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(3) PIA v.

Ople private respondents were terminated pursuant to the

provisions of the employment contract.
Doctrine: Law > Contract; Labor Code > Contract of Employment Ministry of Labor and Employment ("MOLE"): in favor of Private
Resp. because the Labor Code forbades employers to terminate the
FACTS: services of employees with at least one (1) year of service without
prior clearance from the Department of Labor and Employment.
Petitioner Pakistan International Airlines Corporation ("PIA"), a
Hence, this petition. PIAs claim: its relationship with private
foreign corporation licensed to do business in the Philippines,
respiondent was governed by the provisions of its contract (par. 5
executed in Manila 2 separate contracts of employment with
and 6) rather than by the general provisions of the Labor Code.
private responden Farrales and private respondent. Mamasig.
The contracts provides for: ISSUE: WON par. 5 and 6 of the contract of employment governs over the
Labor Code
PENALTY: 3 years. HELD: NO
Par. 6. TERMINATION: Notwithstanding anything to
Gen. Rule: A contract freely entered into should be respected, since
contrary as herein provided, PIA reserves the right to a contract is the law between the parties.
terminate this agreement at any time by giving the
Exception (Art.1306): "provided they are not contrary to law,
EMPLOYEE notice in writing in advance one month
morals, good customs, public order or public policy."
before the intended termination or in lieu thereof, by
paying the EMPLOYEE wages equivalent to one Thus, counter-balancing the principle of autonomy of contracting
month's salary. parties is the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public
Par. 10. APPLICABLE LAW: Laws of Pakistan, and policy, are deemed written into the contract.
only the Courts of Karachi, Pakistan shall have the Put a little differently, the governing principle is that parties may
jurisdiction to consider any matter arising out of or not contract away applicable provisions of law especially
under this agreement. peremptory provisions dealing with matters heavily impressed with
public interest.
1year and 4 months prior to the expiration of the contracts of The law relating to labor and employment is clearly such an area
employment, PIA, sent separate letters to private respondents and parties are not at liberty to insulate themselves and their
Farrales and Mamasig advising both that their services as flight relationships from the impact of labor laws and regulations by
stewardesses would be terminated. simply contracting with each other.
Private respondents filed for a complaint for illegal dismissal and Hence, it is necessary to appraise the contractual provisions
non-payment of benefits. invoked by petitioner PIA in terms of their consistency with
PIA claimed, but no evidence, that both private respondents were: applicable Philippine law and regulations.
(1) habitual absentees; (2) in the habit of bringing in from abroad
sizeable quantities of "personal effects"; (3) PIA personnel at the IN THE CASE AT BAR:
Manila International Airport had been discreetly warned by
customs officials to advise private respondents to discontinue that THE LABOR CODE PROVIDES:
practice; and (4) PIA further claimed that the services of both
Art. 280. Security of Tenure. In cases of regular Because the net effect of paragraphs 5 and 6 of the agreement here involved
employment, the employer shall not terminate the is to render the employment of private respondents Farrales and Mamasig
services of an employee except for a just cause or when basically employment at the pleasure of petitioner PIA, the Court considers
authorized by this Title An employee who is unjustly that paragraphs 5 and 6 were intended to prevent any security of tenure
dismissed from work shall be entitled to reinstatement from accruing in favor of private respondents even during the limited
without loss of seniority rights and to his backwages period of three (3) years, and thus to escape completely the thrust of
computed from the time his compensation was withheld Articles 280 and 281 of the Labor Code.
from him up to the time his reinstatement.
Judgement in favor of PRs. (1) private respondents are entitled to three (3)
Art. 281. Art. 281. Regular and Casual Employment. years backwages, without deduction or qualification; and (2) should
xxx any employee who has rendered at least one year of reinstatement of private respondents to their former positions or to
service, whether such service is continuous or broken, substantially equivalent positions not be feasible, then petitioner shall, in
shall be considered as regular employee with respect to lieu thereof, pay to private respondents separation pay amounting to one
the activity in which he is employed and his employment (1)-month's salary for every year of service actually rendered by them and
shall continue while such actually exists for the three (3) years putative service by private respondents.

As such, paragraphs 5 and 6 of the employment agreement when so read,

the fixed period of 3 years specified in paragraph 5 will be seen to have
been effectively neutralized by the provisions of paragraph 6 of that

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.