES, GREGORIO; FLORES, ROMUALDO; FUENTES,
RODULFO; FORMENTERA, ELEUTERIO; GALUPO, ELMER; GARBAN,
FLORENCIO; GUZMAN, REYNALDO; GORDO, CEFERINO; GENON, ESTEBAN;
GADIA, NERIO; HERNANDO, BERNARDINO; JAPITAN, DANIEL;JUMAWAN,
ROLANDO; LAGLARIO, ELPIDIO; LAURINO, GENEROSO; LAPUZ, TEODOLO;
LILA, NORBERTO; LLABAN, BONIFACIO; LUMEN, ROMEO;LISUNDRA, JOSE;
MACAPAS, ELIZALDE; MANLIGUEZ, SAMSON; MANCIO, ROBERTO;
MALINAO, CARLITO; MALAYA, SIMPLICIO; MANUGAS, NARCISO; MASIADA,
EFREN; NARCISO, ELIAS; NUEVA, JUSTINIANO; OBIDO, ANELOMIO;
OLIVEROS, FRANCISCO; OCAY, FIDEL; OLADO, JONATHAN; ONG, CARLITO;
PAHUYO, HENRY; PAYPA, EDUARDO; PEREW-PEREW, ANTONIO; PERMITES,
BOBBY; PACAA, CRISTITUTO; PONGON, RUBEN; PATOY, MANUEL;
POGALES, ROBERTO; PARAGAMAC, MIGUEL; PARDILLO, ENGRACIO; PARAN,
BENITO; RELLEN, RONNIE; RENTUZA, ALFREDO; REBUTAZO, INOCENCIO;
RUEDAS, SIEGFREDO; ROBLE, ERLITO; RAMIREZ, CESAR; RAMAYRAT,
ROBERTO; RAZO, WILLIE; RIVA, LEOPOLDITO; REYSOMA, BENNY; SANCHEZ,
ROMULO; SANCHEZ,MANUELITO; SARDUAL, CAYETANO; SIQUELLO, EDRIE;
SALIG, MAGDALINO; SIENES, GILBERT; SARA, NICANOR; SIACOR, LUCIO;
SIMPROTA, CRISPIN; TABEROS, VIRGILIO; TARDO, ALEX; TAMPOG,
ALEJANDRE; TAMPARONG, FRANCISCO; TAMPARONG, PRIMO; TINOY,
JESUS; UMBAY, NOEL; UMBAY, RONILO; VACALARES, ALVIN; VELUS,
CRISPIN; VERANO, MANOLO; VILLARINO, FLORENCIO; VERGARA, JOSE;
VILLAPLAZA, MARCELO; GALORIO, RUBEN; DAYGAM, RUDENCIO;
GELLICA, APOLLO; SARUSAL, FELIX; CAPUYAN, RUPERTO; VILLAMOR,
PEDRITO; ALLAS, AQULINO, JR.; GARBAN, DIOSCORO; DELIMA, DIOSDADO;
OBIDO, ELISER (All members of NSCWA with Felix Villa as president, representing
Petitioners), petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, Fifth
Division and NATIONAL STEEL CORPORATION, respondents.
DECISION
ROMERO, J.:
This petition for certiorari seeks a ruling on the issue of whether or not workers
contracted as project employees may be considered as regular employees on account of
their performance of duties inherent in the business of the employer.
Respondent National Steel Corporation (NSC), one of the biggest modern steel mills in
Southeast Asia, produces hot rolled products, cold rolled products, tinplates and billets.
These products are in turn transformed by downstream industries into truss assemblies,

farm implements, pipe structures, shipbuilding and repairing materials, automotive

structures and machine parts, GI roof sheets or galvanized iron, drums, nails, fasteners
and wires.[1]
The NSC embarked on a Five-Year Expansion Program (FYEP) the first phase of which
consisted of the following projects with the corresponding timetable:
A. Major Projects
1. Billet Shop . . . . . . . . . . . . . 1983-1985
2. 5-Stand Tandem Mill,
Pickling line Revamp,
Batch Annealing
Furnaces and other
Cold Mill Peripherals
Projects . . . . . . . . . . . . . 1984-1988
3. Hot Mill Revamp . . . . . . . . . . . . . 1984-1987
B. Major Preparatory, Support
and Post-Implementation
Activities . . . . . . . . . . . . . 1982-1988
1. Site Development
2. Engineering and Planning
3. Relocation/upgrading of
Offices, drainages,
fences and other facilities
4. Administrative, clerical
warehousing and logistics
support.
5. Other support activities.
The second phase of the FYEP was set for 1987 to 1993.[2]
One of the major projects of the NSC was the billet steelmaking plant. According to the
NSCs brochure,[3] the plants product is the steel billet, a semi-finished form of steel
used as raw materials by steel rerolling mills producing steel bars and wire rods. To
produce the billets, the plant would initially use 100% scrap as its raw materials.
Eventually, NSC would build a Direct Reduced Iron (DRI) plant in line with its
expansion program and integration program. Upon the availability of DRI, the raw
materials feed mix will eventually be 20 per cent scrap and 80 per cent DRI.
In line with its program to use 100% scrap, the NSC ventured into a shipbreaking
operation. Under this operation, ships/vessels at sea would be cut up into large chunks
and brought to land to be cut further into smaller sizes. However, due to scarcity of

vessels/ships for salvaging, the higher costs of operation and the unsuitability of raw
materials, this experimental project was stopped after four or five ships had been
chopped. When the project was completely phased out in November 1986, the laborers
hired for said project[4] were terminated.
Prior to the phasing out of the project, the NSC had been beset by labor problems. On
May 2, 1986 the National Steel Corporation Employees Association-Southern Philippines
Federation of Labor (NSCEA-SPFL) filed a notice of strike. It charged the NSC with
unfair labor practices consisting of (a) wage discrimination, (b) interference with the
employees right to self-organization, (c) nonregularization of contractual employees, (d)
illegal termination of employees, (e) nonpayment of wage/benefit differentials, and (f)
nonrecognition of NSCEA-SPFL as the sole bargaining representative of the company.[5]
The then Ministry of Labor and Employment exercising jurisdiction over the case, issued
a return-to-work order[6] dated June 17, 1986. In due course, on August 4, 1986, then
Labor Minister Augusto S. Sanchez rendered a decision that held, in part, as follows:
We have carefully examined the voluminous documents presented by NSCEA-SPFL and
we find nothing therein to support the unions contention that as to the nature of
employment, its members should be regularized. Masons, carpenters, laborers,
electricians and painters cannot, by the nature of their job, be considered as regular
employees of the company under Article 281. The cutters, riggers and those assigned at
the other divisions are, as clearly indicated in annexes `C to `C-70 of the unions
Position Paper, contractual employees. The short periods by which the contractual
employees were hired as shown in the mentioned Annexes clearly indicate the intent of
the company to hire them on a per project basis. We are not unmindful that some of these
employees were hired to work on several projects. This does not make them regular
employees. Applying the law, however, contractual employees who have rendered at least
one (1) year of service, whether continuous or project shall be considered as regular
contractual employee with respect to the activity where such contractual employee has
been assigned. For security of tenure, these contractual employees cannot be removed nor
terminated without just cause so long as the particular activity to which he has been
assigned to work still exists. There is nothing in the record which will show that a
contractual employee has worked for a period of one (1) year, continuous or broken, on a
particular single project. Note may be taken of the fact that some employees have been
assigned to different projects or undertakings but Article 281 nonetheless does recognize
them as regular contractual employees. To finally settle this issue and in view of the
incompleteness of the documents presented before us, the company is hereby directed to
submit to this Office the entire pertinent records in its possession for the sole purpose of
determining the regular contractual employees, if any, using as basis Article 281 of the
New Labor Code regarding their length of service. (Italics and underlining supplied.)[7]
Accordingly, Minister Sanchez disposed of the case as follows:
VIEWED IN THE LIGHT OF THE FOREGOING, judgment is hereby rendered:
(1) finding the expiration of the contracts of contractual employees prior to May 13, 1986
to be in consonance with the law;
(2) directing the Company to submit the entire pertinent record in its possession to
determine who are regular contractual employees within forty eight (48) hours from

receipt hereof;
(3) directing the parties to await, before resorting to any concerted activity, the resolution
of the NASEWA vs. SIMLA case pending before the NATIONAL LABOR RELATIONS
COMMISSION;
(4) ordering the Company subject to existing policies and CBA limitations, to give
priority and preference to its contractual employees in the hiring of new personnel for
project works, such as shipbreaking, masonry, plumbing, etc. and in present and future
vacancies in its regular workforce; and finally
(5)requesting the Company to grant to its present contractual employees a wage increase
of 15% of their basic salary effective July 1, 1986.[8]
The denial of their motion for reconsideration of that decision prompted the workers to
file with this Court a petition for certiorari docketed as G.R. No. 76948 (National Steel
Corporation Employees Association-Southern Philippines Federation of Labor (NSCEASPFL) v. Minister of Labor). On November 14, 1988, this Court issued a Resolution
stating as follows:
G.R. No. 76948 (National Steel Corporation Employees Association Southern
Philippines Federation of Labor (NSCEA-SPFL) v. Minister of Labor, et al.).- The Court
considered the petition, the comments thereon of the public and private respondents, the
petitioners reply, and the rejoinder thereto of the public and private respondents.
After deliberating on the issues raised and the arguments invoked by the parties in their
respective pleadings, the Court AFFIRMED the order of the public respondent dated June
17, 1986, assuming jurisdiction of the labor dispute, upon a showing that the petitioner
(sic) was engaged in a pioneer enterprise affected with public interest and involving its
5,000 employees and their dependents, and more so since both parties had manifested
their concurrence with the intervention of the Department of Labor in settlement of the
said dispute.
It appearing, however, that there are a number of factual questions that have to be
threshed out, such as whether or not the petitioner has defied the return-to-work order or
the private respondent has locked out the returning workers and especially, whether or not
the contractual workers have become regular employees because of their length of service
and the nature of the work they perform, and considering particularly that in the
challenged Decision of August 4, 1986, the Secretary of Labor `directed the Company to
submit the entire pertinent records to determine who are regular contractual employees,
indicating that his own determination of this question in the said Order was at best only
preliminary and not based on a comprehensive study of the said `entire pertinent records,
the Court Resolved to SET ASIDE the said Order of August 4, 1986, and to REMAND
the case to the National Labor Relations Commission for a formal hearing on the factual
issues raised in the petition, including the status of the employees, with a view to the
eventual resolution of such issues and the settlement of all the aspects of the dispute
between the petitioner and the private respondent.[9]
The NLRC accordingly heard the case as regards the factual issues pointed out by this
Court. Because it took quite a while before the NLRC could decide the case, members of
the National Steel Corporation Workers Association (NSCWA) staged a hunger strike.
[10] On March 26, 1992, the Fifth Division of the NLRC in Cagayan de Oro City

promulgated a Decision[11] with the following findings of fact:

After a careful and painstaking review and examination of the voluminous records of
this case, We have come up with the well discerned view that the greater majority of the
individual complainants in this case are `contractual or `casual employees. By the very
nature of their employment or job, they cannot be considered as regular employees of
respondent company by virtue of Article 280 (formerly 281) of the Labor Code, as
amended, excepting the few who are either made to work or perform functions along or
side by side with the regular employees, such as those assigned at the Billeting Mill or
production line departments, or made to perform ground maintenance jobs as well as
those performing administrative and finance support services who may seemingly
deserve to be regularized. (x x x .)
It is well established by the evidence on record that at the time of the strike in May 1986,
the expansion program (FYEP) of respondent company was in full blast. This therefore
accounted for approximately 1,750 casual or contractual workers at the time which at
present had dwindled to about one-third (1/3) of its original size. Practically, all these
workers, at one time or another worked with respondent company. As evidently shown by
the documents and evidence on record, the expansion program of the company consists of
numerous projects, which by themselves and taken independently of each other, are
validly and legally sustainable as separate projects. (See Vols. 26 and 27, List of
Contractual Workers, supra).
This Commission during the ocular inspection at the company plant premises on
February 21, 1992 was able to ascertain additional material facts. Thus, carpentry works
are, remarkedly (sic) different from masonry and which activities are component phases
in the expansion program in the construction of new buildings for new or additional
machineries (sic), offices and other structures. Upon completion of particular civil works,
these are followed by machine installations, requiring technicians and engineers and the
employment of electricians to install the electrical facilities. As administrative support
services, checkers, timekeepers and consulting engineers are likewise hired during the
mechanical installation stage. Additional temporary personnel are hired for the dry-run
operations of the machines. The latter are usually given preference in recruitment of
regular personnel.
Thus, by the very nature of the various activities involved, every undertaking is divided
into phases or projects, the completion of each could be said to be independent from the
other, although interrelated. Admittedly, the temporary skilled personnel initially hired
are also given priority in the hiring of new employees or as replacements for vacated
positions. Ostensibly, this is an exclusive management prerogative we cannot question.
Significantly, the Commission has sent advance notice of its plant visitation to the parties,
through their respective counsels, with an open-ended invitation for them to join the plant
tour. This message was relayed in advance through the Sub-Regional Arbitration Branch
XII, Iligan City, for transmittal to the parties concerned. Atty. Gregorio Pizarro of SPFL
asked to be excused in view of a prior engagement. He, however, sent word that he will
catch up with the inspecting team if he has time. Atty. Isaac Ll. Dandasan was promptly
present at the Sub-Arbitration Branch XII Office. But for unknown reasons, he did not
join the inspecting party. Preparatory to the physical overview of the plant premises, the
inspecting team was first briefed by key personnel of NSC on the various phases of the

steel making operations.

The Commission through interviews and interactions with well-informed sources during
the plant visitation gathered more insights on the operations of respondent NSC. There
are those among the casual workers hired by respondent who were/are made to perform
functions which are seemingly regular. Respondent, however, argued in its pleadings that
these casuals performed services only for the expansion program or as substitute for those
who are absent or on official leave or as additional hands to cope up with an abrupt or
predetermined business peak.[12]
The NLRC found that the shipbreaking operation was phased out in November 1986
prior to the termination of the first phase of the FYEP in 1987. It concluded that such
operation was only a development project. It also found that in compliance with the
directive of the August 4, 1986 decision of Minister Sanchez to give priority to
contractual employees in hiring new personnel for project works, the NSC re-engaged the
services of most casual workers. To the NLRC, the employers choice of persons to
hire is a management prerogative that is beyond its competence to question.[13]
Opining that the majority of the complainant workers are regular contractual
employees pursuant to Art. 280 of the Labor Code, the NLRC said:
The test in determining regularity or employment is the nature of the functions
performed which should be `usually necessary or desirable in the usual business or trade
of the employer. Even if the services rendered are necessary or desirable but they do not
pertain to the usual business or trade of the employer, activity still falls short of being
considered regular employment under the law. It therefore follows that the activity
performed is a casual one. In order for an employment to be categorized as `regular, the
law distinctively requires that the functions and services performed should be `common
and constant and an every day activity. Stated otherwise, the law mandates that the
functions to be carried out must be `customary to the trade or business of the employer.
This rule is, however, subject to exemptions. Where an employment or activity despite
being usually necessary or desirable has been fixed for a specific project or undertaking
the completion of which has been `pre-determined at the time of engagement or where
the services to be performed is seasonal in nature, the same is still considered `casual or
`temporary in nature.[14] (Underscoring supplied.)
The NLRC further held that casual or temporary employees are not entitled to benefits
enjoyed by regular employees other than the `parity on the security of tenure clause, in
that the traditional peculiarities and contrast between the two (2) groups of employees are
inherently preserved. However, the NLRC deferred resolution on the issue of who
among the workers concerned may qualify or deserve to be regularized in view of the
nature of their functions, to provide the parties ample opportunity to be heard in
appropriate proceedings. It disposed of the case as follows:
WHEREFORE, PREMISES CONSIDERED, Judgment is Hereby decreed, in addition
to the foregoing dispositions, adopting and sustaining the findings and conclusions of
former Minister of Labor and Employment August S. Sanchez in his August 4, 1986
decision for being substantially supported by the facts and evidence as well as the
applicable law and jurisprudence on the matter, subject to modification consistent with
this disposition.

ACCORDINGLY, the following orders and directives are issued, to wit:

(1) That the termination of the employment contract of the contractual workers prior to
May 13, 1986 concerted action of workers is held valid and legal;
(2) That the employment status of the greater majority of the casual and temporary
workers, who have been hired or rehired for specific project works or phases thereof are
considered regular for the duration of the period or project they were hired or engaged
and the cessation of the activities to which they have been engaged automatically
terminates employer-employee relations;
(3) That the right of all workers whether contractual or regular to form or set up a labor
association or organization being a Constitutional mandate is hereby declared recognized;
and that their right to join, assist or affiliate with any labor organization or association of
their choice is likewise recognized subject to existing rules, policies and the CBA
stipulations in the particular bargaining unit or units they are presently or may be
employed in the future, as the case may be;
(4) That the final and ultimate determination on who among the contractual workers may
or may not qualify or deserve to be regularized or extended regular employment status
will be the subject of further proceedings pursuant to the foregoing resolution;
(5) That with respect to the casual or contractual workers who were laid off prior to the
May 13, 1986 strike and have not been rehired or reemployed, they are hereby granted
financial assistance and respondent corporation is hereby directed to pay the same,
equivalent to five (5) months salary each, based on their latest salary as of the time of
their separation;
(6) That respondent National Steel Corporation, through its management and corporate
officers, is strongly urged to grant the wage increase of 15% percent as demanded in the
Order of August 4, 1986 of then Labor Minister Augusto S. Sanchez; and
(7) That respondent National Steel Corporation is further ordered and directed, subject to
existing policies or CBA limitations, to give priority and preference to its contractual
workers, with first priority to those who may be regularized, if any, in the hiring of new
personnel, both for project works or existing regular positions and in the filling up of
present and future vacancies in the regular work force.
The Honorable Labor Arbiters Alex A. Muyco and Henry F. Te are hereby deputized to
jointly and/or alternately conduct post-arbitration proceedings for purposes of carrying
out the foregoing directives. The Fiscal Examiner of this Commission or, in her default,
that of the Arbitration Branch is directed to compute the monetary awards in favor of the
beneficiaries as herein decreed.
SO ORDERED.
The National Steel Corporation Workers Association (NSCWA), a break-away group
from the NSCEA-SPFL composed of 204 workers, filed a motion for reconsideration of
the NLRC Decision,[15] assailing the same for its incompleteness and failure to resolve
the case with finality. Atty. Rex Fernandez filed this motion on April 6, 1992
simultaneously with a notification of revocation of the power of Atty. Dandasan as
counsel of the group of 204 workers.[16] Atty. Dandasan, counsel of record, filed another
motion for reconsideration in behalf of the 204 complainant-workers except ten (10) of

them who had revoked his authority as counsel.

On July 6, 1992, the NLRC issued a Resolution denying the motions for reconsideration
thus:
WHEREFORE, premises considered, the following orders are issued:
1. The motions for reconsideration filed by counsels Fernandez and Dandasan are Denied
for lack of merit;
2. The comment/manifestation of Atty. Dandasan is noted and the same is threshed out
during the continuance of the hearing on the remaining issue of regularization;
3. Complainants Fe Fabillar, Marielyd Armecin, Elizabeth Jungao and Elma Dy, are
directed through counsel Antonio Amarga, to file a verified manifestation with the
Commission, copy furnished the petitioner and respondent and, with proof of service
thereof, for their comments preparatory to the disposition of said incidents;
4. The comment/manifestation of petitioner, through counsel, is noted with qualification;
5. Paragraph 5 of the dispositive orders of the March 26, 1992 decision of the
Commission is clarified and the same shall refer to those hired under the FYEP program
of respondent NSC, laid off prior to May 13, 1986 and not rehired thereafter;
6. The manifestation of respondent NSC that it has already complied with paragraphs 6
and 7 of the dispositive orders of the March 26, 1986 decision is both noted and
considered as proof of compliance thereof; and
7. The contractuals to be considered for regularization shall basically be based on the
tentative list drawn up by the Commission but not necessarily limited thereto and subject
to the guidelines specified on paragraph 2 of the order of March 27, 1992 which was
promulgated on March 31, 1992.
Let the continuance of the hearing on the remaining unresolved issue be immediately
scheduled by the Hearing Officers deputized for the purpose. No further motion for
reconsideration on this resolution will be entertained.
SO ORDERED.[17]
Thereafter, Atty. Fernandez filed a motion praying for the inclusion of 204 complainantworkers who were members of the NSCWA, the group which broke away from the
NSCEA-SPFL, in the list of employees whose employment status should be determined.
[18] These workers alleged that their contract of employment do(es) not tell the real
story about their employment because, such contract, having been prepared by the
management, is actually a contract of adhesion which should be construed against the
management. Pressed by financial necessities, these workers agreed to these contracts
even though some of them specified employment for only five or six months. They
asserted that the brochure handed out by the management belied the latters contention
that shipbreaking was only a developmental project. That project was phased out for no
other reason than mismanagement or shortsightedness of its conceivers.[19]
The NSCWA also filed a motion to declare the 204 complainant-workers as regular
employees. It asserted that, except for the packers, those workers were employed at the
billet steelmaking plant under different positions and departments. These departments,
however, were the general plant facilities, the steel fabrication shop, the shipbreaking

operations and the raw material operations which were all engaged in the common and
constant and everyday activities in the customary trade or business of the NSC.[20]
The post arbitration proceedings were marred by apparent efforts of both parties to
becloud the issue of regularization of employees. According to the NLRC, the NSCWA
tried to have its members claims decided separately and ahead of those of other workers.
Counsel of NSCWA, Atty. Fernandez, also sought the inhibition of Commissioner Musib
M. Buat who, in truth, had already given way to Commissioner Leon G. Gonzaga, Jr.
with respect to the study of the case and preparation of the pertinent resolution. Other
incidental matters cropped up like the motion for inhibition filed by Labor Arbiter Alex
A. Muyco. In the end, only the NSCWA and the NSC filed their respective memoranda.
Atty. Gregorio A. Pizarro, counsel of the NSCEA-SPFL, and Atty. Isaac Dandasan,
counsel of 72 of the 204 splinter group NSCEA, did not submit memoranda.[21]
On April 14, 1994, the NLRC rendered a Resolution ruling that the project employees are
not regular employees within the purview of Art. 280 of the Labor Code. Focusing on the
shipbreaking operation which petitioners contend was a customary activity of the NSC,
the NLRC found that:
x x x the shipbreaking operation, although not part of the major programs designated
under FYEP I and FYEP II (Vol. 39, p. 154, TSN, supra), was envisioned to be a
component of the billet shop, a totally new installation. Respondent NSC then ventured
into shipbreaking in a developmental way (Vol. 39, pp. 20-23, TSN, supra), hired
inexperienced labor under a contract (Vol. 39, p. 80, TSN, supra). And finding that after
chopping 4 or 5 ships, there were no more supply of ships, respondent had to put a stop to
its shipbreaking operations, and instead, bought hot breakative iron (HBI) from Malaysia
(Vol. 39, pp. 81, 84-85, TSN, supra) and scrap materials from the local scrap dealers, to
be used by or be fed to the billet shop (Vol. 39, pp. 26-27, TSN, supra).
The shipbreaking operation being a developmental program (Vol. 28, p. 24, supra), had
long been phased out due to non-viability. Since the employees assigned therein are
project employees (Mercado vs. NLRC, 201 SCRA 332), those dismissed are therefore
not entitled to reinstatement (Phil. Jai Alai and Amusement Corp. vs. Calve, 126 SCRA
299). To require at this juncture, the reactivation or reopening of the shipbreaking
program or experiment, would result to ignorance, grave abuse of discretion and/or
interference in management business, judgment and prerogatives.[22]
The NLRC noted that, considering the immensity of the operations of the NSC, it was
understandable that project employees would work alongside regular employees.
However, such a situation did not imply that a contract worker hired under the FYEP or
peakload or as a temporary replacement of a regular employee who is on leave of
absence, would be converted into a regular employee.[23] Hence, the NLRC resolved as
follows:
WHEREFORE, the decision dated March 26, 1992 is Affirmed with modifications
consistent with the foregoing discussions.
It is henceforth decreed, that:
1. The claim for regularization by complainants whose names appear in Tables `A, `C
and `E, are dismissed for being moot and academic;

2. Complainants listed in Table `B are directed to pursue the appropriate remedies in the
already decided cases entitled `NASEWA vs. SIMLA and NSC;
3. The consolidated pending appealed cases of the original complainants listed in Table
`F which involve different and/or new causes of action, are excluded from this
disposition, for same shall be resolved separately; and
4. The remaining majority of complainants as appearing in Tables `D and `G are
considered and declared as contractual, seasonal and/or project employees and shall be
granted separation pay or financial assistance as may be applicable consistent with the
finding on pages 14 and 15 of the herein Resolution.
SO ORDERED.[24]
The NSCEA-SPFL, including the NSCWA, filed through Atty. Fernandez, a motion for
the reconsideration of the April 14, 1994 Resolution. Shorn of allegations on who is to be
blamed for the delay in the resolution of the case, the movant workers mainly averred that
the NLRC merely accepted the allegations of the NSC. These allegations, however, are
belied by the contents of its brochure and the actual plant lay-out showing that the
workers were made to work in line departments and not in the expansion program
projects. Obviously referring to the provision of Art. 280 of the Labor Code, the movants
asserted that the word notwithstanding in the phrase of said provision of law stating
that (t)he provisions of written agreements to the contrary notwithstanding and
regardless of the oral agreement of the parties, implies that the contracts they had
entered into were not valid.[25]
That motion for reconsideration was supplemented by another pleading. Citing Beta
Electric Corporation v. NLRC,[26] the movants alleged that repeated renewal of
contracts, such as in this case where renewal would be made even before the expiration of
the last contract, circumvents the law and therefore is not determinative of whether or not
a worker is a regular worker.[27]
On August 5, 1994, the NLRC issued a Resolution denying the motion for
reconsideration. Reiterating its finding that the shipbreaking operation was a
developmental project that had long been phased out due to non-viability, the NLRC said:
Records show that respondent NSC undertook major projects, special projects and other
major preparatory support and post implementation activities designated as FYEP I (1982
to 1988) and FYEP II (1989 to 1994). These expansion programs involved area or land
operation, construction of buildings, installation of equipment, dry-run of machineries
and acceptance. With the participation and support of the different department of
respondent NSC, contractual or project workers were hired, in addition to the fifteen (15)
other private contractors. Since complainants services are needed only when there are
tasks to be performed, complainants therefore cannot be considered regular employees
but may be categorized as `regular contractual employees.
The hiring of complainants on contract or project basis, although interpreted by them to
be in circumvention of the law, is valid and legal. It is an undisputed fact that more than
2,000 contract workers were employed when FYEP I started. As the projects were
completed, respondent NSC therefore, had all the reasons to reduce its contractual
workforce. It would be unwise and unjust if government will require respondent NSC to
employ and pay complainants wages even if there are no major/special project works to

be done. Neither could We impose upon respondent NSC to continue with the planned
FYEP III, so complainants can be given the much needed jobs, for that would also be
tantamount to encroachment on management prerogatives.
Consequently, on September 23, 1994, the petitioners, led by Felix Villa, filed the instant
petition for certiorari through Atty. Fernandez. They offer for resolution the following
issues:
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed grave
abuse of discretion when it ignored the brochure of the Billet Steel Plant issued by the
private respondent in finding that those of the petitioners who were working under the
shipbreaking project were not regular employees as the shipbreaking was a
developmental project.
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed grave
abuse of discretion when it found petitioners not regular employees contrary to the basic
guidelines which the Honorable Public Respondents set?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed grave
abuse of discretion when IT did not comply with the order of this Honorable Court to
pass upon the question of whether or not the petitioners has (sic) defied the return-towork order or the private respondent has locked out the returning workers?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed grave
abuse of discretion when it included in the list of complainants in the SIMLA case one
IRENEO ALIBANGBANG in Table `B of the April 14, 1994 resolution?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed grave
abuse of discretion when it considered MOOT and ACADEMIC the claims of those who
died during the proceedings?
WHETHER OR NOT PETITIONERS herein are regular employees of private respondent
and should be reinstated with backwages?[28]
We resolve to deny the petition.
The 52-page petition discusses not only said issues but also individual cases of petitioners
representing a particular job, to drive home the point that they are regular employees of
the NSC. A good number of pages of the petition are devoted to the travails of
representatives of winch operators, riggers, cable splicers, packers, utility men, laborers,
carpenters, electricians, scrap cutters, masons, painters, millwrights or plant mechanics,
welder-fabricators, pipe-fitters, erectors and steelmen.
Petitioners assert that the contract each of them executed with the NSC does not mean
anything. The contracts were prepared by the management which, no doubt, stands on a
higher footing than the petitioners whose need for employment comes from vital and
even desperate necessity. Under the forceful intimidation of urgent need, an individual
worker could not have agreed to the contract freely and voluntarily; that there was
actually a vice of consent. That these contracts have no import whatsoever is shown by
the fact that petitioners who were rehired after May 13, 1986 were given gate passes
instead of contracts.[29] Moreover, the job designation in a contract was not reflective of
the actual work an employee was doing. Add to this is the fact that the employment of
most of the petitioners was terminated through a memorandum of a certain Ferraren who,

after calling their attention to a cutting off of oxygen supply incident, promised them
reemployment after twenty days. That promise was never realized.[30]
In truth, petitioners would have the Court look into the factual issue of whether or not
project employees were utilized by the NSC in its mainstream business of producing steel
products. This is obviously outside the ambit of this Courts jurisdiction. This Court relies
on the factual findings of labor administrative tribunals like the NLRC which have
acquired expertise because their jurisdiction is confined to specific matters. Findings of
such tribunals, if supported by substantial evidence, are generally accorded not only
respect but, at times, finality.[31] That general rule, however, admits of an exception
where it is clear that a palpable and demonstrable mistake, that needs rectification, has
been committed by the quasi-administrative tribunal.[32]
In its Decision and Resolutions, the NLRC adamantly held that petitioners were
contractual project employees who are not entitled to regularization under Art. 280 of the
Labor Code. NLRCs factual finding that petitioners are project employees must be dealt
with in the light of pertinent provisions of law and jurisprudential pronouncements on
project employees.
The Labor Code provides for project employees under Art. 280 on casual and regular
employees as follows:
ART. 280. Regular and Casual Employees. The provision of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
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. (Italics supplied.)
This provision of law conceives of three kinds of employees: (a) regular employees or
those who have been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; (b) project employees or those
whose employment has been fixed for a specific project or undertaking the completion
or termination of which has been determined at the time of the engagement of the
employee 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.
Under this law, the nature of the employment is determined by the factors set by law,
regardless of any contract expressing otherwise. The supremacy of the law over contracts
is explained by the fact that labor contracts are not ordinary contracts; these are imbued
with public interest and therefore are subject to the police power of the State.[33] Thus,
the Civil Code provides:

ART. 1700. The relations between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
Contracts for project employment are valid under the law. By entering into such a
contract, an employee is deemed to understand that his employment is coterminous with
the project. He may not expect to be employed continuously beyond the completion of
the project. It is of judicial notice that project employees engaged for manual services or
those for special skills like those of carpenters or masons, are, as a rule, unschooled.
However, this fact alone is not a valid reason for bestowing special treatment on them or
for invalidating a contract of employment. Project employment contracts are not lopsided
agreements in favor of only one party thereto. The employers interest is equally
important as that of the employees for theirs is the interest that propels economic
activity. While it may be true that it is the employer who drafts project employment
contracts with its business interest as overriding consideration, such contracts do not, of
necessity, prejudice the employee. Neither is the employee left helpless by a prejudicial
employment contract. After all, under the law, the interest of the worker is paramount.
A project employment terminates as soon as the project is completed. Thus, an employer
is allowed by law to reduce the work force into a number suited for the remaining work
to be done upon the completion or proximate accomplishment of the project.[34]
However, the law requires that, upon completion of the project, the employer must
present proof of termination of the services of the project employees at the nearest public
employment office. This is specially provided for as regards construction workers
obviously to obviate indiscriminate termination of employment in derogation of the
workers right to security of tenure. After the termination of the project, an employer may
wind up its operations only to complete the project. In such a case, the remaining
employees do not necessarily lose their status as project employees. However, if the
employees services are extended long after the supposed project had been completed, the
employees are removed from the scope of project employees and they shall be considered
regular employees.[35]
The fact that the NSC hired project employees for its FYEP I and II has been deliberated
upon by this Court in ALU-TUCP v. NLRC[36] The individual petitioners involved in that
case were engineers, assistant engineers, a chainman, a utility man, a warehouseman, a
survey aide, a surveying party head and a machine operator.[37] The NLRC ruled that
they were project employees under the NSCs FYEP I and II who could not enjoy the
same benefits accorded to regular employees. The Court distinguished in that case
project employees from regular employees as follows:
The basic issue is thus whether or not petitioners are properly characterized as `project
employees rather than `regular employees of NSC. This issue relates, of course, to an
important consequence: the services of project employees are co-terminous with the
project and may be terminated upon the end or completion of the project for which they
were hired. Regular employees, in contrast, are legally entitled to remain in the service of
their employer until that service is terminated by one or another of the recognized modes
of termination of service under the Labor Code."[38]

The Court then distinguished two kinds of projects which a business or industry may
undertake. First, a project could refer to a particular job or undertaking that is within the
regular or usual business of the employer company, but which is distinct and separate,
and identifiable as such, from the other undertakings of the company. The example
given is a construction company that may undertake two or more projects at the same
time in different places. Second, a project may refer to a particular job or undertaking
that is not within the regular business of the corporation. Such a job or undertaking must
also be identifiably separate and distinct from the ordinary or regular business operations
of the employer. The job or undertaking also begins and ends at determined or
determinable times. Classifying the NSCs project as of the second type, the Court
said:
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate
end in view of expanding the volume and increasing the kinds of products that it may
offer for sale to the public. The Five Year Expansion Program had a number of
component projects: e.g., (a) the setting up of a `Cold Rolling Mill Expansion Project;
(b) the establishment of a `Billet Steelmaking Plant (BSP); (c) the acquisition and
installation of a `Five Stand TDM; and (d) the `Cold Mill Peripherals Project. Instead of
contracting out to an outside or independent contractor the tasks of constructing the
buildings with related civil and electrical works that would house the new machinery and
equipment, the installation of the newly acquired mill or plant machinery and equipment
and the commissioning of such machinery and equipment, NSC opted to execute and
carry out its Five Year Expansion Projects `in house, as it were, by administration. The
carrying out of the Five Year Expansion Program (or more precisely, each of its
component projects) constitutes a distinct undertaking identifiable from the ordinary
business and activity of NSC. Each component project, of course, begins and ends at
specified times, which had already been determined by the time petitioners were engaged.
We also note that NSC did the work here involved the construction of buildings and
civil and electrical works, installation of machinery and equipment and the
commissioning of such machinery only for itself. Private respondent NSC was not in
the business of constructing buildings and installing plant machinery for the general
business community, i.e., for unrelated, third party, corporations. NSC did not hold
itself out to the public as a construction company or as an engineering corporation.
The issue raised in this petition had already been settled in the recent case of Palomares v.
NLRC,[39] involving the same respondent and its workers engaged in FYEP I and II,
wherein the Court stated thus:
The fact that petitioners were required to render services necessary or desirable in the
operation of NSCs business for a specified duration did not in any way impair the
validity of their contracts of employment which stipulated a fixed duration therefor.
Extant in the record are the findings of the NLRC that the petitioners in this case were
utilized in operations other than billet making or other components of the FYEP I and II,
such as shipbreaking. We are constrained to rule that while it is true that they performed
other activities which were necessary or desirable in the usual business of the NSC and
that the duration of their employment was for a period of more than one year, these
factors did not make them regular employees in contemplation of Article 280 of the
Labor Code, as amended. Thus, the fact that petitioners worked for NSC under different

project employment contracts for several years cannot be made a basis to consider them
as regular employees, for they remain project employees regardless of the number of
projects in which they have worked. Length of service is not the controlling determinant
of the employment tenure of a project employee.[40] In the case of Mercado, Sr. v.
NLRC,[41] this Court ruled that the proviso in the second paragraph of Article 280,
providing that an employee who has served for at least one year, shall be considered a
regular employees, relates only to casual employees and not to project employees.
WHEREFORE, the instant petition is DISMISSED. The decision and resolution of the
National Labor Relations Commission dated April 14, 1994 and August 5, 1994,
respectively are AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.

[G.R. No. 128345. May 18, 1999]

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, ROLANDO S. ANGELES and
RICARDO P. PABLO, JR., respondents.
DECISION
PUNO, J.:
This is a special civil action for certiorari to annul the Decision of the National Labor
Relations Commission (NLRC) dated July 31, 1996[1] and its Resolution dated
November 4, 1996[2] in NLRC Case No. RAB III-06-5735-94. The NLRC granted
separation pay to the private respondents inspite of its finding that they were validly
dismissed for committing bribery.
Private respondents Rolando S. Angeles and Ricardo P. Pablo, Jr. were employed by
petitioner corporation as tollway guards. They were posted at the North Luzon Tollway,
Sta. Rita, Guiguinto, Bulacan interchange. Their services, however, were terminated
effective close of office hours of June 15, 1994 on the ground of serious misconduct.
The circumstances leading to the termination of private respondents employment are as
follows:
On September 8, 1993, Rosario C. Maravilla complained to the Tollway General
Manager, Mr. Ibarra G. Paulino, about the mulcting activities of some security
personnel at the North Luzon Tollway. Acting on the complaint, Mr. Paulino formed an
investigating team composed of Rolando Hidalgo, Vicente del Rosario, Salvador Bautista
and Luisito Alvarez.
On September 11, 1993, the investigating team staged an entrapment. They marked one
P500.00 bill and two P100.00 bills with an asterisk and recorded their serial number.
They handed the marked money to Maravilla with instruction to give it to whoever

demands money from her. Thus, the team, together with Maravilla, boarded the latters
passenger jeepney driven by Eustaquio Paa. The jeepney was then carrying a cargo of
dogs destined for Baguio City.
Before reaching the Plaza Santa Entry, the jeepney was stopped by Angeles who was on
duty at that time. He allegedly suspected them of illegally transporting dogs. Angeles
approached the driver, asked for his drivers license and told him to park at the shoulder
of the road. After the jeepney had parked, the driver alighted and talked to the guards on
duty, Angeles and Pablo Maravilla also got off the vehicle to talk to them.
The members of the investigating team saw private respondents accept cash and a sack
containing a dog from Maravilla, after which they allowed the jeepney to leave.
As private respondents walked toward the toll plaza, they were accosted by the members
of the investigating team headed by Hidalgo. Surprised, Angeles dropped the bills he was
holding. Upon verification, Hidalgo found that these were the same bills they had
previously marked. The team also confiscated the dog from Pablo. They were brought to
the Sta. Rita Field Office for initial investigation.
On April 25, 1994, Mr. Ibarra issued a Notice of Dismissal to private respondents
requiring them to answer the charge of serious misconduct. After private respondents
filed their respective answers, a formal investigation was held. Hidalgo, del Rosario and
Bautista testified against private respondents.
After the formal investigation, the investigating officer submitted his findings to Mr.
Ibarra and recommended the dismissal of private respondents. Adopting the findings and
recommendation of the investigating officer, Mr. Ibarra issued a Notice of Termination to
private respondents informing them that their employment shall cease effective close of
office hours of June 15, 1994.
On June 17, 1994, private respondents filed a complaint for illegal dismissal against
petitioner. They alleged that they were dismissed without just or authorized cause and
without due process. They claimed that the entrapment staged on September 11, 1993
was mastermind by Hidalgo, former manager of the North Luzon Tollway, in retaliation,
as they have been very critical of his administration. The complaint prayed for
reinstatement plus payment of backwages and mid-year bonus for the year 1994.
The Labor Arbiter ruled that private respondents dismissal was illegal. He held that
petitioner failed to prove by clear and convincing evidence that private respondents
committed serious misconduct. However, instead of ordering their reinstatement, the
Labor Arbiter ordered the payment of separation pay because of strained relations. He
also ordered petitioner to pay private respondents their backwages and mid-year bonus.
The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby entered in favor of the
complainants and against the respondent, ordering the latter, as follows:
1. To pay the sum of P7,185.00 representing the midyear bonus of complainants for the
year 1994;
2. To pay the sum total of P215,550.00 as backwages of the complainants from June 15,
1994 up to this writing; and

3. To pay the sum total of P206,542.00 representing the separation pay of both
complainants from the date of their employment up to this writing.
So Ordered.[3]
On appeal, the NLRC modified the decision of the Labor Arbiter. It held that private
respondents act of receiving a sum of money and a dog from motorists constituted
bribery which was a sufficient ground for their dismissal. The NLRC nonetheless ordered
petitioner to pay private respondents their separation pay on the ground of equity. It also
retained the award of private respondents mid-year bonus for 1994. The dispositive
portion of the decision states:
WHEREFORE, premises considered, the appealed decision is hereby MODIFIED, to
read as follows:
1. Declaring the dismissal of complainants to be legal as falling under the provision of
Article 282 of the Labor Code, as amended;
2. Ordering respondent Philippine National Construction Corporation (PNCC) to pay
complainants Rolando Angeles and Ricardo Pablo their separation pay in the amount of
P70,609.00 and P143,118.00, respectively;
3. Ordering respondent PNCC to pay complainants Rolando Angeles and Ricardo Pablo
their mid-year bonus in the amount of P3,209.50 and P3,975.50, respectively.
All other claims of both parties are DIMISSED for lack of merit.
So ordered.[4]
Petitioner filed a motion for reconsideration but it was denied by the NLRC for lack of
merit.[5]
On March 13, 1997, petitioner filed the petition at bar raising the sole assignment of
error:
Public respondent, through its Second Division, committed grave abuse of discretion
amounting to lack of jurisdiction in ordering petitioner to pay private respondents their
separation pay and mid-year bonus notwithstanding its finding that private respondents
committed grave and serious misconduct.[6]
On June 18, 1997, we required the respondents to comment on the petition.[7]
Private respondents filed their comment on September 2, 1997. They raised the following
arguments.
1. The National Labor Relations Commission erred in not finding the Philippine
National Construction Corporation guilty of estoppel and laches when the herein private
respondents (complainants in the Labor Arbiter) were required to answer the charges
against them only on April 25, 1994 while the act complained of occurred on September
11, 1993;
2. Even assuming without admitting that the modification by the Honorable NLRC was
correct, yet the assailed decision of said court has become final and executory as this
instant petition was unreasonably and belatedly filed;
3. The assailed decision of the Honorable NLRC is in accord with law and
jurisprudence.[8]

The Solicitor General, on the other hand, filed its comment on May 4, 1998. It submitted
that the NLRC erred in awarding separation pay to private respondents although it was
correct in awarding mid-year bonus to them. The Solicitor General thus recommended
that the decision of the NLRC be modified by deleting the award of separation pay to
private respondents.[9]
In view of the recommendation of the Solicitor General, we required the NLRC to file its
own comment if it so desires within ten days from notice.[10] The NLRC, however,
failed to file its own comment within the prescribed period.
We shall first resolve the issues raised by private respondents.
First, on the issue of estoppel and laches. Private respondents contend that petitioner is
already barred by laches from charging them with serious misconduct because more than
seven (7) months have lapsed since the commission of the act complained of. We
disagree.
Laches, in a general sense, is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been
done earlier.[11] Estoppel by laches arises from the negligence or omission to assert a
right within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert it.[12] It does not merely speak of delay but
unreasonable delay, which is absent in this case. An employer is not expected to dismiss
an erring employee instantly because it may opt to give the employee the chance to
reform and to regain his confidence.
Second, as regards the timeliness of the petition. The petition was filed on March 13,
1997. At that time, the prevailing rule was that petitions for certiorari may be filed within
reasonable time from receipt of the resolution denying the motion for reconsideration.
There was no fixed standard to determine the reasonableness of the period, but the Court
generally considered the period of three (3) months to be reasonable.[13]
The records show that petitioner received the resolution of the NLRC denying its motion
for reconsideration on December 16, 1996 and the petition at bar was filed two (2)
months and twenty-seven (27) days later. We thus find that the instant petition was filed
on time.
We now go to the primary issue in this case whether private respondents are entitled to
separation pay and mid-year bonus.
We rule in the negative.
An employee who is dismissed for just cause is generally not entitled to separation pay.
In some cases, however, the Court awards separation pay to a legally dismissed employee
on the grounds of equity and social justice. This is not allowed, though, when the
employee has been dismissed for serious misconduct or some other cause reflecting on
his moral character.[14]
We stated in the leading case of Philippine Long Distance Telephone Co. vs. NLRC:[15]
We hold that henceforth separation pay shall be allowed as a measure of social justice
only in those instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character. Where the reason for the

valid dismissal is, for example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not
be required to give the dismissed employee separation pay, or financial assistance, or
whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding
rather than punishing the erring employee for his offense. And we do not agree that the
punishment in his dismissal only and that the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if the employee who steals from the
company is granted separation pay even as he is validly dismissed, it is not unlikely that
he will commit a similar offense in his next employment because he thinks he can expect
a like leniency if he is again found out. This kind of misplaced compassion is not going to
do labor in general any good as it will encourage the infiltration of its ranks by those who
do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it
is committed by the underprivileged. At best it may mitigate the penalty but it certainly
will not condone the offense. Compassion for the poor is an imperative of every humane
society but only when the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be a refuge of scoundrels any more than can equity
be an impediment to the punishment of the guilty. Those who invoke social justice may
do so only if their hands are clean and their motives blameless and not simply because
they happen to be poor. This great policy of our Constitution is not meant for the
protection of those who have proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their character.
In the case at bar, private respondents were caught in the act of accepting bribe in the
form of cash and a dog from a motorists who was suspected of illegality transporting
dogs. As tollway guards, private respondents had the duty to maintain peace and order at
the North Luzon Expressway and to ensure that tollway rules and regulations are
followed. But private respondents did the contrary by yielding to bribery. They were the
first to violate the rules they were tasked to enforce. Undoubtedly, private respondents
act constituted serious misconduct which warranted their dismissal from service. It is for
this reason that we find private respondents undeserving of the comparison accorded by
the law to workers who are bound to join the ranks of the unemployed.
Likewise, private respondents are not entitled to the mid-year bonus they are claiming.
We do not agree with the Solicitor Generals contention that private respondents have
already earned their mid-year bonus at the time of their dismissal. A bonus is a gift from
the employer and the grant thereof is a management prerogative. Petitioner may not be
compelled to award a bonus to private respondents whom it found guilty of serious
misconduct.
We held in Traders Royal Bank vs. NLRC:[16]
A bonus is a gratuity or an act of liberality of the giver which the recipient has no right
to demand as a matter of right. It is something given in addition to what is ordinarily
received by or strictly due the recipient. The granting of a bonus is basically a
management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from

the employees basic salaries or wages. (citations omitted)

We further held in Metro Transit Organization, Inc. vs. NLRC[17] that a bonus becomes
a demandable or enforceable obligation only when it is made part of the wage or salary or
compensation of the employee, thus:
The general rule is that a bonus is a gratuity or an act of liberality which the recipient
has no right to demand as a matter of right. A bonus, however, is a demandable or
enforceable obligation when it is made part of the wage or salary or compensation of the
employee. Whether or not a bonus forms part of wages depends upon the circumstances
and conditions for its payment. If it is additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if it is
paid only if profits are realized or if a certain level of productivity is achieved, it cannot
be considered part of the wage. Where it is not payable to all but only to some employees
and only when their labor becomes more efficient or more productive, it is only an
inducement for efficiency, a prize therefor, not a part of the wage.
Private respondents in this case neither alleged nor adduced evidence to show that the
bonus they are claiming is a regular benefit which has become part of their compensation.
Thus, the presumption is that it is not a demandable obligation from the employer and the
latter may not be compelled to grant the same to undeserving employees.
IN VIEW WHEREOF, the petition is GRANTED. The assailed decision and resolution
of the NLRC are hereby SET ASIDE.
SO ORDERED.
Bellosillo (Chairman), Mendoza, and Quisumbing, JJ., concur.
Buena, J., on leave.

G.R. No. 108142 December 26, 1995

ARCHBUILD MASTERS AND CONSTRUCTION, INC., and JOAQUIN C.
REGALA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ROGELIO CAYANGA,
respondents.
BELLOSILLO, J.:
This is a petition for certiorari filed by Archbuild-Masters and Construction, Inc.
(ARMACON), and its president Joaquin C. Regala against respondents National
Labor Relations Commission and Rogelio Cayanga 1 for grave abuse of discretion in
holding that the latter respondent was illegally dismissed by petitioners.
Sometime in August 1988, petitioners entered into a contract with the government of the United
States of America to lay water pipes inside the U.S. Naval Base in Subic, Zambales. This

undertaking involved the digging of ditches, laying of pipes and the filling up of all excavations
resulting therefrom. On 20 March 1989, considering that the project would require the
transporting of men and construction materials, petitioners hired the services of drivers one of
whom was private respondent Rogelio Cayanga. His employment papers specifically provided
that he was being hired as driver for the Subic project. 2
According to petitioners, in December 1989 the phase of work for which private respondent was
hired neared its completion so that a lesser number of workers and construction materials were
required to be transported to the digging sites, which meant fewer trips to the construction site
and a reduction in the number of drivers. Thus on 26 December 1989 petitioners posted a list of
employees whose services were no longer needed by reason of the reduction in manpower due
to the completion of a phase of the Subic project. The list included private respondent.
In a letter dated 26 December 1989 petitioners asked for clearance from Regional Office No. III,
Zambales District Labor Office, Olongapo City, to terminate the services of private respondent
and six (6) other employees to reduce the work force resulting from the completion of the phase
of the project for which private respondent and six (6) others were employed. 3 Petitioners
likewise submitted the necessary Employer's Monthly Report on Employees' Termination or
Suspension required by Sec. 2, Rule 14, of the Rules Implementing B.P. Blg. 130, for the month
of January 1990. 4
On 22 January 1990 private respondent filed a complaint against petitioners for illegal dismissal. 5
He asserted that his dismissal was done in bad faith and that the real reason for his removal was
not the supposed proximate completion of the Subic project but his alleged absences without
leave. According to him, when he first reported for work on 27 December 1989 after a six-day
vacation (20 to 26 December 1989), of which petitioners were properly informed, he was verbally
notified by his supervising engineer that his employment was already terminated because of his
absences without proper leave. After vehemently denying that his vacation was unauthorized, he
alleged that he was then allowed by petitioners to continue his employment for two more days
when they realized that he could not be validly dismissed on such ground. Then on 29 December
1989 private respondent found himself in a quandary when he unexpectedly read in the company
bulletin board that his employment had already been terminated due to project completion. He
contended that the supposed "project completion" cited by petitioners as the ground for his
dismissal was just used by the latter to immediately terminate his employment. He insisted that
the real reason for his dismissal was his absences allegedly incurred by him without proper leave,
and that the latter only used "project completion" to camouflage his unlawful removal so that he
could no longer be heard on the real reason for his dismissal. 6
Private respondent argued that there could not have been any completion of a phase or stage of
the construction project because some employees who were previously dismissed were in fact
either re-hired or replaced by petitioners, 7 and that their bad faith in effecting his dismissal was
further demonstrated by their inconsistent explanations for his dismissal. According to him, the
Employer's Monthly Report submitted by petitioners to the Department of Labor and Employment
expressly stated that the nature of his termination was due to "shutdown/retrenchment" while the
list of dismissed project employees posted in the company premises as well as the request to
terminate these employees submitted to the district labor office declared "project completion" as
the ground for dismissal. Under these circumstances, according to private respondent, if
petitioners would instead invoke "shutdown/retrenchment" as the proper ground for his dismissal
they would have again violated his rights under Art. 283 of the Labor Code which mandates that
in order to dismiss an employee due to "shutdown/retrenchment" he must first be furnished a
written notice of his dismissal at least one (1) month before its effectivity.
On 2 October 1990 Labor Arbiter Manuel R. Caday dismissed the complaint of private respondent
for lack of merit. He ruled that private respondent's separation from work was anchored on a just
and valid ground and that it was not effected in a wanton or malevolent manner. However, he
ordered petitioners to pay private respondent P396.00 for unpaid wage differentials from 1 July
1989 to 1 January 1990. 8 On appeal, the NLRC reversed the Labor Arbiter. It ruled that private
respondent was illegally dismissed and directed petitioners to pay him back wages from 1
January 1990 up to the closure of the Subic Naval Base. The NLRC found that petitioners failed

to refute the claim of private respondent that there was no project completion to speak of when
they did not deny his allegation that another driver was hired to replace him after his dismissal.
The NLRC also gave considerable weight to the established fact that the Employer's Monthly
Report of petitioners expressly stated that private respondent's termination was due to
"shutdown/retrenchment" and not to the completion of the project. According to the NLRC, this
circumstance belied the claim of petitioners that they dismissed private respondent due to project
completion. The NLRC then concluded that if indeed "shutdown/retrenchment" was the reason for
private respondent's dismissal petitioners should have complied with the 30-day notice
requirement under Art. 283 of the Labor Code 9 Petitioners motion for reconsideration was denied;
hence, this appeal.
We affirm the decision of the NLRC as we find private respondent illegally dismissed by
ARMACON.
It is not disputed that private respondent was a project employee of ARMACON. As such he was
employed in connection with a particular project the completion of which had been determined at
the time of his employment. 10 Consequently, as a project employee of ARMACON, his
employment may be terminated upon the completion of the project as there would be no further
need for his services. 11 Since a project employee's work depends on the availability of projects,
necessarily the duration of his employment is not permanent but coterminous with the work to
which he is assigned. 12 It would be extremely burdensome for the employer, who depends on the
availability of projects, to carry him as a permanent employee and pay him wages even if there
are no projects for him to work on. 13 The rationale behind this is that once the project is
completed it would be unjust to require the employer to maintain these employees in their payroll.
To do so would make the employee a privileged retainer who collects payment from his employer
for work not done. This is extremely unfair and amounts to labor coddling at the expense of
management. 14
However, for project workers employed in the construction industry like the one before us,
employers are allowed to reduce their work force into a number suited for the remaining work to
be done upon the completion or proximate accomplishment of the construction project. The
employment of a project worker hired for a specific phase of a construction project is understood
to be coterminus with the completion of such phase and not upon the accomplishment of the
whole project. Thus, a worker hired for a particular phase of a construction project can be
dismissed upon the completion of such phase. Project workers in the construction industry may
also be terminated as the phase of a construction project draws nearer to completion when their
services are no longer needed provided they are not replaced. 15 Policy Instruction No. 20 16
expressly recognizes these peculiar employment arrangements in the construction industry
because each phase in these projects requires a varied number of workers. It is recognized in
this jurisdiction that the number of maintained workers in a particular construction project must be
flexible and must conform with the requirements of each phase that remains unaccomplished.
However, if a project employee is dismissed his removal must still comply with the substantive
and procedural requirements of due process. Sec. 3, Art. XIII, of the Constitution mandates that
the State shall afford full protection to labor and declares that all workers shall be entitled to
security of tenure. The fundamental guarantee of security of tenure and due process dictates that
no worker shall be dismissed except for a just and authorized cause provided by law and after
due process has been properly complied with. 17 Therefore, a project employee hired for a
specific task also enjoys security of tenure. A termination of his employment must be for a lawful
cause and must be done in a manner which affords him the proper notice and hearing. Thus, a
project employee must be duly furnished a written notice of his impending dismissal and must be
given the opportunity to dispute the legality of his removal. 18
In the case before us, we are convinced that private respondent Rogelio Cayanga was illegally
dismissed by petitioners. In pursuing this appeal petitioners rely on Policy Instruction No. 20 to
justify the dismissal of private respondent. They maintain that private respondent's discharge was
necessary because as the Subic project neared completion less and less employees were
needed to finish the undertaking. They insist that Policy Instruction No. 20 provides the legal
basis for his removal and assert that they faithfully complied with all the legal requirements

therefor.
Although it is acknowledged that the employment of private respondent is terminable upon the
completion or proximate accomplishment of the Subic project or a phase thereof under Policy
Instruction No. 20, we nonetheless cannot sustain petitioners' assertion that Rogelio Cayanga's
dismissal was lawful. To justly dismiss private respondent under Policy Instruction No. 20 it is
incumbent upon petitioners to show proof of the proximate completion of the Subic project when
respondent Cayanga questioned the veracity of such an allegation. In the case at bench,
petitioners failed to present substantial evidence to prove the proximate completion of the Subic
project. The affidavit executed by petitioners' personnel officer and the manpower schedule,
which supposedly proves that private respondent's services were no longer necessary for the
remaining duration of the project, are mere self-serving assertions that are not enough to
substantiate their claim of proximate project completion. We find it in the interest of justice to
require employers to state the reason for their project employees' dismissal and prove this ground
once its veracity is challenged. Employers who hire project employees are mandated to prove the
actual basis for the latter's dismissal. A mere claim of project completion is not sufficient to
terminate a project worker's employment without adequate proof to demonstrate such claims. In
termination cases, like the one at bench, the burden of proving that an employee has been
lawfully dismissed lies with the employer. 19 Moreover, to allow employers to exercise their
prerogative to terminate a project worker's employment based on gratuitous assertions of project
completion would destroy the constitutionally protected right of labor to security of tenure. 20
The facts and circumstances surrounding the dismissal of private respondent likewise cast
serious doubt on whether project completion was the true reason behind the termination of his
employment. As correctly observed by the NLRC as well as private respondent, petitioners have
not been consistent in citing project completion as the basis for the dismissal. After a careful
perusal of the Employer's Monthly Report on Employees' Termination accomplished and
submitted by petitioners we cannot help entertaining serious doubt, as the NLRC did, on the
proper cause for private respondent's dismissal from his employment.
WHEREFORE, the petition for certiorari is DENIED. The assailed Resolution of the National
Labor Relations Commission dated 25 August 1992 directing petitioners "to pay complainant
(private respondent) back wages computed from January 1, 1990 up to the closure of the Subic
Naval Base that has been of public knowledge" is AFFIRMED. Costs against petitioners.
SO ORDERED.
Padilla, Davide, Jr., Kapunan and Hermosisima, Jr., JJ., concur.

G.R. No. 101539 September 4, 1992

CECILE DE OCAMPO, WILFREDO SAN PEDRO, REYNALDO DOVICAR,
BIEN MEDINA, CESAR ABRIOL, ARTEMIO CASTRO, LARRY ALCANTARA,
MICHAEL NOCUM, JESUS DEO JR., PUBLEO DARAG, EDUARDO BINO,
EDUARDO VELES, ERVIN DAVID, PROTACIO PEREZ, NOEL VICTOR,
ELENO DACATIMBAN, ANTONIO BERNARDO, CARLITO VICTORIA,
TIMOTEO MIJARES, ALEX RAMOS, REYNALDO CRUZ, MODESTO
MAMESIA, DOMINGO SILARDE, RENATO PUENTAS, RENE VILLANUEVA,
MARCELO DELA CRUZ and HERNANDO LEGASPI, petitioners

vs.
NATIONAL LABOR RELATIONS COMMISSION and BALIWAG MAHOGANY
CORPORATION, respondents.
MEDIALDEA, J.:
This Petition for certiorari seeks to annul and set aside the resolution issued by
the respondent National Labor Relations Commission on July 8, 1991, in
Certified Case No. 0548 entitled "In Re: Labor Dispute at Baliwag Mahogany
Corporation," affirming with modification its previous decision dated October 23,
1990, declaring the union officers and/or members who participated in the illegal
strike staged on February 6, 1990 to have lost their status of employment; and
directing private respondent Baliwag Mahogany Corporation to pay separation
pay to certain employees and to reinstate without backwages all union Members
not found to have committed prohibited acts.
The antecedent facts are as follows:
Petitioners Cecile de Ocampo, Wilfredo San Pedro, Reynaldo Dovicar, Bien
Medina, Cesar Abriol, Artemio Castro, Larry Alcantara, Michael Nocum, Jesus
Deo, Jr., Publeo Darag, Eduardo Bino, Eduardo Veles, Ervin David, Prostacio
Perez, Noel Victor, Eleno Dacatimban, Antonio Bernardo, Carlito Victoria,
Timoteo Mijares, Alex Ramos, Reynaldo Cruz, Modesto Mamesia, Domingo
Silarde, Renato Puertas, Rene Villanueva, Marcelo dela Cruz and Hernando
Legaspi are employees of private respondent Baliwag Mahogany Corporation.
They are either officers or members of the Baliwag Mahogany Corporation
Union-CFW, the existing collective bargaining agent of the rank and file
employees in the company. Private respondent Baliwag Mahogany Corporation
is an enterprise engaged in the production of wooden doors and furniture and
has a total workforce of about 900 employees.
In 1988, private respondent Baliwag Mahogany Corporation (company) and
Baliwag Mahogany Corporation Union-CFW (union) entered into a collective
bargaining agreement containing, among other things, provisions on conversion
into cash of unused vacation and sick leaves; grievance machinery procedure;
and the right of the company to schedule work on Sundays and holidays.
In November, 1989, the union made several requests from the company, one of
which was the cash conversion of unused vacation and sick leave for 1987-1988
and 1988-1989.
Acting on the matter, the company ruled to allow payment of unused vacation
and sick leaves for the period of 1987-1988 but disallowed cash conversion of
the 1988-1989 unused leaves.
On January 3, 1990, the company issued suspension orders affecting twenty (20)
employees for failure to render overtime work on December 30, 1989. The
suspension was for a period of three (3) days effective January 3, 1996 to
January 5, 1990.
On the same day, the union filed a notice of strike on the grounds of unfair labor
practice particularly the violation of the CBA provisions on non-payment of

unused leaves and illegal dismissal of seven (7) employees in November, 1989.
On January 13, 1990, the company issued a notice of termination to three (3)
employees or union members, namely, Cecile de Ocampo, Rene Villanueva and
Marcelo dela Cruz, of the machinery department, allegedly to effect cost
reduction and redundancy.
The members of the union conducted a picket at the main gate of the company
on January 18, 1990.
On the same day, the company filed a petition to declare the strike illegal with
prayer for injunction against the union, Cecile de Ocampo, Wilfredo San Pedro
and Rene Aguilar.
An election of officers was conducted by the union on January 19, 1990.
Consequently, Cecile de Ocampo was elected as president.
During the conciliation meeting held at National Conciliation and Mediation Board
(NCMB) on January 22, 1990 relative to the notice of strike filed by the union on
January 3, 1990, the issue pertaining to the legality of the termination of three (3)
union members was raised by the union. However, both parties agreed to
discuss it separately.
Subsequently, in a letter dated January 28, 1990, the union requested for the
presence of a NCMB representative during a strike vote held by the union. The
strike vote resulted to 388 votes out of 415 total votes in favor of the strike.
Consequently, the union staged a strike on February 6, 1990.
On February 7, 1990, the company filed a petition to assume jurisdiction with the
Department of Labor and Employment.
On February 16, 1990, the company filed an amended petition, praying among
other things, that the strike staged by the union on February 6, 1990 be declared
illegal, there being no genuine strikeable issue and the violation of the no-strike
clause of the existing CBA between the parties.
The Secretary of Labor in an order dated February 15, 1990, certified the entire
labor dispute to the respondent Commission for compulsory arbitration and
directed all striking workers including the dismissed employees to return to work
and the management to accept them back.
The company filed an urgent motion for assignment of a sheriff to enforce the
order of the Secretary.
In an order dated February 22, 1990, the Secretary of Labor directed Sheriff
Alfredo Antonio, Jr., to implement the order.
On February 23, 1990, the sheriff, with the assistance of the PC/INP of San
Rafael, removed the barricades and opened the main gate of the company.
Criminal complaints for illegal assembly, grave threats, and grave coercion were
filed against Cecile de Ocampo, Timoteo Mijares, Modesto Mamesia and
Domingo Silarde by the local police authorities on February 24, 1990.
On February 25, 1990, the company caused the publication of his return to work

order in two (2) newspapers, namely NGAYON and ABANTE.

In its letter dated February 27, 1990, the union, through its President Cecile de
Ocampo, requested the Regional Director of DOLE, Region III to intervene in the
existing dispute with management.
Meanwhile, the company extended the February 26, 1990 deadline for the
workers to return to work until March 15, 1990.
The respondent Commission rendered a decision on October 23, 1990, declaring
the strikes staged on January 18, 1990 and February 6, 1990 illegal, the
dispositive portion of which provides as follows, to wit:
WHEREFORE, judgment is hereby rendered as follows:
1. The strike staged on January 18, 1990 is hereby declared illegal and all
employees who participated therein are reprimanded therefor or an further
warned that future similar acts shall be dealt more severely;
2. The strike staged on February 6, 1990 is hereby declared illegal and the
Union officers/members are deemed suspended from March 15, 1990 the
last deadline of the company for them to report to the date of promulgation
of this Decision. In short, the Union officers/members are ordered
reinstated to their positions but without backwages;.
3. Baliwag Mahogany Corporation is hereby directed to immediately
reinstate Cecile de Ocampo, Rene Villanueva and Marcelo dela Cruz to
their former positions without loss of seniority rights to pay them full
backwages for the period from January 17, 1990 to March 15, 1990 only;
4. The Baliwag Mahogany Corporation is hereby directed to immediately
reinstate Alex Ramos, Ronaldo Cruz, Fernando Hernandez, Renato
Puertas, Hernando Legaspi to their former positions and to pay them
backwages from date of dismissal to March 15, 1990 only;
5. The Baliwag Mahogany Corporation is hereby exonerated of the charge
of unfair labor practice;
6. The Baliwag Mahogany Corporation is directed to pay its employment
the cash equivalent of unused sick leaves for year 1989;
7. The Baliwag Mahogany Corporation is directed to remit to the Union the
dues for the month of January 1990.
SO ORDERED. (Rollo, pp. 68-69)
Such decision prompted the company to file a motion for reconsideration
substantially on the ground that public respondent seriously erred in not
dismissing the employees particularly the union officers, who participated in the
illegal strike.
In its supplemental motion for reconsideration, the company contended that as a
result of the strike, it failed to meet the purchase orders for the quarter valued at
fifteen million pesos.
Petitioners filed an opposition to the company's motion for reconsideration and

subsequently a supplemental comment/opposition to motion for reconsideration.

On December 13, 1990, the respondent Commission directed the Labor Arbiter
to receive evidence on the issues raised in the motion for reconsideration and
additional evidence on the issues already passed upon and to submit a report
thereon.
On July 8, 1991, the respondent Commission rendered a resolution affirming with
modification the decision dated October 23, 1990, the dispositive portion of which
provides as follows:
WHEREFORE, premises considered, the Decision of October 23, 1990 is
hereby MODIFIED, to wit:
1. The strike staged on February 6, 1990 is hereby declared illegal and the
Union officers/members who participated in said strike committed
prohibited acts are deemed to have lost their status of employment, to wit:
1. Cecile de Ocampo
2. Wilfredo San Pedro
3. Reynaldo Aguilar
4. Bren Medina (Bien Medina)
5. Cesar Abriol
6. Artemio Castro
7. Larry Alcantara
8. Melie Nocum (Michael Nocum)
9. Jesus Deo, Jr.
10. Publeo Darag
11. Eduardo Bino
12. Eduardo Vices (Eduardo Veles)
13. Abroin David (Ervin David)
14. Protacio Perez (Prostacio Perez)
15. Celso Sarmiento
16. Neol Vicbon (Noel Victor)
17. Alano Dacatimban (Eleno Dacatimban)
18. Antonio Bernardo
19. Carlito Victoria
20. Timoteo Mijares
21. Alex Ramos
22. Reynaldo Cruz
23. Modesto Manesia
24. Domingo Silarde
25. Renato Puertas
26. Hernando Legaspi
2. The Baliwag Mahogany Corporation is directed to pay Cecile de
Ocampo, Rene Villanueva and Marcelo Cruz separation pay computed at
one month per year of service in addition to one month pay as
indemnification pay for lack of notice (Art. 283, Labor Code).
3. The Baliwag Mahogany Corporation is directed to pay Alex Ramos,

Reynaldo Cruz, Renato Puertas, Hernando Legaspi separation pay

computed at one (1) month per year of service in addition to backwages
limited to six (6) months.
4. The Baliwag Mahogany Corporation is directed to reinstate but without
backwages all Union members not found herein to have committed
prohibited acts nor found to have accepted settlement from it nor have
voluntarily left the Company for reasons of their own.
5. All other findings in the questioned Decision are affirmed.
SO ORDERED. (Rollo, pp. 45-47)
Hence, this present petition raising three (3) issues, to wit:
1. Whether or not there is legal basis for declaring the loss of employment
status by petitioners on account of the strike in respondent Company.
2. Whether or not the dismissals of petitioners Cecile de Ocampo, Rene
Villanueva, and Marcelo dela Cruz from their positions by the company on
the ground of redundancy was done in good faith.
3. Whether or not respondent NLRC acted correctly in allowing
respondent company to submit additional evidence in support of its Motion
for Reconsideration and in giving credence to the said evidence despite
the fact that the same were not newly-discovered evidence as defined
under the Rules of Court. (Rollo, p. 11)
After a careful review of the records of this case, the Court finds the petition
devoid of merit.
Petitioners insist that there is no specific finding by the respondent commision
regarding the particular participation of the individual petitioners in the supposed
acts of violence or commission of prohibited acts during the strike such as denial
of free ingress to the premises of the company and egress therefrom as well as
illegal acts of coercion during the February, 1990 strike.
The Solicitor General disagrees and claims that it is undisputed that the union
resorted to illegal acts during the strike arguing that private respondent's
personnel manager specifically identified the union officers and members who
committed the prohibited acts and actively participated therein.
Moreover, the Solicitor General maintains that the illegality of the strike likewise
stems from the failure of the petitioners to honor the certification order and heed
the return-to-work order issued by the Secretary of Labor.
Answering this contention, the petitioners argued that their failure to immediately
return to work was not impelled by any malicious or malevolent motive but rather,
by their apprehension regarding their physical safety due to the presence of
military men in the factory who might cause them harm.
The law on the matter is Article 264 (a) of the Labor Code, to wit:
Article 264. (a) Prohibited activities. (a)
No strike or lockout shall be declared after assumption of jurisdiction by

the President or the Minister or after certification or submission of the

dispute to compulsory or voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or lockout.
Any worker whose employment has been terminated as a consequence of
an unlawful lockout shall be entitled to reinstatement with full backwages.
Any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
The clear mandate of the aforequoted article was stressed in the case of Union
of Filipro Employees v. Nestle Philippines, Inc. (G.R. Nos. 88710-13, December
19, 1990, 192 SCRA 396, 411) where it was held that a strike that is undertaken
despite the issuance by the Secretary of Labor of an assumption or certification
order becomes a prohibited activity and thus illegal, pursuant to the second
paragraph of Art. 264 of the Labor Code as Amended and the Union officers and
members, as a result, are deemed to have lost their employment status for
having knowingly participated in an illegal act.
Unrebutted evidence shows that the individual petitioners defied the return-towork order of the Secretary of Labor issued on February 15, 1990. As a matter of
fact, it was only on February 23, 1990 when the barricades were removed and
the main gate of the company was opened. Hence, the termination of the
services of the individual petitioners is justified on this ground alone.
Anent the contention that the respondent Commission gravely abused its
discretion when it allowed the presentation of additional evidence to prove the
loss suffered by the company despite the fact that they were mere afterthoughts
and just concocted by the company, time and again, We emphasize that
"technical rules of evidence are not binding in labor cases. Labor officials should
use every and 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" (Philippine Telegraph and Telephone Corporation v.
National Labor Relations Commission, G.R. No. 80600, March 21, 1990, 183
SCRA 451, 457).
Turning to the legality of the termination of three (3) of the individual petitioners,
petitioners contend that the company acted in bad faith when it terminated the
services of the three mechanics because the positions held by them were not at
all abolished but merely given to Gemac Machineries.
On the contrary, the company stresses that when it contracted the services of
Gemac Machineries for the maintenance and repair of its industrial machinery, it
only adopted a cost saving and cost-consciousness program in order to improve
production efficiency.
We sustain respondent Commission's finding that petitioners' dismissal was
justified by redundancy due to superfluity and hence legal.

We believe that redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the
actual requirement of the enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as over hiring of workers, decreased
volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise. The employer had no
legal obligation to keep in its payroll more employees, than are necessary for the
operation of its business. (Wiltshire File Co., Inc. v. National Labor Relations
Commission, G.R. No. 82249, February 7, 1991; 193 SCRA 665,672).
The reduction of the number of workers in a company made necessary by the
introduction of the services of Gemac Machineries in the maintenance and repair
of its industrial machinery is justified. There can be no question as to the right of
the company to contract the services of Gemac Machineries to replace the
services rendered by the terminated mechanics with a view to effecting more
economic and efficient methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners') services
as no longer necessary or sustainable, and therefore properly terminable, was an
exercise of business judgment on the part of (private respondent) company. The
wisdom or soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and malicious action is not shown"
(ibid, p. 673).
In contracting the services of Gemac Machineries, as part of the company's costsaving program, the services rendered by the mechanics became redundant and
superfluous, and therefore properly terminable. The company merely exercised
its business judgment or management prerogative. And in the absence of any
proof that the management abused its discretion or acted in a malicious or
arbitrary manner, the court will not interfere with the exercise of such prerogative.
Well-settled is the rule that the factual findings of administrative bodies are
entitled to great weight, and these findings are accorded not only respect but
even finality when supported by substantial evidence (Family Planning
Organization of the Philippines, Inc. v. National Labor Relations Commission,
G.R. No. 75987, March 23, 1992, p. 7 citing Asian Construction and
Development Corporation v. National Labor Relations Commission, G.R. No.
85866, July 24, 1998, 187 SCRA 784, 787). Hence, the truth or the falsehood of
alleged facts is not for this Court now to re-examine.
In the light of the foregoing considerations, it is clear that the assailed resolution
of the respondent Commission is not tainted with arbitrariness nor grave abuse of
discretion.
ACCORDINGLY, the petition is DISMISSED for lack of merit and the resolution of
the respondent Commission dated July 8, 1991 is hereby AFFIRMED.
SO ORDERED.
Cruz, Grio-Aquino and Bellosillo, JJ., concur.

G.R. No. 106090 February 28, 1994

RICARDO FERNANDEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and D. M. CONSUNJI, INC.,
respondents.
Gaston V. Taquio for petitioner.
Marcos S. Pagaspas for private respondent.
NOCON, J.:
Forming the crux of the matter in this petition for certiorari is the question of
whether or not the National Labor Relations Commission acted with grave abuse
of discretion in reversing the Labor Arbiter's decision by dismissing the
complaints for illegal dismissal, one of which is petitioner's, on the finding that
they were project employees.
Petitioner was hired as a laborer at the D.M. Consunji, Inc., a construction firm,
on November 5, 1974. He became a skilled welder and worked for private
respondent until March 23, 1986 when his employment was terminated on the
ground that the project petitioner had been assigned to was already completed
and there was no more work for him to do.
Skeptic of private respondent's reason, petitioner brought his plight before the
Labor Arbiter who consolidated the same with three (3) other separate
complaints for illegal dismissal and various money claims against private
respondent. After filing their respective position papers and other documents
pertinent to their causes/defenses, the parties agreed to submit the case for
decision based on record.
On May 12, 1988, Labor Arbiter Fernando V. Cinco rendered a decision, finding
that complainants worked continuously in various projects ranging from five (5) to
twenty (20) years and belonged to a work pool, the dispositive portion of which
states as follows:
WHEREFORE, premises considered, the terminations by respondent of
herein complainants are hereby declared illegal. Consequently,
respondent is ordered to reinstate the complainants, who have not yet
reached the retirement age, to their former positions plus backwages of
one (1) year.
Anent complainants who have already reach the retirement age of sixty
(60) years as of the date of this decision, respondent is thereby ordered to
pay said complainants their retirement/separation benefits equivalent to
one half (1/2) month salary for every year of service, a fraction of at least

six (6) months being considered as one (1) whole year.

Moreover, respondent is ordered to pay all complainants their service
incentive leave for the past three (3) years; and to pay complainants
Ricardo Fernandez, Gaudencio Merhan and Rolando Serona their 13th
month pay likewise for the past three (3) years.
The complaints of Amador Borromeo, Jesus Espiritu and Ramon Celestial
are hereby dismissed in view of their receipt of Separation pay and their
execution of quitclaims in favor of herein respondent.
The other claims are likewise dismissed for lack of merit.
SO ORDERED.
Metro Manila, Philippines. 12 May 1988. 1
Private respondent questioned on appeal the aforesaid decision of the Labor Arbiter on the
ground that the complainants were all project employees who were hired on a project-to-project
basis, depending on the availability of projects that the former was able to close with its clients.
Respondent pointed to the gaps in complainants' respective employment histories to show that
they were indeed hired on an "off-and-on" basis.
In view of the lack of evidence on record to prove the continuous employment of complainantsappellees, and that on the contrary, what was proven was the intermittent nature of their work as
shown by the different project contracts, the respondent Commission concluded that
complainants-appellees were project employees. The dispositive portion of the decision dated
September 29, 1989 of respondent Commission reads:
WHEREFORE, the decision of the Labor Arbiter is hereby set aside and a new one
entered dismissing the complaints filed by complainants-appellees for lack of merit. 2
From said decision, the complainants-appellees interposed a motion for reconsideration which
was denied for lack of merit on July 19, 1991. Respondent Commission affirmed its finding that
complainants-appellees were project employees. As such, the nature of their employment did not
change by the number of projects in which they have rendered service. Respondent Commission
also noted that the motion for reconsideration was filed only on January 29, 1990 which was
beyond the ten-day reglementary period from date of receipt of the decision on November 13,
1989.
Without any mention of the denial of said motion for reconsideration, petitioner alone comes
before this Court on a petition filed on July 21, 1992 and assails the decision dated September
29, 1989 of respondent Commission contending that it is more in keeping with the intent and spirit
of the law to consider him and the thirteen (13) other complainants in the consolidated cases as
regular employees.
At the outset, it is obvious that the petition was not filed within a reasonable time from receipt of
the questioned decision on November 13, 1989 as the petition was filed only on July 21, 1992.
Neither does the filing of the petition appear to be reasonable from the date of receipt of the
denial of the motion for reconsideration on August 2, 1991. Reckoned from this later date,
petitioner waited for almost one year before he availed of this extraordinary remedy of certiorari.
We have consistently stated that "the yardstick to measure the timeliness of a petition for
certiorari is the reasonableness of the duration of time that had expired from the commission of
the acts complained of up to the institution of the proceedings to annul the same." 3 Without
doubt, petitioner's negligence or indifference for such a long period of time has in the meantime
rendered the questioned decision final and no longer assailable.
Even if we were to dispense with the requirement that the petition should be filed within a
reasonable time, the petition would still have to be dismissed on the merits. Private respondent
presented material documents showing that petitioner was hired as a project employee with the

specific dates of hiring, the duration of hiring, the dates of his lay-offs, including the lay-off reports
and the termination reports submitted to the then Ministry of Labor and Employment. Such data
covered the period from November 5, 1974 to March 23, 1986.
Inasmuch as the documentary evidence clearly showed gaps of a month or months between the
hiring of petitioner in the numerous projects wherein he was assigned, the ineluctable conclusion
is that petitioner has not continuously worked with private respondent but only intermittently as he
was hired solely for specific projects. As such, he is governed by Policy Instruction No. 20, the
pertinent portions of which read as follows:
Generally, there are two types of employees in the construction industry, namely 1)
Project Employees and 2) Non-project Employees.
Project employees are those employed in connection with a particular construction
project. Non-project employees are those employed by a construction company without
reference to a 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.
Petitioner cites Article 280 of the Labor Code as legal basis for the decision of the Labor Arbiter in
his favor. The text of Article 280 states 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 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.
Petitioner claims that the above-quoted proviso in Article 280 of the Labor Code supports his
claim that he should be regarded as a regular employee.
We disagree. The proviso in the second paragraph of Article 280 of the Labor Code has recently
been explained in Mercado v. NLRC, 4 where it was held that said proviso deems as regular
employees only those "casual" employees who have rendered at least one year of service
regardless of the fact that such service may be continuous or broken. It is not applicable to
"project" employees, who are specifically excepted therefrom. Thus, the Court therein said:
The general rule is that the office of a proviso is to qualify or modify only the phrase
immediately preceding it or restrain or limit the generality of the clause that it immediately
follows. (Statutory Construction by Ruben Agpalo, 1986 ed., p. 173). Thus, it has been
held that a proviso is to be construed with reference to the immediately preceding part of
the provision to which it is attached, and not to the statute itself or to other sections
thereof. (Chinese Flour Importers Association v. Price Stabilization Board, 89 Phil. 469
(1951); Arenas v. City of San Carlos, G.R. No. 24024, April 5, 1978, 82 SCRA 318 (1978).
The only exception to the rule is where the clear legislative intent is to restrain or qualify
not only the phrase immediately preceding it (the proviso) but also earlier provisions of
the statute or even the statute itself as a whole. (Commissioner of Internal Revenue v.
Filipinas Compania de Seguros, 107 Phil. 1055 (1960)
Indeed, a careful reading of the proviso readily discloses that the same relates to employment

where the employee is engaged to perform activities that are usually necessary or desirable in
the usual business or trade of the employer but hastens to qualify that project employment is
specifically exempted therefrom.
Finally, petitioner relies on Policy Instruction No. 20 which was issued by then Secretary Blas F.
Ople to stabilize employer-employee relations in the construction industry to support his
contention that workers in the construction industry may now be considered regular employees
after their long years of service with private respondent. The pertinent provision of Policy
Instruction No. 20 reads:
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 nonproject employees or employees for an indefinite 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.
Respondent Commission correctly observed in its decision that complainants, one of whom
petitioner, failed to consider the requirement in Policy Instruction No. 20 that to qualify as member
of a work pool, the worker must still be considered an employee of the construction company
while in the work pool. In other words, there must be proof to the effect that petitioner was under
an obligation to be always available on call of private respondent and that he was not free to offer
his services to other employees. Unfortunately, petitioner miserably failed to introduce any
evidence of such nature during the times when there were no project.
Noteworthy in this case is the fact that herein private respondent's lay-off reports and the
termination reports were duly submitted to the then Ministry of Labor and Employment everytime
a project was completed in accordance with Policy Instruction No. 20, which provides:
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 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.
The presence of this factor makes this case different from the cases decided by the Court where
the employees were deemed regular employees. The cases of Ochoco v. National Labor
Relations Commission, 5 Philippine National Construction Corporation v. National Labor Relations
Commission, 6 Magante v. National Labor Relations Commission, 7 and Philippine National
Construction Corporation v. National Labor Relations, et al., 8 uniformly held that the failure of the
employer to report to the nearest employment office the termination of workers everytime a
project is completed proves that the employees are not project employees. Contrariwise, the
faithful and regular effort of private respondent in reporting every completion of its project and
submitting the lay-off list of its employees proves the nature of employment of the workers
involved therein as project employees. Given this added circumstance behind petitioner's
employment, it is clear that he does not belong to the work pool from which the private
respondent would draw workers for assignment to other projects at its discretion.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED in view of the foregoing
reasons.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

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
Commission (NLRC) dated 31 October 1991 in NLRC NCR 00-01-04703-88 1
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 amount of P68,826.94 as of 29 November 1989. 2
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 Magante v. NLRC 3 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 whatever being exercised by the former over the latter.
4
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) project contracts 5 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 coterminus 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.
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 to present any report of termination. On this point, the pronouncement in
Magante v. NLRC 7 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 three (3) months is considered reasonable. 8 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.
Cruz, Grio-Aquino, Davide, Jr. and Quiason, JJ., concur.

seasonal

G.R. No. 89920 October 18, 1990

UNIVERSITY OF STO. TOMAS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, UST FACULTY UNION,
respondents.
Abad, Leao & Associates for petitioner.
Eduardo J. Mario, Jr. for private respondent.
GUTIERREZ, JR., J.:
May a university, pending resolution by the National Labor Relations Commission (NLRC) of its labor dispute
with its union, comply with a readmission order by granting substantially equivalent academic assignments,
in lieu of actual reinstatement, to dismissed faculty members?
On June 19, 1989, the University of Sto. Tomas (UST), through its Board of Trustees, terminated the
employment of all sixteen union officers and directors of respondent UST Faculty Union on the ground that
"in publishing or causing to be published in Strike Bulletin No. 5 dated August 4, 1987, the libelous and
defamatory attacks against the Father Rector, (each of them) has committed the offenses of grave
misconduct, serious disrespect to a superior and conduct unbecoming a faculty member." (Rollo p. 41)
As a result of the dismissal of said employees, some faculty members staged mass leaves of absence on
June 28, 1989 and several days thereafter, disrupting classes in all levels at the University. (Rollo, pp. 53,
92)
On July 5, 1989, the faculty union filed a complaint for illegal dismissal and unfair labor practice with the
Department of Labor and Employment. (Rollo, p. 42)
On July 7, 1989, the labor arbiter, on a prima facie showing that the termination was causing a serious labor
dispute, certified the matter to the Secretary of Labor and Employment for a possible suspension of the
effects of termination. (Rollo, p. 51)
Secretary Franklin Drilon subsequently issued an order dated July 11, 1989, the decretal portion of which
reads as follows:
WHEREFORE, ABOVE PREMISES CONSIDERED, and in the interest of industrial peace and
pursuant to Section 33 (b) of RA 6715, the effects of the termination of Ma. Melvyn Alamis, Eduardo
Marino, Jr., Urbano Agalabia, Anthony Cura, Norma Collantes, Fulvio Guerrero, Corinta Barranco,
Porfirio Jose Guico, Lily Matias, Rene Sison, Henedino Brondial, Myrna Hilario, Ronaldo Asuncion,
Nilda Redoblado, Zenaida Burgos, and Milagros Nino are hereby suspended and management is
likewise ordered to accept them back to work under the same terms and conditions prevailing prior
to their dismissal.
In furtherance of this Order, all faculty members are directed to immediately report back for work
and for management to accept them back under the same terms and conditions prevailing prior to
the strike.
Labor Arbiter Nieves de Castro is hereby directed to proceed with the case pending before her and
to expedite the resolution of the same.
Pending resolution, the parties are directed to cease and desist, from committing any and all acts
that might exacerbate the situation. (Rollo, p. 54)
Petitioner UST filed a motion for reconsideration on July 12, 1989 asking the Secretary of Labor and
Employment to either assume jurisdiction over the present case or certify it to the National Labor Relations
Commission (NLRC) for compulsory arbitration without suspending the effects of the termination of the 16
dismissed faculty members. (Rollo, pp. 55-64)
On July 18, 1989, Secretary Drilon, acting on said motion for reconsideration, issued another order
modifying his previous order. The dispositive portion of the new order is quoted below:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 11 July 1989 is hereby
modified. Accordingly, this Office hereby certifies the labor dispute to the National Labor Relations
Commission for compulsory arbitration pursuant to Article 263(g) of the Labor Code, as amended

by Section 27 of RA 6715.
In accordance with the above, the University of Santo Tomas is hereby ordered to readmit all its
faculty members, including the sixteen (16) union officials, under the same terms and conditions
prevailing prior to the present dispute.
The NLRC is hereby instructed to immediately call the parties and expedite the resolution of the
dispute.
The directive to the parties to cease and desist from committing any act that will aggravate the
situation is hereby reiterated. (Rollo, p. 81)
The petitioner filed a motion for clarification dated July 20, 1989 which was subsequently withdrawn. (Rollo,
p. 94)
On July 27, 1989, Secretary Drilon issued another order that contained the following dispositive portion:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 18 July 1989 directing the
readmission of all faculty members, including the 16 union officials, under the same terms and
conditions prevailing prior to the instant dispute is hereby affirmed.
The NLRC is hereby ordered to immediately call the parties and ensure the implementation of this
Order.
No further motion of this and any nature shall be entertained. (Rollo, p. 103)
The NLRC subsequently caned the parties to a conference on August 11, 1989 before its Labor Arbiter
Romeo Go. (Rollo, p. 9)
On August 14, 1989, the respondent union filed before the NLRC a motion to implement the orders of the
Honorable Secretary of Labor and Employment dated July 11, 18 and 27, 1989 and to cite Atty. Joselito
Guianan Chan (the petitioner's in-house counsel) for contempt. (Rollo, p. 104) The petitioner, on August 25,
1989, filed its opposition to the private respondent's motion. (Rollo, p. 112)
On September 6, 1989, the NLRC issued a resolution, which is the subject of this petition for certiorari, set
forth below:
Certified Case No. 0531 IN RE: LABOR DISPUTE at the University of Santo Tomas. Acting on
the Motion to Implement the Orders of the Honorable Secretary of Labor and Employment dated
July 11, 18, and 27, 1989 and to cite Joselito Guianan Chan for Contempt dated August 14, 1989
and the Urgent Ex-parte Motion to Implement Certification Orders of the Honorable Secretary of
Labor and Employment dated July 18 and 17, (Sic) 1989 and the subsequent Manifestation dated
September 4, 1989, all filed by the UST Faculty Union; and considering the Opposition to Union's
Motion to Cite Atty. Joselito Guianan Chan for Contempt and Comments on its Motion to Implement
the Orders of the Honorable Secretary of Labor and Employment dated July 11, 18 and 27, 1989
filed on August 25, 1989 by UST through its counsel, the Commission, after deliberation, resolved,
to wit:
a) The University is hereby directed to comply and faithfully abide with the July 11, 18 and 27, 1989
Orders of the Secretary of Labor and Employment by immediately reinstating or readmitting the
following faculty members under the same terms and conditions prevailing prior to the present
dispute or merely reinstate them in the payroll:
a) Ronaldo Asuncion
b) Lily Matias
c) Nilda Redoblado
d) Zenaida Burgos
e) Eduardo Marino, Jr.
f) Milagros Nino
g) Porfirio Guico
b) To fully reinstate, by giving him additional units or through payroll reinstatement, Prof. Urbano
Agalabia who was assigned only six (6) units;
c) To fully reinstate or reinstate through payroll, Prof. Fulvio Guerrero, who was assigned only three
(3) units;
d) The University is directed to pay the above-mentioned faculty members full backwages starting

from July 13, 1989, the date the faculty members presented themselves for reinstatement up to the
date of actual reinstatement or payroll reinstatement.
e) The payroll reinstatement of the above-named faculty members is hereby allowed only up to the
end of the First semester 1989; Next semester, the University is directed to actually reinstate the
faculty members by giving them their normal teaching loads;
f) The University is directed to cease and desist from offering the aforementioned faculty members
substantially equivalent academic assignments as this is not compliance in good faith with the
Orders of the Secretary of Labor and Employment. (Rollo, pp. 30-31)
Acting on an urgent motion for the issuance of a writ of preliminary injunction and/or restraining order, the
Court resolved to issue a temporary restraining order dated October 25, 1989 enjoining respondents from
enforcing or executing the assailed NLRC resolution. (Rollo, p. 160)
The petitioner assigns the following errors:
I
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) GRAVELY ABUSED ITS
DISCRETION IN A MANNER AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED
THE ASSAILED RESOLUTION WHICH ORDERS THE ALTERNATIVE REMEDIES OF ACTUAL
REINSTATEMENT OR PAYROLL REINSTATEMENT OF THE DISMISSED FACULTY MEMBERS.
II
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DIRECTED THE UNIVERSITY TO PAY
SOME OF THE DISMISSED FACULTY MEMBERS ASSIGNED TO HANDLE SUBSTANTIALLY
EQUIVALENT ACADEMIC ASSIGNMENTS, 'FULL BACKWAGES STARTING FROM JULY 13, 1989, THE
DATE THE FACULTY MEMBERS PRESENTED THEMSELVES FOR REINSTATEMENT UP TO THE DATE
OF ACTUAL REINSTATEMENT OR PAYROLL REINSTATEMENT.
III
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNT ING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONSIDERED AS 'NOT
COMPLIANCE IN GOOD FAITH WITH THE ORDERS OF THE SECRETARY OF LABOR AND
EMPLOYMENT' THE UNIVERSITY'S ACT OF GRANTING TO SOME OF THE DISMISSED FACULTY
MEMBERS, SUBSTANTIALLY EQUIVALENT ACADEMIC ASSIGNMENTS.
IV
THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT ARROGATED UPON ITSELF
THE EXERCISE OF THE RIGHT AND PREROGATIVES REPOSED BY LAW TO THE PETITIONER
UNIVERSITY IN THE LATTER'S CAPACITY AS EMPLOYER. (Rollo, pp. 9-10)
We shall deal with the first and third assignment of errors jointly because they are interrelated.
The petitioner states in its petition that: a) It has already actually reinstated six of the dismissed faculty
members, namely: Professors Alamis, Collantes, Hilario, Barranco, Brondial and Cura; b) As to Professors
Agalabia and Guerrero, whose teaching assignments were partially taken over by new faculty members,
they were given back their remaining teaching loads (not taken by new faculty members) but were likewise
given substantially equivalent academic assignments corresponding to their teachings loads already taken
over by new faculty members; c) The remaining seven faculty members, to wit: Professors Asuncion, Marino
Jr., Matias, Redoblado, Burgos, Nino and Guico, were given substantially equivalent academic assignments
in lieu of actual teaching loads because all of their teaching loads originally assigned to them at the start of
the first semester of school year 1989-1990 were already taken over by new faculty members; d) One
dismissed faculty member Rene Sison, had been "absent without official leave" or AWOL as early as the
start of the first semester. (Rollo, pp. 11-12).
The petitioner advances the argument that its grant of substantially equivalent academic assignments to
some of the dismissed faculty members, instead of actual reinstatement, is well-supported by just and valid
reasons. It alleges that actual reinstatement of the dismissed faculty members whose teaching assignments
were previously taken over by new faculty members is not feasible nor practicable since this would compel
the petitioner university to violate and terminate its contracts with the faculty members who were assigned to
and had actually taken over the courses. The petitioner submits that it was never the intention of the
Secretary of Labor to force it to break employment contracts considering that those ordered temporarily
reinstated could very well be accommodated with substantially equivalent academic assignments without
loss in rank, pay or privilege. Likewise, it claims that to change the faculty member when the semester is

about to end would seriously impair and prejudice the welfare and interest of the students because
dislocation, confusion and loss in momentum, if not demoralization, will surely ensue once the change in
faculty is effected. (Rollo, pp. 13-14)
The petitioner also avers that the faculty members who were given substantially equivalent academic
assignments were told by their respective deans to report to the Office of Academic Affairs and Research for
their academic assignments but the said faculty members failed to comply with these instructions. (Rollo, p.
118) Thus, the petitioner postulates, mere payroll reinstatement which would give rise to the obligation of the
University to pay these faculty members, even if the latter are not working, would squarely run counter to the
principle of "No Work, No Pay". (Rollo, p. 15)
The respondent UST Faculty Union, on the other hand, decries that the petitioner is using the supposed
substantially equivalent academic assignments as a vehicle to embarrass and degrade the union leaders
and that the refusal of the petitioner to comply with the return-to-work order is calculated to deter, impede
and discourage the union leaders from pursuing their union activities. (Rollo, pp. 246, 254)
It also claims that the dismissed faculty members were hired to perform teaching functions and, indeed, they
have rendered dedicated teaching service to the University students for periods ranging from 12 to 39 years.
Hence, they maintain, their qualifications are fitted for classroom activities and the assignment to them of
non-teaching duties, such as (a) book analysis; (b) syllabi-making or revising; (c) test questions construction;
(d) writing of monographs and modules for students' use in learning "hard to understand" topics on the
lectures; (e) designing modules, transparencies, charts, diagrams for students' use as learning aids; and (f)
other related assignments, is oppressive. (Rollo, pp. 243-244)
In resolving the contentions of both parties, this Court refers to Article 263 (g), first paragraph, of the Labor
Code, as amended by Section 27 of Republic Act No. 6715, which provides:
(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in
an industry indispensable to the national interest, the Secretary of Labor and Employment may
assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or certification
order. If one has already taken place at the time of assumption or certification, all striking or locked
out employees shall immediately return to work and the employer shall immediately resume
operations and readmit all workers under the same terms and conditions prevailing before the
strike or lockout. The Secretary of Labor and Employment or the Commission may seek the
assistance of law enforcement agencies to ensure compliance with this provision as well as with
such orders as he may issue to enforce the same. (Emphasis supplied.)
It was in compliance with the above provision that Secretary Drilon issued his July 18, 1989 order to
"readmit all its faculty members, including the sixteen (16) union officials, under the same terms and
conditions prevailing prior to the present dispute." (Rollo, p. 81) And rightly so, since the labor controversy
which brought about a temporary stoppage of classes in a university populated by approximately 40,000
students affected national interest.
After the petitioner filed a motion for clarification which, however, was subsequently withdrawn, Secretary
Drilon issued another order dated July 27, 1989 affirming his July 18 order and directing the NLRC to
immediately call the parties and "ensure the implementation of this order" (Rollo, p. 103)
The NLRC was thereby charged with the task of implementing a valid return-to-work order of the Secretary
of Labor. As the implementing body, its authority did not include the power to amend the Secretary's order.
Since the Secretary's July 18 order specifically provided that the dismissed faculty members shall be
readmitted under the same terms and conditions prevailing prior to the present dispute, the NLRC should
have directed the actual reinstatement of the concerned faculty members. It therefore erred in granting the
alternative remedy of payroll reinstatement which, as it turned, only resulted in confusion. The remedy of
payroll reinstatement is nowhere to be found in the orders of the Secretary of Labor and hence it should not
have been imposed by the public respondent NLRC. There is no showing that the facts called for this type of
alternative remedy.
For the same reason, we rule that the grant of substantially equivalent academic assignments can not be
sustained. Clearly, the giving of substantially equivalent academic assignments, without actual teaching
loads, cannot be considered a reinstatement under the same terms and conditions prevailing before the
strike. Within the context of Article 263(g), the phrase "under the same terms and conditions" contemplates
actual reinstatement or the return of actual teaching loads to the dismissed faculty members. There are
academic assignments such as the research and writing of treatises for publication or full-time laboratory
work leading to exciting discoveries which professors yearn for as badges of honor and achievement. The
assignments given to the reinstated faculty members do not fall under such desirable categories.

Article 263(g) was devised to maintain the status quo between the workers and management in a labor
dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest,
pending adjudication of the controversy. This is precisely why the Secretary of Labor, in his July 11, 1989
order, stated that "Pending resolution, the parties are directed to cease and desist from committing any and
all acts that might exacerbate the situation." (Rollo, p. 54) And in his order of July 18, he decreed that "The
directive to the parties to cease and desist from committing any act that will aggravate the situation is hereby
reiterated." (Rollo, p. 81)
The grant of substantially equivalent academic assignments of the nature assigned by the petitioner would
evidently alter the existing status quo since the temporarily reinstated teachers will not be given their usual
teaching loads. In fact, the grant thereof aggravated the present dispute since the teachers who were
assigned substantially equivalent academic assignments refused to accept and handle what they felt were
degrading or unbecoming assignments, in turn prompting the petitioner University to withhold their salaries.
(Rollo, p. 109)
We therefore hold that the public respondent NLRC did not commit grave abuse of discretion when it ruled
that the petitioner should "cease and desist from offering the aforementioned faculty members substantially
equivalent academic assignments as this is not compliance in good faith with the order of the Secretary of
Labor and Employment."
It was error for the NLRC to order the alternative remedies of payroll reinstatement or actual reinstatement.
However, the order did not amount to grave abuse of discretion. Such error is merely an error of judgment
which is not correctible by a special civil action for certiorari. The NLRC was only trying its best to work out a
satisfactory ad hoc solution to a festering and serious problem. In the light of our rulings on the impropriety
of the substantially equivalent academic assignments and the need to defer the changes of teachers until
the end of the first semester, the payroll reinstatement will actually minimize the petitioners problems in the
payment of full backwages.
As to the second assignment of error, the petitioner contends that the NLRC committed grave abuse of
discretion in awarding backwages from July 13, 1989, the date the faculty members presented themselves
for work, up to the date of actual reinstatement, arguing that the motion for reconsideration seasonably filed
by the petitioner had effectively stayed the Secretary's order dated July 11, 1989.
The petitioner's stand is unmeritorious. A return-to-work order is immediately effective and executory despite
the filing of a motion for reconsideration by the petitioner. As pointed out by the Court in Philippine Air Lines
Employees Association (PALEA) v. Philippine Air Lines, Inc. (38 SCRA 372 [1971]):
The very nature of a return-to-work order issued in a certified case lends itself to no other
construction. The certification attests to the urgency of the matter affecting as it does an industry
indispensable to the national interest. The order is issued in the exercise of the court's compulsory
power of arbitration, and therefore must be obeyed until set aside. To say that its effectivity must
wait affirmance in a motion for reconsideration is not only to emasculate it but indeed to defeat its
import, for by then the deadline fixed for the return-to-work would, in the ordinary course, have
already passed and hence can no longer be affirmed insofar as the time element is concerned.
Additionally, although the Secretary's order of July 11 was modified by the July 18 order, the return-to-work
portion of the earlier order which states that "the faculty members should be admitted under the same terms
and conditions prevailing prior to the dispute" was affirmed.
We likewise affirm the NLRC's finding that the dismissed teachers presented themselves for reinstatement
on July 13, 1989 since the factual findings of quasi-judicial agencies like the NLRC are generally accorded
not only respect but even finality if such findings are supported by substantial evidence. (Mamerto v. Inciong,
118 SCRA 265 [1982]; Baby Bus, Inc. v. Minister of Labor, 158 SCRA 221 [1988]; Packaging Products
Corporation v. National Labor Relations Commission, 152 SCRA 210 [1987]; Talisay Employees' and
Laborers Association (TELA) v. Court of Industrial Relations, 143 SCRA 213 [1986]). There is no showing
that such substantial evidence is not present.
The petitioner, however, stresses that since the faculty members who were given substantially equivalent
academic assignments did not perform their assigned tasks, then they are not entitled to backwages. (Rollo,
p. 19) The petitioner is wrong. The reinstated faculty members' refusal to assume their substantially
equivalent academic assignments does not contravene the Secretary's return-to-work order. They were
merely insisting on being given actual teaching loads, on the return-to-work order being followed. We find
their persistence justified as they are rightfully and legally entitled to actual reinstatement. Since the
petitioner University failed to comply with the Secretary's order of actual reinstatement, we adjudge that the
NLRC's award of backwages until actual reinstatement is correct.
With respect to the fourth assignment of error, the petitioner expostulates that as employer, it has the sole

and exclusive right and prerogative to determine the nature and kind of work of its employees and to control
and manage its own operations. Thus, it objects to the NLRC's act of substituting its judgment for that of the
petitioner in the conduct of its affairs and operations. (Rollo, pp. 23-24)
Again, we cannot sustain the petitioner's contention. The hiring, firing, transfer, demotion and promotion of
employees are traditionally Identified as management prerogatives. However, these are not absolute
prerogatives. They are subject to limitations found in law, a collective bargaining agreement, or general
principles of fair play and justice. (Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA 713 [1987])
Article 263(g) is one such limitation provided by law. To the extent that Art. 263(g) calls for the admission of
all workers under the same terms and conditions prevailing before the strike, the petitioner University is
restricted from exercising its generally unbounded right to transfer or reassign its employees. The public
respondent NLRC is not substituting its own judgment for that of the petitioner in the conduct of its own
affairs and operations; it is merely complying with the mandate of the law.
The petitioner manifests the fear that if the temporarily reinstated faculty members will be allowed to handle
actual teaching assignments in the classroom, the latter would take advantage of the situation by making the
classroom the forum not for the purpose of imparting knowledge to the students but for the purpose of
assailing and lambasting the administration. (Rollo, p. 330) There may be a basis for such a fear. We can
even state that such concern is not entirely unfounded nor farfetched. However, such a fear is speculative
and does not warrant a deviation from the principle that the dismissed faculty members must be actually
reinstated pending resolution of the labor dispute. Unpleasant situations are sometimes aftermaths of bitter
labor disputes. It is the function of Government to fairly apply the law and thereby minimize the dispute's
harmful effects. It is in this light that the return to work order should be viewed and obeyed.
One thing has not escaped this Court's attention. Professors Alamis, Cura, Collantes, Barranco, Brondial
and Hilario were already reinstated by the petitioner in compliance with the Secretary's return-to-work order.
Knowing this to be a fact, the NLRC, in its assailed resolution, dealt only with the fate of the remaining
faculty members who were given substantially equivalent academic assignments. The names of the
aforementioned faculty members appear nowhere in the disputed NLRC order. Inasmuch as these faculty
members actually reinstated were not covered by the NLRC resolution, then it follows that they were
likewise not covered by the Court's temporary restraining order enjoining respondents from enforcing or
executing the NLRC resolution. The effects of the temporary restraining order did not extend to them. Yet,
after the Court issued the temporary restraining order, the petitioner lost no time in recalling their actual
teaching assignments and giving them, together with the rest of the dismissed faculty members,
substantially equivalent academic assignments.
The petitioner's dogmatic insistence in issuing substantially equivalent academic assignments stems from
the fact that the teaching loads of the dismissed professors have already been assigned to other faculty
members. It wants us to accept this remedy as one resorted to in good faith. And yet, the petitioner's
employment of the temporary restraining order as a pretext to enable it to substitute substantially equivalent
academic assignments even for those who were earlier already reinstated to their actual teaching loads runs
counter to the dictates of fair play.
With respect to the private respondent's allegation of union busting by the petitioner, we do not at this time
pass upon this issue. Its determination falls within the competence of the NLRC, as compulsory arbitrator,
before whom the labor dispute is under consideration. We are merely called upon to decide the propriety of
the petitioner University's grant of substantially equivalent academic assignments pending resolution of the
complaint for unfair labor pratice and illegal dismissal filed by the private respondent.
Although we pronounce that the dismissed faculty members must be actually reinstated while the labor
dispute is being resolved, we have to take into account the fact that at this time, the first semester for
schoolyear 1990-1991 is about to end. To change the faculty members around the time of final examinations
would adversely affect and prejudice the students whose welfare and interest we consider to be of primordial
importance and for whom both the University and the faculty union must subordinate their claims and
desires. This Court therefore resolves that the actual reinstatement of the non-reinstated faculty members,
pending resolution of the labor controversy before the NLRC, may take effect at the start of the second
semester of the schoolyear 1990-1991 but not later. With this arrangement, the petitioner's reasoning that it
will be violating contracts with the faculty members who took over the dismissed professors' teaching loads
becomes moot considering that, as it alleges in its petition, it operates on a semestral basis.
Under the principle that no appointments can be made to fill items which are not yet lawfully vacant, the
contracts of new professors cannot prevail over the right to reinstatement of the dismissed personnel.
However, we apply equitable principles for the sake of the students and order actual reinstatement at the
start of the second semester.
WHEREFORE, the petition is hereby DISMISSED. However, the NLRC resolution dated September 6, 1989

is MODIFIED and the petitioner University of Sto. Tomas is directed to temporarily reinstate, pending and
without prejudice to the outcome of the labor dispute before the National Labor Relations Commission, the
sixteen (16) dismissed faculty members to their actual teaching assignments, at the start of the second
semester of the schoolyear 1990-1991. Prior to their temporary reinstatement to their actual teaching loads,
the said faculty members shall be entitled to fall wages, backwages, and other benefits. The Temporary
Restraining Order dated October 25, 1989 is hereby LIFTED.
SO ORDERED.
Fernan, C.J., (Chairman), Bidin and Cortes, JJ., concur.
Feliciano, J., is on leave.

probationary

G.R. No. 74004. August 10, 1989

A.M. ORETA & CO., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and SIXTO GRULLA JR.,
respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking
annulment of the resolution of the respondents National Labor Relations
Commission dated January 17, 1986 (p. 24, rollo) in BES Case no. 8-1371
entitled , "SIXTO GRULLA, JR., Complainant, versus A.M. ORETA & COMPANY
INC. and/or ENGINEERING CONSTRUCTION & INDUSTRIAL DEVELOPMENT
CO. (ENDECO), Respondents", affirming the decision of the Philippine Overseas
Employment Administration (POEA) awarding to private respondents herein Sixto
Grulla the salaries corresponding to the unexpired portion of his employment
contract.
The antecedent facts are as follows:
Private respondent Grulla was engaged by Engineering Construction and
Industrial Development Company (ENDECO) through A.M. Oreta and Co., Inc.,
as a carpenter in its projects in Jeddah, Saudi Arabia. The contract of
employment, which was entered into June 11, 1980 was for a period of twelve
(12) months. Respondent Grulla left the Philippines for Jeddah, Saudi Arabia on
August 5, 1980.
On August 15, 1980, Grulla met an accident which fractured his lumbar vertebra
while working at the jobsite. He was rushed to the New Jeddah Clinic and was

confined there for twelve (12) days. On August 27, 1980, Grulla was discharged
from the hospital and was told that he could resume his normal duties after
undergoing physical therapy for two weeks.
On September 18, 1980, respondent Grulla reported back to his Project Manager
and presented to the latter a medical certificate declaring the former already fit
for work. Since then, he started working again until he received a notice of
termination of his employment on October 9, 1980.
In December, 1981, respondent Grulla filed a complaint for illegal dismissal,
recovery of medical benefits, unpaid wages for the unexpired ten (10) months of
his contract and the sum of P1,000.00 as reimbursement of medical expenses
against A.M. Oreta and Company, Inc., and Engineering Construction and
Industrial Development Co. (ENDECO) with the Philippine Overseas
Employment Administration (POEA).lwph1.t
The petitioner A.M. Oreta and Company, Inc and ENDECO filed their answer and
alleged that the contract of employment entered into between petitioners and
Grulla provides, as one of the grounds for termination, violations of the rules and
regulations promulgated by the contractor; and that Grulla was dismissed
because he has not performed his duties satisfactorally within the probationary
period of three months.
On August 8, 1985, the POEA rendered a decision (pp. 97-107, Rollo) the
dispositive portion of which states, inter alia:
In view of the foregoing, this Office finds and so holds that complainants
dismissal was illegal and warrants the award of his wages for the
unexpired portion of the contract.
2. Anent the complainant's claim for medical expenses, this Office finds
the same well-taken. Respondent did not deny either specifically or
generally said claim. Hence, it is deemed admitted.
Wherefore, judgment is hereby rendered ordering repondents A.M. Oreta
and Company, Inc , and its foreign principal Engineering Construction and
Industrial Development Company (ENDECO) jointly and severally to pay
the complainant within ten (10) days from receipt of this Order the sum of
THREE THOUSAND SEVEN HUNDRED U.S. DOLLARS (U.S.$ 3,700.00)
or its equivalent at the time of payment representing complainant's
salaries for the unexpired portion of his contract for ten (10) months and
the sum of ONE THOUSAND PESOS ( P1,00.00 ) representing
reimbursement of medical expenses.
Respondent is likewise ordered to pay attorney's fees equivalent to ten
(10%) percent of total award
SO ORDERED.
Petitioner appealed from the adverse decision to respondent Commission. On
January 17, 1986, respondent Commission dismissed the appeal for lack of merit
and affirmed in toto the decision of the POEA.

On April 1, 1986, the instant petition was filed on the ground that the respondent
Commission commited grave abuse of discretion in affirming the decision of the
POEA. A temporary restraining order was issued by this court on April 23, 1986,
enjoining the respondents from enforcing the questioned resolution of the
respondent Commission.
The issue to be resolved in the instant case are whether or not the employment
of respondent Grulla was illegaly terminated by the petitioner; and whether or not
the respondent Grulla is entitled to salaries corresponding to the unexpired
portion of his employment contract.
Petitioner contends that the respondent Grulla was validly dismissed because the
latter was still a probationary employee; and that his dismissal was justified on
the basis of his unsatisfactory performance of his job during the probationary
period. This contention has no merit.
Article 280 (formerly Article 281) of the Labor Code, as amended, provides:
Article 280. Regular and Casual Employment The provisions of written
agreement to the contrary not withstanding 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 desireable in the usual business or trade of
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of engagement of the employment 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.
It may be well to cite at this point Policy Instructions No. 12 of the then Minister of
Labor (Now Secretary of Labor and Employment) which provides:
PD 850 has defined the concept of regular and casual employment. What
determines regularity or casualness is not employment contract, written or
otherwise, but the nature of the job. If the job is usually necessary or
desireable to the main business of the employer, the employment is
regular. . .
Petitioner admitted that respondent Grulla was employed in the company as
carpenter for a period of twelve (12) months before he was dismissed on October
9, 1980. A perusal of the employment contract reveals that although the period of
employment of respondent Grulla is twelve (12) months, the contract is
renewable subject to future agreements of the parties. It is clear from the
employment contract that the respondent Grulla was hired by the company as a
regular employee and not just mere probationary employee.

On the matter of probationary employment, the law in point is Article 281

(formerly 282) of the Labor Code which provides in part:
Art. 281 Probationary Employment . . .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 engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee. (Italics
supplied)
The law is clear to the effect that in all cases involving employees engaged on
probationary period basis, the employer shall make known to the employee at the
time he is hired, the standards by which he will qualify as a regular employee.
Nowhere in the employment contract executed between petitioner company and
respondent Grulla is there a stipulation that the latter shall undergo a
probationary period for three months before he can qualify as a regular
employee. There is also no evidence on record showing that the respondent
Grulla has been appraised of his probationary status and the requirements which
he should comply in order to be a regular employee. In the absence of this
requisites, there is justification in concluding that respondent Grulla was a regular
employee at the time he was dismissed by petitioner. As such, he is entitled to
security of tenure during his period of employment and his services cannot be
terminated except for just and authorized causes enumerated under the Labor
Code and under the employment contract.
Granting, in gratia argumenti, that respondent is a probationary employee, he
cannot, likewise, be removed except for cause during the period of probation.
Although a probationary or temporary employee has limited tenure, he still enjoys
security of tenure. During his tenure of employment or before his contract
expires, he cannot be removed except for cause as provided by law (Euro-Linea
Phils., Inc. v. NLRC, No. L-75782, December 1, 1987, 156 SCRA 78; Manila
Hotel Corporation v. NLRC, No. L-53453, January 22, 1986, 141 SCRA
169).lwph1.t
Article 282 of the Labor Code sets forth the following just causes for which an
employer may terminate an employment, namely:
(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 cause analogous to the foregoing
The alleged ground of unsatisfactory performance relied upon by petitioner for

dismissing respondent Grulla is not one of the just causes for dismissal provided
in the Labor Code. Neither is it included among the grounds for termination of
employment under Article VII of the contract of employment executed by
petitioner company and respondent Grulla (p. 18, Rollo). Moreover, petitioner has
failed to show proof of the particular acts or omissions constituting the
unsatisfactory performance of Grulla of his duties, which was allegedly due to his
poor physical state after the accident. Contrary to petitioner's claims, records
show that the medical certificate issued by the hospital where respondent Grulla
was confined as a result of the accident, clearly and positively stated that Grulla
was already physically fit for work after he was released from the hospital (p.
102, Rollo).lwph1.t
Anent the respondent Commission's finding of lack of due process in the
dismissal of Grulla, the petitioner claims that notice and hearing are important
only if the employee is not aware of the problems affecting his employment; that
the same is not true in the instant case where respondent Grulla knew all along
that he could no longer effectively perform his job due to his physical condition.
We find that this contention has no legal basis.
The twin requirements of notice and hearing constitute essential elements of due
process in cases of employee dismissal: the requirement of notice is intended to
inform the employee concerned of the employer's intent to dismiss and the
reason for the proposed dismissal, while the requirement of hearing affords the
employee an opportunity to answer his employer's charges against him and
accordingly to defend himself therefrom before dismissal is effected. Neither of
these requirements can be dispensed with without running afoul of the due
process requirement of the Constitution (Century Textile Mills, Inc., et al. v.
NLRC, et al., G.R. No. 77859, May 25,1988).
In the case at bar, respondent Grulla was not, in any manner, notified of the
charges against him before he was outrightly dismissed. Neither was any hearing
or investigation conducted by the company to give the respondent a chance to be
heard concerning the alleged unsatisfactory performance of his work.
In view of the foregoing, the dismissal of respondent Grulla violated the security
of tenure under the contract of employment which specifically provides that the
contract term shall be for a period of twelve (12) calendar months. Consequently
the respondent Grulla should be paid his salary for the unexpired portion of his
contract of employment which is ten (10) months (See Cuales v. NLRC, et al.,
No. L-57379 April 28, 1983, 121 SCRA 812).
The findings of the POEA and the respondent Commission that the respondent
Grulla is entitled to salaries in the amount of US$ 3,700.00 or its equivalent in
Philippine currency for the unexpired portion of his contract and the sum of
P1,000.00 as reimbursement of medical expenses bear great weight. Wellestablished is the principle that findings of administrative agencies which have
acquired expertise because their jurisdiction is confined to specific matters are
generally accorded not only respect but even finality. Judicial review by this Court
on labor cases does not go so far as to evaluate the sufficiency of the evidence
upon which the labor officer or office based his or its determination but are limited

to issues of jurisdiction or grave abuse of discretion (Special Events and Central

Shipping Office Workers Union v. San Miguel Corporation, Nos. L-51002-06, May
30, 1983, 122 SCRA 557). In the instant case, 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, premises considered, the instant petition is dismissed for lack of
merit and the resolution of the respondent Commission dated January 17, 1986
is hereby AFFIRMED. The temporary restraining order issued on April 23, 1986 is
lifted.
SO ORDERED.
Narvasa, Cruz, Gancayco and Gri;o-Aquino, JJ., concur.

FR. PEDRO ESCUDERO, O.P. JOSEFINA AGUILAR and UNIVERSITY OF

SANTO TOMAS, petitioners,
vs.
OFFICE OF THE PRESIDENT OF THE PHILIPPINES and CARMELITA B.
REYES, respondents.
Augusta K Aligada Jr. for petitioners.
The Solicitor General for public respondent.
Bonifacio R. Reyes, Jr. for private respondent.
CORTES, J.:
This special civil action for certiorari stemmed from a complaint for reinstatement and
backwages filed by private respondent Carmelita B. Reyes against the petitioners
University of Santo Tomas (UST), Friar Pedro Escudero and Josefina Aguilar, the
Assistant Regent and Principal, respectively, of the Elementary School Department of
UST.
Carmelita B. Reyes was appointed by petitioner UST on June 17, 1972 as a teacher with a
"probationary rank" in the latter's Elementary School Department," "with all the duties,
rights and privileges appertaining thereto in accordance with the Statutes and Faculty
Code of the University and other existing rules and regulations" [Rollo, p. 7.] This
appointment expressly provided that it was to take effect on July 5, 1972 and will
terminate at the end of the 1972-1973 school year.
On June 7,1973, Reyes's appointment was renewed effective on June 4, 1973 and to
terminate at the end of the school year 1973-1974. Her appointment was again renewed
on April 2, 1974, to take effect on June 3, 1974 and to terminate at the end of schoolyear

1974-1975. There was no mention in these two renewals whether her appointment was
permanent or still probationary.
On February 7,1975, private respondent Reyes received from petitioners a notice of
termination of her services, advising her that she filed not be given a new contract of
appointment for the ensuing schoolyear. Claiming that she was illegally terminated she
filed on February 14, 1975 a complaint for reinstatement with backwages with Regional
Office No. IV of the Department of Labor.
On November 13,1975, Labor Arbiter Ricarte T. Soriano rendered a decision upholding
the termination of Reyes but ordering petitioner to grant her separation pay, equivalent to
one and one-half months pay. The Labor Arbiter justified the award in this wise:
xxx xxx xxx
Although the respondents have shown by overwhelming evidence to the
satisfaction of the undersigned that the dismissal was justified, hence,
reinstatement of the complainant is unwarranted, the undersigned Arbiter finds it
rather still reasonable to order respondents to pay complainant one- half month
pay for every year of service. The same is in line with the goals of the Labor Code
to be more sympathetic to the cause of the laborers. [Rollo, p. 68.]
From this decision of the Labor Arbiter, both parties appealed to the National
Labor Relations Commission (NLRC). The NLRC however found no valid cause
for the termination and ordered petitioners to reinstate Reyes to her former
position with full backwages from the time her services were terminated on
February 7,1975 up to her actual reinstatement without loss of seniority rights
and other benefits appertaining thereto.
On appeal to the Secretary of Labor, the then Acting Secretary of Labor, Amado
G. Inciong, issued an Order dated November 22,1977 modifying the NLRC
decision by deleting the order for the reinstatement of Reyes and ordering
petitioners to instead pay her separation pay equivalent to one-half month salary
for every year of service.
Private respondent appealed to the Office of the President and on May 27, 1980,
the Office of the President rendered a decision reversing that of the Acting
Secretary of Labor, the decretal portion of which reads:
In view of the foregoing, respondents-appellees should reinstate
complainant-appellant Carmelita B. Reyes to her former position with full
back wages from the time her services were terminated on February 7,
1975 up to her actual reinstatement, without loss of seniority rights, as well
as to other pertinent benefits. [Rollo, p. 36.]
Hence, petitioner filed the instant special civil action for certiorari seeking to
annul the decision of the respondent Office of the President on the principal
ground that the private respondent Reyes has not been illegally terminated and
therefore, the order for her reinstatement with full backwages had no legal basis.
The pivotal issue in this case is whether grave abuse of discretion can be
attributed to the respondent Office of the President in holding that private
respondent Reyes was dismissed illegally.

Petitioners maintain that Reyes' last appointment was one with a fixed period;
i.e., from June 3, 1974 until the end of the 1974-1975 school year, hence her
employment was not covered by then Article 318 * of the Labor Code prohibiting dismissals
without any just cause. Petitioners assert that Reyes' appointment terminates upon expiration of the period
fixed therein such that when Reyes was sent a notice of the termination of her services as of the end of the
1974-1975 schoolyear, petitioners were merely enforcing the provisions of her last appointment. Moreover,
Reyes' employment was subject as well to the UST Faculty Code which prescribes a three-year
probationary period in accordance with the 1970 Manual of Regulations for Private Schools. That Code
requires a third renewal of the annual appointment in order that a teacher may be considered permanent,
thus:
xxx xxx xxx
The provisions of Sections 3 and 4 notwithstanding, faculty members who have rendered three
consecutive years (six semesters) of satisfactory service on full time basis as determined by the
pertinent rules of the University and of the Bureau of Private Schools shall be considered
permanent upon the third renewal of their annual appointment, ...
xxx xxx xxx
[Rollo, p. 16.]
Petitioners maintain that Reyes failed to render three consecutive years of satisfactory service [Rollo, pp.
16-17,] as shown by her poor efficiency rating found established by the Labor Arbiter, and that it is the third
renewal of the appointment of Reyes which is the operative act that will confer her a permanent status.
Since her appointment was not renewed for the third time, petitioners insist that she has not attained
permanent status [Rollo, p. 171].
There is merit in the petition.
The provisions of the Labor Code, in force at the time the cause of action of Reyes accrued on February 7,
1975 Villones v. Employees' Compensation Commission, G.R. No. L-46200, July 30, 1979, 92 SCRA 320],
states that "[t]he 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 to prevent the
circumvention of the right of the employees to be secured in their employment as provided herein" [Section
320; Emphasis supplied].
Under Section 6, Rule I, Book IV of the Rules Implementing the Labor Code:
Section 6. Probationary and fixed period employment. -(a) Where the work for which an employee
has been engaged is learnable or apprenticeable in accordance with the standards prescribed by
the Department of Labor, the probationary employment period of the employee shall be limited to
the authorized learnership or apprenticeable period, whichever is applicable.
(b) Where the work is neither learnable nor apprenticeable the probationary period of employment
shall not exceed 6 months from the date the employee actually started working.
xxx xxx xxx
However, the six-month probationary period prescribed by the Secretary of Labor is merely the general rule.
The recognized exceptions to this rule, as further set forth in Policy Instructions No. 11 issued by the
Secretary of Labor on April 23, 1976, are:
xxx xxx xxx
Probationary employment has been the subject of misunderstanding in some quarters. Some
people believe six (6) months is the probationary period in all cases. On the other hand, employees
who have already served the probationary period are sometimes required to serve again on
probation.
Under the Labor Code, six (6) months is the general probationary period, but the probationary
period is actually the period needed to determine fitness for the job. This period, for lack of a better
measurement, is deemed to be the period needed to learn the job.
Thus, if the job is apprenticeable, then the probationary period is the apprenticeship period, which
may be six (6) months, less than six (6) months, or more than six (6) months, depending upon the
nature of the job. Therefore, upon graduation an apprentice may not be put under probationary
employment in the company in which he trained. In another company, however, the probationary
period for him would be six (6) months. The reason is to allow the employer to test his working

habits and other personal traits with respect to his fitness for regularization in the company. If the
job is learnable-can be learned within three months-then the probationary period is three months or
less. The learner upon completion of the learning period must be considered regular.
The probationary employment of professors, instructors and teachers shall be subject to standards
established by the Department of Education and Culture.
xxx xxx xxx
[Rollo, p. 110; Emphasis supplied.]
It is thus clear that the Labor Code authorizes different probationary periods, according to the requirements
of the particular job. For private school teachers, the period of probation is governed by the 1970 Manual of
Regulations for Private Schools, adopted by the Department of Education and Culture pursuant to the
provisions of Act No. 2076, as amended by Act No. 3075 and Commonwealth Act No. 180. Paragraph 75 of
the Manual provides that "[f]ull-time teachers who have rendered three consecutive years of satisfactory
service shall be considered permanent," while the preceding paragraph requires that the employment
contracts be in writing with at least one school-year's duration. That the probationary period for private
school teachers is three years has already been confirmed by this Court in the recent case of Labajo v.
Alejandro [G.R. No. 80383, September 26, 1988] wherein it was declared:
xxx xxx xxx
The three (3)-year period of service mentioned in paragraph 75 [of the Manual of Regulations for
Private Schools] is of course the maximum period or upper limit, so to speak, of probationary
employment allowed in the case of private school teachers. This necessarily implies that a regular
or permanent employment status may, under certain conditions, be attained in less than three (3)
years. By and large, however, whether or not one has indeed attained permanent status in one's
employment, before the passage of three (3) years, is a matter of proof. [at p. 7.]
xxx xxx xxx
The best proof as to whether Reyes had already attained permanent status, is her contract with petitioner
UST. That contract which was only the second renewal of her original probationary appointment reads as
follows:
April 2,1974
Mrs.
Carmelita
Elementary
School
University of Santo Tomas

Reyes
Department

Dear Mrs. Reyes,

Upon recommendation of the Elementary's Council of the ELEMENTARY SCHOOL
DEPARTMENT
I have the pleasure to appoint you
TEACHER
with all the duties, rights and privileges appertaining thereto in accordance with the Statutes and
Faculty Code of the University and other existing rules and regulations.
This appointment takes effect on June 3,1974 and terminates at the end of the 1974-1975 school
year.
Sincerely,
(signed)
FR.
EXCELSIO
Assistant
to
for Academic Affairs

GARCIA,
the

O.P.
Rector

NON-TENURED
APPOINTMENT
ACCEPTED:
(signed)
CARMELITA
DATED: June 3,1974

B.

REYES

The above contract reveals two significant points: 1) that the contract is one with a definite period to start on

June 3, 1974 to end at the close of the 1974- 75 schoolyear and 2) that Reyes' signature appears
underneath the words "NON-TENURED APPOINTMENT ACCEPTED." These features in the contract
indicate that the appointment of Reyes subsists only for the 1974- 75 schoolyear. That the contract
contained the words "non-tenured appointment accepted" reveals the non-permanent status of her
employment. Nothing therein states that a permanent appointment was extended to her nor that UST was
obliged to extend her one upon the expiration of the above contract.
Moreover no vested right to a permanent appointment had as yet accrued in her favor since she had not yet
completed the prerequisite three year period necessary for the acquisition of permanent status, as required
both by the Manual of Regulations for Private Schools and the UST Faculty Code. That her appointment
was only for a fixed duration is further evinced by the fact that on February 7, 1975, before the expiration of
the abovementioned contract, Reyes was served a notice that she may not expect her appointment to be
renewed the next schoolyear and that her probationary employment was to terminate at the close of the
schoolyear 1974-75. Although Reyes was allowed to complete her term according to the stipulated period,
indeed no new contract was extended her. Reyes however construed the February 7, 1975 notice as a
notice of termination and claims that it constituted dismissal without just cause and thus filed the instant
case.
Reyes' argument is not persuasive. It loses sight of the fact that her employment was probationary,
contractual in nature, and one with a definite period. At the expiration of the period stipulated in the contract,
her appointment was deemed terminated and the letter informing her of the non- renewal of her contract is
not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST.
The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract
would no longer be renewed. It is not a letter of termination. The interpretation that the notice is only a
reminder is consistent with the court's finding in Labajo, supra, where the Court in construing a similar letter
sent to private school teachers whose contracts with San Andres High School were due to expire said:
xxx xxx xxx
Such letter was either a formal reminder to private respondents that their respective contracts of
employment with petitioners for school year 1984-85 were due to expire on 31 March 1985, or
advance notice that such contracts would no longer be renewed for school year 1985-86, or both.
[at p. 10.]
As to the question of the existence of just cause to justify the dismissal, the Court finds applicable here the
case of Biboso v. Victorias Milling Company, Inc. [G.R. No. L-44360, March 31, 1977, 76 SCRA 250, (1977).]
In that case, the Court held that while probationary employees enjoy security of tenure such that they cannot
be removed except for cause as provided by law, such protection extends only during the period of
probation. Once that period expires, the constitutional protection could no longer be invoked. This has been
reiterated in subsequent cases [Manila Hotel Corporation v. NLRC, G.R. No. 53453, January 22, 1986, 141
SCRA 169; Euro-Linea, Phils., Inc. v. National Labor Relations Commission, G.R. No. 75782, December 1,
1987, 156 SCRA 78; Labajo v. Alejandro, et al, supra.]
In the instant case, the probation period provided is three years covered by three separate written annual
contracts. Reyes as a probationary and contractual employee was entitled to security of tenure only during
the three year period of her probation and such protection ended the moment her last employment contract
expired at the close of schoolyear 1974-75 and she was not extended a renewal of her appointment.
The Office of the President therefore gravely abused its discretion in finding that Reyes was illegally
terminated, in ordering her reinstatement and in awarding her backwages "from the time her services were
terminated on February 7, 1975 up to her actual reinstatement" [Rollo, p. 36.]
WHEREFORE, the decision of the respondent Office of the President is hereby SET ASIDE, and the Order
of the Assistant Secretary of Labor dated November 22,1977 is REINSTATED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

G.R. No. 72222 January 30, 1989

INTERNATIONAL CATHOLIC MIGRATION COMMISSION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and BERNADETTE GALANG,
respondents.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not an employee who
was terminated during the probationary period of her employment is entitled to
her salary for the unexpired portion of her six-month probationary employment.
The facts of the case are undisputed.
Petitioner International Catholic Migration Commission (ICMC), a non-profit
organization dedicated to refugee service at the Philippine Refugee Processing
Center in Morong, Bataan engaged the services of private respondent
Bernadette Galang on January 24, 1983 as a probationary cultural orientation
teacher with a monthly salary of P2,000.00.
Three (3) months thereafter, or on April 22, 1983, private respondent was
informed, orally and in writing, that her services were being terminated for her
failure to meet the prescribed standards of petitioner as reflected in the
performance evaluation of her supervisors during the teacher evaluation program
she underwent along with other newly-hired personnel.
Despite her termination, records show that private respondent did not leave the
ICMC refugee camp at Morong, Bataan, but instead stayed thereat for a few
days before leaving for Manila, during which time, she was observed by
petitioner to be allegedly acting strangely.
On July 24, 1983, private respondent returned to Morong, Bataan on board the
service bus of petitioner to accomplish the clearance requirements. In the
evening of that same day, she was found at the Freedom Park of Morong wet
and shivering from the rain and acting bizarrely. She was then taken to
petitioner's hospital where she was given the necessary medical attention.
Two (2) days later, or on July 26, 1983, she was taken to her residence in Manila
aboard petitioner's service bus. Thru a letter, her father expressed appreciation to
petitioner for taking care of her daughter. On that same day, her father received,
on her behalf, the proportionate amount of her 13th month pay and the
equivalent of her two week pay.
On August 22, 1983, private respondent filed a complaint 1 for illegal dismissal, unfair
labor practice and unpaid wages against petitioner with the then Ministry of Labor and
Employment, praying for reinstatement with backwages, exemplary and moral damages.
On October 8, 1983, after the parties submitted their respective position papers and other
pleadings, Labor Arbiter Pelagio A. Carpio rendered his decision dismissing the complaint for
illegal dismissal as well as the complaint for moral and exemplary damages but ordering the
petitioner to pay private respondent the sum of P6,000.00 as payment for the last three (3)
months of the agreed employment period pursuant to her verbal contract of employment. 2
Both parties appealed the decision to the National Labor Relations Commission. In her appeal,
private respondent contended that her dismissal was illegal considering that it was effected
without valid cause. On the other hand, petitioner countered that private respondent who was

employed for a probationary period of three (3) months could not rightfully be awarded P6,000.00
because her services were terminated for failure to qualify as a regular employee in accordance
with the reasonable standards prescribed by her employer.
On August 22, 1985, the NLRC, by a majority vote of Commissioners Guillermo C. Medina and
Gabriel M. Gatchalian, sustained the decision of the Labor Arbiter and thus dismissed both
appeals for lack of merit. Commissioner Miguel Varela, on the other hand, dissented and voted
for the reversal of the Labor Arbiter's decision for lack of legal basis considering that the
termination of services of complainant, now private respondent, was effected during her
probationary period on valid grounds made known to her. 3
Dissatisfied, petitioner filed the instant petition.
Petitioner maintains that private respondent is not entitled to the award of salary for the unexpired
three-month portion of the probationary period since her services were terminated during such
period when she failed to qualify as a regular employee in accordance with the reasonable
standards prescribed by petitioner; that having been terminated on valid grounds during her
probationary period, or specifically on April 24, 1983, petitioner is not liable to private respondent
for services not rendered during the unexpired three-month period, otherwise, unjust enrichment
of her part would result; that under Article 282 (now Article 281) of the Labor Code, if the
employer finds that the probationary employees does not meet the standards of employment set
for the position, the probationary employee may be terminated at any time within the six-month
period, without need of exhausting raid entire six-month term. 4
The Solicitor General, on the other hand, contends that a probationary employment for six (6)
months, as in the case of herein private respondent, is an employment for a definite period of
time and, as such, the employer is duty-bound to allow the probationary employee to work until
the termination of the probationary employment before her re- employment could be refused; that
when petitioner disrupted the probationary employment of private respondent, without giving her
the opportunity to improve her method of instruction within the said period, it held itself liable to
pay her salary for the unexpired portion of such employment by way of damages pursuant to the
general provisions of civil law that he who in any manner contravenes the terms of his obligation
without any valid cause shall be liable for damages; 5 that, as held in Madrigal v. Ogilvie, et al, 6
the damages so awarded are equivalent to her salary for the unexpired portion of her
employment for a fixed period. 7
We find for petitioner.
There is justifiable basis for the reversal of public respondent's award of salary for the unexpired
three-month portion of private respondent's six-month probationary employment in the light of its
express finding that there was no illegal dismissal. There is no dispute that private respondent
was terminated during her probationary period of employment for failure to qualify as a regular
member of petitioner's teaching staff in accordance with its reasonable standards. Records show
that private respondent was found by petitioner to be deficient in classroom management,
teacher-student relationship and teaching techniques. 8 Failure to qualify as a regular employee in
accordance with the reasonable standards of the employer is a just cause for terminating a
probationary employee specifically recognized under Article 282 (now Article 281) of the Labor
Code which provides thus:
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 employer who
has been engaged in a probationary basis may be terminated for a just cause or when he
fails to qualify as a regular employer in accordance with reasonable standard made
known by the employer to the employer at the time of his engagement. An employee who
is allowed to work after a probationary period shall be considered a regular employee.
(Emphasis supplied.)
It must be noted that notwithstanding the finding of legality of the termination of private
respondent, public respondent justified the award of salary for the unexpired portion of the

probationary employment on the ground that a probationary employment for six (6) months is an
employment for a "definite period" which requires the employer to exhaust the entire probationary
period to give the employee the opportunity to meet the required standards.
The legal basis of public respondent is erroneous. 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. 9 The word "probationary", as used to describe the period of employment, implies the
purpose of the term or period, but not its length. 10
Being in the nature of a "trial period" 11 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. The equality of right that
exists between the employer and the employee as to the nature of the probationary employment
was aptly emphasized by this Court in Grand Motor Parts Corporation v. Minister of Labor, et al.,
130 SCRA 436 (1984), citing the 1939 case of Pampanga Bus. Co., Inc. v. Pambusco Employees
Union, Inc. 68 Phil. 541, thus:
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 latter's will,
this is servitude. If the employee can compel the employer to give him work against the
employer's will, this is oppression.
As the law now stands, Article 281 of the Labor Code gives ample authority to the employer to
terminate a probationary employee 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. There is nothing under Article 281 of the Labor Code
that would preclude the employer from extending a regular or a permanent appointment to an
employee once the employer finds that the employee is qualified for regular employment even
before the expiration of the probationary period. Conversely, if the purpose sought by the
employer is neither attained nor attainable within the said period, Article 281 of the Labor Code
does not likewise preclude the employer from terminating the probationary employment on
justifiable causes as in the instant case.
We find unmeritorious, therefore, public respondents argument that the security of tenure of
probationary employees within the period of their probation, as in the case of herein private
respondent, justified the award of salary for the unexpired portion of her probationary
employment. The termination of private respondent predicated on a just cause negates the
application in this case of the pronouncement in the case of Biboso v. Victories Milling Co., Inc., 12
on the right of security of tenure of probationary employees.
Upon inquiry by the then Ministry of Labor and Employment as a consequence of the illegal
dismissal case filed by private respondent before it, docketed as Case No. NLRC NCR-8-378683, it was found that there was no illegal dismissal involved in the case, hence, the circumvention
of the rights of the probationary employees sought to be regulated as pointed out in Biboso v.
Victorias Milling Co., Inc., 13 is wanting.

There was no showing, as borne out by the records, that there was circumvention of the rights of
private respondent when she was informed of her termination. Her dismissal does not appear to
us as arbitrary, fanciful or whimsical. Private respondent was duly notified, orally and in writing,
that her services as cultural orientation teacher were terminated for failure to meet the prescribed
standards of petitioner as reflected in the performance evaluation conducted by her supervisors
during the teacher evaluating program. The dissatisfaction of petitioner over the performance of
private respondent in this regard is a legitimate exercise of its prerogative to select whom to hire
or refuse employment for the success of its program or undertaking. More importantly, private
respondent failed to show that there was unlawful discrimination in the dismissal.
It was thus a grave abuse of discretion on the part of public respondent to order petitioner to pay
private respondent her salary for the unexpired three-month portion of her six-month probationary
employment when she was validly terminated during her probationary employment. To sanction
such action would not only be unjust, but oppressive on the part of the employer as emphasized
in Pampanga Bus Co., Inc., v. Pambusco Employer Union, Inc. 14
WHEREFORE, in view of the foregoing, the petition is GRANTED. The Resolution of the National
Labor Relations Commission dated August 22, 1985, is hereby REVERSED and SET ASIDE
insofar as it ordered petitioner to pay private respondent her P6,000.00 salary for the unexpired
portion of her six-month probationary employment. No cost.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. 75782 December 1, 1987

EURO-LINEA, PHILS., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JIMMY O. PASTORAL,
respondents.
PARAS, J.:
This is a petition for review on certiorari seeking to reverse and set aside the
resolution of public respondent, * NLRC, in Case No. RAB 111-2-1589-84 entitled "Jimmy O.
Pastoral v. Euro-Linea Phils., Inc." affirming the decision of the Labor Arbiter ** which ordered the
reinstatement of complainant with six months backwages.
The facts as found by the Solicitor General are as follows:
On August 17, 1983, petitioner hired Pastoral as shipping expediter on a probationary basis for a period of
six months ending February 18, 1984. However, prior to hiring by petitioner, Pastoral had been employed by
Fitscher Manufacturing Corporation also as shipping expediter for more than one and a half years. Pastoral
was absorbed by petitioner but under a probationary basis.
On February 4, 1984, Pastoral received a memorandum dated January 31, 1984 terminating his
probationary employment effective also on February 4, 1984 in view of his failure ito meet the performance
standards set by the company." To contest his dismissal, Pastoral filed a complaint for illegal dismissal
against petitioner on February 6, 1984 (Rollo, pp. 45-46). On July 19, 1985, the Labor Arbiter found
petitioner guilty of illegal dismissal, the dispositive portion of the decision reading:
WHEREFORE all things considered the respondent or its President and/or General Manager
should be as it is hereby ordered to reinstate complainant with six months backwages.
SO ORDERED.

San Fernando, Pampanga, Philippines, July 19,1985.

EMILIO TONGIO
Labor Arbiter
(Rollo, p. 32).
Petitioner appealed the decision to the NLRC on August 5, 1985 (Rollo, pp. 33-39) but the appeal was
dismissed on July 16, 1986 (Resolution; Rollo, p. 41).
Hence, this petition.
Petitioner raises the following errors of the NLRC (Rollo, p. 7):
a) The Labor Arbiter decided a question of law in a manner contrary to the spirit and purpose of the
law; and that
b) The Labor Arbiter gravely abused his discretion by ignoring the material and significant facts in
favor of employer.
In the resolution of October 29, 1986, the Second Division of the Court without giving due course to the
petition required the respondents to comment (Rollo, p. 42).
The Solicitor General submitted his comment on November 24, 1986 (Rollo, pp. 45-49), while petitioner
through counsel filed its reply to public respondent National Labor Relations Commission's comment in
compliance with the resolution of December 10, 1986 (Rollo, p. 50).
In the resolution of February 18, 1987 (Rollo, 58), the Court gave due course to the petition and required the
parties to file their respective memoranda.
The only issue is whether or not the National Labor Relations Commission acted with grave abuse of
discretion amounting to excess of jurisdiction in ruling against the dismissal of the respondent, a temporary
or probationary employee, by his employer (Petitioner).
Although a probationary or temporary employee has a limited tenure, he still enjoys the constitutional
protection of security of tenure. During his tenure of employment or before his contract expires, he cannot be
removed except for cause as provided for by law (Manila Hotel Corp. v. NLRC, 141 SCRA 169 [1986]).
This brings us to the issue of whether or not private respondent's dismissal was justifiable.
Petitioner claims that the dismissal is with cause, since respondent during his period of employment failed to
meet the performance standards set by the company; that employers should be given leeway in the
application of his right to choose efficient workers (Rollo, p. 6) and that the determination of compliance with
the standards is the prerogative of the employer as long as it is not whimsical; that it had terminated for
cause the respondent before the expiration of the probationary employment (Rollo, p. 70, Petitioner's
Memorandum).
The records, however, reveal the contrary.
Petitioner not only failed to present sufficient evidence to substantiate the cause of private respondent's
dismissal, but likewise failed to cite particular acts or instances to show the latter's poor performance.
As correctly argued by the Solicitor General
There is no dispute that failure to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer is a ground to terminate an employee engaged on a
probationary basis (Art. 282, Labor Code; Bk. VI, Rule 1, Section 6(c), Implementing Rules, Labor
Code). In this case, petitioner alleged that Pastoral was dismissed because he failed to meet its
performance standard. However, petitioner did not bother to cite particular acts or instances in its
position paper which show that Pastoral was performing below par. ...
Petitioner's performance as shipping expediter can readily be gauged from specific acts as may be
gleaned from his duties enumerated by petitioner to include processing of export and import
documents for dispatch or release and talking to customs personnel regarding said documents. (p.
2, Annex "E " Petition).
Furthermore, what makes the dismissal highly suspicious is the fact that while petitioner claims that
respondent was inefficient, it retained his services until the last remaining two weeks of the six months
probationary employment.
No less important is the fact that private respondent had been a shipping expediter for more than one and a
half years before he was absorbed by petitioner. It therefore appears that the dismissal in question is without

sufficient justification.
It must be emphasized that the prerogative of management to dismiss or lay- off an employee must be done
without abuse of discretion, for what is at stake is not only petitioner's position but also his means of
livelihood. (Remerco Garments Manufacturing vs. Minister of Labor, 135 SCRA 137 [1985]). The right of an
employer to freely select or discharge his employees is subject to regulation by the State, basically in the
exercise of its paramount police power (PAL, Inc. vs. PALEA, 57 SCRA 489 [1974]). This is so because the
preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of
corporate profits (Phil. Apparel Workers Union v. NLRC, 106 SCRA 444 [1981]; Manila Hotel Corp. v. NLRC,
supra).
Finally, it is significant to note that in the interpretation of the protection to labor and social justice provisions
of the constitution and the labor laws and rules and regulations implementing the constitutional mandate, the
Supreme Court has always adopted the liberal approach which favors the exercise of labor rights. (Adamson
& Adamson, Inc. v. CIR, 127 SCRA 268 [1984]).
In the instant case, it is evident that the NLRC correctly applied Article 282 in the light of the foregoing and
that its resolution is not tainted with unfairness or arbitrariness that would amount to grave abuse of
discretion or lack of jurisdiction (Rosario Brothers Inc. v. Ople, 131 SCRA 73 [1984]).
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the resolution of the NLRC is
affirmed.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

G.R. No. L-58639 August 12, 1987

CEBU ROYAL PLANT (SAN MIGUEL CORPORATION), petitioner,
vs.
THE HONORABLE DEPUTY MINISTER OF LABOR and RAMON PILONES,
respondents.
CRUZ, J.:
The private respondent was removed by the petitioner and complained to the
Ministry of Labor. His complaint was dismissed by the regional director, who was,
however, reversed by the public respondent. Required to reinstate the separated
employee and pay him back wages, the petitioner has come to us, faulting the
Deputy Minister with grave abuse of discretion. We have issued in the meantime
a temporary restraining order. 1
The public respondent held that Ramon Pilones, the private respondent, was already a permanent employee
at the time of his dismissal and so was entitled to security of tenure. The alleged ground for his removal, to
wit, "pulmonary tuberculosis minimal," was not certified as incurable within six months as to justify his
separation. 2 Additionally, the private respondent insists that the petitioner should have first

obtained a clearance, as required by the regulations then in force, for the termination of his
employment.
The petitioner for its part claims that the private respondent was still on probation at the time of
his dismissal and so had no security of tenure. His dismissal was not only in conformity with
company policy but also necessary for the protection of the public health, as he was handling
ingredients in the processing of soft drinks which were being sold to the public. It is also argued
that the findings of the regional director, who had direct access to the facts, should not have been
disturbed on appeal. For these same reasons, it contends, the employee's reinstatement as

ordered by the public respondent should not be allowed.

The original findings were contained in a one-page order 3 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 4 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
respondent's 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.
The petitioner claims it could not have dismissed the private respondent earlier because the x-ray
examination was made only on August 17, 1978, and the results were not immediately available.
That excuse is untenable. We note that when the petitioner had all of six months during which to
conduct such examination, it chose to wait until exactly the last day of the probation period. In the
light of such delay, its protestations now that reinstatement of Pilones would prejudice public
health cannot but sound hollow and hypocritical. By its own implied admission, the petitioner had
exposed its customers to the employee's disease because of its failure to examine him before
entrusting him with the functions of a "syrup man." Its belated concern for the consuming public is
hardly persuasive, if not clearly insincere and self-righteous.
There is proof in fact that the private respondent was first hired not on February 16, 1978, but
earlier in 1977. This is the 1977 withholding tax statement 5 issued for him by the petitioner itself
which it does not and cannot deny. The petitioner stresses that this is the only evidence of the
private respondent's earlier service and notes that he has not presented any co-worker to
substantiate his claim. This is perfectly understandable. Given the natural reluctance of many
workers to antagonize their employers, we need not wonder why none of them testified against
the petitioner.
We are satisfied that whether his employment began on February 16, 1978, or even earlier as he
claims, the private respondent was already a regular employee when he was dismissed on
August 21, 1978. As such, he could validly claim the security of tenure guaranteed to him by the
Constitution and the Labor Code.
The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI,
of the Rules and Regulations Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees, the employer shall not terminate his employment unless
there is a certification by a competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee to take a
leave. The employer shall reinstate such employee to his former position immediately
upon the restoration of his normal health.
The record does not contain the certification required by the above rule. The medical certificate
offered by the petitioner came from its own physician, who was not a "competent public health
authority," and merely stated the employee's disease, without more. We may surmise that if the
required certification was not presented, it was because the disease was not of such a nature or
seriousness that it could not be cured within a period of six months even with proper medical

treatment. If so, dismissal was unquestionably a severe and unlawful sanction.

It is also worth noting that the petitioner's application for clearance to terminate the employment
of the private respondent was filed with the Ministry of Labor only on August 28, 1978, or seven
days after his dismissal. 6 As the NLRC has repeatedly and correctly said, the prior clearance rule
(which was in force at that time) was not a "trivial technicality." It required "not just the mere filing
of a petition or the mere attempt to procure a clearance" but that "the said clearance be obtained
prior to the operative act of termination. 7
We agree that there was here an attempt to circumvent the law by separating the employee after
five months' service to prevent him from becoming a regular employee, and then rehiring him on
probation, again without security of tenure. We cannot permit this subterfuge if we are to be true
to the spirit and mandate of social justice. On the other hand, we have also the health of the
public and of the dismissed employee himself to consider. Hence, although we must rule in favor
of his reinstatement, this must be conditioned on his fitness to resume his work, as certified by
competent authority.
We take this opportunity to reaffirm our concern for the lowly worker who, often at the mercy of
his employers, must look up to the law for his protection. Fittingly, that law regards him with
tenderness and even favor and always with faith and hope in his capacity to help in shaping the
nation's future. It is error to take him for granted. He deserves our abiding respect. How society
treats him will determine whether the knife in his hands shall be a caring tool for beauty and
progress or an angry weapon of defiance and revenge. The choice is obvious, of course. If we
cherish him as we should, we must resolve to lighten "the weight of centuries" of exploitation and
disdain that bends his back but does not bow his head.
WHEREFORE, the petition is DISMISSED and the temporary restraining order of November 18,
1981, is LIFTED. The Order of the public respondent dated July 14, 1981, is AFFIRMED, but with
the modification that the backwages shall be limited to three years only and the private
respondent shall be reinstated only upon certification by a competent public health authority that
he is fit to return to work. Costs against the petitioner.
SO ORDERED.
Teehankee (Chairman), C.J., Narvasa, Paras and Gancayco, JJ., concur.

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 sixmonth 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
eighteen-month 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.

G.R. No. 109114 September 14, 1993

HOLIDAY INN MANILA and/or HUBERT LINER and BABY DISQUITADO,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and
ELENA HONASAN, respondents.
Inocentes, De Leon, Leogardo, Atienza, Manaye & Azucena Law Office for
petitioners.
Florante M. Yambot for private respondent.
CRUZ, J.:
The employer has absolute discretion in hiring his employees in accordance with
his standards of competence and probity. This is his prerogative. Once hired,
however, the employees are entitled to the protection of the law even during the
probation period and more so after they have become members of the regular
force. The employer does not have the same freedom in the hiring of his
employees as in their dismissal.
Elena Honasan applied for employment with the Holiday Inn and was on April 15,
1991, accepted for "on-the-job training" as a telephone operator for a period of
three weeks. 1 For her services, she received food and transportation allowance. 2 On May 13,
1992, after completing her training, she was employed on a "probationary basis" for a period of
six
months
ending
November
12,
1991. 3
Her employment contract stipulated that the Hotel could terminate her probationary employment
at any time prior to the expiration of the six-month period in the event of her failure (a) to learn or
progress in her job; (b) to faithfully observe and comply with the hotel rules and the instructions
and orders of her superiors; or (c) to perform her duties according to hotel standards.
On November 8, 1991, four days before the expiration of the stipulated deadline, Holiday Inn
notified her of her dismissal, on the ground that her performance had not come up to the
standards of the Hotel. 4
Through counsel, Honasan filed a complaint for illegal dismissal, claiming that she was already a
regular employee at the time of her separation and so was entitled to full security of tenure. 5 The
complaint was dismissed on April 22, 1992 by the Labor Arbiter, 6 who held that her separation
was justified under Article 281 of the Labor Code providing as follows:
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.

On appeal, this decision was reversed by the NLRC, which held that Honasan had become a
regular employee and so could not be dismissed as a probationer. 7 In its own decision dated
November 27, 1992, the NLRC ordered the petitioners to reinstate Honasan "to her former
position without loss of seniority rights and other privileges with backwages without deduction and
qualification." Reconsideration was denied in a resolution dated January 26, 1993. 8
The petitioners now fault the NLRC for having entertained Honasan's appeal although it was filed
out of time and for holding that Honasan was already a regular employee at the time of her
dismissal, which was made 4 days days before the expiration of the probation period.
The petition has no merit.
On the timeliness of the appeal, it is well-settled that all notices which a party is entitled to receive
must be coursed through his counsel of record. Consequently, the running of the reglementary
period is reckoned from the date of receipt of the judgment by the counsel of the appellant. 9
Notice to the appellant himself is not sufficient notice. 10 Honasan's counsel received the decision
of the Labor Arbiter on May 18, 1992. 11 Before that, however, the appeal had already been filed
by Honasan herself, on May 8, 1992. 12 The petitioners claim that she filed it on the thirteenth but
this is irrelevant. Even if the latter date was accepted, the appeal was nevertheless still filed on
time, in fact even before the start of the reglementary period.
On the issue of illegal dismissal, we find that Honasan was placed by the petitioner on probation
twice, first during her on-the-job training for three weeks, and next during another period of six
months, ostensibly in accordance with Article 281. Her probation clearly exceeded the period of
six months prescribed by this article.
Probation is the period during which the employer may determine if the employee is qualified for
possible inclusion in the regular force. In the case at bar, the period was for three weeks, during
Honasan's on-the-job training. When her services were continued after this training, the
petitioners in effect recognized that she had passed probation and was qualified to be a regular
employee.
Honasan was certainly under observation during her three-week on-the-job training. If her
services proved unsatisfactory then, she could have been dropped as early as during that period.
But she was not. On the contrary, her services were continued, presumably because they were
acceptable, although she was formally placed this time on probation.
Even if it be supposed that the probation did not end with the three-week period of on-the-job
training, there is still no reason why that period should not be included in the stipulated six-month
period of probation. Honasan was accepted for on-the-job training on April 15, 1991. Assuming
that her probation could be extended beyond that date, it nevertheless could continue only up to
October 15, 1991, after the end of six months from the earlier date. Under this more lenient
approach, she had become a regular employee of Holiday Inn and acquired full security of tenure
as of October 15, 1991.
The consequence is that she could no longer be summarily separated on the ground invoked by
the petitioners. As a regular employee, she had acquired the protection of Article 279 of the Labor
Code stating as follows:
Art. 279. Security of Tenure In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
The grounds for the removal of a regular employee are enumerated in Articles 282, 283 and 284
of the Labor Code. The procedure for such removal is prescribed in Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code. These rules were not observed in the case at bar
as Honasan was simply told that her services were being terminated because they were found to
be unsatisfactory. No administrative investigation of any kind was undertaken to justify this
ground. She was not even accorded prior notice, let alone a chance to be heard.

We find in the Hotel's system of double probation a transparent scheme to circumvent the plain
mandate of the law and make it easier for it to dismiss its employees even after they shall have
already passed probation. The petitioners had ample time to summarily terminate Honasan's
services during her period of probation if they were deemed unsatisfactory. Not having done so,
they may dismiss her now only upon proof of any of the legal grounds for the separation of
regular employees, to be established according to the prescribed procedure.
The policy of the Constitution is to give the utmost protection to the working class when subjected
to such maneuvers as the one attempted by the petitioners. This Court is fully committed to that
policy and has always been quick to rise in defense of the rights of labor, as in this case.
WHEREFORE, the petition is DISMISSED, with costs against petitioners. It is so ordered.
Grio-Aquino, Davide, Jr., Bellosillo and Quiason, JJ., concur.

G.R. No. L-63316 July 31, 1984

ILUMINADA VER BUISER, MA. CECILIA RILLOACUA and MA. MERCEDES
P. INTENGAN, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of the
Ministry of Labor & Employment, and GENERAL TELEPHONE DIRECTORY,
CO., respondents.
Jimenez, Apolo & Leynes Law Office for petitioners.
The Solicitor General for respondent Deputy Minister.
Abad, Legayada & Associates for private respondent.
GUERRERO, J.:
This is a petition for certiorari seeking to set aside the Order of the Deputy
Minister of Labor and Employment, affirming the Order of the Regional Director,
National Capital Region, in Case No. NCR-STF-5-2851-81, which dismissed the
petitioners' complainant for alleged illegal dismissal and unpaid commission.
Petitioners were employed by the private respondent GENERAL TELEPHONE
DIRECTORY COMPANY as sales representatives and charged with the duty of
soliciting advertisements for inclusion in a telephone directory.
The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P.
Intengan entered into an "Employment Contract (on Probationary Status)" on
May 26, 1980 with private respondent, a corporation engaged in the business of
publication and circulation of the directory of the Philippine Long Distance
Telephone Company. Petitioner Ma. Cecilia Rillo-Acuna entered into the same
employment contract on June 11, 1980 with the private respondent.
Among others, the "Employment Contract (On Probationary Status)" included the

following common provisions:

l. The company hereby employs the employee as telephone
representative on a probationary status for a period of eighteen (18)
months, i.e. from May 1980 to October 1981, inclusive. It is understood
that darung the probationary period of employment, the Employee may be
terminated at the pleasure of the company without the necessity of giving
notice of termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the telephone sales
representative's job is such that the company would be able to determine
his true character, conduct and selling capabilities only after the
publication of the directory, and that it takes about eighteen (18) months
before his worth as a telephone saw representative can be fully evaluated
inasmuch as the advertisement solicited by him for a particular year are
published in the directory only the following year.
Corollary to this, the private respondent prescribed sales quotas to be
accomplished or met by the petitioners. Failing to meet their respective sales
quotas, the petitioners were dismissed from the service by the private
respondent. The records show that the private respondent terminated the
services of petitioners Iluminada Ver Buiser and Cecilia Rillo-Acuna on May 14,
1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for their failure to
meet their sales quotas.
Thus, on May 27, 1981, petitioners filed with the National Capital Region,
Ministry of Labor and Employment, a complaint for illegal dismissal with claims
for backwages, earned commissions and other benefits, docketed as Case No.
NCR-STF-5-2851-81.
The Regional Director of said ministry, in an Order dated September 21, 1982,
dismissed the complaints of the petitioners, except the claim for allowances
which private respondent was ordered to pay. A reconsideration of the Order was
sought by the petitioners in a motion filed on September 30, 1982. This motion,
however, was treated as an appeal to the Minister of Labor.
On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor issued
an Order dated January 7, 1983, affirming the Regional Director's Order dated
September 21, 1982, wherein it ruled that the petitioners have not attained
permanent status since private respondent was justified in requiring a longer
period of probation, and that the termination of petitioners' services was valid
since the latter failed to meet their sales quotas.
Hence, this petition for certiorari on the alleged ground that public respondent
committed grave abuse of discretion amounting to lack of jurisdiction.
Specifically, petitioners submit that:
1. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that the probationary
employment of petitioners herein is eighteen (18) months instead of the
mandated six (6) months under the Labor Code, and in consequently further
ruling that petitioners are not entitled to security of tenure while under said

probation for 18 months.

2. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that petitioners were
dismissed for a just and valid cause.
3. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that petitioners are
not entitled to the commissions they have earned and accrued during their period
of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having served
the respondent company continuously for over six (6) months, they have become
automatically regular employees notwithstanding an agreement to the contrary.
Articles 281-282 read thus:
Art. 282. Probationary Employment. Probationary employment shall not
exceed six (6) months from the date the employee started working, unless
it iscCovered 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. (As amended by PD 850).
Art. 281. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or 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
preceeding 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. (As amended by PD 850).
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.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified
any and all doubts on the period of probationary employment. It states as follows:
Probationary Employment has been the subject of misunderstanding in
some quarter. Some people believe six (6) months is the probationary
period in all cases. On the other hand employs who have already served
the probationary period are sometimes required to serve again on
probation.
Under the Labor Code, six (6) months is the general probationary period '
but the probationary period is actually the period needed to determine
fitness for the job. This period, for lack of a better measurement is deemed
to be the period needed to learn the job.
The purpose of this policy is to protect the worker at the same time enable
the employer to make a meaningful employee selection. This purpose
should be kept in mind in enforcing this provision of the Code. This
issuance shall take effect immediately.
In the case at bar, it is shown that private respondent Company needs at least
eighteen (18) months to determine the character and selling capabilities of the
petitioners as sales representatives. The Company is engaged in advertisement
and publication in the Yellow Pages of the PLDT Telephone Directories.
Publication of solicited ads are only made a year after the sale has been made
and only then win the company be able to evaluate the efficiency, conduct, and
selling ability of its sales representatives, the evaluation being based on the
published ads. Moreover, an eighteen month probationary period is recognized
by the Labor Union in the private respondent company, which is Article V of the
Collective Bargaining Agreement, ... thus:
Probationary Period New employees hired for regular or permanent
shall undergo a probationary or trial period of six (6) months, except in the
cases of telephone or sales representatives where the probationary period

shall be eighteen (I 8) months.

And as indicated earlier, the very contracts of employment signed and
acquiesced to by the petitioners specifically indicate that "the company hereby
employs the employee as telephone sales representative on a probationary
status for a period of eighteen (18) months, i.e. from May 1980 to October 1981,
inclusive. This stipulation is not contrary to law, morals and public policy.
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.
On the second assignment of error that public respondent committed grave
abuse of discretion in ruling that petitioners were dismissed for a just and valid
cause, this is not the first time that this issue has been raised before this Court.
Earlier, in the case of "Arthur Golez vs. The National Labor Relations
Commission and General Telephone Directory Co. "G.R. No. L-64459, July 25,
1983, the petition for certiorari which raised the same issue against the herein
private respondent was dismissed by this Court for lack of merit.
The practice of a company in laying off workers because they failed to make the
work quota has been recognized in this jurisdiction. (Philippine American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the
case at bar, the petitioners' failure to meet the sales quota assigned to each of
them constitute a just cause of their dismissal, regardless of the permanent or
probationary status of their employment. Failure to observe prescribed standards
of work, or to fulfill reasonable work assignments due to inefficiency may
constitute just cause for dismissal. Such inefficiency is understood to mean
failure to attain work goals or work quotas, either by failing to complete the same
within the alloted reasonable period, or by producing unsatisfactory results. This
management prerogative of requiring standards availed of so long as they are
exercised in good faith for the advancement of the employer's interest.
Petitioners anchor their claim for commission pay on the Collective Bargaining
Agreement (CBA) of September 1981, in support of their third assignment of
error. Petitioners cannot avail of this agreement since their services had been
terminated in May, 1981, at a time when the CBA of September, 1981 was not
yet in existence.
In fine, there is nothing in the records to show any abuse or misuse of power
properly vested in the respondent Deputy Minister of Labor and Employment. For
certiorari to lie, "there must be capricious, arbitrary and whimsical exercise of
power, the very antithesis of the judicial prerogative inaccordance with centuries
of both civil and common law traditions." (Panaligan vs. Adolfo, 67 SCRA 176,
180). The "abuse of discretion must be grave and patent, and it must be shown
that the discretion was exercised arbitrarily or despotically." (Palma and Ignacio
vs. Q. & S., Inc., et al., 17 SCRA 97, 100; Philippine Virginia Tobacco
Administration vs. Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., Abad Santos, Escolin and
Cuevas, JJ., concur.

casual

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, at the Maintenance Section of its Engineering
Department in Tondo, Manila. 1 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 used to do. Emiliano Tanque
Jr. corroborated these averments of petitioner in his affidavit. 2
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.
On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision 3 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
regularized that he would be automatically terminated. ... . 4
On appeal, however, the above decision of the Labor Arbiter was reversed by the First Division of
the National Labor Relations Commission by virtue of the votes of two members 5 which
constituted a majority. Commissioner Geronimo Q. Quadra dissented, voting "for the affirmation
of the well-reasoned decision of the Labor Arbiter below." 6 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 never paid his salary through the regular payroll but always
through petty cash vouchers. 7
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 payment of backwages and other benefits be upheld. 8
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 construction project 9 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 early one assigned to him. 10
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 process of wines and liquors. 11
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 jobs in connection with maintenance work. 12 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.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. L-77629 May 9, 1990

KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVISM
AND NATIONALISM-ORGANIZED LABOR ASSOCIATION IN LINE
INDUSTRIES AND AGRICULTURE (KILUSAN-OLALIA), ROQUE JIMENEZ,
MARIO C. RONGALEROS and OTHERS, petitioners,
vs.
HON. FRANKLIN M. DRILON, KIMBERLY-CLARK PHILIPPINES, INC.,
RODOLFO POLOTAN, doing business under the firm name "Rank
Manpower Co." and UNITED KIMBERLY-CLARK EMPLOYEES UNIONPHILLIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION
(UKCEU-PTGWO), respondents.
KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM
AND NATIONALISM-OLALIA (KILUSAN-OLALIA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA.
ESTRELLA ALDA, CAPT. REY L. LANADA, COL. VIVENCIO MANAIG and
KIMBERLY-CLARK PHILIPPINES, INC., respondents.
REGALADO, J.:

Before us are two consolidated petitions for certiorari filed by the above-named petitioner union (hereinafter
referred to as KILUSAN-OLALIA, for conciseness) and individual complainants therein, to wit (a) G.R.
77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the resolution,

dated January 9, 1987, 2 respectively handed down by the two former Ministers of Labor, both
rendered in BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of
the resolutions of the National Labor Relations Commission, dated May 25, 1987 3 and June
19,1987 4 issued in Injunction Case No. 1442 thereof.
Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective
bargaining agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport
and General Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986.
Within the 60-day freedom period prior to the expiration of and during the negotiations for the
renewal of the aforementioned CBA, some members of the bargaining unit formed another union
called "Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized
Labor Association in Line Industries and Agriculture (KILUSAN-OLALIA)."
On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in Regional Office
No. IV, Ministry of Labor and Employment (MOLE), docketed as Case No. RO4-OD-M-415-86. 5
KIMBERLY and (UKCEU-PTGWO) did not object to the holding of a certification election but
objected to the inclusion of the so-called contractual workers whose employment with KIMBERLY
was coursed through an independent contractor, Rank Manpower Company (RANK for short), as
among the qualified voters.
Pending resolution of the petition for certification election by the med-arbiter, KILUSAN-OLALIA
filed a notice of strike on May 7, 1986 with the Bureau of Labor Relations, docketed as BLR Case
No. NS-5-164-86, 6 charging KIMBERLY with unfair labor practices based on the following alleged
acts: (1) dismissal of union members (KILUSAN-OLALIA); (2) non-regularization of
casuals/contractuals with over six months service; (3) non-implementation of appreciation bonus
for 1982 and 1983; (4) non-payment of minimum wages; (5) coercion of employees; and (6)
engaging in CBA negotiations despite the pendency of a petition for certification election. This
was later amended to withdraw the charge of coercion but to add, as new charges, the dismissal
of Roque Jimenez and the non-payment of backwages of the reinstated Emerito Fuentes . 7
Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared
a strike at KIMBERLY's premises in San Pedro, Laguna on May 23, 1986.
On May 26, 1986, KIMBERLY petitioned MOLE to assume jurisdiction over the labor dispute. On
May 30, 1986, finding that the labor dispute would adversely affect national interest, then Minister
Augusto S. Sanchez issued an assumption order, the dispositive portion whereof reads:
Wherefore, premises considered, immediately upon receipt of this order, the striking
union and its members are hereby enjoined to lift the picket and remove all obstacles to
the free ingress to and egress from the company premises and to return to work,
including the 28 contractual workers who were dismissed; likewise, the company is
directed to resume its operations immediately thereafter and to accept all the employees
back under the same terms and conditions of employment prevailing prior to the industrial
action. Further, all issues in the notice of strike, as amended, are hereby assumed in this
assumption order, except for the representation issue pending in Region IV in which the
Med-Arbiter is also enjoined to decide the same the soonest possible time. 8
In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing
activities effective June 1, 1986 after a compliance agreement was entered into by it with
KIMBERLY. 9
On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election
case (RO4-OD-M-4-1586), issued an order 10 declaring the following as eligible to vote in the
certification election, thus:
1. The regular rank-and-file laborers/employees of the respondent company consisting of
537 as of May 14, 1986 should be considered qualified to vote;

2. Those casuals who have worked at least six (6) months as appearing in the payroll
months prior to the filing of the instant petition on April 21, 1986; and
3. Those contractual employees who are allegedly in the employ of an independent
contractor and who have also worked for at least six (6) months as appearing in the
payroll month prior to the filing of the instant petition on April 21, 1986.
During the pre-election conference, 64 casual workers were challenged by KIMBERLY and
(UKCEU-PTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It was
agreed by all the parties that the 64 voters shall be allowed to cast their votes but that their ballots
shall be segregated and subject to challenge proceedings. The certification election was
conducted on July I., 1986, with the following results: 11
1. KILUSAN-OLALIA = 246 votes
2. (UKCEU-PTGWO) = 266 votes
3. NO UNION = 1 vote
4. SPOILED BALLOTS = 4 votes
5. CHALLENGED BALLOTS = 64 votes

TOTAL 581 votes

On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and
Count Challenged Votes" 12 on the ground that the 64 workers are employees of KIMBERLY
within the meaning of Article 212(e) of the Labor Code. On July 7, 1986, KIMBERLY filed an
opposition to the protest and motion, asserting that there is no employer-employee relationship
between the casual workers and the company, and that the med-arbiter has no jurisdiction to rule
on the issue of the status of the challenged workers which is one of the issues covered by the
assumption order. The med-arbiter opted not to rule on the protest until the issue of regularization
has
been
resolved
by
MOLE. 13
On November 13, 1986, then Minister Sanchez rendered a decision in BLR Case No. NS-5-16486, 14 the disposition wherein is summarized as follows:
1. The service contract for janitorial and yard maintenance service between KIMBERLY
and RANK was declared legal;
2. The other casual employees not performing janitorial and yard maintenance services
were deemed labor-only contractual and since labor-only contracting is prohibited, such
employees were held to have attained the status of regular employees, the regularization
being effective as of the date of the decision;
3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as
the exclusive bargaining representative of KIMBERLY's employees;
4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered;
5. Roque Jimenez was ordered reinstated without backwages, the period when he was
out of work being considered as penalty for his misdemeanor;
6. The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes
with backwages was declared as already final and unappealable; and
7. KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983.
On November 25, 1986, KIMBERLY flied a motion for reconsideration with respect to the
regularization of contractual workers, the appreciation bonus and the reinstatement of Roque
Jimenez. 15 In a letter dated November 24, 1986, counsel for KILUSAN-OLALIA demanded from
KIMBERLY the implementation of the November 13, 1986 decision but only with respect to the
regularization of the casual workers. 16

On December 11, 1986, KILUSAN-OLALIA filed a motion for reconsideration questioning the
authority of the Minister of Labor to assume jurisdiction over the representation issue. In the
meantime, KIMBERLY and UKCEU-PTGWO continued with the negotiations on the new
collective bargaining agreement (CBA), no restraining order or junctive writ having been issued,
and on December 18, 1986, a new CBA was concluded and ratified by 440 out of 517 members
of the bargaining unit. 17
In an order dated January 9, 1987, former Labor Minister Franklin Drilon denied both motions for
reconsideration filed by KIMBERLY and KILUSAN-OLALIA. 18 On March 10, 1987, the new CBA
executed between KIMBERLY and UKCEU-PTGWO was signed.
On March 16, 1987, KILUSAN-OLALIA filed a petition for certiorari in this Court docketed as G.R.
No. 77629, seeking to set aside the aforesaid decision, dated November 13, 1986, and the order,
dated January 9, 1987, rendered by the aforesaid labor ministers.
On March 25, 1987, this Court issued in G.R. No. 77629 a temporary restraining order, enjoining
respondents from enforcing and/or carrying out the decision and order above stated, particularly
that portion (1) recognizing respondent UKCEU-PTGWO as the exclusive bargaining
representative of all regular rank-and-file employees in the establishment of respondent company,
(2) enforcing and/or implementing the alleged CBA which is detrimental to the interests of the
members of the petitioner union, and (3) stopping respondent company from deducting monthly
dues and other union assessments from the wages of all regular rank-and-file employees of
respondent company and from remitting the said collection to respondent UKCEU-PTGWO
issued in BLR Case No. NS-5-164-86, entitled, "In Re: Labor Dispute at Kimberly-Clark
Philippines, Inc.," of the Department of Labor and Employment, Manila, 19
In its comment, 20 respondent company pointed out certain events which took place prior to the
filing of the petition in G.R. No. 77629, to wit:
1. The company and UKCEU-PTGWO have concluded a new collective bargaining
agreement which had been ratified by 440 out of 517 members of the bargaining unit;
2. The company has already granted the new benefits under the new CBA to all its
regular employees, including members of petitioner union who, while refusing to ratify the
CBA nevertheless readily accepted the benefits arising therefrom;
3. The company has been complying with the check-off provision of the CBA and has
been remitting the union dues to UKCEU-PTGWO
4. The company has already implement the decision of November 13, 1986 insofar as the
regularization of contractual employees who have rendered more than one (1) year of
service as of the filing of the Notice of Strike on May 7, 1986 and are not engaged in
janitorial and yard maintenance work, are concerned
5. Rank Manpower Company had already pulled out, reassigned or replaced the
contractual employees engaged in janitorial and yard maintenance work, as well as those
with less than one year service; and
6. The company has reinstated Roque Jimenez as of January 11, 1987.
In G.R. No. 78791, the records 21 disclose that on May 4, 1987, KILUSAN-OLALIA filed another
notice of strike with the Bureau of Labor Relations charging respondent company with unfair labor
practices. On May 8, 1987, the bureau dismissed and considered the said notice as not filed by
reason of the pendency of the representation issue before this Court in G.R. No. 77629.
KILUSAN-OLALIA moved to reconsider said order, but before the bureau could act on said
motion, KILUSAN-OLALIA declared a strike and established a picket on respondent company's
premises in San Pedro, Laguna on May 17, 1987.
On May 18, 1987, KIMBERLY filed a petition for injunction with the National Labor Relations
Commission (NLRC), docketed as Injunction Case No. 1442. A supplement to said petition was
filed on May 19, 1987. On May 26, 1987, the commission en banc issued a temporary restraining
order (TRO) on the basis of the ocular inspection report submitted by the commission's agent, the
testimonies of KIMBERLY's witnesses, and pictures of the barricade. KILUSAN-OLALIA moved to

dissolve the TRO on the ground of lack of jurisdiction.

Immediately after the expiration of the first TRO on June 9, 1987, the striking employees returned
to their picket lines and reestablished their barricades at the gate. On June 19, 1987, the
commission en banc issued a second TRO.
On June 25, 1987, KILUSAN-OLALIA filed another petition for certiorari and prohibition with this
Court, docketed as G.R. No. 78791, questioning the validity of the temporary restraining orders
issued by the NLRC on May 26, 1987 and June 19, 1987. On June 29, 1987, KILUSAN-OLALIA
filed in said case an urgent motion for a TRO to restrain NLRC from implementing the questioned
orders. An opposition, as well as a reply thereto, were filed by the parties.
Meanwhile, on July 3, 1987, KIMBERLY filed in the NLRC an urgent motion for the issuance of a
writ of preliminary injunction when the strikers returned to the strike area after the second TRO
expired. After due hearing, the commission issued a writ of preliminary injunction on July 14,
1987, after requiring KIMBERLY to post a bond in the amount of P20,000.00.
Consequently, on July 17, 1987, KILUSAN-OLALIA filed in G.R. No. 78791 a second urgent
motion for the issuance of a TRO by reason of the issuance of said writ of preliminary injunction,
which motion was opposed by KIMBERLY.
Thereafter, in its memorandum 22 filed on December 28, 1989 and in its motion for early resolution
23
filed on February 28, 1990, both in G.R. No. 78791, KILUSAN-OLALIA alleged that it had
terminated its strike and picketing activities and that the striking employees had unconditionally
offered to return to work, although they were refused admission by KIMBERLY. By reason of this
supervening development, the petition in G.R. No. 78791, questioning the propriety of the
issuance of the two temporary restraining orders and the writ of injunction therein, has been
rendered moot and academic.
In G.R. No. 77629, the petition of KILUSAN-OLALIA avers that the respondent Secretary of Labor
and/or the former Minister of Labor have acted with grave abuse of discretion and/or without
jurisdiction in (1) ruling on the issue of bargaining representation and declaring respondent
UKCEU-PTGWO as the collective bargaining representative of all regular rank-and-file
employees of the respondent company; (2) holding that petitioners are not entitled to vote in the
certification election; (3) considering the regularization of petitioners (who are not janitors and
maintenance employees) to be effective only on the date of the disputed decision; (4) declaring
petitioners who are assigned janitorial and yard maintenance work to be employees of
respondent RANK and not entitled to be regularized; (5) not awarding to petitioners differential
pay arising out of such illegal work scheme; and (6) ordering the mere reinstatement of petitioner
Jimenez.
The issue of jurisdiction actually involves a question of whether or not former Minister Sanchez
committed a grave abuse of discretion amounting to lack of jurisdiction in declaring respondent
UKCEU-PTGWO as the certified bargaining representative of the regular employees of
KIMBERLY, after ruling that the 64 casual workers, whose votes are being challenged, were not
entitled to vote in the certification election.
KILUSAN-OLALIA contends that after finding that the 64 workers are regular employees of
KIMBERLY, Minister Sanchez should have remanded the representation case to the med-arbiter
instead of declaring UKCEU-PTGWO as the winner in the certification election and setting aside
the med-arbiter's order which allowed the 64 casual workers to cast their votes.
Respondents argue that since the issues of regularization and representation are closely
interrelated and that a resolution of the former inevitably affects the latter, it was necessary for the
former labor minister to take cognizance of the representation issue; that no timely motion for
reconsideration or appeal was made from his decision of November 13, 1986 which has become
final and executory; and that the aforesaid decision was impliedly accepted by KILUSAN-OLALIA
when it demanded from KIMBERLY the issuance of regular appointments to its affected members
in compliance with said decision, hence petitioner employees are now stopped from questioning
the legality thereof.
We uphold the authority of former Minister Sanchez to assume jurisdiction over the issue of the

regularization of the 64 casual workers, which fact is not even disputed by KILUSAN-OLALIA as
may be gleaned from its request for an interim order in the notice of strike case (BLR-NS-5-16486), asking that the regularization issue be immediately resolved. Furthermore, even the medarbiter who ordered the holding of the certification election refused to resolve the protest on the
ground that the issue raised therein correctly pertains to the jurisdiction of the then labor minister.
No opposition was offered by KILUSAN-OLALIA. We hold that the issue of regularization was
properly addressed to the discretion of said former minister.
However, the matter of the controverted pronouncement by former Minister Sanchez, as
reaffirmed by respondent secretary, regarding the winner in the certification election presents a
different situation.
It will be recalled that in the certification election, UKCEU-PTGWO came out as the winner, by
garnering a majority of the votes cast therein with the exception of 64 ballots which were subject
to challenge. In the protest filed for the opening and counting of the challenged ballots, KILUSANOLALIA raised the main and sole question of regularization of the 64 casual workers. The medarbiter refused to act on the protest on the ground that the issue involved is within the jurisdiction
of the then Minister of Labor. KILUSAN-OLALIA then sought an interim order for an early
resolution on the employment status of the casual workers, which was one of the issues included
in the notice of strike filed by KILUSAN-OLALIA in BLR Case No. NS-5-164-86. Consequently,
Minister Sanchez rendered the questioned decision finding that the workers not engaged in
janitorial and yard maintenance service are regular employees but that they became regular only
on the date of his decision, that is, on November 13, 1986, and, therefore, they were not entitled
to vote in the certification election. On the basis of the results obtained in the certification election,
Minister Sanchez declared UKCEU-PTGWO as the winner.
The pivotal issue, therefore, is when said workers, not performing janitorial or yard maintenance
service, became regular employees of KIMBERLY.
We find and so hold that the former labor minister gravely abused his discretion in holding that
those workers not engaged in janitorial or yard maintenance service attained the status of regular
employees only on November 13, 1986, which thus deprived them of their constitutionally
protected right to vote in the certification election and choose their rightful bargaining
representative.
The Labor Code defines who are regular employees, as follows:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the
contrary not withstanding 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
under 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.
The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed. The individual petitioners herein
who have been adjudged to be regular employees fall under the second category. These are the
mechanics, electricians, machinists machine shop helpers, warehouse helpers, painters,
carpenters, pipefitters and masons It is not disputed that these workers have been in the employ
of KIMBERLY for more than one year at the time of the filing of the Petition for certification

election by KILUSAN-OLALIA.
Owing to their length of service with the company, these workers became regular employees, by
operation of law, one year after they were employed by KIMBERLY through RANK. While the
actual regularization of these employees entails the mechanical act of issuing regular
appointment papers and compliance with such other operating procedures as may be adopted by
the employer, it is more in keeping with the intent and spirit of the law to rule that the status of
regular employment attaches to the casual worker on the day immediately after the end of his first
year of service. To rule otherwise, and to instead make their regularization dependent on the
happening of some contingency or the fulfillment of certain requirements, is to impose a burden
on the employee which is not sanctioned by law.
That the first stated position is the situation contemplated and sanctioned by law is further
enhanced by the absence of a statutory limitation before regular status can be acquired by a
casual employee. The law is explicit. As long as the employee has rendered at least one year of
service, he becomes a regular employee with respect to the activity in which he is employed. The
law does not provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he can acquire a regular status.
Obviously, where the law does not distinguish, no distinction should be drawn.
The submission that the decision of November 13, 1986 has become final and executory, on the
grounds that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly
acceded thereto, is untenable.
Rule 65 of the Rules of Court allows original petitions for certiorari from decisions or orders of
public respondents provided they are filed within a reasonable time. We believe that the period
from January 9, 1987, when the motions for reconsideration separately filed by KILUSAN-OLALIA
and KIMBERLY were denied, to March 16, 1987, when the petition in G.R. No. 77629 was filed,
constitutes a reasonable time for availing of such recourse.
We likewise do not subscribe to the claim of respondents that KILUSAN-OLALIA has impliedly
accepted the questioned decision by demanding compliance therewith. In the letter of KILUSANOLALIA dated November 24, 1986 24 addressed to the legal counsel of KIMBERLY, it is there
expressly and specifically pointed out that KILUSAN-OLALIA intends to file a motion for
reconsideration of the questioned decision but that, in the meantime, it was demanding the
issuance of regular appointments to the casual workers who had been declared to be regular
employees. The filing of said motion for reconsideration of the questioned decision by KILUSANOLALIA, which was later denied, sustains our position on this issue and denies the theory of
estoppel postulated by respondents.
On the basis of the foregoing circumstances, and as a consequence of their status as regular
employees, those workers not perforce janitorial and yard maintenance service were performance
entitled to the payment of salary differential, cost of living allowance, 13th month pay, and such
other benefits extended to regular employees under the CBA, from the day immediately following
their first year of service in the company. These regular employees are likewise entitled to vote in
the certification election held in July 1, 1986. Consequently, the votes cast by those employees
not performing janitorial and yard maintenance service, which form part of the 64 challenged
votes, should be opened, counted and considered for the purpose of determining the certified
bargaining representative.
We do not find it necessary to disturb the finding of then Minister Sanchez holding as legal the
service contract executed between KIMBERLY and RANK, with respect to the workers performing
janitorial and yard maintenance service, which is supported by substantial and convincing
evidence. Besides, we take judicial notice of the general practice adopted in several government
and private institutions and industries of hiring a janitorial service on an independent contractor
basis. Furthermore, the occasional directives and suggestions of KIMBERLY are insufficient to
erode primary and continuous control over the employees of the independent contractor. 25 Lastly,
the duties performed by these workers are not independent and integral steps in or aspects of the
essential operations of KIMBERLY which is engaged in the manufacture of consumer paper
products and cigarette paper, hence said workers cannot be considered regular employees.

The reinstatement of Roque Jimenez without backwages involves a question of fact best
addressed to the discretion of respondent secretary whose finding thereon is binding and
conclusive upon this Court, absent a showing that he committed a grave abuse in the exercise
thereof.
WHEREFORE, judgment is hereby rendered in G.R. No. 77629:
1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged
votes, and that the union with the highest number of votes be thereafter declared as the duly
elected certified bargaining representative of the regular employees of KIMBERLY;
2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with
respect to minimum wage, cost of living allowance, 13th month pay, and benefits provided for
under the applicable collective bargaining agreement from the time they became regular
employees.
All other aspects of the decision appealed from, which are not so modified or affected thereby, are
hereby AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made
permanent.
The petition filed in G.R. No. 78791 is hereby DISMISSED.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

contractual

G.R. No. 61594 September 28, 1990

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B.
FARRALES and MARIA MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation
licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment,
one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig.
1

The contracts, which became effective on 9 January 1979, provided in pertinent portion as
follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the mutual
consent of the parties.

xxx xxx xxx

6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the right to
terminate this agreement at any time by giving the EMPLOYEE notice in writing in
advance one month before the intended termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of Pakistan, and
only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter
arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training period, they began
discharging their job functions as flight attendants, with base station in Manila and flying
assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local
branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales
and Mamasig advising both that their services as flight stewardesses would be terminated
"effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they
had) executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint,
docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company benefits and
bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After several
unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the
parties to submit their position papers and evidence supporting their respective positions. The PIA
submitted its position paper, 3 but no evidence, and there claimed that both private respondents
were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities
of "personal effects"; and that PIA personnel at the Manila International Airport had been
discreetly warned by customs officials to advise private respondents to discontinue that practice.
PIA further claimed that the services of both private respondents were terminated pursuant to the
provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the payment to
them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of
their employment contracts; the payment to private respondent Mamasig of an amount equivalent
to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the
private respondents equivalent to their one-month salary. 4 The Order stated that private
respondents had attained the status of regular employees after they had rendered more than a
year of continued service; that the stipulation limiting the period of the employment contract to
three (3) years was null and void as violative of the provisions of the Labor Code and its
implementing rules and regulations on regular and casual employment; and that the dismissal,
having been carried out without the requisite clearance from the MOLE, was illegal and entitled
private respondents to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister,
MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the
latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay
each of the complainants [private respondents] their salaries corresponding to the unexpired
portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and
the Order of the Deputy Minister as having been rendered without jurisdiction; for having been

rendered without support in the evidence of record since, allegedly, no hearing was conducted by
the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation
of petitioner's rights under the employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the
subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction
over the same being lodged in the Arbitration Branch of the National Labor Relations Commission
("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was
initiated in September 1980 and at the time the Orders assailed were rendered on January 1981
(by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente
Leogardo, Jr.), the Regional Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the Department of
Labor and Employment:
Art. 278. Miscellaneous Provisions . . .
(b) With or without a collective agreement, no employer may shut down his establishment
or dismiss or terminate the employment of employees with at least one year of service
during the last two (2) years, whether such service is continuous or broken, without prior
written authority issued in accordance with such rules and regulations as the Secretary
may promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made
clear that in case of a termination without the necessary clearance, the Regional Director was
authorized to order the reinstatement of the employee concerned and the payment of
backwages; necessarily, therefore, the Regional Director must have been given jurisdiction
over such termination cases:
Sec. 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without
prior clearance shall be conclusively presumed to be termination of employment without a
just cause. The Regional Director shall, in such case order the immediate reinstatement
of the employee and the payment of his wages from the time of the shutdown or
dismissal until the time of reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly
very explicit about the jurisdiction of the Regional Director over termination of employment
cases:
Under PD 850, termination cases with or without CBA are now placed under the
original jurisdiction of the Regional Director. Preventive suspension cases, now made
cognizable for the first time, are also placed under the Regional Director. Before PD 850,
termination cases where there was a CBA were under the jurisdiction of the grievance
machinery and voluntary arbitration, while termination cases where there was no CBA
were under the jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its implementing rules
and regulations with respect to termination and preventive suspension cases are:
1. The Regional Director is now required to rule on every application for clearance,
whether there is opposition or not, within ten days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction,
still his order was null and void because it had been issued in violation of petitioner's right to
procedural due process . 6 This claim, however, cannot be given serious consideration. Petitioner
was ordered by the Regional Director to submit not only its position paper but also such evidence
in its favor as it might have. Petitioner opted to rely solely upon its position paper; we must
assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was

conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able
to appeal his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must be rejected. At the
time the complaint was filed by private respondents on 21 September 1980 and at the time the
Regional Director issued his questioned order on 22 January 1981, applicable regulation, as
noted above, specified that a "dismissal without prior clearance shall be conclusively presumed to
be termination of employment without a cause", and the Regional Director was required in such
case to" order the immediate reinstatement of the employee and the payment of his wages from
the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then
applicable rule, the Regional Director did not even have to require submission of position papers
by the parties in view of the conclusive (juris et de jure) character of the presumption created by
such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and
Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules
and Regulations, the termination of [an employee] which was without previous clearance from the
Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption which]
cannot be overturned by any contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment
with private respondents Farrales and Mamasig, arguing that its relationship with them was
governed by the provisions of its contract rather than by the general provisions of the Labor
Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by
agreement between the parties; while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the employment agreement at any time
by giving one-month's notice to the employee or, in lieu of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is
the law between the parties. 10 The principle of party autonomy in contracts is not, however, an
absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may
establish such stipulations as they may deem convenient, "provided they are not contrary to law,
morals, good customs, public order or public policy." Thus, counter-balancing the principle of
autonomy of contracting parties is the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other. It is thus necessary to appraise
the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable
Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that
paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor
Code as they existed at the time the contract of employment was entered into, and hence refused
to give effect to said paragraph 5. These Articles read as follows:
Art. 280. 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 to his backwages computed from the time his
compensation was withheld from him up to the time his reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of

the engagement of the employee or where the work or 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 as 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., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine
in detail the question of whether employment for a fixed term has been outlawed under the above
quoted provisions of the Labor Code. After an extensive examination of the history and
development of Articles 280 and 281, the Court reached the conclusion that a contract providing
for employment with a fixed period was not necessarily unlawful:
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
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 employers" 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.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the employee's right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. 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. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or absence of a
substantial indication that the period specified in an employment agreement was designed to

circumvent the security of tenure of regular employees which is provided for in Articles 280
and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the ernployment agreement, or
upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner
PIA and private respondents, we consider that those provisions must be read together and when
so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been
effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect
took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by
rendering such period in effect a facultative one at the option of the employer PIA. For petitioner
PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to
itself, to a one-month period, or even less by simply paying the employee a month's salary.
Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the
employment of private respondents Farrales and Mamasig basically employment at the pleasure
of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any
security of tenure from accruing in favor of private respondents even during the limited period of
three (3) years, 13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor
Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies,
firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue
for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of
Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application
of Philippine labor laws and regulations to the subject matter of this case, i.e., the employeremployee relationship between petitioner PIA and private respondents. We have already pointed
out that the relationship is much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some
other law to govern their relationship. Neither may petitioner invoke the second clause of
paragraph 10, specifying the Karachi courts as the sole venue for the settlement of dispute;
between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this
case will show the multiple and substantive contacts between Philippine law and Philippine
courts, on the one hand, and the relationship between the parties, upon the other: the contract
was not only executed in the Philippines, it was also performed here, at least partially; private
respondents are Philippine citizens and respondents, while petitioner, although a foreign
corporation, is licensed to do business (and actually doing business) and hence resident in the
Philippines; lastly, private respondents were based in the Philippines in between their assigned
flights to the Middle East and Europe. All the above contacts point to the Philippine courts and
administrative agencies as a proper forum for the resolution of contractual disputes between the
parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given
effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by
Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove
the contents of Pakistan law on the matter; it must therefore be presumed that the applicable
provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. 14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that
public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor
any act without or in excess of jurisdiction in ordering their reinstatement with backwages. Private
respondents are entitled to three (3) years backwages without qualification or deduction. Should
their reinstatement to their former or other substantially equivalent positions not be feasible in
view of the length of time which has gone by since their services were unlawfully terminated,
petitioner should be required to pay separation pay to private respondents amounting to one (1)
month's salary for every year of service rendered by them, including the three (3) years service
putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order
dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private
respondents are entitled to three (3) years backwages, without deduction or qualification; and (2)

should reinstatement of private respondents to their former positions or to substantially equivalent

positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents
separation pay amounting to one (1)-month's salary for every year of service actually rendered by
them and for the three (3) years putative service by private respondents. The Temporary
Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner.
SO ORDERED.
Fernan (C.J., Chairman), Gutierrez, Jr., Bidin and Corts, JJ., concur.

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.:
The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor Code,
2

as amended, 3 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 engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. 4
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 contained in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated period, or more precisely on April
20,1976, Alegre was given a copy of the report filed by Brent School with the Department of
Labor advising of the termination of his services effective on July 16, 1976. The stated ground for
the termination was "completion of contract, expiration of the definite period of employment." And
a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a
receipt therefor containing the phrase, "in full payment of services for the period May 16, to July
17, 1976 as full payment of contract."
However, at the investigation conducted by a Labor Conciliator of said report of termination of his
services, Alegre protested the announced termination of his employment. He argued that
although his contract did stipulate that the same would terminate on July 17, 1976, since his
services were necessary and desirable in the usual business of his employer, and his
employment had lasted for five years, he had acquired the status of a regular employee and
could not be removed except for valid cause. 6 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. 8, series of 1969,
of the Bureau of Private Schools. 7

Brent School filed a motion for reconsideration. The Regional Director denied the motion and
forwarded the case to the Secretary of Labor for review. 8 The latter sustained the Regional
Director. 9 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 the just causes provided in the Labor Code
for termination of services. 10
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18, 1971, at a
time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed,
the Code did not come into effect until November 1, 1974, some three years after the perfection
of the employment contract, and rights and obligations thereunder had arisen and been mutually
observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the
validity of term employment. It was impliedly but nonetheless clearly recognized by the
Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787. 12 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 Milling Co., Inc., promulgated on March 31, 1977, 13 and J. Walter Thompson
Co. (Phil.) v. NLRC, promulgated on December 29, 1983. 14 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)
Under American law 15 the principle is the same. "Where a contract specifies the period of its
duration, it terminates on the expiration of such period." 16 "A contract of employment for a definite
period terminates by its own terms at the end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the
Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The
Code contained explicit references to fixed period employment, or employment with a fixed or
definite period. Nevertheless, obscuration of the principle of licitness of term employment began
to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally stated that the
"termination of employment of probationary employees and those employed WITH A FIXED
PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The
asserted objective to was "prevent the circumvention of the right of the employee to be secured in
their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate "an employment
without a definite period."
And Article 319 undertook to define "employment without a fixed period" in the following manner:
18

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

Chapter where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee
or where the work or service to be performed is seasonal in nature and the employment
is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or not a voluntary
agreement on a fixed term or period would be valid where the employee "has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer." The definition seems a non sequitur. From the premise that the duties of an
employee entail "activities which are usually necessary or desirable in the usual business or trade
of the employer the" conclusion does not necessarily follow that the employer and employee
should be forbidden to stipulate any period of time for the performance of those activities. There
is nothing essentially contradictory between a definite period of an employment contract and the
nature of the employee's duties set down in that contract as being "usually necessary or desirable
in the usual business or trade of the employer." The concept of the employee's duties as being
"usually necessary or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, the decisive determinant
in term employment should not be the activities that the employee is called upon to perform, but
the day certain agreed upon by the parties for the commencement and termination of their
employment relationship, a day certain being understood to be "that which must necessarily
come, although it may not be known when." 19 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 definite length. . . . the period from one fixed date to another fixed date . . ."
20
It connotes a "space of time which has an influence on an obligation as a result of a juridical
act, and either suspends its demandableness or produces its extinguishment." 21 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 article 22 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 exclusively of "regular" and "casual" employment. As revised, said article,
renumbered 270, 23 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 Bilang 130, 24 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 fixedperiod employment in the Labor Code, and the specific statement of the rule 25 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 order or public policy. 26 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 predetermined dates of completion; they also include those to which the parties by free choice have
assigned a specific date of termination.
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment will all that it implies does not appear ever to
have been applied, Article 280 of the Labor Code not withstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative offices in
educational institutions, which are by practice or tradition rotated among the faculty members,
and where fixed terms are a necessity, without which no reasonable rotation would be possible.
Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor 27
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
objecionable mischievous, undefensible, wrongful, evil and injurious consequences. 28
Nothing is better settled than that courts are not to give words a meaning which would
lead to absurd or unreasonable consequences. That s a principle that does back to In re
Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be
rejected if it would be unjust or lead to absurd results. That is a strong argument against
its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the
construction placed upon the statute by the appellants would lead to an absurdity is
another argument for rejecting it. . . ." 29
. . . We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the
statute, since adherence to the letter would result in absurdity, injustice and
contradictions and would defeat the plain and vital purpose of the statute. 30
Accordingly, and since the entire purpose behind the development of legislation culminating in the
present Article 280 of the Labor Code clearly appears to have been, as already observed, to
prevent circumvention of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements conflicting with the
concept of regular employment as defined therein should be construed to refer to the substantive
evil that the Code itself has singled out: agreements entered into precisely to circumvent security
of tenure. It should have no application to instances where a fixed period of employment was
agreed upon knowingly and voluntarily by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent any other circumstances vitiating
his consent, or where it satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law would be made to apply to
purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended consequences.
Such interpretation puts the seal on Bibiso 31 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
court's finding in Labajo supra. ... 32
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of
his last contract with Brent School on July 16, 1976 without the necessity of any notice. The
advance written advice given the Department of Labor with copy to said petitioner was a mere
reminder of the impending expiration of his contract, not a letter of termination, nor an application
for clearance to terminate which needed the approval of the Department of Labor to make the
termination of his services effective. In any case, such clearance should properly have been
given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE.
Respondent Alegre's contract of employment with Brent School having lawfully terminated with
and by reason of the expiration of the agreed term of period thereof, he is declared not entitled to
reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No
pronouncement as to costs.
SO ORDERED.
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Corts, GrioAquino, Medialdea and Regalado, JJ., concur.
Fernan, C.J., took no part.

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
Lei Trucking Company. The Labor Arbiter found for him and ordered his reinstatement with back wages. 1

On appeal, the decision was reversed by the National Labor Relations Commission, which held
that the petitioner's employment had expired under a valid contract. 2 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 by the Court from the NLRC, which had obtained
them from its Cagayan de Oro regional office. 3
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:
AF F I D AV I T
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.
______________
Driver
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 individual vouchers 4 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, cost-of-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.

Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 172241 November 20, 2008

PUREFOODS CORPORATION (now SAN MIGUEL PUREFOODS COMPANY,
INC.), petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and LOLITA
NERI, respondents.
DECISION
TINGA, J.:
This is a Petition for Review of the Decision 1 and Resolution2 of the Court of Appeals
dated 2 November 2005 and 7 April 2006, respectively, in C.A. G.R. SP No. 65180,
which upheld the National Labor Relations Commission's (NLRC) 22 November 2000
decision.3
The antecedents follow.
On 8 June 1992, Lolita Neri (Neri) originally filed a claim4 for nonpayment of additional
wage increase, regularization, nonpayment of service incentive leave, underpayment of
13th month pay, and nonpayment of premium pay for holiday and holiday pay against
Purefoods Corporation (Purefoods). By 4 July 1992, however, Neri was dismissed from
her work as a Deli-Attendant.5 Subsequently, or on 13 July 1992, eleven (11) other
complainants6 joined forces with Neri and together they filed an amended complaint, with
Neri charging Purefoods with illegal dismissal.7 All the other complainants, save for Neri,
were still working for Purefoods at the time of the filing of the amended complaint. On
31 August 1993, Labor Arbiter Arthur L. Amansec declared Neri and the complainants as
Purefoods' regular employees; and Neri as having been illegally dismissed and entitled to
reinstatement with payment of backwages. 8 Purefoods filed a partial appeal, praying that
the claims of complainants be dismissed for lack of merit, or in the alternative, the case
be remanded for formal hearing on the merits and to implead D.L. Admark as a partyrespondent.9 The NLRC granted the appeal and remanded the case for further hearings on
the factual issues.10
The case was remanded to Labor Arbiter Felipe P. Pati, who, after finding that Neri is not
an employee of petitioner, but rather of D.L. Admark, an independent labor contractor,
dismissed the complaint on 14 December 1998.11 On 15 March 1999, a memorandum on
appeal was nominally filed by all the complainants; however, it was only Neri who
verified the same.12 On 22 November 2000, the NLRC ruled in complainants' favor and
reversed and set aside the labor arbiter's decision. According to the NLRC, the pieces of
evidence on record established the employer-employee relationship between Purefoods
and Neri and the other complainants. It thus ordered Neri's reinstatement and the payment
of backwages or of separation pay if reinstatement is not possible. 13 Purefoods moved for

the reconsideration of the decision but its motion was denied for lack of merit. 14 Hence,
its recourse to the Court of Appeals via a petition for certiorari.15
The Court of Appeals, relying on the case of Escario v. NLRC,16 held that D.L. Admark is
a legitimate independent contractor. However, it ruled that complainants are regular
employees of Purefoods.17 Citing Art. 280 of the Labor Code, the appellate court found
that complainants were engaged to perform activities which are usually necessary or
desirable in the usual business or trade of Purefoods, and that they were under the control
and supervision of Purefoods' supervisors, and not of D.L. Admark's. It noted that in the
Promotions Agreements between D.L. Admark and Purefoods, there was no mention of
the list of D.L. Admark employees who will handle particular promotions for petitioner,
and that complainants' periods of employment are not fully covered by the Promotions
Agreements.18
The Court of Appeals pointed out that Purefoods did not present any evidence to support
its claim that complainants were employees of D.L. Admark. It likewise failed to implead
D.L. Admark, or even present a representative of D.L. Admark who could testify in its
favor.19 Finally, the Court of Appeals ruled that Neri was illegally dismissed, as there was
no valid and just cause for terminating her employment and she was not given the
requisite notice and hearing.20
Purefoods sought reconsideration21 of the decision but its motion was denied on 7 April
2006, with the Court of Appeals making special note of the fact that it was only after it
had issued the assailed decision that Purefoods introduced several affidavits in support of
its case, particularly on the alleged spuriousness of the documents presented by
respondent Neri.22
In the present petition for review,23 Purefoods argues that the affidavits it attached to its
motion for reconsideration before the Court of Appeals are not evidence presented for the
first time, but rather just corroboration, clarification, and/or explanation of what it had
advanced in the proceedings below. It likewise claims that the other complainants in this
case are not entitled to the avails of the suit because they failed to verify the position
paper and the memorandum on appeal. Purefoods maintains that Neri and the
complainants are not employees of Purefoods, but of D.L. Admark, an independent job
contractor. Thus, it cannot be held liable for illegal dismissal. Finally, it claims that
Article 280 of the Labor Code is not applicable in a trilateral relationship involving a
principal, an independent job contractor, and the latter's employees.24
This simple issue of determining employer-employee relationship between Purefoods and
the complainants has been given differing answers by the lower tribunals, so much so that
the Court
will have to look into the factual matters involved. Deeply embedded in our jurisprudence
is the rule that the findings of facts of quasi-judicial bodies like the NLRC are accorded
great respect and, at times, even finality. There are, however, exceptions, among which is
when there is a conflict between the factual findings of the NLRC and the Labor
Arbiter.25 Accordingly, this Court must of necessity review the records to determine
which findings should be preferred as more conformable to the evidentiary facts.26
There is merit in the petition.
The Court agrees with Purefoods' argument that Art. 280 of the Labor Code 27 finds no

application in a trilateral relationship involving a principal, an independent job contractor,

and the latter's employees. Indeed, the Court has ruled that said provision 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; it does not apply where the existence of an
employment relationship is in dispute. 28 It is therefore erroneous on the part of the Court
of Appeals to rely on Art. 280 in determining whether an employer-employee relationship
exists between respondent Neri and Purefoods.
Permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with the contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or
predetermined period regardless of whether such job, work or service is to be performed
or completed within or outside the premises of the principal.29 In this arrangement, the
following conditions must be met: (a) the contractor carries on a distinct and independent
business and undertakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of his work except as
to the results thereof; (b) the contractor has substantial capital or investment; and (c) the
agreement between the principal and contractor or subcontractor assures the contractual
employees' entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social welfare benefits.30
To support its position that respondent is not its employee, Purefoods relies on the
following: (i) the Promotions Agreements31 it entered into with D.L. Admark; (ii)
Department Order No. 10 (Series of 1997)32 which defines legitimate contracting or
subcontracting; and (iii) Escario v. NLRC33 wherein the Court declared D.L. Admark as a
legitimate labor contractor.
On the other hand, early on, Neri and the rest of the complainants admitted that they
worked for petitioner through D.L. Admark. 34 However, they also averred that they were
under the control and supervision of petitioner's employeessalesmen, poultry sales
managers, deli supervisorswho give them work orders and to whom they submit weekly
inventory reports and monthly competitive sales report. In support of these statements,
Neri appended several documents (various Identification Cards, Certification from
Rustan's Supermarkets stating that respondent Neri is from Purefoods, Memoranda to
respondent Neri written by a supervisor from
Purefoods, letters from Purefoods area sales managers introducing complainants as
Purefoods Merchandisers).35 Purefoods, meanwhile, claims that these documents must be
taken in the context of the performance of the service contracted outpromotion of its
products.36
In the first place, D.L. Admark's status as a legitimate independent contractor has already
been established in Escario v. NLRC.37 In the said case, complainants, through D.L.
Admark, worked as merchandisers for California Manufacturing Corporation (CMC).
They filed a case before the labor arbiter for the regularization of their employment status
with CMC, and while the case was pending, D.L. Admark sent termination letters to
complainants. The complainants thereafter amended their complaint to include illegal

dismissal. The Court considered the following circumstances as tending to establish D.L.
Admark's status as a legitimate job contractor:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in
promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the
agreement is for the supply of sales promoting merchandising services rather than one
of manpower placement.
3) D.L. Admark was actually engaged in several activities, such as advertising,
publication, promotions, marketing and merchandising. It had several merchandising
contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and
Licron. It was likewise engaged in the publication business as evidenced by its
magazine the "Phenomenon."
4) It had its own capital assets to carry out its promotion business. It then had current
assets amounting to P6 million and is therefore a highly capitalized venture. It had an
authorized capital stock of P500,000.00. It owned several motor vehicles and other
tools, materials and equipment to service its clients. It paid rentals of P30,020 for the
office space it occupied.38
Moreover, applying the four-fold test used in determining employer-employee
relationship, the Court found that: the employees therein were selected and hired by D.L.
Admark; D.L. Admark paid their salaries, as evidenced by the payroll prepared by D.L.
Admark and sample contribution forms; D.L. Admark had the power of dismissal as it
admitted that it was the one who terminated the employment of the employees; and
finally, it was D.L. Admark who exercised control and supervision over the employees.39
Furthermore, it is evident from the Promotions Agreements entered into by Purefoods
that D.L. Admark is a legitimate labor contractor. A sample agreement reads in part:
WHEREAS, The FIRST PARTY is engaged in the general promotion business;
WHEREAS, The SECOND PARTY will launch its "Handog sa Graduates" promotion
project;
WHEREAS, The FIRST PARTY has offered its services to the SECOND PARTY, in
connection with the said promotion project, and the latter has accepted the said offer;
NOW, THEREFORE, for and in consideration of the foregoing premises, and of the
mutual convenience between them, the parties have agreed as follows:
1. The FIRST PARTY shall handle and implement the "Handog sa Graduates"
promotion project of the SECOND PARTY, said project to last from February 1,
1992 to July 31, 1992.
2. The FIRST PARTY shall indemnify the SECOND PARTY for any loss or
damage to the latter's properties, if such loss or damage is due to the fault or
negligence of the FIRST PARTY or its agents or employees.
3. There shall be no employer-employee relationship between the FIRST PARTY
or its agents or employees and the SECOND PARTY.
4. In consideration for the services to be rendered by the FIRST PARTY to the

SECOND PARTY, the latter shall pay the former the amount of Two Million Six
Hundred Fifty Two Thousand pesos only (P2,652,000.00) payable as follows:
x x x40
The agreements confirm that D.L. Admark is an independent contractor which Purefoods
had engaged to supply general promotion services, and not mere manpower services, to
it. The provisions expressly permit D.L. Admark to handle and implement Purefoods'
project, and categorically state that there shall be no employer-employee relationship
between D.L. Admark's employees and Purefoods. While it may be true that
complainants were required to submit regular reports and were introduced as Purefoods
merchandisers, these are not enough to establish Purefoods' control over them. Even if
the report requirements are somehow considered as control measures, they were imposed
only to ensure the effectiveness of the promotion services rendered by D.L. Admark. It
would be a rare contract of service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his performance of the engagement. 41
Indeed, it would be foolhardy for any company to completely give the reins and totally
ignore the operations it has contracted out.
Significantly, the pieces of evidence submitted by Neri do not support her claim of
having been a regular employee of Purefoods. We note that two "Statement of Earnings
and Deductions"42 were issued for the same period, December 1989, and in one
"Statement," someone deliberately erased the notation "January 1997," thereby casting
doubt on the authenticity of the said documents. Even the identification cards 43 presented
by Neri are neither binding on Purefoods nor even indicative of her claimed employee
status of Purefoods, issued as they were by the supermarkets concerned and not by
Purefoods itself. Moreover, the check voucher issued by Purefoods marked "IN
PAYMENT OF DL ADMARK DELI ATTENDANTS 12.00 PESOS ADJUSTMENT
JAN 30, 1991 TO JUNE 22, 1992,"44 signed and received by Neri, is proof that Purefoods
never considered Neri as its own employee, but rather as one of D.L. Admark's deli
attendants.
We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings
that she applied with D.L. Admark45 and that she worked for Purefoods through D.L.
Admark.46 Neri was aware from the start that D.L. Admark was her employer and not
Purefoods. She had kept her contract with D.L. Admark, and inquired about her
employment status with D.L. Admark. It was D.L. Admark, as her employer, which had
the final say in, and which actually effected, her termination.
Purefoods argues that the Court of Appeals erred in denying the affidavits it attached to
its motion for reconsideration on the ground that these were presented for the first time,
and additionally states that the affidavits are just corroboration, clarification and/or
explanation of what it had already argued in its previous pleadings. The point is not
pivotal.47 After all, there is no need for such supporting affidavits. Purefoods had already
disputed the authenticity and veracity of the pieces of evidence presented by Neri in the
earlier proceedings, plausibly and successfully as it turned out ultimately. Verily, this
Court earlier debunked the documents as not sufficient to establish the purported
employer-employee relationship.
On to another matter. We agree with Purefoods that it is only Neri who could have been

entitled to the avails of the suit, if at all. While there are twelve complainants in the
amended complaint, only seven (7) out of the twelve (12) had verified it. 48 Thereafter,
when the case was remanded to the labor arbiter for further proceedings, it was only Neri
who verified the memorandum on appeal. It was also only Neri who presented evidence
and testified during the hearings conducted by the labor arbiter. This is most evident in
Neri's Formal
Offer of Exhibits for Complainant49 wherein the only pieces of evidence offered were the
position paper, her Sinumpaang Salaysay, her signature, a copy of the Collective
Bargaining Agreement, and a computation of her claims. Significantly, all of the exhibits
were offered to support Neri's claims only; there was no mention of the other
complainants. It being very clear that it was only Neri who had participated in the appeal
and presented evidence, the NLRC erred in including the other complainants as
prevailing parties in its decision. Otherwise stated, considering that it is only Neri who
had appealed the case and participated in the proceedings up to the present petition, it is
only she who should be entitled to the avails of this suit, if any should be due.
In view of the foregoing, we hold that Neri is not an employee of Purefoods, but that of
D.L. Admark. In the absence of employer-employee relations between Neri and
Purefoods, the complaint for illegal dismissal and other monetary claims must fail.
WHEREFORE, the Petition is GRANTED. The Decision and Resolution of the Court of
Appeals dated 2 November 2005 and 7 April 2006, respectively, in C.A. G.R. SP No.
65180 are REVERSED
and SET ASIDE. Respondent Neris' complaint docketed as NLRC NCR Case No. 00-0603149-92 is DISMISSED.
SO ORDERED.

G.R. No. 80774 May 31, 1988

SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA,
respondents.
Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.
The Solicitor General for public respondent.
FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner San Miguel Corporation ("Corporation;" "SMC")
and under which management undertook to grant cash awards to "all SMC employees ... except [ED-HO
staff, Division Managers and higher-ranked personnel" who submit to the Corporation Ideas and suggestions
found to be beneficial to the Corporation, private respondent Rustico Vega submitted on 23 September 1980
an innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization Process," and

was supposed to eliminate certain alleged defects in the quality and taste of the product "San Miguel Beer
Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure
At the early stage of beer grande production, several cases of beer grande full goods were
received by MB as returned beer fulls (RBF). The RBF's were found to have sediments and their
contents were hazy. These effects are usually caused by underpasteurization time and the
pasteurzation units for beer grande were almost similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of beer grande, reduce the speed of the
beer grande pasteurizer thereby, increasing the pasteurization time and the pasteurization acts for
grande beer. In this way, the self-life (sic) of beer grande will also be increased. 1

Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3) years and
was then holding the position of "mechanic in the Bottling Department of the SMC Plant Brewery
situated in Tipolo, Mandaue City.
Petitioner Corporation, however, did not find the aforequoted proposal acceptable and
consequently refused Mr. Vega's subsequent demands for a cash award under the Innovation
Program. On 22 February 1983., a Complaint 2 (docketed as Case No. RAB-VII-0170-83) was
filed against petitioner Corporation with Regional Arbitration Branch No. VII (Cebu City) of the
then.", Ministry of Labor and Employment. Frivate respondent Vega alleged there that his
proposal "[had] been accepted by the methods analyst and implemented by the Corporation [in]
October 1980," and that the same "ultimately and finally solved the problem of the Corporation in
the production of Beer Grande." Private respondent thus claimed entitlement to a cash prize of
P60,000.00 (the maximum award per proposal offered under the Innovation Program) and
attorney's fees.
In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that private
respondent had no cause of action. It denied ever having approved or adopted Mr. Vega's
proposal as part of the Corporation's brewing procedure in the production of San Miguel Beer
Grande. Among other things, petitioner stated that Mr. Vega's proposal was tumed down by the
company "for lack of originality" and that the same, "even if implemented [could not] achieve the
desired result." Petitioner further alleged that the Labor Arbiter had no jurisdiction, Mr. Vega
having improperly bypassed the grievance machinery procedure prescribed under a then existing
collective bargaining agreement between management and employees, and available
administrative remedies provided under the rules of the Innovation Program. A counterclaim for
moral and exemplary damages, attorney's fees, and litigation expenses closed out petitioner's
pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of complainant
Vega in this case is "not a necessary incident of his employment" and that said claim is not
among those mentioned in Article 217 of the Labor Code, dismissed the complaint for lack of
jurisdiction. However, in a gesture of "compassion and to show the government's concern for the
workingman," the Labor Arbiter also directed petitioner to pay Mr. Vega the sum of P2,000.00 as
"financial assistance."
The Labor Arbiter's order was subsequently appealed by both parties, private respondent Vega
assailing the dismissal of his complaint for lack of jurisdiction and petitioner Corporation
questioning the propriety of the award of "financial assistance" to Mr. Vega. Acting on the
appeals, the public respondent National Labor Relations Commission, on 4 September 1987,
rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and another udgment entered,
order the respondent to pay the complainant the amount of P60,000.00 as explained
above.

SO ORDERED.
In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation, invoking
Article 217 of the Labor Code, seeks to annul the Decision of public respondent Commission in
Case No. RAB-VII-01 70-83 upon the ground that the Labor Arbiter and the Commission have no
jurisdiction over the subject matter of the case.
The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in
Article 217 of the Labor Code, as last amended by Batas Pambansa Blg. 227 which took effect on
1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The Labor Arbiters shall
have the original and exclusive jurisdiction to hear and decide within thirty (30) working
days after submission of the case by the parties for decision, the following cases
involving are workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other terms
and conditions of employment;
3. All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this; Code, including
questions involving the legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters. (Emphasis supplied)
While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose
that the entire universe of money claims that might be asserted by workers against their
employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the
first place, paragraph 3 should be read not in isolation from but rather within the context formed
by paragraph 1 related to unfair labor practices), paragraph 2 (relating to claims concerning terms
and conditions of employment), paragraph 4 (claims relating to household services, a particular
species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited
to employees or to employers).<re||an1w> It is evident that there is a unifying element which
runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes arising out of or
in connection with an employer-employee relationship. This is, in other words, a situation where
the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and
any other paragraph of Article 217 of the Labor Code, as amended. We reach the above
conclusion from an examination of the terms themselves of Article 217, as last amended by B.P.
Blg. 227, and even though earlier versions of Article 217 of the Labor Code expressly brought
within the jurisdiction of the Labor Arbiters and the NLRC "cases arising from employer employee
relations," 6 which clause was not expressly carried over, in printer's ink, in Article 217 as it exists
today. For it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall within the
general jurisdiction of the regular courts of justice, were intended by the legislative authority to be
taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive
basis. The Court, therefore, believes and so holds that the money claims of workers" referred to
in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the
employer-employee relationship, or some aspect or incident of such relationship. Put a little
differently, that money claims of workers which now fall within the original and exclusive
jurisdiction of Labor Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.
Applying the foregoing reading to the present case, we note that petitioner's Innovation Program

is an employee incentive scheme offered and open only to employees of petitioner Corporation,
more specifically to employees below the rank of manager. Without the existing employeremployee relationship between the parties here, there would have been no occasion to consider
the petitioner's Innovation Program or the submission by Mr. Vega of his proposal concerning
beer grande; without that relationship, private respondent Vega's suit against petitioner
Corporation would never have arisen. The money claim of private respondent Vega in this case,
therefore, arose out of or in connection with his employment relationship with petitioner.
The next issue that must logically be confronted is whether the fact that the money claim of
private respondent Vega arose out of or in connection with his employment relation" with
petitioner Corporation, is enough to bring such money claim within the original and exclusive
jurisdiction of Labor Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the sale and
repair of motor vehicles, while private respondent was the sales Manager of petitioner. Petitioner
had sued private respondent for non-payment of accounts which had arisen from private
respondent's own purchases of vehicles and parts, repair jobs on cars personally owned by him,
and cash advances from the corporation. At the pre-trial in the lower court, private respondent
raised the question of lack of jurisdiction of the court, stating that because petitioner's complaint
arose out of the employer-employee relationship, it fell outside the jurisdiction of the court and
consequently should be dismissed. Respondent Judge did dismiss the case, holding that the sum
of money and damages sued for by the employer arose from the employer-employee relationship
and, hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the order of
dismissal and requiring respondent Judge to take cognizance of the case below, this Court,
speaking through Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5
of Article 217 of the Labor Code had jurisdiction over" all other cases arising from
employer-employee relation, unless, expressly excluded by this Code." Even then, the
principle followed by this Court was that, although a controversy is between an employer
and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not
involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating jurisdiction of
the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice
Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor Code has any
relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no
relevance, any discussion concerning the statutes amending it and whether or
not they have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any unfair
labor practice. Theirs is a simple action for damages for tortious acts allegedly
committed by the defendants. Such being the case, the governing statute is the
Civil Code and not the Labor Code. It results that the orders under review are
based on a wrong premise.
And in Singapore Airlines Limited v. Pao, 122 SCRA 671, 677, the following was said:
Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay.
The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of
repair jobs made on his personal cars, and for the purchase price of vehicles and parts
sold to him. Those accounts have no relevance to the Labor Code. The cause of action
was one under the civil laws, and it does not breach any provision of the Labor Code or

the contract of employment of DEFENDANT. Hence the civil courts, not the Labor
Arbiters and the NLRC should have jurisdiction. 8
It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt, involved
a claim for damages by two (2) employees against the employer company and the General
Manager thereof, arising from the use of slanderous language on the occasion when the General
Manager fired the two (2) employees (the Plant General Manager and the Plant Comptroller). The
Court treated the claim for damages as "a simple action for damages for tortious acts" allegedly
committed by private respondents, clearly if impliedly suggesting that the claim for damages did
not necessarily arise out of or in connection with the employer-employee relationship. Singapore
Airlines Limited v. Pao, also cited in Molave, involved a claim for liquidated damages not by a
worker but by the employer company, unlike Medina. The important principle that runs through
these three (3) cases is that where the claim to the principal relief sought 9 is to be resolved not
by reference to the Labor Code or other labor relations statute or a collective bargaining
agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular
courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolution of the
dispute requires expertise, not in labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the application of the general civil law. Clearly,
such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters
and the NLRC and the rationale for granting jurisdiction over such claims to these agencies
disappears.
Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was
essentially an invitation from petitioner Corporation to its employees to submit innovation
proposals, and that petitioner Corporation undertook to grant cash awards to employees who
accept such invitation and whose innovation suggestions, in the judgment of the Corporation's
officials, satisfied the standards and requirements of the Innovation Program 10 and which,
therefore, could be translated into some substantial benefit to the Corporation. Such undertaking,
though unilateral in origin, could nonetheless ripen into an enforceable contractual (facio ut des) 11
obligation on the part of petitioner Corporation under certain circumstances. Thus, whether or not
an enforceable contract, albeit implied arid innominate, had arisen between petitioner Corporation
and private respondent Vega in the circumstances of this case, and if so, whether or not it had
been breached, are preeminently legal questions, questions not to be resolved by referring to
labor legislation and having nothing to do with wages or other terms and conditions of
employment, but rather having recourse to our law on contracts.
WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987 of
public respondent National Labor Relations Commission is SET ASIDE and the complaint in Case
No. RAB-VII-0170-83 is hereby DISMISSED, without prejudice to the right of private respondent
Vega to file a suit before the proper court, if he so desires. No pronouncement as to costs.
SO ORDERED.
Fernan, Gutierrez, Jr., Bidin and Cortes, JJ., concur.

[G.R. No. 79560 : December 3, 1990.]

191 SCRA 823
ANDRES E. DITAN, Petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION ADMINISTRATOR, NATIONAL LABOR RELATIONS
COMMISSION, ASIAWORLD RECRUITMENT, INC., AND/OR INTRACO
SALES CORPORATION, Respondents.

DECISION
CRUZ, J.:
The petitioner had the rare experience of being taken hostage in 1984, along with a
number of his co-workers, by the rebels in Angola. His captivity for more than two
months and the events that followed his release are the subject of the present petition.
Andres E. Ditan was recruited by private respondent Intraco Sales Corporation, through
its local agent, Asia World, the other private respondent, to work in Angola as a welding
supervisor. The contract was for nine months, at a monthly salary of US$1,100.00 or
US$275.00 weekly, and contained the required standard stipulations for the protection of
our overseas workers.
Arriving on November 30, 1984, in Luanda, capital of Angola, the petitioner was
assigned as an ordinary welder in the INTRACO central maintenance shop from
December 2 to 25, 1984. On December 26, 1984, he was informed, to his distress, that
would be transferred to Kafunfo, some 350 kilometers east of Luanda. This was the place
where, earlier that year, the rebels had attacked and kidnapped expatriate workers, killing
two Filipinos in the raid. Naturally, Ditan was reluctant to go. However, he was assured
by the INTRACO manager that Kafunfo was safe and adequately protected by
government troops; moreover and this was more persuasive he was told he would
be sent home if he refused the new assignment. In the end, with much misgiving, he
relented and agreed.: nad
On December 29, 1984, his fears were confirmed. The Unita rebels attacked the diamond
mining site where Ditan was working and took him and sixteen other Filipino hostages,
along with other foreign workers. The rebels and their captives walked through jungle
terrain for 31 days to the Unita stronghold near the Namibian border. They trekked for
almost a thousand kilometers. They subsisted on meager fare. Some of them had diarrhea.
Their feet were blistered. It was only on March 16, 1985, that the hostages were finally
released after the intercession of their governments and the International Red Cross. Six
days later, Ditan and the other Filipino hostages were back in the Philippines. 1
The repatriated workers had been assured by INTRACO that they would be given priority
in re-employment abroad, and eventually eleven of them were taken back. Ditan having
been excluded, he filed in June 1985 a complaint against the private respondents for
breach of contract and various other claims. Specifically, he sought the amount of
US$4,675.00, representing his salaries for the unexpired 17 weeks of his contract;
US$25,000.00 as war risk bonus; US$2,196.50 as the value of his lost belongings;
US$1,100 for unpaid vacation leave; and moral and exemplary damages in the sum of
US$50,000.00, plus attorney's fees.
All these claims were dismissed by POEA Administrator Tomas D. Achacoso in a
decision dated January 27, 1987. 2 This was affirmed in toto by respondent NLRC in a
resolution dated July 14, 1987, 3 which is now being challenged in this petition.
Going over the record, we find that the public respondent correctly rejected the
petitioner's claim for paid vacation leave. The express stipulation in Clause 5 of the
employment contract reads:
Should the Employee enter into a further 9 to 12 months contract at the completion

contract, he will be entitled to one month's paid vacation before commencement of his
second or subsequent contract.
It appears that the petitioner had not entered into a second contract with the employer
after the expiration of the first. Such re-employment was not a matter of right on the part
of the petitioner but dependent on the need for his skills in another project the employer
might later be undertaking.
As regards the cost of his belongings, the evidence shows that they were not really lost
but in fact returned to him by the rebels prior to their release. If he had other properties
that were not recovered, there was no proof of their loss that could support his
allegations. They were therefore also properly rejected.:-cralaw
We find, though, that the claims for breach of contract and war risk bonus deserve a little
more reflection in view of the peculiar circumstances of this case.
The fact that stands out most prominently in the record is the risk to which the petitioner
was subjected when he was assigned, after his reluctant consent, to the rebel-infested
region of Kafunfo. This was a dangerous area. This same place had earlier been the target
of a rebel attack that had resulted in the death of two Filipino workers and the capture of
several others. Knowing all this, INTRACO still pressured Ditan into agreeing to be
transferred to that place, dismissing his initial objection and, more important, threatening
to send him home if he refused.
We feel that in failing to provide for the safety of the petitioner, the private respondents
were clearly remiss in the discharge of one of the primary duties of the employer. Worse,
they not only neglected that duty but indeed deliberately violated it by actually subjecting
and exposing Ditan to a real and demonstrated danger. It does not help to argue that he
was not forced to go to Kafunfo and had the option of coming home. That was a cruel
choice, to say the least. The petitioner had gone to that foreign land in search of a better
life that he could share with his loved ones after his stint abroad. That choice would have
required him to come home empty-handed to the disappointment of an expectant family.
It is not explained why the petitioner was not paid for the unexpired portion of his
contract which had 17 more weeks to go. The hostages were immediately repatriated after
their release, presumably so they could recover from their ordeal. The promise of
INTRACO was that they would be given priority in re-employment should their services
be needed. In the particular case of the petitioner, the promise was not fulfilled. It would
seem that his work was terminated, and not again required, because it was really intended
all along to assign him only to Kafunfo.:-cralaw
The private respondents stress that the contract Ditan entered into called for his
employment in Angola, without indication of any particular place of assignment in the
country. This meant he agreed to be assigned to work anywhere in that country, including
Kafunfo. When INTRACO assigned Ditan to that place in the regular course of its
business, it was merely exercising its rights under the employment contract that Ditan had
freely entered into. Hence, it is argued, he cannot now complain that there was a breach
of that contract for which he is entitled to monetary redress.
The private respondents also reject the claim for war risk bonus and point out that POEA
Memorandum Circular No. 4, issued pursuant to the mandatory war risk coverage
provision in Section 2, Rule VI, of the POEA Rules and Regulations on Overseas

Employment, categorizing Angola as a war risk took effect only on February 6, 1985,
"after the petitioner's deployment to Angola on November 27, 1984." Consequently, the
stipulation could not be applied to the petitioner as it was not supposed to have a
retroactive effect.
A strict interpretation of the cold facts before us might support the position taken by the
respondents. However, we are dealing here not with an ordinary transaction but with a
labor contract which deserves special treatment and a liberal interpretation in favor of the
worker. As the Solicitor General observes in his Comment supporting the petitioner, the
Constitution mandates the protection of labor and the sympathetic concern of the State
for the working class conformably to the social justice policy. This is a command we
cannot disregard in the resolution of the case before us.
The paramount duty of this Court is to render justice through law. The law in this case
allows two opposite interpretations, one strictly in favor of the employers and the other
liberally in favor of the worker. The choice is obvious. We find, considering the totality of
the circumstances attending this case, that the petitioner is entitled to relief.
The petitioner went to Angola prepared to work as he had promised in accordance with
the employment contract he had entered into in good faith with the private respondents.
Over his objection, he was sent to a dangerous assignment and as he feared was taken
hostage in a rebel attack that prevented him from fulfilling his contract while in captivity.
Upon his release, he was immediately sent home and was not paid the salary
corresponding to the unexpired portion of his contract. He was immediately repatriated
with the promise that he would be given priority in re-employment, which never came.
To rub salt on the wound, many of his co-hostages were re-employed as promised. The
petitioner was left only with a bleak experience and nothing to show for it except dashed
hopes and a sense of rejection.
In these circumstances, the Court feels that the petitioner should be paid the salary
corresponding to the 17 unserved weeks of his contract, which was terminated by the
private respondents despite his willingness to work out the balance of his term. In
addition, to assuage the ordeal he underwent while in captivity by the rebels, the Court
has also decided in its discretion to award him nominal damages in the sum of
P20,000.00. This is not payment of the war risk claim which, as earlier noted, was not
provided for in the employment contract in question, or indemnification for any loss
suffered by him. This is but a token of the tenderness of the law towards the petitioning
workman vis-a-vis the private respondents and their more comfortable resources.: nad
Under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less privileges in
life should have more privileges in law. That is why our judgment today must be for the
petitioner.
WHEREFORE, the challenged resolution of the NLRC is hereby MODIFIED. The
private respondents are hereby DIRECTED jointly and severally to pay the petitioner: a)
the current equivalent in Philippine pesos of US$4,675.00, representing his unpaid
salaries for the balance of the contract term; b) nominal damages in the amount of
P20,000.00; and c) 10% attorney's fees. No costs.
SO ORDERED.

Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.