FIXED TERM EMPLOYMENT; Brent School Case
amended, have anathematized "fixed period employment" or
BRENT SCHOOL, INC.DIMACHE vs. RONALDO ZAMORA and
DOROTEO R. ALEGRE
G.R. No. L-48494 February 5, 1990 en banc
FACTS:
Private respondent Doroteo R. Alegre was engaged as
athletic director by petitioner Brent School, Inc. at a yearly
compensation of P20,000.00. The contract fixed a specific term for its
existence, five (5) years, i.e., from July 18, 1971, the date of execution
of the agreement, to July 17, 1976. Subsequent subsidiary
agreements dated March 15, 1973, August 28, 1973, and September
14, 1974 reiterated the same terms and conditions, including the
expiry date, as those contained in the original contract of July 18,
1971.
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." Although protesting the
announced termination stating that his services were necessary and
desirable in the usual business of his employer, and his employment
lasted for 5 years - therefore he had acquired the status of regular
employee - 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."
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.
ISSUE:
Whether or not the provisions of the Labor Code, as
employment for a term.
RULING:
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.
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. At that time,
the validity of term employment was impliedly recognized by the
Termination Pay Law, R.A. 1052, as amended by R.A. 1787. Prior,
thereto, it was the Code of Commerce (Article 302) which governed
employment without a fixed period, and also implicitly
acknowledged the propriety of employment with a fixed period. 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. 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, 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.
The status of legitimacy continued to be enjoyed by fixed-
period employment contracts under the Labor Code (PD 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 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." 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: 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.
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).
As it is evident 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.
Such interpretation puts the seal on Bibiso upon the effect of
the expiry of an agreed period of employment as still good rulea
rule reaffirmed in the recent case of Escudero vs. Office of the
President (G.R. No. 57822, April 26, 1989) where, in the fairly
analogous case of a teacher being served by her school a notice of
termination following the expiration of the last of three successive
fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the
fact that her employment was probationary, contractual in nature,
and one with a definitive period. At the expiration of the period
stipulated in the contract, her appointment was deemed terminated
and the letter informing her of the non-renewal of her contract is not
a condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere reminder
that Reyes' contract of employment was due to expire and that the
contract would no longer be renewed. It is not a letter of termination.
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.
PNOC Energy Development Corporation vs NLRC, 201 SCRA 487
(1991)
FACTS:
Private respondent Danilo Mercado was employed by
petitioner Phil. National Oil Company-Energy Development
Corp. (PNOC-EDC).
Mercado held various positions ranging from clerk, general
clerk to shipping clerk during his employment at its Cebu
office until his transfer to its establishment at Oriental
Negros.
Mercado was dismissed due to alleged serious acts of
dishonesty and violation of rules and regulations.
Mercado purchased 1,400 pieces of nipa shingles from Mrs.
Leonardo Nodado for the total purchase price of Pl,680.00.
Against company policy, regulations and specific orders,
Danilo Mercado withdrew the nipa shingles from the supplier
but paid the amount of P1,000.00 only. Mercado
appropriated the balance of P680.00 for his personal use;
In the same transaction, the supplier agreed to give the
company a discount of P70.00 which Mercado did not report
to the company;
Mercado was instructed to contract the services of Fred R.
Melon for the fabrication of rubber stamps, for the total
amount of P28.66. Mercado paid the amount of P20.00 to
Fred R. Melon and appropriated for his personal use the
balance of P8.66.
Mercado was absent from work without leave, without
proper turn-over of his work, causing disruption and delay of
work activities;
Mercado went on vacation leave without prior leave, against
company policy, rules and regulations.
Mercado filed for illegal dismissal, retirement benefits,
separation pay, unpaid wages, etc. against PNOC-EDC before
the NLRC.
PNOC-EDC praying for the dismissal of the case on the
ground that the Labor Arbiter and/or the NLRC had no
jurisdiction.
The Labor Arbiter ruled in favor of private respondent
Mercado.
Petition for certiorari to set aside the Resolution of NLRC
which affirmed the decision of Labor Arbiter Vito J. Minoria.
ISSUE:
1.Whether or not matters of employment affecting the
PNOC-EDC, a government-owned and controlled corporation, are
within the jurisdiction of the Labor Arbiter and the NLRC.
2.Whether or not the Labor Arbiter and the NLRC are justified
in ordering the reinstatement of private respondent
RULING:
1. Yes. PNOC-EDC having been incorporated under the
General Corporation Law was held to be a GOCC whose employees
are subject to the provisions of the Labor Code.
The test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law are the manner of its
creation, such that government corporations created by special
charter are subject to its provisions while those incorporated under
the General Corporation Law are not within its coverage.
The fact that the case arose at the time when the 1973
Constitution was still in effect, does not deprive the NLRC of
jurisdiction on the premise that it is the 1987 Constitution that
governs because it is the Constitution in place at the time of the
decision.
2. PNOC-EDC's accusations of dishonesty and violations of
company rules are not supported by evidence. While it is true that
loss of trust or breach of confidence is a valid ground for dismissing
an employee, such loss or breach of trust must have some basis.
VERSION2

FACTS:
In June 1985, Danilo Mercado was dismissed by PNOC-Energy
Development Corporation (PNOC-EDC) due to serious acts of
dishonesty allegedly committed by Mercado. Mercado then filed a
complaint for illegal dismissal against PNOC-EDC. PNOC-EDC filed a
motion to dismiss on the ground that the Labor arbiter and/or the
National Labor Relations Commission (NLRC) has no jurisdiction over
PNOC-EDC because it is a subsidiary of the Philippine National Oil
Company (PNOC), a government owned or controlled corporation,
and as a subsidiary, it is also a GOCC and as such, the proper forum
for Mercados suit is the Civil Service Commission.
ISSUE: Whether or not PBOC-EDC is correct.
HELD:
No. The issue in this case has been decided already in the
case of PNOC-EDC vs Leogardo. It is true that PNOC is a GOCC and
that PNOC-EDC, being a subsidiary of PNOC, is likewise a GOCC. It is
also true that under the 1973 Constitution, all GOCCs are under the
jurisdiction of the CSC. However, the 1987 Constitution change all
this as it now provides:
The Civil Service embraces all branches, subdivisions,
instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original charters.
(Article IX-B, Section 2 [1])
Hence, the above provision sets the rule that the mere fact
that a corporation is a GOCC does not automatically place it under
the CSC. Under this provision, the test in determining whether a
GOCC is subject to the Civil Service Law is the manner of its creation
such that government corporations created by special charter are
subject to its provisions while those incorporated under the general
Corporation Law are not within its coverage.
In the case at bar, PNOC-EDC, even though it is a GOCC, was
incorporated under the general Corporation Law it does not have
its own charter, hence, it is under the jurisdiction of the MOLE.
Even though the facts of this case occurred while the 1973
Constitution was still in force, the provisions of the 1987 Constitution
regarding the legal matters [procedural aspect] are applicable
because it is the law in force at the time of the decision.
MERCEDILLA VS NLRC
FACTS:
Petitioners were employees of the Philippine Veterans Bank (PVB).
On June 15, 1985, their services were terminated as a result of the
liquidation of PVB pursuant to the order of the Monetary Board of
the Central Bank embodied in MB Resolution No. 612 dated June 7,
1985.
On the same day of their termination, petitioners were rehired
through PVBs Bank Liquidator, Antonio T. Castro, Jr.. However, all of
them were required to sign employment contracts which provided
that:
(1) The employment shall be strictly on a temporary basis
and only for the duration of the particular undertaking for
which a particular employee is hired;
(2) Such temporary employment will not entitle an employee
to any benefits except those granted by law;
(3) The Liquidator reserves the right to terminate the services
of the employee at any time during the period of such
employment if the employee is found not qualified,
competent or, efficient in the performance of his job, or have
violated any rules and regulations, or such circumstances and
conditions recognized by law.
 On January 18, 1991, petitioners received a uniform notice of
dismissal effective a month from the date of receipt, which notice
contained the reasons justifying the termination:

"(a) To reduce costs and expenses in the liquidation of closed

banks in order to protect the interests of the depositors,
creditors and stockholders of the Philippine Veterans Bank.
(b) The employment were on strictly temporary basis."
On February 4, 1991, petitioners instituted a case for illegal
dismissal before Honorable Labor Arbiter Oswald Lorenzo.
On January 14, 1992, the said Labor Arbiter came out with a
decision declaring petitioners dismissal illegal.
Respondent Bank appealed the aforesaid decision of the
Labor Arbiter. On July 12, 1994, the NLRC reversed the decision of the
Labor Arbiter and dismissed the Complaints for lack of merit.