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, Peña & 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—

1
 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)."

2
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 Seasonalemployment,
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

3
 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 fixed-period 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 pre-determined dates of
completion; they also include those to which the parties by free choice have assigned a specific date of termination.

Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for
specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts,
for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies
does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational
institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a
4
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 rule—a 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:

5
 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.

6
JAIME D. VIERNES, CARLOS R. GARCIA, BERNARD BUSTILLO, DANILO C. BALANAG,
FERDINAND DELLA, EDWARD A. ABELLERA, ALEXANDER ABANAG, DOMINGO ASIA,
FRANCISCO BAYUGA, ARTHUR M. ORIBELLO, BUENAVENTURA DE GUZMAN, JR.,
ROBERT A. ORDOO, BERNARD V. JULARBAL, IGNACIO C. ALINGBAS and LEODEL N.
SORIANO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION),
and BENGUET ELECTRIC COOPERATIVE, INC. (BENECO) respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for certiorari seeking to annul the decision promulgated by the National Labor Relations
Commission (NLRC) on July 2, 1992 in NLRC CA No. L-000384-92,[1] and its resolution dated September 24, 1992
denying petitioners motion for reconsideration.
The factual background of this case, as summarized by the Labor Arbiter, is as follows:

Fifteen (15) in all, these are consolidated cases for illegal dismissal, underpayment of wages and claim for indemnity
pay against a common respondent, the Benguet Electric Cooperative, Inc., (BENECO for short) represented by its
Acting General Manager, Gerardo P. Versoza.

Complainants services as meter readers were contracted for hardly a months duration, or from October 8 to 31,
1990. Their employment contracts, couched in identical terms, read:

You are hereby appointed as METER READER (APPRENTICE) under BENECO-NEA Management with
compensation at the rate of SIXTY-SIX PESOS AND SEVENTY-FIVE CENTAVOS (P66.75) per day from October
08 to 31, 1990.

x x x. (Annex B, Complainants Joint Position Paper)

The said term notwithstanding, the complainants were allowed to work beyond October 31, 1990, or until January 2,
1991. On January 3, 1991, they were each served their identical notices of termination dated December 29, 1990. The
same read:

Please be informed that effective at the close of office hours of December 31, 1990, your services with the BENECO
will be terminated. Your termination has nothing to do with your performance. Rather, it is because we have to
retrench on personnel as we are already overstaffed.

x x x. (Annex C, CJPP)

On the same date, the complainants filed separate complaints for illegal dismissal. And following the amendment of
said complaints, they submitted their joint position paper on April 4, 1991.Respondent filed its position paper on
April 2, 1991.

It is the contention of the complainants that they were not apprentices but regular employees whose services were
illegally and unjustly terminated in a manner that was whimsical and capricious.On the other hand, the respondent
invokes Article 283 of the Labor Code in defense of the questioned dismissal.[2]

On October 18, 1991, the Labor Arbiter rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaints for illegal dismissal filed by the complainants for lack of merit. However in view of the
offer of the respondent to enter into another temporary employment contract with the complainants, the respondent is
directed to so extend such contract to each complainant, with the exception of Jaime Viernes, and to pay each the
amount of P2,590.50, which represents a months salary, as indemnity for its failure to give complainants the 30-day
notice mandated under Article 283 of the Labor Code; or, at the option of the complainants, to pay each financial
assistance in the amount of P5,000.00 and the P2,590.50 above-mentioned.

2. Respondent is also ordered:

A. To pay complainants the amount representing underpayment of their wages:

7
a) Jaime Viernes, Carlos Garcia, Danilo Balanag, Edward Abellera, Francisco Bayuga, Arthur Oribello, Buenaventura
de Guzman, Jr., Robert Ordoo, Bernard Jularbal and Leodel Soriano, P1,994.25 each;

b) Bernard Bustillo and Domingo Asia, P1,838.50 each; and

c) Ferdinand Della, Alexander Abanag and Ignacio Alingbas, P1,816.25 each.

B. To extend to complainant Jaime Viernes an appointment as regular employee for the position of meter reader, the
job he held prior to his termination, and to pay him P2,590.50 as indemnity, plus the underpayment of his wages as
above stated.

C. To pay P7,000.00 as and for attorneys fees.

No damages.

SO ORDERED.[3]

Aggrieved by the Labor Arbiters decision, the complainants and the respondent filed their respective appeals to
the NLRC.
On July 2, 1992, the NLRC modified its judgment, to wit:

WHEREFORE, premises considered, judgment is hereby rendered modifying the appealed decision by declaring
complainants dismissal illegal, thus ordering their reinstatement to their former position as meter readers or to any
equivalent position with payment of backwages limited to one year and deleting the award of indemnity and attorneys
fees. The award of underpayment of wages is hereby AFFIRMED.

SO ORDERED.[4]

On August 27, 1992, complainants filed a Motion for Clarification and Partial Reconsideration. [5] On September
24, 1992, the NLRC issued a resolution denying the complainants motion for reconsideration.[6]
Hence, complainants filed herein petition.
Private respondent BENECO filed its Comment; the Office of the Solicitor General (OSG) filed a Manifestation
and Motion in Lieu of Comment; public respondent NLRC filed its own Comment; and petitioners filed their
Manifestation and Motion In Lieu of Consolidated Reply. Public respondent NLRC, herein petitioners, and private
respondent filed their respective memoranda, and the OSG, its Manifestation in 1994.
Pursuant to our ruling in Rural Bank of Alaminos Employees Union vs. NLRC,[7] to wit:

in the decision in the case of St. Martin Funeral Homes vs. National Labor Relations Commission, G.R. No. 130866,
promulgated on September 16, 1998, this Court pronounced that petitions for certiorari relating to NLRC decisions
must be filed directly with the Court of Appeals, and labor cases pending before this Court should be referred to the
appellate court for proper disposition.However, in cases where the Memoranda of both parties have been filed with
this Court prior to the promulgation of the St. Martin decision, the Court generally opts to take the case itself for its
final disposition.[8]

and considering that the parties have filed their respective memoranda as of 1994, we opt to resolve the issues raised
in the present petition.
The parties raised the following issues:

1. Whether the respondent NLRC committed grave abuse of discretion in ordering the reinstatement of petitioners to
their former position as meter readers on probationary status in spite of its finding that they are regular employees
under Article 280 of the Labor Code.

2. Whether the respondent NLRC committed grave abuse of discretion in limiting the backwages of petitioners to one
year only in spite of its finding that they were illegally dismissed, which is contrary to the mandate of full backwages
until actual reinstatement but not to exceed three years.

8
3. Whether the respondent NLRC committed grave abuse of discretion in deleting the award of indemnity pay which
had become final because it was not appealed and in deleting the award of attorneys fees because of the absence of a
trial-type hearing.

4. Whether the mandate of immediately executory on the reinstatement aspect even pending appeal as provided in the
decision of Labor Arbiters equally applies in the decision of the National Labor Relations Commission even pending
appeal, by means of a motion for reconsideration of the order reinstating a dismissed employee or pending appeal
because the case is elevated on certiorari before the Supreme Court.[9]

We find the petition partly meritorious.

As to the first issue: We sustain petitioners claim that they should be reinstated to their former position as meter
readers, not on a probationary status, but as regular employees.
Reinstatement means restoration to a state or condition from which one had been removed or separated.[10] In
case of probationary employment, Article 281 of the Labor Code requires the employer to make known to his
employee at the time of the latters engagement of the reasonable standards under which he may qualify as a regular
employee.
A review of the records shows that petitioners have never been probationary employees. There is nothing in the
letter of appointment, to indicate that their employment as meter readers was on a probationary basis. It was not
shown that petitioners were informed by the private respondent, at the time of the latters employment, of the
reasonable standards under which they could qualify as regular employees. Instead, petitioners were initially engaged
to perform their job for a limited duration, their employment being fixed for a definite period, from October 8 to 31,
1990.
Private respondents reliance on the case of Brent School, Inc. vs. Zamora,[11] wherein we held as follows:

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 employees
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.[12]

is misplaced.
The principle we have enunciated in Brent applies only with respect to fixed term employments. While it is true
that petitioners were initially employed on a fixed term basis as their employment contracts were only for October 8
to 31, 1990, after October 31, 1990, they were allowed to continue working in the same capacity as meter readers
without the benefit of a new contract or agreement or without the term of their employment being fixed anew. After
October 31, 1990, the employment of petitioners is no longer on a fixed term basis. The complexion of the
employment relationship of petitioners and private respondent is thereby totally changed. Petitioners have attained the
status of regular employees.
Under Article 280 of the Labor Code, a regular employee is one who is engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer, or a casual employee who has rendered at least
one year of service, whether continuous or broken, with respect to the activity in which he is employed.
In De Leon vs. NLRC,[13] and Abasolo vs. NLRC,[14] we laid down the test in determining regular employment, to
wit:

The primary standard, therefore, of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual 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 a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity exists.[15]

9
 Clearly therefrom, there are two separate instances whereby it can be determined that an employment is regular:
(1) The particular activity performed by the employee is necessary or desirable in the usual business or trade of the
employer; or (2) if the employee has been performing the job for at least a year.
Herein petitioners fall under the first category. They were engaged to perform activities that are necessary to the
usual business of private respondent. We agree with the labor arbiters pronouncement that the job of a meter reader is
necessary to the business of private respondent because unless a meter reader records the electric consumption of the
subscribing public, there could not be a valid basis for billing the customers of private respondent. The fact that the
petitioners were allowed to continue working after the expiration of their employment contract is evidence of the
necessity and desirability of their service to private respondents business. In addition, during the preliminary hearing
of the case on February 4, 1991, private respondent even offered to enter into another temporary employment contract
with petitioners. This only proves private respondents need for the services of herein petitioners. With the
continuation of their employment beyond the original term, petitioners have become full-fledged regular
employees. The fact alone that petitioners have rendered service for a period of less than six months does not make
their employment status as probationary.
Since petitioners are already regular employees at the time of their illegal dismissal from employment, they are
entitled to be reinstated to their former position as regular employees, not merely probationary.
As to the second issue, Article 279 of the Labor Code, as amended by R.A. No. 6715, which took effect on
March 21, 1989, provides that an illegally dismissed employee is entitled to 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. Since petitioners were employed on October 8, 1990, the amended
provisions of Article 279 of the Labor Code shall apply to the present case. Hence, it was patently erroneous,
tantamount to grave abuse of discretion on the part of the public respondent in limiting to one year the backwages
awarded to petitioners.
With respect to the third issue, an employer becomes liable to pay indemnity to an employee who has been
dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. [16] The
indemnity is in the form of nominal damages intended not to penalize the employer but to vindicate or recognize the
employees right to procedural due process which was violated by the employer.[17] Under Article 2221 of the Civil
Code, nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered
by him.
We do not agree with the ruling of the NLRC that indemnity is incompatible with the award of backwages. These
two awards are based on different considerations.Backwages are granted on grounds of equity to workers for earnings
lost due to their illegal dismissal from work.[18] On the other hand, the award of indemnity, as we have earlier held, is
meant to vindicate or recognize the right of an employee to due process which has been violated by the employer.
In the present case, the private respondent, in effecting the dismissal of petitioners from their employment, failed
to comply with the provisions of Article 283 of the Labor Code which requires an employer to serve a notice of
dismissal upon the employees sought to be terminated and to the Department of Labor, at least one month before the
intended date of termination. Petitioners were served notice on January 3, 1991 terminating their services, effective
December 29, 1990, or retroactively, in contravention of Article 283. This renders the private respondent liable to pay
indemnity to petitioners.
Thus, we find that the NLRC committed grave abuse of discretion in deleting the award of indemnity. In Del Val
vs. NLRC,[19] we held that the award of indemnity ranges from P1,000.00 to P10,000.00 depending on the particular
circumstances of each case. In the present case, the amount of indemnity awarded by the labor arbiter is P2,590.50,
which is equivalent to petitioners one-month salary. We find no cogent reason to modify said award, for being just
and reasonable.
As to the award of attorneys fees, the same is justified by the provisions of Article 111 of the Labor Code, to wit:

Art. 111. Attorneys fees (a) In cases of unlawful withholding of wages the culpable party may be assessed attorneys
fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the
recovery of the wages, attorneys fees which exceed ten percent of the amount of wages recovered.

As to the last issue, Article 223 of the Labor Code is plain and clear that the decision of the NLRC shall be final
and executory after ten (10) calendar days from receipt thereof by the parties. In addition, Section 2(b), Rule VIII of
the New Rules of Procedure of the NLRC provides that should there be a motion for reconsideration entertained

10
pursuant to Section 14, Rule VII of these Rules, the decision shall be executory after ten calendar days from receipt of
the resolution on such motion.
We find nothing inconsistent or contradictory between Article 223 of the Labor Code and Section 2(b), Rule
VIII, of the NLRC Rules of Procedure. The aforecited provision of the NLRC Rules of Procedure merely provides for
situations where a motion for reconsideration is filed. Since the Rules allow the filing of a motion for reconsideration
of a decision of the NLRC, it simply follows that the ten-day period provided under Article 223 of the Labor Code
should be reckoned from the date of receipt by the parties of the resolution on such motion. In the case at bar,
petitioners received the resolution of the NLRC denying their motion for reconsideration on October 22, 1992. Hence,
it is on November 2, 1992 that the questioned decision became executory.
WHEREFORE, the petition is partially GRANTED. The decision of the National Labor Relations Commission
dated July 2, 1992 is MODIFIED. Private respondent Benguet Electric Cooperative, Inc. (BENECO) is hereby
ordered to reinstate petitioners to their former or substantially equivalent position as regular employees, without loss
of seniority rights and other privileges appurtenant thereto, with full backwages from the time of their dismissal until
they are actually reinstated. The amount of P2,590.50 awarded by the labor arbiter as indemnity to petitioners is
REINSTATED. Private respondent is also ordered to pay attorneys fees in the amount of ten percent (10%) of the
total monetary award due to the petitioners. In all other respects the assailed decision and resolution are AFFIRMED.
Costs against private respondent BENECO.
SO ORDERED.

11
PHILIPS SEMICONDUCTORS (PHILS.), INC., petitioner, vs. ELOISA FADRIQUELA, respondent.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review of the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 52149 and
its Resolution dated January 26, 2000 denying the motion for reconsideration therefrom.

The Case for the Petitioner

The petitioner Philips Semiconductors (Phils.), Inc. is a domestic corporation engaged in the production and
assembly of semiconductors such as power devices, RF modules, CATV modules, RF and metal transistors and glass
diods. It caters to domestic and foreign corporations that manufacture computers, telecommunications equipment and
cars.
Aside from contractual employees, the petitioner employed 1,029 regular workers. The employees were subjected
to periodic performance appraisal based on output, quality, attendance and work attitude.[2] One was required to
obtain a performance rating of at least 3.0 for the period covered by the performance appraisal to maintain good
standing as an employee.
On May 8, 1992, respondent Eloisa Fadriquela executed a Contract of Employment with the petitioner in which
she was hired as a production operator with a daily salary of P118. Her initial contract was for a period of three
months up to August 8, 1992,[3] but was extended for two months when she garnered a performance rating of
3.15.[4] Her contract was again renewed for two months or up to December 16, 1992,[5] when she received a
performance rating of 3.8.[6] After the expiration of her third contract, it was extended anew, for three months, [7] that
is, from January 4, 1993 to April 4, 1993.
After garnering a performance rating of 3.4,[8] the respondents contract was extended for another three months,
that is, from April 5, 1993 to June 4, 1993.[9] She, however, incurred five absences in the month of April, three
absences in the month of May and four absences in the month of June.[10] Line supervisor Shirley F. Velayo asked the
respondent why she incurred the said absences, but the latter failed to explain her side. The respondent was warned
that if she offered no valid justification for her absences, Velayo would have no other recourse but to recommend the
non-renewal of her contract. The respondent still failed to respond, as a consequence of which her performance rating
declined to 2.8. Velayo recommended to the petitioner that the respondents employment be terminated due to habitual
absenteeism,[11] in accordance with the Company Rules and Regulations.[12] Thus, the respondents contract of
employment was no longer renewed.

The Complaint of the Respondent

The respondent filed a complaint before the National Capital Region Arbitration Branch of the National Labor
Relations Commission (NLRC) for illegal dismissal against the petitioner, docketed as NLRC Case No. NCR-07-
04263-93. She alleged, inter alia, that she was illegally dismissed, as there was no valid cause for the termination of
her employment. She was not notified of any infractions she allegedly committed; neither was she accorded a chance
to be heard. According to the respondent, the petitioner did not conduct any formal investigation before her
employment was terminated. Furthermore, considering that she had rendered more than six months of service to the
petitioner, she was already a regular employee and could not be terminated without any justifiable cause. Moreover,
her absences were covered by the proper authorizations.[13]
On the other hand, the petitioner contended that the respondent had not been dismissed, but that her contract of
employment for the period of April 4, 1993 to June 4, 1993merely expired and was no longer renewed because of her
low performance rating. Hence, there was no need for a notice or investigation. Furthermore, the respondent had
already accumulated five unauthorized absences which led to the deterioration of her performance, and ultimately
caused the non-renewal of her contract.[14]

The Ruling of the Labor Arbiter and the NLRC

On June 26, 1997, the Labor Arbiter rendered a decision dismissing the complaint for lack of merit, thus:

12
IN THE LIGHT OF ALL THE FOREGOING, the complaint is hereby dismissed for lack of merit. The respondent is,
however, ordered to extend to the complainant a send off award or financial assistance in the amount equivalent to
one-month salary on ground of equity.[15]

The Labor Arbiter declared that the respondent, who had rendered less than seventeen months of service to the
petitioner, cannot be said to have acquired regular status.The petitioner and the Philips Semiconductor Phils., Inc.,
Workers Union had agreed in their Collective Bargaining Agreement (CBA) that a contractual employee would
acquire a regular employment status only upon completion of seventeen months of service. This was also reflected in
the minutes of the meeting of April 6, 1993 between the petitioner and the union. Further, a contractual employee was
required to receive a performance rating of at least 3.0, based on output, quality of work, attendance and work
attitude, to qualify for contract renewal. In the respondents case, she had worked for the petitioner for only twelve
months. In the last extension of her employment contract, she garnered only 2.8 points, below the 3.0 required
average, which disqualified her for contract renewal, and regularization of employment. The Labor Arbiter also ruled
that the respondent cannot justifiably complain that she was deprived of her right to notice and hearing because her
line supervisor had asked her to explain her unauthorized absences.Accordingly, these dialogues between the
respondent and her line supervisor can be deemed as substantial compliance of the required notice and investigation.
The Labor Arbiter declared, however, that the respondent had rendered satisfactory service for a period of one
year, and since her infraction did not involve moral turpitude, she was entitled to one months salary.
Aggrieved, the respondent appealed to the NLRC, which, on September 16, 1998, issued a Resolution affirming
the decision of the Labor Arbiter and dismissing the appeal.The NLRC explained that the respondent was a
contractual employee whose period of employment was fixed in the successive contracts of employment she had
executed with the petitioner. Thus, upon the expiration of her contract, the respondents employment automatically
ceased. The respondents employment was not terminated; neither was she dismissed.
The NLRC further ruled that as a contractual employee, the respondent was bound by the stipulations in her
contract of employment which, among others, was to maintain a performance rating of at least 3.0 as a condition for
her continued employment. Since she failed to meet the said requirement, the petitioner was justified in not renewing
her contract.
The respondent filed a motion for reconsideration of the resolution, but on January 12, 1999, the NLRC resolved
to deny the same.

The Case Before the Court of Appeals

Dissatisfied, the respondent filed a petition for certiorari under Rule 65 before the Court of Appeals, docketed as
CA-G.R. SP No. 52149, for the reversal of the resolutions of the NLRC.
On October 11, 1999, the appellate court rendered a decision reversing the decisions of the NLRC and the Labor
Arbiter and granting the respondents petition. The CA ratiocinated that the bases upon which the NLRC and the
Labor Arbiter founded their decisions were inappropriate because the CBA and the Minutes of the Meeting between
the union and the management showed that the CBA did not cover contractual employees like the respondent. Thus,
the seventeenth-month probationary period under the CBA did not apply to her. The CA ruled that under Article 280
of the Labor Code, regardless of the written and oral agreements between an employee and her employer, an
employee shall be deemed to have attained regular status when engaged to perform activities which are necessary and
desirable in the usual trade or business of the employer.Even casual employees shall be deemed regular employees if
they had rendered at least one year of service to the employer, whether broken or continuous.
The CA noted that the respondent had been performing activities that were usually necessary and desirable to the
petitioners business, and that she had rendered thirteen months of service. It concluded that the respondent had
attained regular status and cannot, thus, be dismissed except for just cause and only after due hearing. The appellate
court further declared that the task of the respondent was hardly specific or seasonal. The periods fixed in the
contracts of employment executed by the respondent were designed by the petitioner to preclude the respondent from
acquiring regular employment status. The strict application of the contract of employment against the respondent
placed her at the mercy of the petitioner, whose employees crafted the said contract.
According to the appellate court, the petitioners contention that the respondents employment on as the need arises
basis was illogical. If such stance were sustained, the court ruled, then no employee would attain regular status even if
employed by the petitioner for seventeen months or more. The CA held that the respondents sporadic absences upon
which her dismissal was premised did not constitute valid justifiable grounds for the termination of her
employment. The tribunal also ruled that a less punitive penalty would suffice for missteps such as absenteeism,
especially considering that the respondent had performed satisfactorily for the past twelve months.
13
 The CA further held that, contrary to the ruling of the Labor Arbiter, the dialogues between the respondent and
the line supervisor cannot be considered substantial compliance with the requirement of notice and
investigation. Thus, the respondent was not only dismissed without justifiable cause; she was also deprived of her
right to due process.
The petitioner filed a motion for reconsideration of the decision but on January 26, 2000, the CA issued a
resolution denying the same.

The Case Before the Court

The petitioner filed the instant petition and raised the following issues for the courts resolution: (a) whether or not
the respondent was still a contractual employee of the petitioner as of June 4, 1993; (b) whether or not the petitioner
dismissed the respondent from her employment; (c) if so, whether or not she was accorded the requisite notice and
investigation prior to her dismissal; and, (d) whether or not the respondent is entitled to reinstatement and full
payment of backwages as well as attorneys fees.
On the first issue, the petitioner contends that the policy of hiring workers for a specific and limited period on an
as needed basis, as adopted by the petitioner, is not new; neither is it prohibited. In fact, according to the petitioner,
the hiring of workers for a specific and limited period is a valid exercise of management prerogative. It does not
necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the
usual course of business of the employer, the parties are forbidden from agreeing on a period of time for the
performance of such activities. Hence, there is nothing essentially contradictory between a definite period of
employment and the nature of the employees duties.
According to the petitioner, it had to resort to hiring contractual employees for definite periods because it is a
semiconductor company and its business is cyclical in nature.Its operation, production rate and manpower
requirements are dictated by the volume of business from its clients and the availability of the basic materials. It
produces the products upon order of its clients and does not allow such products to be stockpiled. Peak loads due to
cyclical demands increase the need for additional manpower for short duration. Thus, the petitioner often experiences
short-term surges in labor requirements. The hiring of workers for a definite period to supplement the regular work
force during the unpredictable peak loads was the most efficient, just and practical solution to the petitioners
operating needs.
The petitioner contends that the CA misapplied the law when it insisted that the respondent should be deemed a
regular employee for having been employed for more than one year. The CA ignored the exception to this rule, that
the parties to an employment contract may agree otherwise, particularly when the same is established by company
policy or required by the nature of work to be performed. The employer has the prerogative to set reasonable
standards to qualify for regular employment, as well as to set a reasonable period within which to determine such
fitness for the job.
According to the petitioner, the conclusion of the CA that the policy adopted by it was intended to circumvent the
respondents security of tenure is without basis. The petitioner merely exercised a right granted to it by law and, in the
absence of any evidence of a wrongful act or omission, no wrongful intent may be attributed to it. Neither may the
petitioner be penalized for agreeing to consider workers who have rendered more than seventeen months of service as
regular employees, notwithstanding the fact that by the nature of its business, the petitioner may enter into specific
limited contracts only for the duration of its clients peak demands. After all, the petitioner asserts, the union
recognized the need to establish such training and probationary period for at least six months for a worker to qualify
as a regular employee. Thus, under their CBA, the petitioner and the union agreed that contractual workers be hired as
of December 31, 1992.
The petitioner stresses that the operation of its business as a semiconductor company requires the use of highly
technical equipment which, in turn, calls for certain special skills for their use. Consequently, the petitioner, in the
exercise of its best technical and business judgment, has set a standard of performance for workers as well as the level
of skill, efficiency, competence and production which the workers must pass to qualify as a regular employee. In
rating the performance of the worker, the following appraisal factors are considered by the respondent company as
essential: (1) output (40%), (2) quality (30%), (3) attendance (15%), and (4) work attitude (15%). The rate of 3.0 was
set as the passing grade. As testified to by the petitioners Head of Personnel Services, Ms. Cecilia C. Mallari:

A workers efficiency and productivity can be established only after he has rendered service using Philips equipment
over a period of time. A worker has to undergo training, during which time the worker is taught the manufacturing
process and quality control. After instructions, the worker is subjected to written and oral examinations to determine

14
his fitness to continue with the training. The orientation and initial training lasts from three to four weeks before the
worker is assigned to a specific work station. Thereafter, the workers efficiency and skill are monitored.

Among the factors considered (before a contractual employee becomes a regular employee) are output, quality,
attendance, and work attitude, which includes cooperation, discipline, housekeeping and inter-office employee
relationship. These factors determine the workers efficiency and productivity.[16]

The Courts Ruling

In ruling for the respondent, the appellate court applied Article 280 of the Labor Code of the Philippines, as
amended, which reads:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

The appellate court held that, in light of the factual milieu, the respondent was already a regular employee
on June 4, 1993. Thus:

It is apparent from the factual circumstances of this case that the period of employment has been imposed to preclude
acquisition of tenurial security by petitioner. It bears stressing that petitioners original contract of employment, dated
May 8, 1992 to August 8, 1992, had been extended through several contracts one from October 13, 1992 to December
16, 1992, another from January 7, 1993 to April 4, 1993, and, lastly, from April 5, 1993 to June 4, 1993.

The fact that the petitioner had rendered more than one year of service at the time of his (sic) dismissal only shows
that she is performing an activity which is usually necessary and desirable in private respondents business or
trade. The work of petitioner is hardly specific or seasonal. The petitioner is, therefore, a regular employee of private
respondent, the provisions of their contract of employment notwithstanding. The private respondents prepared
employment contracts placed petitioner at the mercy of those who crafted the said contract.[17]

We agree with the appellate court.

Article 280 of the Labor Code of the Philippines was emplaced in our statute books to prevent the circumvention
by unscrupulous employers of the employees right to be secure in his tenure by indiscriminately and completely
ruling out all written and oral agreements inconsistent with the concept of regular employment defined therein. The
language of the law manifests the intent to protect the tenurial interest of the worker who may be denied the rights and
benefits due a regular employee because of lopsided agreements with the economically powerful employer who can
maneuver to keep an employee on a casual or temporary status for as long as it is convenient to it. [18] In tandem with
Article 281 of the Labor Code, Article 280 was designed to put an end to the pernicious practice of making permanent
casuals of our lowly employees by the simple expedient of extending to them temporary or probationary
appointments, ad infinitum.[19]
The two kinds of regular employees under the law are (1) those engaged to perform activities which are necessary
or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least
one year of service, whether continuous or broken, with respect to the activities in which they are employed. [20] The
primary standard to determine a regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the 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.[21] If the employee has been performing
the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability of that
activity to the business of the employer. Hence, the employment is also considered regular, but only with respect to

15
such activity and while such activity exists.[22] The law does not provide the qualification that the employee must first
be issued a regular appointment or must be declared as such before he can acquire a regular employee status.[23]
In this case, the respondent was employed by the petitioner on May 8, 1992 as production operator. She was
assigned to wirebuilding at the transistor division. There is no dispute that the work of the respondent was necessary
or desirable in the business or trade of the petitioner.[24] She remained under the employ of the petitioner without any
interruption since May 8, 1992 to June 4, 1993 or for one (1) year and twenty-eight (28) days. The original contract of
employment had been extended or renewed for four times, to the same position, with the same chores. Such a
continuing need for the services of the respondent is sufficient evidence of the necessity and indispensability of her
services to the petitioners business.[25] By operation of law, then, the respondent had attained the regular status of her
employment with the petitioner, and is thus entitled to security of tenure as provided for in Article 279 of the Labor
Code which reads:

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 respondents re-employment under contracts ranging from two to three months over a period of one year and
twenty-eight days, with an express statement that she may be reassigned at the discretion of the petitioner and that her
employment may be terminated at any time upon notice, was but a catch-all excuse to prevent her regularization.Such
statement is contrary to the letter and spirit of Articles 279 and 280 of the Labor Code. We reiterate our ruling
in Romares v. NLRC:[26]

Succinctly put, in rehiring petitioner, employment contracts ranging from two (2) to three (3) months with an express
statement that his temporary job/service as mason shall be terminated at the end of the said period or upon completion
of the project was obtrusively a convenient subterfuge utilized to prevent his regularization. It was a clear
circumvention of the employees right to security of tenure and to other benefits. It, likewise, evidenced bad faith on
the part of PILMICO.

The limited period specified in petitioners employment contract having been imposed precisely to circumvent the
constitutional guarantee on security of tenure should, therefore, be struck down or disregarded as contrary to public
policy or morals. To uphold the contractual arrangement between PILMICO and petitioner would, in effect, permit
the former to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis,
thereby violating the employees security of tenure in their jobs.[27]

Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of
tenure and free them from the bondage of uncertainty of tenure woven by some employers into their contracts of
employment. The guarantee is an act of social justice. When a person has no property, his job may possibly be his
only possession or means of livelihood and those of his dependents. When a person loses his job, his dependents
suffer as well. The worker should therefor be protected and insulated against any arbitrary deprivation of his job.[28]
We reject the petitioners general and catch-all submission that its policy for a specific and limited period on an as
the need arises basis is not prohibited by law or abhorred by the Constitution; and that there is nothing essentially
contradictory between a definite period of employment and the nature of the employees duties.
The petitioners reliance on our ruling in Brent School, Inc. v. Zamora[29] and reaffirmed in subsequent rulings is
misplaced, precisely in light of the factual milieu of this case.In the Brent School, Inc. case, we ruled that the Labor
Code does not outlaw employment contracts on fixed terms or for specific period. We also ruled that the decisive
determinant in term employment should not be the activity 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. However,
we also emphasized in the same case that where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy and morals. In the Romares v. NLRC case, we cited the criteria under which term
employment cannot be said to be in circumvention of the law on security of tenure, namely:

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 the employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.[30]
16
 None of these criteria has been met in this case. Indeed, in Pure Foods Corporation v. NLRC,[31] we sustained the
private respondents averments therein, thus:

[I]t could not be supposed that private respondents and all other so-called casual workers of [the petitioner]
KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract.Cannery workers are never on
equal terms with their employers. Almost always, they agree to any terms of an employment contract just to get
employed considering that it is difficult to find work given their ordinary qualifications. Their freedom to contract is
empty and hollow because theirs is the freedom to starve if they refuse to work as casual or contractual
workers. Indeed, to the unemployed, security of tenure has no value. It could not then be said that petitioner and
private respondents dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter.[32]

We reject the petitioners submission that it resorted to hiring employees for fixed terms to augment or
supplement its regular employment for the duration of peak loads during short-term surges to respond to cyclical
demands; hence, it may hire and retire workers on fixed terms, ad infinitum, depending upon the needs of its
customers, domestic and international. Under the petitioners submission, any worker hired by it for fixed terms of
months or years can never attain regular employment status. However, the petitioner, through Ms. Cecilia C. Mallari,
the Head of Personnel Services of the petitioner, deposed that as agreed upon by the Philips Semiconductor (Phils.),
Inc. Workers Union and the petitioner in their CBA, contractual employees hired before December 12, 1993 shall
acquire regular employment status after seventeen (17) months of satisfactory service, continuous or broken:

5. Q: What was the response of Philips regular employees to your hiring of contractual workers in the event of peak
loads?

A: Philips regular rank-and-file employees, through their exclusive bargaining agent, the Philips Semiconductors
(Phils.), Inc. Workers Union (Union), duly recognized the right of Philips, in its best business judgment, to hire
contractual workers, and excluded these workers from the bargaining unit of regular rank-and-file employees.

Thus, it is provided under the Collective Bargaining Agreement, dated May 16, 1993, between Philips and the Union
that:

ARTICLE I

UNION RECOGNITION

Section 1. Employees Covered: The Company hereby recognizes the Union as the exclusive bargaining representative
of the following regular employees in the Factory at Las Pias, Metro Manila: Janitors, Material Handlers, Store
helpers, Packers, Operators, QA Inspectors, Technicians, Storekeepers, Production Controllers, Inventory Controllers,
Draftsmen, Machinists, Sr. Technician, Sr. QA Inspectors, Controllers, Sr. Draftsmen, and Servicemen, except
probationary and Casual/Contractual Employees, all of whom do not belong to the bargaining unit.

A copy of the CBA, dated May 16, 1993, was attached as Annex 1 to Philips Position Paper, dated August 30, 1993.

6. Q: May a contractual employee become a regular employee of the Philips?

A: Yes. Under the agreement, dated April 6, 1993, between the Union and Philips, contractual workers hired
before 12 December 1993, who have rendered seventeen months of satisfactory service, whether continuous or
broken, shall be given regular status. The service rendered by a contractual employee may be broken depending on
production needs of Philips as explained earlier.

A copy of the Minutes of the Meeting (Minutes, for brevity), dated April 6, 1993, evidencing the agreement between
Philips and the Union has been submitted as Annex 2 of Philips Position Paper.[33]

In fine, under the CBA, the regularization of a contractual or even a casual employee is based solely on a
satisfactory service of the employee/worker for seventeen (17) months and not on an as needed basis on the
fluctuation of the customers demands for its products. The illogic of the petitioners incongruent submissions was
exposed by the appellate court in its assailed decision, thus:

The contention of private respondent that petitioner was employed on as needed basis because its operations and
manpower requirements are dictated by the volume of business from its client and the availability of the basic
materials, such that when the need ceases, private respondent, at its option, may terminate the contract, is certainly
17
untenable. If such is the case, then we see no reason for private respondent to allow the contractual employees to
attain their regular status after they rendered service for seventeen months. Indubitably, even after the lapse of
seventeen months, the operation of private respondent would still be dependent on the volume of business from its
client and the availability of basic materials. The point is, the operation of every business establishment naturally
depends on the law of supply and demand. It cannot be invoked as a reason why a person performing an activity,
which is usually desirable and necessary in the usual business, should be placed in a wobbly status. In reiteration, the
relation between capital and labor is not merely contractual. It is so impressed with public interest that labor contracts
must yield to the common good.

While at the start, petitioner was just a mere contractual employee, she became a regular employee as soon as she had
completed one year of service. It is not difficult to see that to uphold the contractual arrangement between private
respondent and petitioner would, in effect, be to permit employers to avoid the necessity of hiring regular or
permanent employees. By hiring employees indefinitely on a temporary or casual status, employers deny their right to
security of tenure. This is not sanctioned by law. [34]

Even then, the petitioners reliance on the CBA is misplaced. For, as ratiocinated by the appellate court in its
assailed decision:

Obviously, it is the express mandate of the CBA not to include contractual employees within its coverage. Such being
the case, we see no reason why an agreement between the representative union and private respondent, delaying the
regularization of contractual employees, should bind petitioner as well as other contractual employees. Indeed,
nothing could be more unjust than to exclude contractual employees from the benefits of the CBA on the premise that
the same contains an exclusionary clause while at the same time invoke a collateral agreement entered into between
the parties to the CBA to prevent a contractual employee from attaining the status of a regular employee.

This cannot be allowed.

The CBA, during its lifetime, constitutes the law between the parties. Such being the rule, the aforementioned CBA sh
ould be binding only upon private respondent and its regular employeeswho were duly represented by the bargaining
union. The agreement embodied in the Minutes of Meeting between the representative union and private respondent,
providing that contractual employees shall become regular employees only after seventeen months of employment,
cannot bind petitioner. Such a provision runs contrary to law not only because contractual employees do not form part
of the collective bargaining unit which entered into the CBA with private respondent but also because of the Labor
Code provision on regularization. The law explicitly states that an employee who had rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular employee. The period set by law
is one year. The seventeen months provided by the Minutes of Meeting is obviously much
longer. The principle is well settled that the law forms part of and is read into every contract without the need for the
partiesexpressly making reference to it. [35]

On the second and third issues, we agree with the appellate court that the respondent was dismissed by the
petitioner without the requisite notice and without any formal investigation. Given the factual milieu in this case, the
respondents dismissal from employment for incurring five (5) absences in April 1993, three (3) absences in May 1993
and four (4) absences in June 1993, even if true, is too harsh a penalty. We do agree that an employee may be
dismissed for violation of reasonable regulations/rules promulgated by the employer. However, we emphasized
in PLDT v. NLRC[36] that:

Dismissal is the ultimate penalty that can be meted to an employee. Where a penalty less punitive would suffice,
whatever missteps may have been committed by the worker ought not to be visited with a consequence so severe such
as dismissal from employment. For, the Constitution guarantees the right of workers to security of tenure. The misery
and pain attendant to the loss of jobs then could be avoided if there be acceptance of the view that under certain
circumstances of the case the workers should not be deprived of their means of livelihood.[37]

Neither can the conferences purportedly held between the respondent and the line supervisor be deemed
substantial compliance with the requirements of notice and investigation. We are in full accord with the following
ratiocinations of the appellate court in its assailed decision:

As to the alleged absences, we are convinced that the same do not constitute sufficient ground for
dismissal. Dismissal is just too stern a penalty. No less than the Supreme Court mandates that where a penalty less
punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so
severe. (Meracap v. International Ceramics Manufacturing Co., Inc., 92 SCRA 412 [1979]). Besides, the fact that
petitioner was repeatedly given a contract shows that she was an efficient worker and, therefore, should be retained
18
despite occasional lapses in attendance. Perfection cannot, after all, be demanded. (Azucena, The Labor Code, Vol. II,
1996 ed., [p.] 680)

Finally, we are convinced that it is erroneous for the Commission to uphold the following findings of the Labor
Arbiter, thus:

Those dialogues of the complainant with the Line Supervisor, substantially, stand for the notice and investigation
required to comply with due process. The complainant did not avail of the opportunity to explain her side to justify
her shortcomings, especially, on absences. She cannot now complain about deprivation of due process.

Of course, the power to dismiss is a formal prerogative of the employer. However, this is not without limitations. The
employer is bound to exercise caution in terminating the services of his employees. Dismissals must not be arbitrary
and capricious. Due process must be observed in dismissing an employee because it affects not only his position but
also his means of livelihood.Employers should respect and protect the rights of their employees which include the
right to labor. (Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 90 SCRA 391 [1979])

To rule that the mere dialogue between private respondent and petitioner sufficiently complied with the demands of
due process is to disregard the strict mandate of the law. A conference is not a substitute for the actual observance of
notice and hearing. (Pepsi Cola Bottling Co., Inc. v. National Labor Relations Commission, 210 SCRA 277
[1992]) The failure of private respondent to give petitioner the benefit of a hearing before she was dismissed
constitutes an infringement on her constitutional right to due process of law and not to be denied the equal protection
of the laws.The right of a person to his labor is deemed to be his property within the meaning of the constitutional
guarantee. This is his means of livelihood. He cannot be deprived of his labor or work without due process of
law. (Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 71 SCRA 470 [1976])

All told, the court concludes that petitioners dismissal is illegal because, first, she was dismissed in the absence of a
just cause, and second, she was not afforded procedural due process. In pursuance of Article 279 of the Labor Code,
we deem it proper to order the reinstatement of petitioner to her former job and the payment of her full
backwages. Also, having been compelled to come to court to protect her rights, we grant petitioners prayer for
attorneys fees.[38]

IN LIGHT OF ALL THE FOREGOING, the assailed decision of the appellate court in CA-G.R. SP No. 52149
is AFFIRMED. The petition at bar is DENIED. Costs against the petitioner.
SO ORDERED.

19
G.R. No. 181974 February 1, 2012

LYNVIL FISHING ENTERPRISES, INC. and/or ROSENDO S. DE BORJA, Petitioners,

vs.
ANDRES G. ARIOLA, JESSIE D. ALCOVENDAS, JIMMY B. CALINAO AND LEOPOLDO G.
SEBULLEN,Respondents.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari1 of the Decision2 of the Fourteenth Division of the Court of
Appeals in CA-G.R. SP No. 95094 dated 10 September 2007, granting the Writ of Certiorari prayed for under Rule 65
of the 1997 Revised Rules of Civil Procedure by herein respondents Andres G. Ariola, Jessie D. Alcovendas, Jimmy
B. Calinao and Leopoldo Sebullen thereby reversing the Resolution of the National Labor Relations Commission
(NLRC). The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the Decision dated March 31, 2004 rendered by the National Labor Relations
Commission is hereby REVERSED and SET ASIDE. In lieu thereof, the Decision of the Labor Arbiter is hereby
REINSTATED, except as to the award of attorney’s fees, which is ordered DELETED.3

The version of the petitioners follows:

1. Lynvil Fishing Enterprises, Inc. (Lynvil) is a company engaged in deep-sea fishing, operating along the
shores of Palawan and other outlying islands of the Philippines.4 It is operated and managed by Rosendo S. de
Borja.

2. On 1 August 1998, Lynvil received a report from Romanito Clarido, one of its employees, that on 31 July
1998, he witnessed that while on board the company vessel Analyn VIII, Lynvil employees, namely: Andres
G. Ariola (Ariola), the captain; Jessie D. Alcovendas (Alcovendas), Chief Mate; Jimmy B. Calinao (Calinao),
Chief Engineer; Ismael G. Nubla (Nubla), cook; Elorde Bañez (Bañez), oiler; and Leopoldo D. Sebullen
(Sebullen), bodegero, conspired with one another and stole eight (8) tubs of "pampano" and "tangigue" fish
and delivered them to another vessel, to the prejudice of Lynvil.5

3. The said employees were engaged on a per trip basis or "por viaje" which terminates at the end of each trip.
Ariola, Alcovendas and Calinao were managerial field personnel while the rest of the crew were field
personnel.6

4. By reason of the report and after initial investigation, Lynvil’s General Manager Rosendo S. De Borja (De
Borja) summoned respondents to explain within five (5) days why they should not be dismissed from service.
However, except for Alcovendas and Bañez,7 the respondents refused to sign the receipt of the notice.

5. Failing to explain as required, respondents’ employment was terminated.

6. Lynvil, through De Borja, filed a criminal complaint against the dismissed employees for violation of P.D.
532, or the Anti-Piracy and Anti-Highway Robbery Law of 1974 before the Office of the City Prosecutor of
Malabon City.8

7. On 12 November 1998, First Assistant City Prosecutor Rosauro Silverio found probable cause for the
indictment of the dismissed employees for the crime of qualified theft9 under the Revised Penal Code.

On the other hand, the story of the defense is:

1. The private respondents were crew members of Lynvil’s vessel named Analyn VIII.10

2. On 31 July 1998, they arrived at the Navotas Fishport on board Analyn VIII loaded with 1,241 bañeras of
different kinds of fishes. These bañeras were delivered to a consignee named SAS and Royale.11

The following day, the private respondents reported back to Lynvil office to inquire about their new job
assignment but were told to wait for further advice. They were not allowed to board any vessel.12

20
 3. On 5 August 1998, only Alcovendas and Bañez received a memorandum from De Borja ordering them to
explain the incident that happened on 31 July 1998. Upon being informed about this, Ariola, Calinao, Nubla
and Sebullen went to the Lynvil office. However, they were told that their employments were already
terminated.13

Aggrieved, the employees filed with the Arbitration Branch of the National Labor Relations Commission-National
Capital Region on 25 August 1998 a complaint for illegal dismissal with claims for backwages, salary differential
reinstatement, service incentive leave, holiday pay and its premium and 13th month pay from 1996 to1998. They also
claimed for moral, exemplary damages and attorney’s fees for their dismissal with bad faith.14

They added that the unwarranted accusation of theft stemmed from their oral demand of increase of salaries three
months earlier and their request that they should not be required to sign a blank payroll and vouchers.15

On 5 June 2002, Labor Arbiter Ramon Valentin C. Reyes found merit in complainants’ charge of illegal
dismissal.16The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered finding that complainants were illegally dismissed,
ordering respondents to jointly and severally pay complainants (a) separation pay at one half month pay for every year
of service; (b) backwages; (c) salary differential; (d) 13th month pay; and (e) attorney’s fees, as follows:

"1) Andres Ariola

Backwages P234,000.00
(P6,500.00 x 36 = P234,000.00)
Separation Pay – P74,650.00
13th Month Pay – P6,500.00

P325,250.00
"2) Jessie Alcovendas
Backwages P195,328.00
(P5,148.00 x 36 = P195,328.00)
Separation Pay – P44,304.00
13th Month Pay – 5,538.00
Salary Differential – 1,547.52

P246,717.52
"3) Jimmy Calinao
Backwages P234,000.00
(P6,500.00 x 36 = P234,000.00)
Separation Pay – 55,250.00
13th Month Pay – P6,500.00

P295,700.00
"4) Leopoldo Sebullen
Backwages P154,440.00
(P4, 290.00 x 36 = P154,440.00)
Separation Pay – P44,073.00
13th Month Pay – 2,473.12
Salary Differential – 4,472.00

P208,455.12
"5) Ismael Nubla
Backwages P199,640.12
21
 Separation Pay – P58,149.00
13th Month Pay – 2,473.12
Salary Differential – P5,538.00

P265, 28.12

TOTAL P 1, 341, 650.76

All other claims are dismissed for lack of merit."17

The Labor Arbiter found that there was no evidence showing that the private respondents received the 41 bañeras of
"pampano" as alleged by De Borja in his reply-affidavit; and that no proof was presented that the 8 bañeras of
pampano [and tangigue] were missing at the place of destination.18

The Labor Arbiter disregarded the Resolution of Assistant City Prosecutor Rosauro Silverio on the theft case. He
reasoned out that the Labor Office is governed by different rules for the determination of the validity of the dismissal
of employees.19

The Labor Arbiter also ruled that the contractual provision that the employment terminates upon the end of each trip
does not make the respondents’ dismissal legal. He pointed out that respondents and Lynvil did not negotiate on equal
terms because of the moral dominance of the employer.20

The Labor Arbiter found that the procedural due process was not complied with and that the mere notice given to the
private respondents fell short of the requirement of "ample opportunity" to present the employees’ side.21

On appeal before the National Labor Relations Commission, petitioners asserted that private respondents were only
contractual employees; that they were not illegally dismissed but were accorded procedural due process and that De
Borja did not commit bad faith in dismissing the employees so as to warrant his joint liability with Lynvil.22

On 31 March 2004, the NLRC reversed and set aside the Decision of the Labor Arbiter. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered REVERSING AND SETTING ASIDE the Decision of the Labor
Arbiter a quo and a new one entered DISMISSING the present complaints for utter lack of merit;

However as above discussed, an administrative fine of PhP5,000.00 for each complainant, Andres Ariola, Jessie
Alcovendas, Jimmy Canilao, Leopoldo Sebullen and Ismael Nobla or a total of PhP25,000.00 is hereby awarded.23

The private respondents except Elorde Bañez filed a Petition for Certiorari24 before the Court of Appeals alleging
grave abuse of discretion on the part of NLRC.

The Court of Appeals found merit in the petition and reinstated the Decision of the Labor Arbiter except as to the
award of attorney’s fees. The appellate court held that the allegation of theft did not warrant the dismissal of the
employees since there was no evidence to prove the actual quantities of the missing kinds of fish loaded to Analyn
VIII.25 It also reversed the finding of the NLRC that the dismissed employees were merely contractual employees and
added that they were regular ones performing activities which are usually necessary or desirable in the business and
trade of Lynvil. Finally, it ruled that the two-notice rule provided by law and jurisprudence is mandatory and non-
compliance therewith rendered the dismissal of the employees illegal.

The following are the assignment of errors presented before this Court by Lynvil:

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THE ESTABLISHED

DOCTRINE LAID DOWN IN NASIPIT LUMBER COMPANY V. NLRC HOLDING THAT THE FILING
OF A CRIMINAL CASE BEFORE THE PROSECUTOR’S OFFICE CONSTITUTES SUFFICIENT BASIS
FOR A VALID TERMINATION OF EMPLOYMENT ON THE GROUNDS OF SERIOUS MISCONDUCT
AND/OR LOSS OF TRUST AND CONFIDENCE.

II
22
 THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE TERMINATION OF
RESPONDENTS’ EMPLOYMENT WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

III

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT THE

RESPONDENTS’ EMPLOYMENT, IN ANY EVENT, WERE CONTRACTUAL IN NATURE BEING ON
A PER VOYAGE BASIS. THUS, THEIR RESPECTIVE EMPLOYMENT TERMINATED AFTER THE
END OF EACH VOYAGE

IV

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS WERE
NOT ACCORDED PROCEDURAL DUE PROCESS.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS ARE
ENTITLED TO THE PAYMENT OF THEIR MONEY CLAIMS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT PETITIONER

ROSENDO S. DE BORJA IS NOT JOINTLY AND SEVERALLY LIABLE FOR THE JUDGMENT WHEN
THERE WAS NO FINDING OF BAD FAITH.26

The Court’s Ruling

The Supreme Court is not a trier of facts. Under Rule 45,27 parties may raise only questions of law. We are not duty-
bound to analyze again and weigh the evidence introduced in and considered by the tribunals below. Generally when
supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not
reviewable by this Court, unless the case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

(2) When the inference made is manifestly mistaken, absurd or impossible;

(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee;

(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific evidence on which they are based;

(9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed
by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record. (Emphasis supplied)28

The contrariety of the findings of the Labor Arbiter and the NLRC prevents reliance on the principle of special
administrative expertise and provides the reason for judicial review, at first instance by the appellate court, and on
final study through the present petition.

23
In the first assignment of error, Lynvil contends that the filing of a criminal case before the Office of the Prosecutor is
sufficient basis for a valid termination of employment based on serious misconduct and/or loss of trust and confidence
relying on Nasipit Lumber Company v. NLRC.29

Nasipit is about a security guard who was charged with qualified theft which charge was dismissed by the Office of
the Prosecutor. However, despite the dismissal of the complaint, he was still terminated from his employment on the
ground of loss of confidence. We ruled that proof beyond reasonable doubt of an employee's misconduct is not
required when loss of confidence is the ground for dismissal. It is sufficient if the employer has "some basis" to lose
confidence or that the employer has reasonable ground to believe or to entertain the moral conviction that the
employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him
absolutely unworthy of the trust and confidence demanded by his position.30 It added that the dropping of the qualified
theft charges against the respondent is not binding upon a labor tribunal.31

In Nicolas v. National Labor Relations Commission,32 we held that a criminal conviction is not necessary to find just
cause for employment termination. Otherwise stated, an employee’s acquittal in a criminal case, especially one that is
grounded on the existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty of
acts inimical to the employer’s interests.33 In the reverse, the finding of probable cause is not followed by automatic
adoption of such finding by the labor tribunals.

In other words, whichever way the public prosecutor disposes of a complaint, the finding does not bind the labor
tribunal.

Thus, Lynvil cannot argue that since the Office of the Prosecutor found probable cause for theft the Labor Arbiter
must follow the finding as a valid reason for the termination of respondents’ employment. The proof required for
purposes that differ from one and the other are likewise different.

Nonetheless, even without reliance on the prosecutor’s finding, we find that there was valid cause for respondents’
dismissal.

In illegal dismissal cases, the employer bears the burden of proving that the termination was for a valid or authorized
cause.34

Just cause is required for a valid dismissal. The Labor Code35 provides that an employer may terminate an
employment based on fraud or willful breach of the trust reposed on the employee. Such breach is considered willful
if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. It must also be based on substantial evidence and not on the
employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the
employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the
dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of
must be work-related and shows that the employee concerned is unfit to continue working for the employer. In
addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee
concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with
confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of
the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.36

Breach of trust is present in this case.

We agree with the ruling of the Labor Arbiter and Court of Appeals that the quantity of tubs expected to be received
was the same as that which was loaded. However, what is material is the kind of fish loaded and then unloaded.
Sameness is likewise needed.

We cannot close our eyes to the positive and clear narration of facts of the three witnesses to the commission of
qualified theft. Jonathan Distajo, a crew member of the Analyn VIII, stated in his letter addressed to De Borja37 dated
8 August 1998, that while the vessel was traversing San Nicolas, Cavite, he saw a small boat approach them. When
the boat was next to their vessel, Alcovendas went inside the stockroom while Sebullen pushed an estimated four tubs
of fish away from it. Ariola, on the other hand, served as the lookout and negotiator of the transaction. Finally, Bañez
and Calinao helped in putting the tubs in the small boat. He further added that he received ₱800.00 as his share for the
transaction. Romanito Clarido, who was also on board the vessel, corroborated the narration of Distajo on all accounts
in his 25 August 1998 affidavit.38 He added that Alcovendas told him to keep silent about what happened on that day.
Sealing tight the credibility of the narration of theft is the affidavit39 executed by Elorde Bañez dated 3 May 1999.
Bañez was one of the dismissed employees who actively participated in the taking of the tubs. He clarified in the
24
affidavit that the four tubs taken out of the stockroom in fact contained fish taken from the eight tubs. He further
stated that Ariola told everyone in the vessel not to say anything and instead file a labor case against the management.
Clearly, we cannot fault Lynvil and De Borja when it dismissed the employees.

The second to the fifth assignment of errors interconnect.

The nature of employment is defined in the Labor Code, thus:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

Lynvil contends that it cannot be guilty of illegal dismissal because the private respondents were employed under a
fixed-term contract which expired at the end of the voyage. The pertinent provisions of the contract are:

xxxx

1. NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa patakarang "por viaje" na
magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro
Manila;

xxxx

1. NA ako ay nakipagkasundo na babayaran ang aking paglilingkod sa paraang "por viaje" sa halagang P__________
isang biyahe ng kabuuang araw xxxx.40

Lynvil insists on the applicability of the case of Brent School,41 to wit:

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

Contrarily, the private respondents contend that they became regular employees by reason of their continuous hiring
and performance of tasks necessary and desirable in the usual trade and business of Lynvil.

Jurisprudence,42 laid two conditions for the validity of a fixed-contract agreement between the employer and
employee:

First, 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

Second, it satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms
with no moral dominance exercised by the former or the latter.43
25
Textually, the provision that: "NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa
patakarang "por viaje" na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng
lantsa sa Navotas, Metro Manila" is for a fixed period of employment. In the context, however, of the facts that: (1)
the respondents were doing tasks necessarily to Lynvil’s fishing business with positions ranging from captain of the
vessel to bodegero; (2) after the end of a trip, they will again be hired for another trip with new contracts; and (3) this
arrangement continued for more than ten years, the clear intention is to go around the security of tenure of the
respondents as regular employees. And respondents are so by the express provisions of the second paragraph of
Article 280, thus:

xxx 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 same set of circumstances indicate clearly enough that it was the need for a continued source of income that
forced the employees’ acceptance of the "por viaje" provision.

Having found that respondents are regular employees who may be, however, dismissed for cause as we have so found
in this case, there is a need to look into the procedural requirement of due process in Section 2, Rule XXIII, Book V
of the Rules Implementing the Labor Code. It is required that the employer furnish the employee with two written
notices: (1) a written notice served on the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side; and (2) 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.

From the records, there was only one written notice which required respondents to explain within five (5) days why
they should not be dismissed from the service. Alcovendas was the only one who signed the receipt of the notice. The
others, as claimed by Lynvil, refused to sign. The other employees argue that no notice was given to them. Despite the
inconsistencies, what is clear is that no final written notice or notices of termination were sent to the employees.

The twin requirements of notice and hearing constitute the elements of [due] process in cases of employee's 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. Upon the other hand, 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.44 Obviously, the second written notice, as indispensable as the first, is intended to ensure the
observance of due process.

Applying the rule to the facts at hand, we grant a monetary award of ₱50,000.00 as nominal damages, this, pursuant
to the fresh ruling of this Court in Culili v. Eastern Communication Philippines, Inc.45 Due to the failure of Lynvil to
follow the procedural requirement of two-notice rule, nominal damages are due to respondents despite their dismissal
for just cause.

Given the fact that their dismissal was for just cause, we cannot grant backwages and separation pay to respondents.
However, following the findings of the Labor Arbiter who with the expertise presided over the proceedings below,
which findings were affirmed by the Court of Appeals, we grant the 13th month pay and salary differential of the
dismissed employees.

Whether De Borja is jointly and severally liable with Lynvil

As to the last issue, this Court has ruled that in labor cases, the corporate directors and officers are solidarily liable
with the corporation for the termination of employment of employees done with malice or in bad faith.46 Indeed,
moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes an
act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.

It has also been discussed in MAM Realty Development Corporation v. NLRC47 that:

x x x A corporation being a juridical entity, may act only through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they
represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as,
generally, in the following cases:

1. When directors and trustees or, in appropriate cases, the officers of a corporation:
26
xxx

(b) act in bad faith or with gross negligence in directing the corporate affairs;

x x x 48

The term "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of
self-interest or will or for ulterior purpose."49 1âwphi1

We agree with the ruling of both the NLRC and the Court of Appeals when they pronounced that there was no
evidence on record that indicates commission of bad faith on the part of De Borja. He is the general manager of
Lynvil, the one tasked with the supervision by the employees and the operation of the business. However, there is no
proof that he imposed on the respondents the "por viaje" provision for purpose of effecting their summary dismissal.

WHEREFORE, the petition is partially GRANTED. The 10 September 2007 Decision of the Court of Appeals in CA-
G.R. SP No. 95094 reversing the Resolution dated 31 March 2004 of the National Labor Relations Commission is
hereby MODIFIED. The Court hereby rules that the employees were dismissed for just cause by Lynvil Fishing
Enterprises, Inc. and Rosendo S. De Borja, hence, the reversal of the award for backwages and separation pay.
However, we affirm the award for 13th month pay, salary differential and grant an additional ₱50,000.00 in favor of
the employees representing nominal damages for petitioners’ non-compliance with statutory due process. No cost.

SO ORDERED.

27
PURE FOODS CORPORATON, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
RODOLFO CORDOVA, VIOLETA CRUSIS, ET AL.,* respondents.

DECISION
DAVIDE, JR., J.:

The crux of this petition for certiorari is the issue of whether employees hired for a definite period and whose
services are necessary and desirable in the usual business or trade of the employer are regular employees.
The private respondents (numbering 906) were hired by petitioner Pure Foods Corporation to work for a fixed
period of five months at its tuna cannery plant in Tambler, General Santos City. After the expiration of their
respective contracts of employment in June and July 1991, their services were terminated. They forthwith executed a
Release and Quitclaim stating that they had no claim whatsoever against the petitioner.
On 29 July 1991, the private respondents filed before the National Labor Relations Commission (NLRC) Sub-
Regional Arbitration Branch No. XI, General Santos City, a complaint for illegal dismissal against the petitioner and
its plant manager, Marciano Aganon. [1] This case was docketed as RAB-11-08-50284-91.
On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a decision [2] dismissing the complaint on
the ground that the private respondents were mere contractual workers, and not regular employees; hence, they could
not avail of the law on security of tenure. The termination of their services by reason of the expiration of their
contracts of employment was, therefore, justified. He pointed out that earlier he had dismissed a case entitled Lakas
ng Anak-Pawis- NOWM v. Pure Foods Corp. (Case No. RAB-11-02-00088-88) because the complainants therein
were not regular employees of Pure Foods, as their contracts of employment were for a fixed period of five months.
Moreover, in another case involving the same contractual workers of Pure Foods (Case No. R-196-ROXI- MED- UR-
55-89), then Secretary of Labor Ruben Torres held, in a Resolution dated 30 April 1990, that the said contractual
workers were not regular employees.
The Labor Arbiter also observed that an order for private respondents reinstatement would result in the
reemployment of more than 10,000 former contractual employees of the petitioner. Besides, by executing a Release
and Quitclaim, the private respondents had waived and relinquished whatever right they might have against the
petitioner.
The private respondents appealed from the decision to the National Labor Relations Commission (NLRC), Fifth
Division, in Cagayan de Oro City, which docketed the case as NLRC CA No. M-001323-93.
On 28 October 1994, the NLRC affirmed the Labor Arbiter's decision. [3] However, on private respondents
motion for reconsideration, the NLRC rendered another decision on 30 January 1995 [4] vacating and setting aside its
decision of 28 October 1994 and holding that the private respondents and their co-complainants were regular
employees. It declared that the contract of employment for five months was a clandestine scheme employed by [the
petitioner] to stifle [private respondents] right to security of tenure and should therefore be struck down and
disregarded for being contrary to law, public policy, and morals. Hence, their dismissal on account of the expiration
of their respective contracts was illegal.
Accordingly, the NLRC ordered the petitioner to reinstate the private respondents to their former position without
loss of seniority rights and other privileges, with full back wages; and in case their reinstatement would no longer be
feasible, the petitioner should pay them separation pay equivalent to one-month pay or one-half-month pay for every
year of service, whichever is higher, with back wages and 10% of the monetary award as attorneys fees.
Its motion for reconsideration having been denied,[5] the petitioner came to this Court contending that respondent
NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the decision of the Labor
Arbiter.
The petitioner submits that the private respondents are now estopped from questioning their separation from
petitioners employ in view of their express conformity with the five-month duration of their employment contracts.
Besides, they fell within the exception provided in Article 280 of the Labor Code which reads: [E]xcept 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.
Moreover, the first paragraph of the said article must be read and interpreted in conjunction with the proviso in
the second paragraph, which reads: 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.... In the instant case, the private respondents were employed for a period of five months
only. In any event, private respondents' prayer for reinstatement is well within the purview of the Release and

28
Quitclaim they had executed wherein they unconditionally released the petitioner from any and all other claims which
might have arisen from their past employment with the petitioner.
In its Comment, the Office of the Solicitor General (OSG) advances the argument that the private respondents
were regular employees, since they performed activities necessary and desirable in the business or trade of the
petitioner. The period of employment stipulated in the contracts of employment was null and void for being contrary
to law and public policy, as its purpose was to circumvent the law on security of tenure. The expiration of the contract
did not, therefore, justify the termination of their employment.
The OSG further maintains that the ruling of the then Secretary of Labor and Employment in LAP-NOWM v.
Pure Foods Corporation is not binding on this Court; neither is that ruling controlling, as the said case involved
certification election and not the issue of the nature of private respondents employment. It also considers private
respondents quitclaim as ineffective to bar the enforcement for the full measure of their legal rights.
The private respondents, on the other hand, argue that contracts with a specific period of employment may be
given legal effect provided, however, that they are not intended to circumvent the constitutional guarantee on security
of tenure. They submit that the practice of the petitioner in hiring workers to work for a fixed duration of five months
only to replace them with other workers of the same employment duration was apparently to prevent the
regularization of these so-called casuals, which is a clear circumvention of the law on security of tenure.
We find the petition devoid of merit.
Article 280 of the Labor Code defines regular and casual employment as follows:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

Thus, the two kinds of regular employees are (1) those who are engaged to perform activities which are necessary
or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least
one year of service, whether continuous or broken, with respect to the activity in which they are employed.[6]
In the instant case, the private respondents activities consisted in the receiving, skinning, loining, packing, and
casing-up of tuna fish which were then exported by the petitioner. Indisputably, they were performing activities which
were necessary and desirable in petitioners business or trade.
Contrary to petitioner's submission, the private respondents could not be regarded as having been hired for a
specific project or undertaking. The term specific project or undertaking under Article 280 of the Labor Code
contemplates an activity which is not commonly or habitually performed or such type of work which is not done on a
daily basis but only for a specific duration of time or until completion; the services employed are then necessary and
desirable in the employers usual business only for the period of time it takes to complete the project.[7]
The fact that the petitioner repeatedly and continuously hired workers to do the same kind of work as that
performed by those whose contracts had expired negates petitioners contention that those workers were hired for a
specific project or undertaking only.
Now on the validity of private respondents' five-month contracts of employment. In the leading case of Brent
School, Inc. v. Zamora, [8] which was reaffirmed in numerous subsequent cases, [9] this Court has upheld the legality
of fixed-term employment. It ruled that 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. But, this Court went on to say that where from the circumstances it is
apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy and morals.
Brent also laid down the criteria under which term employment cannot be said to be in circumvention of the law
on security of tenure:

29
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 the employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.

None of these criteria had been met in the present case. As pointed out by the private respondents:

[I]t could not be supposed that private respondents and all other so-called casual workers of [the petitioner]
KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract.Cannery workers are never on
equal terms with their employers. Almost always, they agree to any terms of an employment contract just to get
employed considering that it is difficult to find work given their ordinary qualifications. Their freedom to contract is
empty and hollow because theirs is the freedom to starve if they refuse to work as casual or contractual
workers. Indeed, to the unemployed, security of tenure has no value. It could not then be said that petitioner and
private respondents "dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. [10]

The petitioner does not deny or rebut private respondents' averments (1) that the main bulk of its workforce
consisted of its so-called casual employees; (2) that as of July 1991, casual workers numbered 1,835; and regular
employees, 263; (3) that the company hired casual every month for the duration of five months, after which their
services were terminated and they were replaced by other casual employees on the same five-month duration; and (4)
that these casual employees were actually doing work that were necessary and desirable in petitioners usual business.
As a matter of fact, the petitioner even stated in its position paper submitted to the Labor Arbiter that, according
to its records, the previous employees of the company hired on a five-month basis numbered about 10,000 as of July
1990. This confirms private respondents allegation that it was really the practice of the company to hire workers on a
uniformly fixed contract basis and replace them upon the expiration of their contracts with other workers on the same
employment duration.
This scheme of the petitioner was apparently designed to prevent the private respondents and the other casual
employees from attaining the status of a regular employee. It was a clear circumvention of the employees right to
security of tenure and to other benefits like minimum wage, cost-of-living allowance, sick leave, holiday pay, and
13th month pay. [11] Indeed, the petitioner succeeded in evading the application of labor laws. Also, it saved itself
from the trouble or burden of establishing a just cause for terminating employees by the simple expedient of refusing
to renew the employment contracts.
The five-month period specified in private respondents employment contracts having been imposed precisely to
circumvent the constitutional guarantee on security of tenure should, therefore, be struck down or disregarded as
contrary to public policy or morals. [12] To uphold the contractual arrangement between the petitioner and the private
respondents would, in effect, permit the former to avoid hiring permanent or regular employees by simply hiring them
on a temporary or casual basis, thereby violating the employees security of tenure in their jobs.[13]
The execution by the private respondents of a Release and Quitclaim did not preclude them from questioning the
termination of their services. Generally, quitclaims by laborers are frowned upon as contrary to public policy and are
held to be ineffective to bar recovery for the full measure of the workers rights. [14] The reason for the rule is that the
employer and the employee do not stand on the same footing.[15]
Notably, the private respondents lost no time in filing a complaint for illegal dismissal. This act is hardly
expected from employees who voluntarily and freely consented to their dismissal.[16]
The NLRC was, thus, correct in finding that the private respondents were regular employees and that they were
illegally dismissed from their jobs. Under Article 279 of the Labor Code and the recent jurisprudence, [17] the legal
consequence of illegal dismissal is reinstatement without loss of seniority rights and other privileges, with full back
wages computed from the time of dismissal up to the time of actual reinstatement, without deducting the earnings
derived elsewhere pending the resolution of the case.
However, since reinstatement is no longer possible because the petitioner's tuna cannery plant had, admittedly,
been closed in November 1994,[18] the proper award is separation pay equivalent to one month pay or one-half month
pay for every year of service, whichever is higher, to be computed from the commencement of their employment up
to the closure of the tuna cannery plant. The amount of back wages must be computed from the time the private
respondents were dismissed until the time petitioner's cannery plant ceased operation.[19]

30
 WHEREFORE, for lack of merit, the instant petition is DISMISSED and the challenged decision of 30 January
1995 of the National Labor Relations Commission in NLRC CA No. M-001323-93 is hereby AFFIRMED subject to
the above modification on the computation of the separation pay and back wages.
SO ORDERED.

31
G.R. No. 186439 January 15, 2014

UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE CABATI, Petitioners,

vs.
FERDINAND ACIBO, ROBERTO AGUILAR, EDDIE BALDOZA, RENE ABELLAR, DIOMEDES
ALICOS, MIGUEL ALICOS, ROGELIO AMAHIT, LARRY AMASCO, FELIPE BALANSAG, ROMEO
BALANSAG, MANUEL BANGOT, ANDY BANJAO, DIONISIO BENDIJO, JR., JOVENTINO BROCE,
ENRICO LITERAL, RODGER RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO PALAGTIW, ERNIE
SABLAN, RICHARD PANCHO, RODRIGO ESTRABELA, DANNY KADUSALE and ALLYROBYL
OLPUS, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 29, 2007 decision2 and the January
22, 2009 resolution3 of the Court of Appeals (CA) in CA-G.R. CEB-SP No. 02028. This CA decision affirmed with
modification the July 22, 2005 decision4 and the April 28, 2006 resolution5 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-00006-03 which, in turn, reversed the October 9, 2002 decision6 of the
Labor Arbiter (LA). The LA’s decision dismissed the complaint filed by complainants Ferdinand Acibo, et
al.7 against petitioners Universal Robina Sugar Milling Corporation (URSUMCO) and Rene Cabati.

The Factual Antecedents

URSUMCO is a domestic corporation engaged in the sugar cane milling business; Cabati is URSUMCO’s Business
Unit General Manager.

The complainants were employees of URSUMCO. They were hired on various dates (between February 1988 and
April 1996) and on different capacities,8 i.e., drivers, crane operators, bucket hookers, welders, mechanics, laboratory
attendants and aides, steel workers, laborers, carpenters and masons, among others. At the start of their respective
engagements, the complainants signed contracts of employment for a period of one (1) month or for a given season.
URSUMCO repeatedly hired the complainants to perform the same duties and, for every engagement, required the
latter to sign new employment contracts for the same duration of one month or a given season.

On August 23, 2002,9 the complainants filed before the LA complaints for regularization, entitlement to the benefits
under the existing Collective Bargaining Agreement (CBA),and attorney’s fees.

In the decision10 dated October 9, 2002, the LA dismissed the complaint for lack of merit. The LA held that the
complainants were seasonal or project workers and not regular employees of URSUMCO. The LA pointed out that
the complainants were required to perform, for a definite period, phases of URSUMCO’s several projects that were
not at all directly related to the latter’s main operations. As the complainants were project employees, they could not
be regularized since their respective employments were coterminous with the phase of the work or special project to
which they were assigned and which employments end upon the completion of each project. Accordingly, the
complainants were not entitled to the benefits granted under the CBA that, as provided, covered only the regular
employees of URSUMCO.

Of the twenty-two original complainants before the LA, seven appealed the LA’s ruling before the NLRC, namely:
respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao, Dionisio Bendijo, Jr., Rodger Ramirez, Diocito Palagtiw,
Danny Kadusale and Allyrobyl Olpus.

The Ruling of the NLRC

In its decision11 of July 22, 2005, the NLRC reversed the LA’s ruling; it declared the complainants as regular
URSUMCO employees and granted their monetary claims under the CBA. The NLRC pointed out that the
complainants performed activities which were usually necessary and desirable in the usual trade or business of
URSUMCO, and had been repeatedly hired for the same undertaking every season. Thus, pursuant to Article 280 of
the Labor Code, the NLRC declared that the complainants were regular employees. As regular employees, the NLRC
held that the complainants were entitled to the benefits granted, under the CBA, to the regular URSUMCO
employees.

32
The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April 28, 2006 resolution.12 The
petitioners elevated the case to the CA via a petition for certiorari.13

The Ruling of the CA

In its November 29, 2007 decision,14 the CA granted in part the petition; it affirmed the NLRC’s ruling finding the
complainants to be regular employees of URSUMCO, but deleted the grant of monetary benefits under the CBA.

The CA pointed out that the primary standard for determining regular employment is the reasonable connection
between a particular activity performed by the employee vis-à-vis the usual trade or business of the employer. This
connection, in turn, can be determined by considering the nature of the work performed and the relation of this work
to the business or trade of the employer in its entirety.

In this regard, the CA held that the various activities that the complainants were tasked to do were necessary, if not
indispensable, to the nature of URSUMCO’s business. As the complainants had been performing their respective
tasks for at least one year, the CA held that this repeated and continuing need for the complainants’ performance of
these same tasks, regardless of whether the performance was continuous or intermittent, constitutes sufficient
evidence of the necessity, if not indispensability, of the activity to URSUMCO’s business.

Further, the CA noted that the petitioners failed to prove that they gave the complainants opportunity to work
elsewhere during the off-season, which opportunity could have qualified the latter as seasonal workers. Still, the CA
pointed out that even during this off-season period, seasonal workers are not separated from the service but are simply
considered on leave until they are re-employed. Thus, the CA concluded that the complainants were regular
employees with respect to the activity that they had been performing and while the activity continued.

On the claim for CBA benefits, the CA, however, ruled that the complainants were not entitled to receive them. The
CA pointed out that while the complainants were considered regular, albeit seasonal, workers, the CBA-covered
regular employees of URSUMCO were performing tasks needed by the latter for the entire year with no regard to the
changing sugar milling season. Hence, the complainants did not belong to and could not be grouped together with the
regular employees of URSUMCO, for collective bargaining purposes; they constitute a bargaining unit separate and
distinct from the regular employees. Consequently, the CA declared that the complainants could not be covered by the
CBA.

The petitioners filed the present petition after the CA denied their motion for partial reconsideration15 in the CA’s
January 22, 2009 resolution.16

The Issues

The petition essentially presents the following issues for the Court’s resolution: (1) whether the respondents are
regular employees of URSUMCO; and (2) whether affirmative relief can be given to the fifteen (15) of the
complainants who did not appeal the LA’s decision.17

The Court’s Ruling

We resolve to partially GRANT the petition.

On the issue of the status of the respondents’ employment

The petitioners maintain that the respondents are contractual or project/seasonal workers and not regular employees of
URSUMCO. They thus argue that the CA erred in applying the legal parameters and guidelines for regular
employment to the respondents’ case. They contend that the legal standards – length of the employee’s engagement
and the desirability or necessity of the employee’s work in the usual trade or business of the employer – apply only to
regular employees under paragraph 1, Article 280 of the Labor Code, and, under paragraph 2 of the same article, to
casual employees who are deemed regular by their length of service.

The respondents, the petitioners point out, were specifically engaged for a fixed and predetermined duration of, on the
average, one (1) month at a time that coincides with a particular phase of the company’s business operations or sugar
milling season. By the nature of their engagement, the respondents’ employment legally ends upon the end of the
predetermined period; thus, URSUMCO was under no legal obligation to rehire the respondents.

33
In their comment,18 the respondents maintain that they are regular employees of URSUMCO. Relying on the NLRC
and the CA rulings, they point out that they have been continuously working for URSUMCO for more than one year,
performing tasks which were necessary and desirable to URSUMCO’s business. Hence, under the above-stated legal
parameters, they are regular employees.

We disagree with the petitioners’ position.1âwphi1 We find the respondents to be regular seasonal employees of
URSUMCO.

As the CA has explained in its challenged decision, Article 280 of the Labor Code provides for three kinds of
employment arrangements, namely: regular, project/seasonal and casual. Regular employment refers to that
arrangement whereby the employee "has been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer[.]"19 Under the definition, the primary standard that determines regular
employment is the reasonable connection between the particular activity performed by the employee and the usual
business or trade of the employer;20 the emphasis is on the necessity or desirability of the employee’s activity. Thus,
when the employee performs activities considered necessary and desirable to the overall business scheme of the
employer, the law regards the employee as regular.

By way of an exception, paragraph 2, Article 280 of the Labor Code also considers regular a casual employment
arrangement when the casual employee’s engagement has lasted for at least one year, regardless of the engagement’s
continuity. The controlling test in this arrangement is the length of time during which the employee is engaged.

A project employment, on the other hand, contemplates on arrangement whereby "the employment has been fixed for
a specific project or undertaking whose completion or termination has been determined at the time of the engagement
of the employee[.]"21 Two requirements, therefore, clearly need to be satisfied to remove the engagement from the
presumption of regularity of employment, namely: (1) designation of a specific project or undertaking for which the
employee is hired; and (2) clear determination of the completion or termination of the project at the time of the
employee’s engagement.22 The services of the project employees are legally and automatically terminated upon the
end or completion of the project as the employee’s services are coterminous with the project.

Unlike in a regular employment under Article 280 of the Labor Code, however, the length of time of the asserted
"project" employee’s engagement is not controlling as the employment may, in fact, last for more than a year,
depending on the needs or circumstances of the project. Nevertheless, this length of time (or the continuous rehiring
of the employee even after the cessation of the project) may serve as a badge of regular employment when the
activities performed by the purported "project" employee are necessary and indispensable to the usual business or
trade of the employer.23 In this latter case, the law will regard the arrangement as regular employment.24

Seasonal employment operates much in the same way as project employment, albeit it involves work or service that is
seasonal in nature or lasting for the duration of the season.25 As with project employment, although the seasonal
employment arrangement involves work that is seasonal or periodic in nature, the employment itself is not
automatically considered seasonal so as to prevent the employee from attaining regular status. To exclude the asserted
"seasonal" employee from those classified as regular employees, the employer must show that: (1) the employee must
be performing work or services that are seasonal in nature; and (2) he had been employed for the duration of the
season.26 Hence, when the "seasonal" workers are continuously and repeatedly hired to perform the same tasks or
activities for several seasons or even after the cessation of the season, this length of time may likewise serve as badge
of regular employment.27 In fact, even though denominated as "seasonal workers," if these workers are called to work
from time to time and are only temporarily laid off during the off-season, the law does not consider them separated
from the service during the off-season period. The law simply considers these seasonal workers on leave until re-
employed.28

Casual employment, the third kind of employment arrangement, refers to any other employment arrangement that
does not fall under any of the first two categories, i.e., regular or project/seasonal.

Interestingly, the Labor Code does not mention another employment arrangement – contractual or fixed term
employment (or employment for a term) – which, if not for the fixed term, should fall under the category of regular
employment in view of the nature of the employee’s engagement, which is to perform an activity usually necessary or
desirable in the employer’s business.

In Brent School, Inc. v. Zamora,29 the Court, for the first time, recognized and resolved the anomaly created by a
narrow and literal interpretation of Article 280 of the Labor Code that appears to restrict the employee’s right to freely
stipulate with his employer on the duration of his engagement. In this case, the Court upheld the validity of the fixed-
term employment agreed upon by the employer, Brent School, Inc., and the employee, Dorotio Alegre, declaring that
34
the restrictive clause in Article 280 "should be construed to refer to the substantive evil that the Code itself x x x
singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to
instances where [the] fixed period of employment was agreed upon knowingly and voluntarily by the parties x x x
absent any x x x circumstances vitiating [the employee’s] consent, or where [the facts satisfactorily show] that the
employer and [the] employee dealt with each other on more or less equal terms[.]"30 The indispensability or
desirability of the activity performed by the employee will not preclude the parties from entering into an otherwise
valid fixed term employment agreement; a definite period of employment does not essentially contradict the nature of
the employees duties31 as necessary and desirable to the usual business or trade of the employer.

Nevertheless, "where the circumstances evidently show that the employer imposed the period precisely to preclude
the employee from acquiring tenurial security, the law and this Court will not hesitate to strike down or disregard the
period as contrary to public policy, morals, etc."32 In such a case, the general restrictive rule under Article 280 of the
Labor Code will apply and the employee shall be deemed regular.

Clearly, therefore, the nature of the employment does not depend solely on the will or word of the employer or on the
procedure for hiring and the manner of designating the employee. Rather, the nature of the employment depends on
the nature of the activities to be performed by the employee, considering the nature of the employer’s business, the
duration and scope to be done,33 and, in some cases, even the length of time of the performance and its continued
existence.

In light of the above legal parameters laid down by the law and applicable jurisprudence, the respondents are neither
project, seasonal nor fixed-term employees, but regular seasonal workers of URSUMCO. The following factual
considerations from the records support this conclusion:

First, the respondents were made to perform various tasks that did not at all pertain to any specific phase of
URSUMCO’s strict milling operations that would ultimately cease upon completion of a particular phase in the
milling of sugar; rather, they were tasked to perform duties regularly and habitually needed in URSUMCO’s
operations during the milling season. The respondents’ duties as loader operators, hookers, crane operators and
drivers were necessary to haul and transport the sugarcane from the plantation to the mill; laboratory attendants,
workers and laborers to mill the sugar; and welders, carpenters and utility workers to ensure the smooth and
continuous operation of the mill for the duration of the milling season, as distinguished from the production of the
sugarcane which involves the planting and raising of the sugarcane until it ripens for milling. The production of
sugarcane, it must be emphasized, requires a different set of workers who are experienced in farm or agricultural
work. Needless to say, they perform the activities that are necessary and desirable in sugarcane production. As in the
milling of sugarcane, the plantation workers perform their duties only during the planting season.

Second, the respondents were regularly and repeatedly hired to perform the same tasks year after year. This regular
and repeated hiring of the same workers (two different sets) for two separate seasons has put in place, principally
through jurisprudence, the system of regular seasonal employment in the sugar industry and other industries with a
similar nature of operations.

Under the system, the plantation workers or the mill employees do not work continuously for one whole year but only
for the duration of the growing of the sugarcane or the milling season. Their seasonal work, however, does not detract
from considering them in regular employment since in a litany of cases, this Court has already settled that seasonal
workers who are called to work from time to time and are temporarily laid off during the off-season are not separated
from the service in said period, but are merely considered on leave until re-employment.34 Be this as it may, regular
seasonal employees, like the respondents in this case, should not be confused with the regular employees of the sugar
mill such as the administrative or office personnel who perform their tasks for the entire year regardless of the season.
The NLRC, therefore, gravely erred when it declared the respondents regular employees of URSUMCO without
qualification and that they were entitled to the benefits granted, under the CBA, to URSUMCO’S regular employees.

Third, while the petitioners assert that the respondents were free to work elsewhere during the off-season, the records
do not support this assertion. There is no evidence on record showing that after the completion of their tasks at
URSUMCO, the respondents sought and obtained employment elsewhere.

Contrary to the petitioners’ position, Mercado, Sr. v. NLRC, 3rd Div.35 is not applicable to the respondents as this
case was resolved based on different factual considerations. In Mercado, the workers were hired to perform phases of
the agricultural work in their employer’s farm for a definite period of time; afterwards, they were free to offer their
services to any other farm owner. The workers were not hired regularly and repeatedly for the same phase(s) of
agricultural work, but only intermittently for any single phase. And, more importantly, the employer in Mercado

35
sufficiently proved these factual circumstances. The Court reiterated these same observations in Hda. Fatima v. Nat’l
Fed. of Sugarcane Workers-Food and Gen. Trade36 and Hacienda Bino/Hortencia Starke, Inc. v. Cuenca.37

At this point, we reiterate the settled rule that in this jurisdiction, only questions of law are allowed in a petition for
review on certiorari.38 This Court’s power of review in a Rule 45 petition is limited to resolving matters pertaining to
any perceived legal errors, which the CA may have committed in issuing the assailed decision.39 In reviewing the
legal correctness of the CA’s Rule 65 decision in a labor case, we examine the CA decision in the context that it
determined, i.e., the presence or absence of grave abuse of discretion in the NLRC decision before it and not on the
basis of whether the NLRC decision on the merits of the case was correct.40 In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.41

Viewed in this light, we find the need to place the CA’s affirmation, albeit with modification, of the NLRC decision
of July 22, 2005 in perspective. To recall, the NLRC declared the respondents as regular employees of
URSUMCO.42With such a declaration, the NLRC in effect granted the respondents’ prayer for regularization and,
concomitantly, their prayer for the grant of monetary benefits under the CBA for URSUMCO’s regular employees. In
its challenged ruling, the CA concurred with the NLRC finding, but with the respondents characterized as regular
seasonal employees of URSUMCO.

The CA misappreciated the real import of the NLRC ruling. The labor agency did not declare the respondents as
regular seasonal employees, but as regular employees. This is the only conclusion that can be drawn from the NLRC
decision’s dispositive portion, thus:

WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants are declared regular employees
of respondent.1âwphi1 As such, they are entitled to the monetary benefits granted to regular employees of respondent
company based on the CBA, reckoned three (3) years back from the filing of the above-entitled case on 23 August
2002 up to the present or to their entire service with respondent after the date of filing of the said complaint if they are
no longer connected with respondent company.43

It is, therefore, clear that the issue brought to the CA for resolution is whether the NLRC gravely abused its discretion
in declaring the respondents regular employees of URSUMCO and, as such, entitled to the benefits under the CBA for
the regular employees.

Based on the established facts, we find that the CA grossly misread the NLRC ruling and missed the implications of
the respondents’ regularization. To reiterate, the respondents are regular seasonal employees, as the CA itself opined
when it declared that "private respondents who are regular workers with respect to their seasonal tasks or activities
and while such activities exist, cannot automatically be governed by the CBA between petitioner URSUMCO and the
authorized bargaining representative of the regular and permanent employees."44 Citing jurisprudential standards,45 it
then proceeded to explain that the respondents cannot be lumped with the regular employees due to the differences in
the nature of their duties and the duration of their work vis-a-vis the operations of the company.

The NLRC was well aware of these distinctions as it acknowledged that the respondents worked only during the
milling season, yet it ignored the distinctions and declared them regular employees, a marked departure from existing
jurisprudence. This, to us, is grave abuse of discretion, as it gave no reason for disturbing the system of regular
seasonal employment already in place in the sugar industry and other industries with similar seasonal operations. For
upholding the NLRC’s flawed decision on the respondents’ employment status, the CA committed a reversible error
of judgment.

In sum, we find the complaint to be devoid of merit. The issue of granting affirmative relief to the complainants who
did not appeal the CA ruling has become academic.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. Except for the denial of the
respondents' claim for CBA benefits, the November 29, 2007 decision and the January 22, 2009 resolution of the
Court of Appeals are SET ASIDE. The complaint is DISMISSED for lack of merit.

SO ORDERED.

36
 G.R. No. 204944-45, December 03, 2014

FUJI TELEVISION NETWORK, INC., Petitioner, v. ARLENE S. ESPIRITU, Respondent.

DECISION

LEONEN, J.:

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather
than a regular employee with or without a fixed term. That a person has a disease does not per se entitle the employer
to terminate his or her services. Termination is the last resort. At the very least, a competent public health authority
must certify that the disease cannot be cured within six (6) months, even with appropriate treatment.

We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc., seeking the reversal of the
Court of Appeals� decision2 dated June 25, 2012, affirming with modification the decision3 of the National Labor
Relations Commission.

In 2005, Arlene S. Espiritu (�Arlene�) was engaged by Fuji Television Network, Inc. (�Fuji�) as a news
correspondent/producer4 �tasked to report Philippine news to Fuji through its Manila Bureau field
office.�5 Arlene�s employment contract initially provided for a term of one (1) year but was successively renewed
on a yearly basis with salary adjustment upon every renewal.6chanRoblesvirtualLawlibrary

Sometime in January 2009, Arlene was diagnosed with lung cancer.7 She informed Fuji about her condition. In turn,
the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene �that the company will have a problem renewing
her contract�8 since it would be difficult for her to perform her job.9 She �insisted that she was still fit to work as
certified by her attending physician.�10chanRoblesvirtualLawlibrary

After several verbal and written communications,11 Arlene and Fuji signed a non-renewal contract on May 5, 2009
where it was stipulated that her contract would no longer be renewed after its expiration on May 31, 2009. The
contract also provided that the parties release each other from liabilities and responsibilities under the employment
contract.12chanRoblesvirtualLawlibrary

In consideration of the non-renewal contract, Arlene �acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay.�13 However, Arlene affixed her signature on the non-renewal contract with the initials �U.P.� for �under
protest.�14chanRoblesvirtualLawlibrary

On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and
attorney�s fees with the National Capital Region Arbitration Branch of the National Labor Relations Commission.
She alleged that she was forced to sign the non-renewal contract when Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March and April 2009 when she refused to
sign.15chanRoblesvirtualLawlibrary

Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it was only upon
signing that she was given her salaries and bonuses, in addition to separation pay equivalent to four (4)
years.16chanRoblesvirtualLawlibrary

In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlene�s
complaint.18 Citing Sonza v. ABS-CBN19 and applying the four-fold test, the Labor Arbiter held that Arlene was not
Fuji�s employee but an independent contractor.20chanRoblesvirtualLawlibrary

Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the National
Labor Relations Commission reversed the Labor Arbiter�s decision.21 It held that Arlene was a regular employee
with respect to the activities for which she was employed since she continuously rendered services that were deemed
necessary and desirable to Fuji�s business.22 The National Labor Relations Commission ordered Fuji to pay Arlene
backwages, computed from the date of her illegal dismissal.23 The dispositive portion of the decision
reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The Decision of
the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
37
respondents-appellees to pay complainant-appellant backwages computed from the date of her illegal dismissal until
finality of this Decision.

SO ORDERED.24

Arlene and Fuji filed separate motions for reconsideration.25 Both motions were denied by the National Labor
Relations Commission for lack of merit in the resolution dated April 26, 2010.26chanRoblesvirtualLawlibrary

From the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals consolidated the petitions and considered the following
issues for resolution:chanroblesvirtuallawlibrary

1) Whether or not Espiritu is a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and

3) Whether or not Espiritu is entitled to damages and attorney�s fees.28

In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with the
modification that Fuji immediately reinstate Arlene to her position as News Producer without loss of seniority rights,
and pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and vacation leave with pay until
reinstated, moral damages, exemplary damages, attorney�s fees, and legal interest of 12% per annum of the total
monetary awards.29chanRoblesvirtualLawlibrary

The Court of Appeals ruled that:chanroblesvirtuallawlibrary

WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and
the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March 5, 2010 of the National
Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated
April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as follows:

Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and to pay her the following:chanroblesvirtuallawlibrary

1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal), until reinstated;

2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;

3. One and a half (1�) months pay or $2,850.00 as midyear bonus per year from the date of dismissal, until
reinstated;

4. One and a half (1�) months pay or $2,850.00 as year-end bonus per year from the date of dismissal, until
reinstated;

5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated; and

6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until reinstated.

7. The amount of P100,000.00 as moral damages;

8. The amount of P50,000.00 as exemplary damages;

9. Attorney�s fees equivalent to 10% of the total monetary awards herein stated; and

10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from May 5, 2009, until
their full satisfaction.

The Labor Arbiter is hereby DIRECTED to make another re-computation of the above monetary awards consistent
with the above directives.

SO ORDERED.30

38
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she was engaged to
perform work that was necessary or desirable in the business of Fuji,31 and the successive renewals of her fixed-term
contract resulted in regular employment.32chanRoblesvirtualLawlibrary

According to the Court of Appeals, Sonza does not apply in order to establish that Arlene was an independent
contractor because she was not contracted on account of any peculiar ability, special talent, or skill.33 The fact that
everything used by Arlene in her work was owned by Fuji negated the idea of job
contracting.34chanRoblesvirtualLawlibrary

The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with the
requirements of substantive and procedural due process necessary for her dismissal since she was a regular
employee.35chanRoblesvirtualLawlibrary

The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the contract was a
mere subterfuge by Fuji to secure its position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment.36chanRoblesvirtualLawlibrary

Fuji filed a motion for reconsideration that was denied in the resolution37 dated December 7, 2012 for failure to raise
new matters.38chanRoblesvirtualLawlibrary

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming with
modification the National Labor Relations Commission�s decision, holding that Arlene was a regular employee and
that she was illegally dismissed. Fuji also questioned the award of monetary claims, benefits, and
damages.39chanRoblesvirtualLawlibrary

Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain one.40 She was hired as
an independent contractor as defined in Sonza.41 Fuji had no control over her work.42 The employment contracts were
executed and renewed annually upon Arlene�s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when they negotiated and entered
into the employment contracts.44 There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since �such employment terminated upon expiration of her
contract.�46Finally, Fuji had dealt with Arlene in good faith, thus, she should not have been awarded
damages.47chanRoblesvirtualLawlibrary

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily be secured from
other entities or from the internet.48 Fuji �never controlled the manner by which she performed her functions.�49 It
was Arlene who insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for annual increases
in her pay.50chanRoblesvirtualLawlibrary

Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in March 2009,
and one (1) day in April 2009.51 Despite the provision in her employment contract that sick leaves in excess of 30
days shall not be paid, Fuji paid Arlene her entire salary for the months of March, April, and May; four (4) months of
separation pay; and a bonus for two and a half months for a total of US$18,050.00.52 Despite having received the
amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53chanRoblesvirtualLawlibrary

Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The decision to not
renew her contract was mutually agreed upon by the parties as indicated in Arlene�s e-mail54 dated March 11, 2009
where she consented to the non-renewal of her contract but refused to sign anything.55 Aoki informed Arlene in an e-
mail56 dated March 12, 2009 that she did not need to sign a resignation letter and that Fuji would pay Arlene�s salary
and bonus until May 2009 as well as separation pay.57chanRoblesvirtualLawlibrary

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she agreed to sign
this time.58 This attached version contained a provision that Fuji shall re-hire her if she was still interested to work for
Fuji.59 For Fuji, Arlene�s e-mail showed that she had the power to bargain.60chanRoblesvirtualLawlibrary

Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-employee relationship
are present, particularly that of control;61 that Arlene�s separation from employment upon the expiration of her
contract constitutes illegal dismissal;62 that Arlene is entitled to reinstatement;63and that Fuji is liable to Arlene for
damages and attorney�s fees.64chanRoblesvirtualLawlibrary
39
This petition for review on certiorari under Rule 45 was filed on February 8, 2013.65 On February 27, 2013, Arlene
filed a manifestation66 stating that this court may not take jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.

Based on the arguments of the parties, there are procedural and substantive issues for resolution:

I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the verification
and certification of non-forum shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;

II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed by the
National Labor Relations Commission when it ruled that Arlene was a regular employee, not an independent
contractor, and that she was illegally dismissed; and

III. Whether the Court of Appeals properly modified the National Labor Relations Commission�s decision by
awarding reinstatement, damages, and attorney�s fees.

The petition should be dismissed.

I
Validity of the verification and certification against forum shopping

In its comment on Arlene�s manifestation, Fuji alleges that Corazon was authorized to sign the verification and
certification of non-forum shopping because Mr. Shuji Yano was empowered under the secretary�s certificate to
delegate his authority to sign the necessary pleadings, including the verification and certification against forum
shopping.69chanRoblesvirtualLawlibrary

On the other hand, Arlene points out that the authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretary�s
certificate is only for the petition for certiorari before the Court of Appeals.70 Fuji did not attach any board resolution
authorizing Corazon or any other person to file a petition for review on certiorari with this court.71 Shuji Yano and Jin
Eto could not re-delegate the power that was delegated to them.72 In addition, the special power of attorney executed
by Shuji Yano in favor of Corazon indicated that she was empowered to sign on behalf of Shuji Yano, and not on
behalf of Fuji.73chanRoblesvirtualLawlibrary

The Rules of Court requires the

submission of verification and
certification against forum shopping

Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while Section 5 of the
same rule provides the requirement of certification against forum shopping. These sections
state:chanroblesvirtuallawlibrary

SEC. 4. Verification. � Except when otherwise specifically required by law or rule, pleadings need not be under
oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and
correct of his knowledge and belief.

A pleading required to be verified which contains a verification based on �information and belief,� or upon
�knowledge, information and belief,� or lacks a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping.� The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading
has been filed.
40
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Section 4(e) of Rule 4574 requires that petitions for review should �contain a sworn certification against forum
shopping as provided in the last paragraph of section 2, Rule 42.� Section 5 of the same rule provides that failure to
comply with any requirement in Section 4 is sufficient ground to dismiss the petition.

Effects of non-compliance

Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and stated
that:chanroblesvirtuallawlibrary

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a
condition affecting the form of pleading, the non-compliance of which does not necessarily render the pleading fatally
defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and
correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.
The court may order the correction of the pleading if the verification is lacking or act on the pleading although it is
not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in
order that the ends of justice may thereby be served.76 (Citations omitted)

Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its effect from non-
compliance with the requirement of certification against forum shopping:chanroblesvirtuallawlibrary

On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the
petitioner to submit the required documents that should accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory
is authorized to file a petition on behalf of the corporation.78 (Emphasis supplied)

Effects of substantial compliance

with the requirement of verification
and certification against forum shopping

Although the general rule is that failure to attach a verification and certification against forum shopping is a ground
for dismissal, there are cases where this court allowed substantial compliance.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification one day after filing his
electoral protest.80 This court considered the subsequent filing as substantial compliance since the purpose of filing
the certification is to curtail forum shopping.81chanRoblesvirtualLawlibrary

In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Pe�a signed the verification and certification against forum
shopping but failed to attach the board resolution indicating her authority to sign.83 In a motion for reconsideration,
LDP Marketing attached the secretary�s certificate quoting the board resolution that authorized Dela Pe�a.84 Citing
Shipside, this court deemed the belated submission as substantial compliance since LDP Marketing complied with the
requirement; what it failed to do was to attach proof of Dela Pe�a�s authority to
sign.85chanRoblesvirtualLawlibrary

Havtor Management Phils., Inc. v. National Labor Relations Commission86 and General Milling Corporation v.
National Labor Relations Commission87 involved petitions that were dismissed for failure to attach any document
showing that the signatory on the verification and certification against forum-shopping was authorized.88 In both
cases, the secretary�s certificate was attached to the motion for reconsideration.89 This court considered the
subsequent submission of proof indicating authority to sign as substantial compliance.90chanRoblesvirtualLawlibrary

41
Altres v. Empleo91 summarized the rules on verification and certification against forum shopping in this
manner:chanroblesvirtuallawlibrary

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements . . .
respecting non-compliance with the requirement on, or submission of defective, verification and certification against
forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective
verification, and non-compliance with the requirement on or submission of defective certification against forum
shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally
defective. The court may order its submission or correction or act on the pleading if the attending circumstances
are such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be
served thereby.
3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of
the allegations in the complaint or petition signs the verifcation, and when matters alleged in the petition have
been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification,
is generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the
Rule on the ground of �substantial compliance� or presence of �special circumstances or compelling
reasons.�
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise,
those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances,
however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action
or defense, the signature of only one of them in the certification against forum shopping substantially complies
with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If,
however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special
Power of Attorney designating his counsel of record to sign on his behalf.92

There was substantial compliance

by Fuji Television Network, Inc.

Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly authorized
officers and agents. Thus, the physical act of signing the verification and certification against forum shopping can
only be done by natural persons duly authorized either by the corporate by-laws or a board
resolution.93chanRoblesvirtualLawlibrary

In its petition for review on certiorari, Fuji attached Hideaki Ota�s secretary�s certificate,94 authorizing Shuji Yano
and Jin Eto to represent and sign for and on behalf of Fuji.95 The secretary�s certificate was duly authenticated96 by
Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise attached to the petition is the special power
of attorney executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The verification and certification
against forum shopping was signed by Corazon.98chanRoblesvirtualLawlibrary

Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be dismissed
because Corazon was not duly authorized to sign the verification and certification against forum shopping.

Fuji filed a comment on Arlene�s manifestation, stating that Corazon was properly authorized to sign. On the basis
of the secretary�s certificate, Shuji Yano was empowered to delegate his authority.

Quoting the board resolution dated May 13, 2010, the secretary's certificate states:chanroblesvirtuallawlibrary

(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines� National Labor
Relations Commission (�NLRC�) and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-
09, RAB No. 05-06811-00 and entitled �Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki�, and
participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;

(b) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to verify and execute the
certification against non-forum shopping which may be necessary or required to be attached to any pleading to [sic]
42
submitted to the Court of Appeals; and the authority to so verify and certify for the Corporation in favor of the said
persons shall subsist and remain effective until the termination of the said case;

....

(d) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to represent and appear on behalf
the [sic] Corporation in all stages of the [sic] this case and in any other proceeding that may necessarily arise
thereform [sic], and to act in the Corporation�s name, place and stead to determine, propose, agree, decide, do, and
perform any and all of the following:

1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;

2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action.99 (Emphasis in the original; Italics
omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera
as his attorneys-in-fact.100 The special power of attorney states:chanroblesvirtuallawlibrary

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-
8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the attached Secretary�s Certificate)
one of the respondents in NLRC-NCR Case No. 05-06811-00 entitled �Arlene S. Espiritu v. Fuji Television
Network, Inc./Yoshiki Aoki�, and subsequently docketed before the Court of Appeals as C.A. G.R. S.P. No.
114867 (Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as my true and lawful attorneys-in-fact for me and my name, place and stead to act and
represent me in the above-mentioned case, with special power to make admission/s and stipulations and/or to make
and submit as well as to accept and approve compromise proposals upon such terms and conditions and under such
covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Offices as
the legal counsel to represent the Company in the Supreme Court;

The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such papers or documents
as may be necessary in furtherance of the power thus granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be filed.101 (Emphasis in the original)

In its comment102 on Arlene�s manifestation, Fuji argues that Shuji Yano could further delegate his authority
because the board resolution empowered him to �act in the Corporation�s name, place and stead to determine,
propose, agree, decided [sic], do and perform any and all of the following: . . . such other matters as may aid in the
prompt disposition of the action.�103chanRoblesvirtualLawlibrary

To clarify, Fuji attached a verification and certification against forum shopping, but Arlene questions Corazon�s
authority to sign. Arlene argues that the secretary�s certificate empowered Shuji Yano to file a petition for certiorari
before the Court of Appeals, and not a petition for review before this court, and that since Shuji Yano�s authority
was delegated to him, he could not further delegate such power. Moreover, Corazon was representing Shuji Yano in
his personal capacity, and not in his capacity as representative of Fuji.

A review of the board resolution quoted in the secretary�s certificate shows that Fuji shall �file a Petition for
Certiorari with the Court of Appeals�104 and �participate in any other subsequent proceeding that may necessarily
arise therefrom, including but not limited to the filing of appeals in the appropriate venue,�105 and that Shuji Yano
and Jin Eto are authorized to represent Fuji �in any other proceeding that may necessarily arise
thereform [sic].�106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to �act in the
Corporation�s name, place and stead to determine, propose, agree, decide, do, and perform any and all of the
following: . . . 5. Such other matters as may aid in the prompt disposition of the
action.�107chanRoblesvirtualLawlibrary

Considering that the subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is
the filing of a petition for review with this court, Fuji substantially complied with the procedural requirement.

43
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:chanroblesvirtuallawlibrary

ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously
incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

The secretary�s certificate does not state that Shuji Yano is prohibited from appointing a substitute. In fact, he is
empowered to do acts that will aid in the resolution of this case.

This court has recognized that there are instances when officials or employees of a corporation can sign the
verification and certification against forum shopping without a board resolution. In Cagayan Valley Drug
Corporation v. CIR,108 it was held that:chanroblesvirtuallawlibrary

In sum, we have held that the following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.

While the above cases109 do not provide a complete listing of authorized signatories to the verification and
certification required by the rules, the determination of the sufficiency of the authority was done on a case to case
basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of
the corporation to sign the verification or certificate against forum shopping, being �in a position to verify the
truthfulness and correctness of the allegations in the petition.�110

Corazon�s affidavit111 states that she is the �office manager and resident interpreter of the Manila Bureau of Fuji
Television Network, Inc.�112 and that she has �held the position for the last twenty-three
years.�113chanRoblesvirtualLawlibrary

As the office manager for 23 years, Corazon can be considered as having knowledge of all matters in Fuji�s Manila
Bureau Office and is in a position to verify �the truthfulness and the correctness of the allegations in the
Petition.�114chanRoblesvirtualLawlibrary

Thus, Fuji substantially complied with the requirements of verification and certification against forum shopping.

Before resolving the substantive issues in this case, this court will discuss the procedural parameters of a Rule 45
petition for review in labor cases.

II
Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the National Labor Relations
Commission. It merely states that �[t]he decision of the Commission shall be final and executory after ten (10)
calendar days from receipt thereof by the parties.� Being final, it is no longer appealable. However, the finality of
the National Labor Relations Commission�s decisions does not mean that there is no more recourse for the parties.

In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited several cases117and rejected
the notion that this court had no jurisdiction to review decisions of the National Labor Relations Commission. It
stated that this court had the power to review the acts of the National Labor Relations Commission to see if it kept
within its jurisdiction in deciding cases and also as a form of check and balance.118 This court then clarified that
judicial review of National Labor Relations Commission decisions shall be by way of a petition for certiorari under
Rule 65. Citing the doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of
Appeals. From the Court of Appeals, an aggrieved party may file a petition for review on certiorari under Rule 45.

A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of discretion. As
44
an original action, it cannot be considered as a continuation of the proceedings of the labor tribunals.

On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to
questions of law. In labor cases, a Rule 45 petition is limited to reviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding other jurisdictional errors of the
National Labor Relations Commission.119chanRoblesvirtualLawlibrary

In Odango v. National Labor Relations Commission,120 this court explained that a petition for certiorari is an
extraordinary remedy that is �available only and restrictively in truly exceptional cases�121 and that its sole office
�is the correction of errors of jurisdiction including commission of grave abuse of discretion amounting to lack or
excess of jurisdiction.�122 A petition for certiorari does not include a review of findings of fact since the findings of
the National Labor Relations Commission are accorded finality.123 In cases where the aggrieved party assails the
National Labor Relations Commission�s findings, he or she must be able to show that the Commission �acted
capriciously and whimsically or in total disregard of evidence material to the
controversy.�124chanRoblesvirtualLawlibrary

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a petition for
review under Rule 45, only questions of law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission:125chanRoblesvirtualLawlibrary

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are completely devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the
NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.126

Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the parameters of judicial review
under Rule 45:chanroblesvirtuallawlibrary

As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular
parameters of a Rule 45 appeal from the CA�s Rule 65 decision on a labor case, as
follows:ChanRoblesVirtualawlibrary
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law
raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.129 (Emphasis in the original)

Justice Brion�s dissenting opinion in Abott Laboratories, PhiIippines v. AIcaraz130 discussed that in petitions for
review under Rule 45, �the Court simply determines whether the legal correctness of the CA�s finding that the
NLRC ruling . . . had basis in fact and in Iaw.�131 In this kind of petition, the proper question to be raised is, �Did
the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?�132chanRoblesvirtualLawlibrary

Justice Brion�s dissenting opinion also laid down the following guidelines:chanroblesvirtuallawlibrary

If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave abuse of
discretion exists and the CA should so declare and, accordingly, dismissthe petition. If grave abuse of discretion
exists, then the CA must grant the petition and nullify the NLRC ruling, entering at the same time the ruling that is
justified under the evidence and the governing law, rules and jurisprudence. In our Rule 45 review, this Court
must deny the petition if it finds that the CA correctly acted.133 (Emphasis in the original)

These parameters shall be used in resolving the substantive issues in this petition.cralawred

III
Determination of employment status; burden of proof

In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that Arlene was an
45
independent contractor, while Arlene alleges that she was a regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed between Fuji and Arlene.

This court has often used the four-fold test to determine the existence of an employer-employee relationship. Under
the four-fold test, the �control test� is the most important.134 As to how the elements in the four-fold test are
proven, this court has discussed that:chanroblesvirtuallawlibrary

[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment
letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee
status.135

If the facts of this case vis-�-vis the four-fold test show that an employer-employee relationship existed, we then
determine the status of Arlene�s employment, i.e., whether she was a regular employee. Relative to this, we shall
analyze Arlene�s fixed-term contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall scrutinize whether the nature of
Arlene�s work was necessary and desirable to Fuji�s business or whether Fuji only needed the output of her work.
If the circumstances show that Arlene�s work was necessary and desirable to Fuji, then she is presumed to be a
regular employee. The burden of proving that she was an independent contractor lies with Fuji.

In labor cases, the quantum of proof required is substantial evidence.136 �Substantial evidence� has been defined as
�such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.�137chanRoblesvirtualLawlibrary

If Arlene was a regular employee, we then determine whether she was illegally dismissed. In complaints for illegal
dismissal, the burden of proof is on the employee to prove the fact of dismissal.138 Once the employee establishes the
fact of dismissal, supported by substantial evidence, the burden of proof shifts to the employer to show that there was
a just or authorized cause for the dismissal and that due process was observed.139chanRoblesvirtualLawlibrary

IV
Whether the Court of Appeals correctly affirmed the National Labor Relations Commission�s finding that
Arlene was a regular employee

Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the following facts:
(1) she was hired because of her skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3) she
had the power to bargain with her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forced to sign the non-renewal agreement, considering that she sent an
email with another version of the non-renewal agreement.140 Further, she is not entitled to moral damages and
attorney�s fees because she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.141chanRoblesvirtualLawlibrary

Arlene argues that she was a regular employee because Fuji had control and supervision over her work. The news
events that she covered were all based on the instructions of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary and desirable.143 In addition, Fuji�s
payment of separation pay equivalent to one (1) month�s pay per year of service indicates that she was a regular
employee.144 To further support her argument that she was not an independent contractor, she states that Fuji owns the
laptop computer and mini-camera that she used for work.145chanRoblesvirtualLawlibrary

Arlene also argues that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who was a
news anchor, talk show host, and who enjoyed a celebrity status.146chanRoblesvirtualLawlibrary

On her illness, Arlene points out that it was not a ground for her dismissal because her attending physician certified
that she was fit to work.147chanRoblesvirtualLawlibrary

Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to its terms, but
because she was not in a position to reject the non-renewal agreement. Further, she badly needed the salary withheld
for her sustenance and medication.148 She posits that her acceptance of separation pay does not bar filing of a
complaint for illegal dismissal.149chanRoblesvirtualLawlibrary

Article 280 of the Labor Code provides that:chanroblesvirtuallawlibrary

46
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exist.

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

Another classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School, Inc.
v. Zamora150 where this court discussed that:chanroblesvirtuallawlibrary

Logically, the decisive determinant in the 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.�151 (Emphasis in the original)

This court further discussed that there are employment contracts where �a fixed term is an essential and natural
appurtenance�152 such as overseas employment contracts and officers in educational
institutions.153chanRoblesvirtualLawlibrary

Distinctions among fixed-term

employees, independent contractors,
and regular employees

GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed-term contracts laid down in Brent in the following
manner:chanroblesvirtuallawlibrary

Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we emphasized in Brent
that where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down as contrary to public policy or morals. We thus laid down
indications or criteria under which �term employment� cannot be said to be in circumvention of the law on security
of tenure, namely:chanroblesvirtuallawlibrary

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 the employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few special cases
wherein the employer and employee are on more or less in equal footing in entering into the contract. The reason for
this is evident: when a prospective employee, on account of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker.
Lesser limitations on the parties� freedom of contract are thus required for the protection of the
employee.155 (Citations omitted)

For as long as the guidelines laid down in Brent are satisfied, this court will recognize the validity of the fixed-term
contract.

In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixed-term employment of petitioners because from the
time they were hired, they were informed that their engagement was for a specific period. This court stated
that:chanroblesvirtuallawlibrary
47
[s]imply put, petitioners were not regular employees. While their employment as mixers, packers and machine
operators was necessary and desirable in the usual business of respondent company, they were employed temporarily
only, during periods when there was heightened demand for production. Consequently, there could have been no
illegal dismissal when their services were terminated on expiration of their contracts. There was even no need for
notice of termination because they knew exactly when their contracts would end. Contracts of employment for a fixed
period terminate on their own at the end of such period.

Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers from the capricious termination of
employment.157 (Citation omitted)

Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of employment. Caparoso and
Quindipan were hired as delivery men for three (3) months. At the end of the third month, they were hired on a
monthly basis. In total, they were hired for five (5) months. They filed a complaint for illegal dismissal. 159 This court
ruled that there was no evidence indicating that they were pressured into signing the fixed-term contracts. There was
likewise no proof that their employer was engaged in hiring workers for five (5) months only to prevent
regularization. In the absence of these facts, the fixed-term contracts were upheld as
valid.160chanRoblesvirtualLawlibrary

On the other hand, an independent contractor is defined as:chanroblesvirtuallawlibrary

. . . one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its
own account and under one�s own responsibility according to one�s own manner and method, free from the control
and direction of the principal in all matters connected with the performance of the work except as to the results
thereof.161

In view of the �distinct and independent business� of independent contractors, no employer-employee relationship
exists between independent contractors and their principals.

Independent contractors are recognized under Article 106 of the Labor Code:chanroblesvirtuallawlibrary

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former�s work, the employees of the contractor and of the latter�s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

....

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

There is �labor-only� contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

In Department Order No. 18-A, Series of 2011, of the Department of Labor and Employment, a contractor is defined
as having:chanroblesvirtuallawlibrary

Section 3. . . .

....

(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor 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.

This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting

48
arrangements among the principal, contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractor�s services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work for the
principal.162chanRoblesvirtualLawlibrary

Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that
set them apart from ordinary employees. There is no trilateral relationship in this case because the independent
contractor himself or herself performs the work for the principal. In other words, the relationship is bilateral.

In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer. This court
ruled that she was an independent contractor because of her �talent, skill, experience, and her unique viewpoint as a
feminist advocate.�164 In addition, the Philippine Daily Inquirer did not have the power of control over Orozco, and
she worked at her own pleasure.165chanRoblesvirtualLawlibrary

Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court ruled that �petitioners
performed their functions as masiador and sentenciador free from the direction and control of respondents�169 and
that the masiador and sentenciador �relied mainly on their �expertise that is characteristic of the cockfight
gambling.��170 Hence, no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court ruled that �a referee is an
independent contractor, whose special skills and independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party.�172chanRoblesvirtualLawlibrary

In these cases, the workers were found to be independent contractors because of their unique skills and talents and the
lack of control over the means and methods in the performance of their work.

In other words, there are different kinds of independent contractors: those engaged in legitimate job contracting and
those who have unique skills and talents that set them apart from ordinary employees.

Since no employer-employee relationship exists between independent contractors and their principals, their contracts
are governed by the Civil Code provisions on contracts and other applicable laws.173chanRoblesvirtualLawlibrary

A contract is defined as �a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.�174 Parties are free to stipulate on terms and conditions in
contracts as long as these �are not contrary to law, morals, good customs, public order, or public policy.�175 This
presupposes that the parties to a contract are on equal footing. They can bargain on terms and conditions until they are
able to reach an agreement.

On the other hand, contracts of employment are different and have a higher level of regulation because they are
impressed with public interest. Article XIII, Section 3 of the 1987 Constitution provides full protection to
labor:chanroblesvirtuallawlibrary

Article XIII. Social Justice and Human Rights

....

Labor

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use
of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.

49
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in
the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code
states:chanroblesvirtuallawlibrary

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.

In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory
review by the labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special
class that is constitutionally protected because of the inequality between capital and labor.176 This presupposes that
the labor force is weak.

However, the level of protection to labor should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga,the ruling in Brent applies in
cases where it appears that the employer and employee are on equal footing.177 This recognizes the fact that not all
workers are weak. To reiterate the discussion in GMA Network v. Pabriga:chanroblesvirtuallawlibrary

The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a
position to make demands upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties� freedom of contract are thus required for the protection of the
employee.178

The level of protection to labor must be determined on the basis of the nature of the work, qualifications of the
employee, and other relevant circumstances.

For example, a prospective employee with a bachelor�s degree cannot be said to be on equal footing with a grocery
bagger with a high school diploma. Employees who qualify for jobs requiring special qualifications such as
�[having] a Master�s degree� or �[having] passed the licensure exam� are different from employees who
qualify for jobs that require �[being a] high school graduate; with pleasing personality.� In these situations, it is
clear that those with special qualifications can bargain with the employer on equal footing. Thus, the level of
protection afforded to these employees should be different.

Fuji�s argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees
under fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity and desirability of the employee�s activities,
�but the day certain agreed upon by the parties for the commencement and termination of the employment
relationship.�179 For regular employees, the necessity and desirability of their work in the usual course of the
employer�s business are the determining factors. On the other hand, independent contractors do not have employer-
employee relationships with their principals.

Hence, before the status of employment can be determined, the existence of an employer-employee relationship must
be established.

The four-fold test180 can be used in determining whether an employer-employee relationship exists. The elements of
the four-fold test are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control, which is the most important
element.181chanRoblesvirtualLawlibrary

The �power of control� was explained by this court in Corporal, Sr. v. National Labor Relations
Commission:182chanRoblesvirtualLawlibrary

The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it
essential for the employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.183 (Citation omitted)

Orozco v. Court of Appeals further elucidated the meaning of �power of control� and stated the
following:chanroblesvirtuallawlibrary
50
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. . . .184 (Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the �power of control� was defined as �[the]
right to control not only the end to be achieved but also the means to be used in reaching such
end.� 186chanRoblesvirtualLawlibrary

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit-Murillo v. Court of Appeals187 in determining
whether Arlene was an independent contractor or a regular employee.

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved newscasters and
anchors. However, Sonza was held to be an independent contractor, while Dumpit-Murillo was held to be a regular
employee.

Comparison of the Sonza and

Dumpit-Murillo cases using
the four-fold test

Sonza was engaged by ABS-CBN in view of his �unique skills, talent and celebrity status not possessed by ordinary
employees.�188 His work was for radio and television programs.189 On the other hand, Dumpit-Murillo was hired by
ABC as a newscaster and co-anchor.190chanRoblesvirtualLawlibrary

Sonza�s talent fee amounted to P317,000.00 per month, which this court found to be a substantial amount that
indicated he was an independent contractor rather than a regular employee.191 Meanwhile, Dumpit-Murillo�s
monthly salary was P28,000.00, a very low amount compared to what Sonza received.192chanRoblesvirtualLawlibrary

Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract. There was no
indication that he could be terminated based on just or authorized causes under the Labor Code. In addition, ABS-
CBN continued to pay his talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have been illegally dismissed by her employer when they did not renew
her contract on her fourth year with ABC.194chanRoblesvirtualLawlibrary

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he appeared on
television, or how he sounded on radio.195 All that Sonza needed was his talent.196 Further, �ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his work . . . did not meet ABS-
CBN�s approval.�197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract was a clear
indication that ABC had control over her work.198chanRoblesvirtualLawlibrary

Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling of the
National Labor Relations Commission finding that Arlene was a regular employee. Arlene was hired by Fuji as a
news producer, but there was no showing that she was hired because of unique skills that would distinguish her from
ordinary employees. Neither was there any showing that she had a celebrity status. Her monthly salary amounting to
US$1,900.00 appears to be a substantial sum, especially if compared to her salary when she was still connected with
GMA.199 Indeed, wages may indicate whether one is an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment contract.200 Her
contract also indicated that Fuji had control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-
Murillo had to be in ABC to do both on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what to report.202 Even the mode of
transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her contract
states:chanroblesvirtuallawlibrary

51
 6. During the travel to carry out work, if there is change of place or change of place of work, the train, bus, or
public transport shall be used for the trip. If the Employee uses the private car during the work and there is an
accident the Employer shall not be responsible for the damage, which may be caused to the Employee.203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations Commission that
Arlene was not an independent contractor.

Having established that an employer-employee relationship existed between Fuji and Arlene, the next questions for
resolution are the following: Did the Court of Appeals correctly affirm the National Labor Relations Commission that
Arlene had become a regular employee? Was the nature of Arlene�s work necessary and desirable for Fuji�s usual
course of business?

Arlene was a regular employee

with a fixed-term contract

The test for determining regular employment is whether there is a reasonable connection between the employee�s
activities and the usual business of the employer. Article 280 provides that the nature of work must be �necessary or
desirable in the usual business or trade of the employer� as the test for determining regular employment. As stated
in ABS-CBN Broadcasting Corporation v. Nazareno:204chanRoblesvirtualLawlibrary

In determining whether an employment should be considered regular or non-regular, the applicable test is the
reasonable connection between the particular activity performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or
desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the business or trade is pursued in the usual
course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying
on the particular business or trade.205

However, there may be a situation where an employee�s work is necessary but is not always desirable in the usual
course of business of the employer. In this situation, there is no regular employment.

In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman was hired to repair
furnaces at San Miguel Corporation�s Manila glass plant. He had a separate contract for every furnace that he
repaired. He filed a complaint for illegal dismissal three (3) years after the end of his last contract.207 In ruling that de
Guzman did not attain the status of a regular employee, this court explained:chanroblesvirtuallawlibrary

Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of
glass, an integral component of the packaging and manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after being used continuously for a varying period of five (5) to ten
(10) years.

In 1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and separate
from petitioner's business of manufacturing glass. For this purpose, petitioner must hire workers to undertake the said
repair and upgrading. . . .

....

Clearly, private respondent was hired for a specific project that was not within the regular business of the corporation.
For petitioner is not engaged in the business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity therefor arose only when a particular furnace reached the end
of its life or operating cycle. Or, as in the second undertaking, when a particular furnace required an emergency
repair. In other words, the undertakings where private respondent was hired primarily as helper/bricklayer have
specified goals and purposes which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or regular business operations of
petitioner, which is glass manufacturing. These undertakings, the duration and scope of which had been determined
and made known to private respondent at the time of his employment, clearly indicated the nature of his employment
as a project employee.208

52
Fuji is engaged in the business of broadcasting,209 including news programming.210 It is based in Japan211 and has
overseas offices to cover international news.212chanRoblesvirtualLawlibrary

Based on the record, Fuji�s Manila Bureau Office is a small unit213 and has a few employees.214 As such, Arlene had
to do all activities related to news gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was �News Talent/Reporter/Producer.�215chanRoblesvirtualLawlibrary

A news producer �plans and supervises newscast . . . [and] work[s] with reporters in the field planning and gathering
information. . . .�216 Arlene�s tasks included �[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing
subjects in front of a video camera,�217 �the timely submission of news and current events reports pertaining to the
Philippines[,] and traveling [sic] to [Fuji�s] regional office in Thailand.�218 She also had to report for work in
Fuji�s office in Manila from Mondays to Fridays, eight (8) hours per day.219 She had no equipment and had to use
the facilities of Fuji to accomplish her tasks.

The Court of Appeals affirmed the finding of the National Labor Relations Commission that the successive renewals
of Arlene�s contract indicated the necessity and desirability of her work in the usual course of Fuji�s business.
Because of this, Arlene had become a regular employee with the right to security of tenure.220 The Court of Appeals
ruled that:chanroblesvirtuallawlibrary

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was hired for the
primary purpose of news gathering and reporting to the television network�s headquarters. Espiritu was not
contracted on account of any peculiar ability or special talent and skill that she may possess which the network desires
to make use of. Parenthetically, if it were true that Espiritu is an independent contractor, as claimed by Fuji, the fact
that everything that she uses to perform her job is owned by the company including the laptop computer and mini
camera discounts the idea of job contracting.221

Moreover, the Court of Appeals explained that Fuji�s argument that no employer-employee relationship existed in
view of the fixed-term contract does not persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223chanRoblesvirtualLawlibrary

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were successively
renewed for four (4) years.224 This court held that �[t]his repeated engagement under contract of hire is indicative of
the necessity and desirability of the petitioner�s work in private respondent ABC�s
business.�225chanRoblesvirtualLawlibrary

With regard to Fuji�s argument that Arlene�s contract was for a fixed term, the Court of Appeals cited Philips
Semiconductors, Inc. v. Fadriquela226 and held that where an employee�s contract �had been continuously
extended or renewed to the same position, with the same duties and remained in the employ without any
interruption,�227 then such employee is a regular employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor of Arlene.

As stated in Price, et al. v. Innodata Corp., et al.:228chanRoblesvirtualLawlibrary

The employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other.229 (Citations omitted)

Arlene�s contract indicating a fixed term did not automatically mean that she could never be a regular employee.
This is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the exception rather than the general
rule.

Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility
that a regular employee may opt to have a fixed-term contract for valid reasons. This was recognized in Brent: For as
long as it was the employee who requested, or bargained, that the contract have a �definite date of termination,� or
that the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-
term contract will be upheld.230chanRoblesvirtualLawlibrary

53
 V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission�s finding of illegal dismissal

Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of the non-
renewal contract voluntarily executed by the parties. Fuji also argues that Arlene�s contract merely expired; hence,
she was not illegally dismissed.231chanRoblesvirtualLawlibrary

Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheld her salary and
benefits.

With regard to this issue, the Court of Appeals held:chanroblesvirtuallawlibrary

We cannot subscribe to Fuji�s assertion that Espiritu�s contract merely expired and that she voluntarily agreed not
to renew the same. Even a cursory perusal of the subject Non-Renewal Contract readily shows that the same was
signed by Espiritu under protest. What is apparent is that the Non-Renewal Contract was crafted merely as a
subterfuge to secure Fuji�s position that it was Espiritu�s choice not to renew her contract.232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just or authorized
causes and after the observance of due process.

The right to security of tenure is guaranteed under Article XIII, Section 3 of the 1987
Constitution:chanroblesvirtuallawlibrary

Article XIII. Social Justice and Human Rights

....

Labor

....

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

Article 279 of the Labor Code also provides for the right to security of tenure and states the
following:chanroblesvirtuallawlibrary

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 of 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.

Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just or authorized causes and
only after compliance with procedural and substantive due process is conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained in Philippine Daily
Inquirer, Inc. v. Magtibay, Jr.:233chanRoblesvirtualLawlibrary

Within the limited legal six-month probationary period, probationary employees are still entitled to security of tenure.
It is expressly provided in the afore-quoted Article 281 that a probationary employee may be terminated only on two
grounds: (a) for just cause, or (b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement.234 (Citation omitted)

The expiration of Arlene�s contract does not negate the finding of illegal dismissal by Fuji. The manner by which
Fuji informed Arlene that her contract would no longer be renewed is tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of resignation prepared by Fuji.235 The existence of a fixed-term
contract should not mean that there can be no illegal dismissal. Due process must still be observed in the pre-

54
termination of fixed-term contracts of employment.

In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was dismissed
because of her health condition. In the non-renewal agreement executed by Fuji and Arlene, it is stated
that:chanroblesvirtuallawlibrary

WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to effectively
perform her functions under the said Contract such as the timely submission of news and current events reports
pertaining to the Philippines and travelling [sic] to the FIRST PARTY�s regional office in Thailand.236 (Emphasis
supplied)

Disease as a ground for termination is recognized under Article 284 of the Labor Code:chanroblesvirtuallawlibrary

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been
found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one
(1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least
six (6) months being considered as one (1) whole year.

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:chanroblesvirtuallawlibrary

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.

For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the employee�s disease
cannot be cured within six (6) months and his �continued employment is prohibited by law or prejudicial to his
health as well as to the health of his co-employees�; and (2) certification issued by a competent public health
authority that even with proper medical treatment, the disease cannot be cured within six (6) months.237 The burden of
proving compliance with these requisites is on the employer.238 Non-compliance leads to the conclusion that the
dismissal was illegal.239chanRoblesvirtualLawlibrary

There is no evidence showing that Arlene was accorded due process. After informing her employer of her lung
cancer, she was not given the chance to present medical certificates. Fuji immediately concluded that Arlene could no
longer perform her duties because of chemotherapy. It did not ask her how her condition would affect her work.
Neither did it suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did not present any
certificate from a competent public health authority. What Fuji did was to inform her that her contract would no
longer be renewed, and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld
the finding of the National Labor Relations Commission that for failure of Fuji to comply with due process, Arlene
was illegally dismissed.240chanRoblesvirtualLawlibrary

VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission�s decision
when it awarded reinstatement, damages, and attorney�s fees

The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the ground that the
filing of the complaint for illegal dismissal may have seriously strained relations between the parties. Backwages
were also awarded, to be computed from date of dismissal until the finality of the National Labor Relations
Commission�s decision. However, only backwages were included in the dispositive portion because the National
Labor Relations Commission recognized that Arlene had received separation pay in the amount of US$7,600.00.

The Court of Appeals affirmed the National Labor Relations Commission�s decision but modified it by awarding
moral and exemplary damages and attorney�s fees, and all other benefits Arlene was entitled to under her contract
with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the grounds when separation pay was
awarded in lieu of reinstatement were not proven.241chanRoblesvirtualLawlibrary

55
Article 279 of the Labor Code provides:chanroblesvirtuallawlibrary

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.(Emphasis supplied)

The Court of Appeals� modification of the National Labor Relations Commission�s decision was proper because
the law itself provides that illegally dismissed employees are entitled to reinstatement, backwages including
allowances, and all other benefits.

On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu of
reinstatement, reasoning �that the filing of the instant suit may have seriously abraded the relationship of the parties
so as to render reinstatement impractical.�242 The Court of Appeals reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is allowed only in several instances such as (1) when the employer
has ceased operations; (2) when the employee�s position is no longer available; (3) strained relations; and (4) a
substantial period has lapsed from date of filing to date of finality.243chanRoblesvirtualLawlibrary

On this matter, Quijano v. Mercury Drug Corp.244 is instructive:chanroblesvirtuallawlibrary

Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. . . .

To protect labor�s security of tenure, we emphasize that the doctrine of �strained relations� should be strictly
applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every labor dispute almost
always results in �strained relations� and the phrase cannot be given an overarching interpretation, otherwise, an
unjustly dismissed employee can never be reinstated.245 (Citations omitted)

The Court of Appeals reasoned that strained relations are a question of fact that must be supported by evidence.246 No
evidence was presented by Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that it ceased
operations or that Arlene�s position was no longer available. Nothing in the records shows that Arlene�s
reinstatement would cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in 2009. Five
(5) years are not yet a substantial period247 to bar reinstatement.

On the award of damages, Fuji argues that Arlene is not entitled to the award of damages and attorney�s fees
because the non-renewal agreement contained a quitclaim, which Arlene signed.

Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal agreement out of necessity. In Land and Housing Development
Corporation v. Esquillo,248 this court explained:chanroblesvirtuallawlibrary

We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public
policy, and why they are held to be ineffective to bar claims for the full measure of the workers� legal rights, is the
fact that the employer and the employee obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence,
not of choice.249

With regard to the Court of Appeals� award of moral and exemplary damages and attorney�s fees, this court has
recognized in several cases that moral damages are awarded �when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public
policy.�250 On the other hand, exemplary damages may be awarded when the dismissal was effected �in a wanton,
oppressive or malevolent manner.�251chanRoblesvirtualLawlibrary

The Court of Appeals and National Labor Relations Commission found that after Arlene had informed Fuji of her
cancer, she was informed that there would be problems in renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety, and wounded feelings that can be gleaned from the tenor
of her email dated March 11, 2009. A portion of her email reads:chanroblesvirtuallawlibrary

56
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you suddenly came to
deliver to me the NEWS that you will no longer renew my contract. I knew this will come but I never thought that
you will be so �heartless� and insensitive to deliver that news just a month after I informed you that I am sick. I
was asking for patience and understanding and your response was not to RENEW my contract.252

Apart from Arlene�s illegal dismissal, the manner of her dismissal was effected in an oppressive approach with her
salary and other benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal
contract. Thus, there was legal basis for the Court of Appeals to modify the National Labor Relations Commission�s
decision.

However, Arlene received her salary for May 2009.253 Considering that the date of her illegal dismissal was May 5,
2009,254 this amount may be subtracted from the total monetary award.

With regard to the award of attorney�s fees, Article 111 of the Labor Code states that �[i]n cases of unlawful
withholding of wages, the culpable party may be assessed attorney�s fees equivalent to ten percent of the amount of
wages recovered.� Likewise, this court has recognized that �in actions for recovery of wages or where an employee
was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney�s fees is
legally and morally justifiable.�255 Due to her illegal dismissal, Arlene was forced to litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per
annum.256 In view of this court�s ruling in Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of
6% per annum from July 1, 2013 until full satisfaction.chanrobleslaw

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012
is AFFIRMED with the modification that backwages shall be computed from June 2009. Legal interest shall be
computed at the rate of 6% per annum of the total monetary awards from May 5, 2009 until full satisfaction.

SO ORDERED.cralawlawlibrary

57
 G.R. No. 205300, March 18, 2015

FONTERRA BRANDS PHILS., INC., Petitioner, v. LEONARDO1 LARGADO AND TEOTIMO

ESTRELLADO, Respondents.

DECISION

VELASCO JR., J.:

The Case

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside
of the Decision of the Court of Appeals (CA) dated September 6, 2012, as well as its January 11, 2013 Resolution
denying reconsideration thereof, in CA-G.R. SP No. 114227, entitled Leonardo Largado and Teotimo P. Estrellado v.
National Labor Relations Commission (NLRC), Fonterra Brands Phils., Inc./Carlo Mendoza, Zytron Marketing &
Promotions Corp./Francisco Valencia, A.C. Sicat Marketing & Promotional Services/Arturo Sicat.

The Facts

Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and Promotions Corp.
(Zytron) for the marketing and promotion of its milk and dairy products. Pursuant to the contract, Zytron provided
Fonterra with trade merchandising representatives (TMRs), including respondents Leonardo Largado (Largado) and
Teotimo Estrellado (Estrellado). The engagement of their services began on September 15, 2003 and May 27, 2002,
respectively, and ended on June 6, 2006.

On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006. Fonterra
then entered into an agreement for manpower supply with A.C. Sicat Marketing and Promotional Services (A.C.
Sicat). Desirous of continuing their work as TMRs, respondents submitted their job applications with A.C. Sicat,
which hired them for a term of five (5) months, beginning June 7, 2006 up to November 6, 2006.

When respondents� 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal thereof,
but wereallegedly refused. This prompted respondents to file complaints for illegal dismissal, regularization, non-
payment of service incentive leave and 13th month pay, and actual and moral damages, against petitioner, Zytron, and
A.C. Sicat.

The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not illegally dismissed. As a matter of
fact, they were the ones who refused to renew their contract and that they voluntarily complied with the requirements
for them to claim their corresponding monetary benefits in relation thereto; and (2) they were consecutively employed
by Zytron and A.C. Sicat, not by Fonterra. The dispositive portion of the
Decision2 reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the instant case for utter lack of
merit.

SO ORDERED.cralawred
The NLRC affirmed the Labor Arbiter, finding that respondents� separation from Zytron was brought about by the
execution of the contract between Fonterra and A.C. Sicat where the parties agreed to absorb Zytron�s personnel,
including respondents. Too, respondents failed to present any evidence that they protested this set-up. Furthermore,
respondents failed to refute the allegation that they voluntarily refused to renew their contract with A.C. Sicat. Also,
respondents did not assert any claim against Zytron and A.C. Sicat. The NLRC disposed of the case in this
wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeals are hereby ordered DISMISSED and the Decision of the Labor
Arbiter is AFFIRMED [in]toto.

SO ORDERED.3
The NLRC decision was assailed in a petition under Rule 65 before the CA.

Ruling on the petition, the CA, in the questioned Decision,4 found that A.C. Sicat satisfies the requirements of
legitimate job contracting, but Zytron does not. According to the CA: (1) Zytron�s paid-in capital of P250,000
cannot be considered as substantial capital; (2) its Certificate of Registration was issued by the DOLE months after
respondents� supposed employment ended; and (3) its claim that it has the necessary tools and equipment for its
business is unsubstantiated. Therefore, according to the CA, respondents were Fonterra�s employees.
58
Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be reckoned from the termination of their supposed
employment with Zytron on June 6, 2006. Furthermore, respondents� transfer to A.C. Sicat is tantamount to a
completely new engagement by another employer. Lastly, the termination of their contract with A.C. Sicat arose from
the expiration of their respective contracts with the latter. The CA, thus, ruled that Fonterra is liable to respondents
and ordered the reinstatement of respondents without loss of seniority rights, with full backwages, and other benefits
from the time of their illegal dismissal up to the time of their actual reinstatement. The fallo of the Decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated 20 November
2009 and Resolution dated 5 March 2010 of the National Labor Relations Commission (NLRC), Seventh Division,
are hereby ANULLED and SET ASIDE. Private respondent Fonterra Brand, Inc. is hereby ordered to REINSTATE
[respondents] without loss of seniority rights. Private respondents Fonterra Brand, Inc. and Zytron Marketing and
Promotional Corp. are hereby further ORDERED to jointly and severally pay petitioners their full backwages and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement; and attorney�s fees.

SO ORDERED.
Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.

The Issues

Petitioner presents the following issues for Our resolution:chanRoblesvirtualLawlibrary

I. The CA erred in ruling that Zytron was a mere labor-only contractor to petitioner Fonterra, in
that:chanRoblesvirtualLawlibrary
a. As held by the Court, there is no absolute figure that constitutes �substantial� capital for an
independent contractor, and the same should instead be measured against the type of work it is
obligated to do for the principal. It is most respectfully submitted that, here, the merchandising work
undertaken by Zytron�s paid-in capital of P250,000 was as of 1990, the year it was
incorporated;chanrobleslaw

b. As shown in its Articles of Incorporation, Zytron� had been in business since 1990, or more than a
decade before it signed a merchandising agreement with petitioner Fonterra;chanrobleslaw

c. Very importantly, petitioner Fonterra never exercised the right to control respondents and other
employees of Zytron. Indeed, respondents neither alleged that petitioner exercised control over them
nor presented proof in support thereof in any of their previous pleadings.

II. Respondents never claimed nor adduced evidence that they were dismissed from employment by Zytron. In
fact, Zytron denies terminating them from work. The CA, thus, erred in finding that respondents were
�illegally dismissed.�

Succinctly, the issues in the case at bar are: (1) whether or not Zytron and A.C. Sicat are labor-only contractors,
making Fonterra the employer of herein respondents; and (2) whether or not respondents were illegally dismissed.

Our Ruling

We find merit in the petition.

As regards the CA�s conclusion that Zytron is not a legitimate job contractor, We are of the view that such is
immaterial to the resolution of the illegal dismissal issue for one reason: We find that respondents voluntarily
terminated their employment with Zytron, contrary to their allegation that their employment with Zytron was illegally
terminated.

We do not agree with the CA that respondents� employment with Zytron was illegally terminated.

As correctly held by the Labor Arbiter and the NLRC, the termination of respondents� employment with Zytron was
brought about by the cessation of their contracts with the latter. We give credence to the Labor Arbiter�s conclusion
that respondents were the ones who refused to renew their contracts with Zytron, and the NLRC�s finding that they
59
themselves acquiesced to their transfer to A.C. Sicat.

By refusing to renew their contracts with Zytron, respondents effectively resigned from the latter. Resignation is the
voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment,
done with the intention of relinquishing an office, accompanied by the act of
abandonment.5chanroblesvirtuallawlibrary

Here, it is obvious that respondents were no longer interested in continuing their employment with Zytron. Their
voluntary refusal to renew their contracts was brought about by their desire to continue their assignment in Fonterra
which could not happen in view of the conclusion of Zytron�s contract with Fonterra. Hence, to be able to continue
with their assignment, they applied for work with A.C. Sicat with the hope that they will be able to continue rendering
services as TMRs at Fonterra since A.C. Sicat is Fonterra�s new manpower supplier. This fact is even acknowledged
by the CA in the assailed Decision where it recognized the reason why respondents applied for work at A.C. Sicat.
The CA stated that �[t]o continuously work as merchandisers of Fonterra products, [respondents] submitted their job
applications to A.C. Sicat xxx.�6 This is further bolstered by the fact that respondents voluntarily complied with the
requirements for them to claim their corresponding monetary benefits in relation to the cessation of their employment
contract with Zytron.

In short, respondents voluntarily terminated their employment with Zytron by refusing to renew their employment
contracts with the latter, applying with A.C. Sicat, and working as the latter�s employees, thereby abandoning their
previous employment with Zytron. Too, it is well to mention that for obvious reasons, resignation is inconsistent with
illegal dismissal. This being the case, Zytron cannot be said to have illegally dismissed respondents, contrary to the
findings of the CA.

As regards respondents� employment with A.C. Sicat and its termination via non-renewal of their contracts,
considering that in labor-only contracting, the law creates an employer-employee relationship between the principal
and the labor-only contractor�s employee as if such employees are directly employed by the principal employer, and
considers the contractor as merely the agent of the principal,7 it is proper to dispose of the issue on A.C. Sicat�s
status as a job contractor first before resolving the issue on the legality of the cessation of respondents� employment.

In this regard, We defer to the findings of the CA anent A.C. Sicat�s status as a legitimate job contractor, seeing that
it is consistent with the rules on job contracting and is sufficiently supported by the evidence on record.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions
concur:chanRoblesvirtualLawlibrary

1. The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the
job, work or service on its own account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all matters connected with the performance
of the work except as to the results thereof;chanrobleslaw

2. The contractor or subcontractor has substantial capital or investment; and

3. 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 and welfare benefits.8

On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and if any of the following elements are present,
thus:chanRoblesvirtualLawlibrary

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

2. The contractor does not exercise the right to control over the performance of the work of the contractual
employee.9

The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C. Sicat was able
to prove its status as a legitimate job contractor for having presented the following evidence, to
wit:chanRoblesvirtualLawlibrary
60
 1. Certificate of Business Registration;chanrobleslaw

2. Certificate of Registration with the Bureau of Internal Revenue;chanrobleslaw

3. Mayor�s Permit;chanrobleslaw

4. Certificate of Membership with the Social Security System;chanrobleslaw

5. Certificate of Registration with the Department of Labor and Employment;chanrobleslaw

6. Company Profile; and

7. Certifications issued by its clients.10

Furthermore, A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of December 31, 2006. Too,
its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and protection due them, as well as remittance to the proper
government entities of all withholding taxes, Social Security Service, and Medicare premiums, in accordance with
relevant laws.

The appellate court further correctly held that Fonterra�s issuance of Merchandising Guidelines, stock monitoring
and inventory forms, and promo mechanics, for compliance and use of A.C. Sicat�s employees assigned to them,
does not establish that Fonterra exercises control over A.C. Sicat. We agree with the CA�s conclusion that these
were imposed only to ensure the effectiveness of the promotion services to be rendered by the merchandisers as it
would be risky, if not imprudent, for any company to completely entrust the performance of the operations it has
contracted out.

These sufficiently show that A.C. Sicat carries out its merchandising and promotions business, independent of
Fonterra�s business. Thus, having settled that A.C. Sicat is a legitimate job contractor, We now determine whether
the termination of respondents� employment with the former is valid.

We agree with the findings of the CA that the termination of respondents� employment with the latter was simply
brought about by the expiration of their employment contracts.

Foremost, respondents were fixed-term employees. As previously held by this Court, 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.11 The determining factor of such contracts is not the duty of the employee
but the day certain agreed upon by the parties for the commencement and termination of the employment
relationship.12chanroblesvirtuallawlibrary

In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees. In their employment
contract with the latter, it is clearly stated that �[A.C. Sicat is] temporarily employing [respondents] as TMR[s]
effective June 6[, 2006] under the following terms and conditions: The need for your service being only for a specific
project, your temporary employment will be for the duration only of said project of our client, namely to promote
FONTERRA BRANDS products xxx which is expected to be finished on or before Nov. 06,
2006.�13chanroblesvirtuallawlibrary

Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even acceded to the
condition that their employment thereat will end on said pre-determined date of termination. They cannot now argue
that they were illegally dismissed by the latter when it refused to renew their contracts after its expiration. This is so
since the non-renewal of their contracts by A.C. Sicat is a management prerogative, and failure of respondents to
prove that such was done in bad faith militates against their contention that they were illegally dismissed. The
expiration of their contract with A.C. Sicat simply caused the natural cessation of their fixed-term employment there
at. We, thus, see no reason to disturb the ruling of the CA in this respect.

With these, We need not belabor the other assigned errors.

IN VIEW OF THE FOREGOING, the instant Petition for Review is GRANTED. The assailed Decision of the
Court of Appeals dated September 6, 2012 and its January 11, 2013 Resolution denying reconsideration thereof, in
CA-G.R. SP No. 114227, are hereby REVERSED and SET ASIDE. The Decision of the National Labor Relations

61
Commission dated November 20, 2009 and its Resolution dated March 5, 2010 in NLRC Case No. RAB IV 12-
23927-06-Q are hereby REINSTATED.

SO ORDERED.

62
PHILIPPINE TOBACCO FLUE-CURING & REDRYING CORPORATION, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, LIGAYA LUBAT, MARY JANE ESTARIS, EUFRECINA
JAVIER, OFELIA PLANDEZ, EDGARDO FORMENTO, CRESCENCIA TIU, MA. VICTORIA
LEON, GELLEN EULALIA, AIDA LICUDO, LUCINA LURIS, ERLINDA BORCE, DOMINGA
AYALA, CARMELITA APANTO, AIDA ALBANIEL, SALVACION SORIO, PETRONILA
SAMSON, ERLINDA CARANAY, ROSALIE TIU, MILAGROS QUISMUNDO, LUZ DELA CRUZ,
VIVIAN DERLA, IRENE ENIEGO, VICENTA GARCIA, YOLANDA IGNACIO, ADORACION
LADERA, GLORIA MENDEZ, LEONILA MENDOZA, REBECCA MORALES, TERESITA TIU,
EMELITA QUILANO, JULIETA PEDRIGAL, ANTONIA REYES, JOSEFA ROSALES,
FRANCISCA TISMO, NORMA AGUIRRE, CAROLINA AVISO, AMELIA BAUTISTA, ROSA
BORJA, APOLONIA CASTILLO, CARMELITA CAYETANO, ROSELFIDA CENTINA, PATRIA
BUSTILLO, FELICIAD CIPRIANO, MARINA CORPUZ, MATILDE CORPUZ, JOSEFINA
CUENZA, BIENVENIDA DE GUZMAN, EUGENIA DELA CRUZ, MARIA PINEDA, PANCHITA
NARCA, CRISANTA MULAWIN, VIRGINIA MENGOLIO, ROSARIO OSMA, ARCELI
MADRILEJO, CRISTOPHER LABADOR, CANDELARIA LAZONA, ANGELITA LESTINGYO,
CARMELITA ESPIRITU, HELEN ESTARIS, ROSA JAPSON, ARDIONELA LAZONA, ARIEL
ULTRA, REYNANTE TUMBUCON, ANTENOR REMOLLINO, ALEXANDER
REMOLLINO, ARNALDO NAPALIT, MACARIO MORIEL, JOSELITO LICUDO, PATERNO
LAVALLA, JERRYLICUDO, CESAR SAMSON, EDUARDO ESGUERRA JR., RAMISES
CENTARAN, JUAN BUSTILLO, ROLANDO ALBANIEL, REYNALDO AQUINO, JAIME
ESGUERRA, ARMANDO JAPSON, FERNANDO ESGUERRA, CARLITO ENIEGO, REYNALDO
DAYOT, MARCELO DAYOT, RODOLFO CERBITE, ARTEMIO BOQUILLA, PASCUAL AGUJA,
ERIC AGUJA, CELESTINA AQUINO, REYNALDO BARQUIN, FELOMENA BEGONIA, ROSITA
BAGONIA, REGINA BENITEZ, EDGARDO BERGANO, RODOLFO BORROMEO, LUDIVICO
DALAY, ASCILIPIADES GOYENA, REMEDIO GOYENA, OSCAR EMNACE, GERTRUDES
GUIAO, LOLITA MUSNE, ALBERTO PARAMA, LUNINGNING PERALTA, AMELIA RANCHES,
ERNESTO SAN JUAN, LIWAYWAY SAN JUAN, RICARDO TRIUMFANTE, LORENA
TORCIDO, PRISCILLA VILLASIN, LUZVIMINDA VILLEGAS, ROSILE VERSOZA, CHARITO
ISIDRO, PETER LABAYNE, and SHIRLEYLUBAT, respondents.
PANGANIBAN, J.:

This case involves two groups of seasonal workers who claimed separation benefits after the closure of
petitioners tobacco processing plant in Balintawak, Metro Manila and the transfer of its tobacco operations to Candon,
Ilocos Sur. Petitioner refuses to grant separation pay to the workers belonging to the first batch (referred to as the
Lubat group), because they had not been given work during the preceding year and, hence, were no longer in its
employ at the time it closed its Balintawak plant. Likewise, it claims exemption from awarding separation pay to the
second batch (the Luris group), because the closure of its plant was due to serious business losses, as defined in
Article 283 of the Labor Code.
In resolving this controversy, this Court issues the following rulings: (1) the aforecited Article 283 applies to both
complete and partial cessation of operations; (2) serious business losses that would have exempted petitioner from
paying separation benefits were not proven by its recasted financial statements; (3) the employers refusal to rehire the
first batch of employees had no legal justification and was thus an illegal dimissal; and (4) the second batch of
employees are entitled to the separation pay provided by the Labor Code in cases of closure x x x not due to serious
business losses.

The Case

The foregoing points encapsulate our ruling on the present Petition for Certiorari, assailing the August 30, 1996
Decision of the National Labor Relations Commission (NLRC)[1] in NLRC NCR Case No. 00-08-06061-94 and
NLRC Case No. 08-06082-94, the dispositive portion of which reads:

WHEREFORE, the instant appeals are hereby dismissed for lack of merit.[2]

The NLRC upheld the November 27, 1995 Decision of the labor arbiter[3] which disposed:

WHEREFORE, premises considered, respondent PHILIPPINE TOBACCO FLUE-CURING and REDYING

CORPORATION is hereby ordered to pay within ten (10) days from receipt hereof herein complainants (Lubat
group) their respective separation pay, equivalent to one-half month pay for every year of service considering the

63
above stated conditions, as follows: under Lubat Group: Mary Jane Estaris - P9,206.25 (P122.75 x 15 days x 5 yrs.);
Eufrecina Javier -- P9,131.25 (P121.75 x 15 days x 5 yrs.); Ofelia Plandez -- P10,957.50 (P121.75 x 15 days x 6 yrs.);
Edgardo Pormento - P5,310 (P118 x 15 x 3 yrs.); Cresenciana Tiu -- P7,140 (P119 x 15 days x 4 yrs.); Ma. Victoria
Leon -- P7,305 (P121.75 x 15 days x 4 yrs.); Ligaya Lubat -- P11,047.50 (122.75 x 15 days x 6 yrs.); Gellen Eulalia --
P12,888.75 (P122.75 x 15 days x 7 yrs.); and Aida Licudo -- P18,630 (P124.20 x 15 days x 10 yrs.); and [u]nder
Luris group: Erlinda Borce -- P37,116 (P154.65 x 15 days x 21 yrs.) -- (less) of P11,598.75); Dominga Ayala --
P56,477.94 (P156.40 x 15 days x 32 yrs.) -- P18,594.06); Carmelita Apanto -- P42,720.20 (P154.65 x 15 days x 22
yrs.) -- P13,757.74); Aida Albaniel -- P6,693.75 (P148.75 x 15 days x 5 yrs.) -- P4,462.50); Salvacion Sorio --
(P51,034.50 (P154.65 x 15 days x 30 yrs.) -- P18,558.00); Petronila Samon Petronilo Samson) -- P13,567.50
(P150.75 x 15 days x 9 yrs.) P6,783.75); Erlinda Caranay -- P34,615.81 (P153.65 x 15 days x 20 yrs.) P11,479.19);
Rosalie Tiu -- P11,231.25 (P149.75 x 15 days x 7 yrs.) -- P4,492.50); Milagros Quismundo -- P44,943.73 (P154.65 x
15 days x 26 yrs.) -- P16,149.78); Luz dela Cruz -- P13,567.50 (P150.75 x 15 days x 9 yrs.) -- P6,783.75); Vivian
Derla -- P13,477.50 (P149.75 x 15 days x 8 yrs.) -- P4,492.50); Irene Eniego -- P7,475.31 (P149.75 x 15 days x 5
yrs.) -- (P3,755.94); Vicenta Garcia -- P44,618.56 (P155.35 x 15 days x 26 yrs.) -- P15,967.94); Yolanda Ignacio --
P7,400.31 (P148.75 x 15 days x 5 yrs.) -- P3,755.94); Adoracion Ladera P18,276 (P152.30 x 15 days x 12) --
P9,138); Luciana Luris -- P64,577.78 (P159 x 15 days x 35 yrs.) -- P18,975.97); Gloria Mendez -- P32,266.50 yrs.) --
P3,755.94); Julieta Pedrigal -- P54,622.68 (P156.40 x 15 x 32 yrs.) -- P20,449.32); Antonia Reyes -- P52,410.26
(P155.35 x 15 x 33 yrs.) -- P24,487.99); Josefa Rosales -- P32,291.83) P153.65 x 15 x 18 yrs.) -- P9,193.67);
Francisca Tismo -- P25,377.67); (P153.65 x 15 x 5 yrs.) -- P9,193.58); Norma Aguirre -- P11,300.25 (P150.75 x 15 x
8 yrs.) P6,783.75); Carolina Aviso -- P4,522.50 (P150.75 x 15 x 4 yrs.) -- P4,522.50); Amelia Bautista -- P13,567.50
(P150.75 x 15 x 9 yrs.) -- P6,783.75); Rosa Borja -- P2,863.75 (P145 x 15 x 3 yrs.) -- P3,661.25); Apolonia Castillo --
P27,540 (P153 x 15 x 17 yrs.) -- P11,475); Carmelita Cayetano P34,571.25 (P153.65 x 15 x 20 yrs.) -- P11,523.75);
Roselfida Centina -- P11,231.25 (P149.75 x 15 x 7 yrs.) -- P4,492.50); Patria Bustillo -- P39,461.41 (P154.65 x 15 x
24 yrs.) -- P16,212.59); Felicidad Cipriano -- P11,306.25 (P150.75 x 15 x 8 yrs.) -- P6,783.75); Marina Corpuz --
P15,716.25 (150.75 x 15 x 10 yrs.) -- P6,783.75); Matilde Corpuz -- P34,312.50 (P152.50 x 15 x 20 yrs.) --
P11,437.50); Josefina Cuenza -- P70,241.05 (P159.85 x 15 x 40 yrs.) -- P25,668.95); Bienvenida De Guzman --
P68,974.45 (P159.15 x 15 x 39 yrs.) -- P24,128.30; Eugenio dela Cruz -- P30,281.21 (P153.65 x 15 x 17 yrs.) --
P8,899.54); Maria Pineda -- P11,306.25 (P150.75 x 15 x 8 yrs.) -- P6,783.75); Panchita Narca P34,571.25 (P153.65 x
18 x 20) -- P11,523.75); Crisanta Mulawin -- P25,389.98 (P153.65 x 15 x 15 yrs. -- P9,181.87); Virginia Mengolio --
P34,571.25 (P153.65 x 15 x 20 yrs. -- P11,523.75); Rosario Osma -- P25,286.14 (P153. x 15 x 15 yrs.) -- P9,138.80);
Arceli Madrilejo -- P51,034.50 (P154.65 x 15 x 28 yrs.) -- P13,918.50); Christopher Labador -- P13,507.57 (P149.75
x 15 x 8 yrs.) -- P4,462.43); Candelaria Lazona -- P39,435.80 (P154.65 x 15 x 22 yrs.) -- P11,598.75); Angelita
Lestingyo -- P56,469.28 (156 x 15 x 32 yrs.) -- P18,602.72); Carmelita Espiritu -- P20,499.75 (P151.85 x 15 x 13
yrs.) -- P9,111); Helen Estaris -- P11,156.25 (P148.75 x 15 x 7 yrs.) -- P4,462.50); Rosa Japson -- P29,961.75
(P153.65 x 15 x 18 yrs.) -- P11,523.75); Ardionela Lazona -- P13,479.50) (P149.75 x 15 x 8 yrs.) -- P4,490.50); Ariel
Ultra -- P20,773.70 (P150.75 x 15 x 13 yrs.) -- P8,622.55); Reynante Tumbucon -- P4,343.50 (P147.75 x 15 x 7 yrs. -
- P6,738.75); Antenor Remollino -- P13,609.36) P148-75 x 15 x 8 yrs.) -- P4,240.64); Alexander Remollino --
P7,425.56 (P148.75 x 15 x 5 yrs.) -- P3,760.69); Arnaldo Napalit -- P27,817.29 (P152.30 x 15 x 16 yrs. --
P8,734.71); Macario Moriel -- P37,046.96 (153.65 x 15 x 22 yrs. -- (P13,657.57); Joselito Licudo -- P5,135 (P147.75
x 15 x 4 yrs. -- P3,730.69); Paterno Lavalle -- P7,350.56 (P147.75 x 15 x 5 yrs. -- P3,730.69); Jerry Licudo --
P11,257.05 (P149.75 x 15 x 7 yrs. -- P4,466.70); Cesar Samson -- P2,918.06 (P147.75 x 15 x 3 yrs. -- P3,730.69);
Eduardo Esguerra, Jr. P20,412 (P151.20 x 15 x 15 yrs. -- P13,608); Ramises Centaran -- P17,970 (P149.75 x 15 x 8
yrs. less the amount advanced to him if any; Juan Bustillo -- P9,665.26 (P148.75 x 15 x 6 yrs. -- P3,722.24); Rolando
Albaniel -- P20,351.25 (P150.75 x 15 x 12 yrs. -- P6,783.75); Reynaldo Aquino -- P27,475.35 (P150.75 x 15 x 16 yrs.
-- P8,704.65); Jaime Esguerra -- P3,175.20 (P151.20 x 15 x 19 yrs. -- P11,340); Armando Japson -- P11,156.25
(P148.75 x 15 x 7 yrs. -- P4,462.50); Fernando Esguerra -- P15,723[.]75 (P149.75 x 15 x 9 yrs. -- P4,492.50); Carlito
Eniego -- P13,066.14 (P145.94 x 15 x 8 yrs. -- P4,446.66); Carlito Eniego -- P13,066.14 (P145.95 x 15 x 8 yrs. --
P4,446.66); Reynaldo Dayot -- P9,566.81 (P147.75 x 15 x 6 yrs. -- P3,730.69); Marcelo Dayot -- P9,074.36 (P149.75
x 15 x 7 yrs. -- P6,649.39); Rodolfo Cerbite -- P24,873.75 (P150.75 x 15 x 16 yrs. - P11,306.25); Artemio Boquilla --
P44,362.93 (P153.65 x 15 x 25 yrs. -- P13,255.82); and the following subject to the no. of years provided they
rendered at least one (1) month service each season as appearing in their personnel and service records; Pascuala
Aguja -- P48,399.75 (P153.65 x 15 x 26 yrs. -- P11,523.75); Eric Aguja -- P9,667.50 (P118 x 15 x 8 yrs. --
P4,492.50); Celestina Aquino -- P11,257.51 (P149,75 x 15 x 8 yrs. -- P6,712.49); Reynaldo Barquin -- P13,519.26
(P149.75 x 15 x 9 yrs. -- P6,696.99); Felomena Bagonia -- P24,716.25 (150 x 15 x 14 yrs. -- P6,783.75); Rosita
Bagonia -- P42,386.26 (P149.75 x 15 x 24 years. -- P11,523.75); Regina Benitez -- P56,586.75 (P151 x 15 x 28 yrs. --
P6,833.25); Edgardo Bergano -- P9,784.75 (P149.40 x 15 x 6 yrs. -- P3,661.25); Rodolfo Borromeo -- P26,979.81
(P150 x 15 x 18 yrs. -- P13,520.19); Ludivico Dalay -- P14,180.36 (P152.50 x 15 x 10 yrs. -- P8,694.64); Ascilipiades
Goyena -- P27,020.63 (P150 x 15 x 18 yrs. -- P13,479.37); Remedios Goyena -- P22,511.25 (P150 x 15 x 13 yrs. --
P6,738.75); Oscar Emnace -- P17,970 (P149.75 x 15 x 8 yrs. less the amount he received if any); Gertrudes
Guiao P59,670 (P153 x 15 x 29 yrs. -- P6,885); Lolita Musne -- P53,394.36 (P154,65 x 15 x 29 yrs. -- P13,878.39);
Alberto Parama -- P12,161.25 (P140 x 15 x 9 yrs. -- P6,738.75); Luningning Peralta -- P48,448.50 (P153.65 x 15 x 26
64
yrs. -- P11,475); Amelia Ranches -- P58,102.04 (P157.60 x 15 x 34 yrs. -- P22,273.96); Ernesto San Juan --
P11,261.25 (P149.75 x 15 x 7 yrs. -- P4,462.50); Liwayway San Juan -- P67,655.08) P160.35 x 15 x 39 yrs. --
P26,149.67); Ricardo Triumfante --P8,986.00 (P149.75 x 15 x 7 yrs. -- P6,738.75); Lorena Torcido -- P11,231.25
(P149.75 x 15 x 8 yrs. -- P6,738.75); Priscilla Villasin -- P64,162.50 (P147.50 x 15 x 29 yrs. less any amount she
received from the respondent; Luzviminda Villegas -- P13,478 (P149.75 x 15 x 8 yrs. -- P4,492.00) Rosile Verzosa --
P13,387.50 (P149. x 15 x 8 yrs. -- P4,492.50) Charito Isidro -- P53,997 (P155.85 x 15 x 32 yrs. -- P20,811); Peter
Labayne -- P17,130.36 (P150.45 x 15 x 7 yrs. -- P15,132.38); Shirley Lubat -- P13,773 (P149.75 x 15 x 8 yrs. --
P4,196.22); or a total sum of P2,811,724.33, plus ten (10%) percent attorneys fee, or a grand total sum
of P3,092,896.76.

As xxx data o[n] their salary rates were not indicated on record, the claims of complainants Milagros Calubayan,
Carmencita Cruz, Armando Goyena, Erlinda Nakpil, Pacita Narca, Virgilio Punzalan, Roberto Reduta, Maritess
Medina, Nestor Medina, and Dominga Siababa can not be ascertained, and therefore, the same should be dismissed
but without prejudice.

With respect to the other claims of the above Luris group including their charge of illegal dismissal, they are hereby
dismissed for lack of merit.[4]

The Facts

The facts are summarized in the challenged NLRC Decision as follows:

These refer to the consolidated cases for payment of separation pay lodged by [the] Lubat Group, and for illegal
dismissal and underpayment of separation pay by [the] Luris group, with prayers for damages and attorneys fees
against the above respondents.

The record reveals that all complainants in both cases were former workers of respondent with their respective periods
of employment and latest wages stated in the parties pleadings/[a]nnexes.

On August 1, 1994, due to supposed serious financial reverses and losses suffered by respondent and its desire to
prevent further losses, a notice of permanent closure of its red[r]ying operations at Balintawak, Quezon City and
transfer [of] the same to Candon, Ilocos Sur was served to the DOLE.

On August 3, 1994, complainants were also notified of the said decision to close and transfer.

On August 16, 1994, their separation benefits were given to them but allegedly [based on] wrong computation when
management did not consider 3/4 of their length of service as claimed by complainants (Luris group).

While the Lubat group were not granted xxx separation pay as their previous seasonal service [was] not continuous,
and as of August, 1994, they were not employed ther[e]with as declared by respondent.

Based on the complaint and from the above facts, the issues are as follows:

1) Whether or not the Lubat Group are entitled to the payment of separation pay[;]

2) Whether or not the Luris Group can be legally awarded separation pay differentials[,] or whether or not the
computation adopted by respondent in granting complainants separation pay is erroneous[;] and

3) Whether or not the Luris group can be properly allowed backwages and damages by reason of their alleged illegal
dismissal, and for both groups, attorneys fees[.]

In [its] position paper respondent maintains that [the] Lubat group are not entitled to separation pay for the reason that
they were not among those separated or could not have been separated from employment on August 3, 1994 due to
such closure and transfer as they were not employed or did not report for work at the plant for the 1994 tobacco
season as shown by [the] companys records.

As to the Luris group, although being questioned by this group, respondent considers the following formula in
determining the length of service in years as basis for computing the separation pay of this group to be fair and
reasonable and xxx supported by Article 283 of the Labor Code, as amended, such as the total number of working

65
days actually worked over total number of working days in a year (303 days), multipl[ied] by the daily rate and
further multipl[ied] by 15 days.

Respondent explains that this is so because complainants nature of work is seasonal as they are employed every year
only during the tobacco season which may fall within the months of February to November but actually work for a
period of less [than] six (6) months for each season. The law qualifies tenure for purposes of separation benefits as
based on service and not employment.

With these considerations, respondent claims that complainants relief for separation pay differentials must fail.

On the charge of illegal dismissal by the Luris group, respondent asserts that complainants were separated from
employment for [a] just cause that is the closure of its REDRYING operations at the Balintawak plant and the transfer
of the same to Candon, Ilocos Sur which was authorized by the law and the parties CBA.

The decision of management to close and transfer its tobacco processing and REDRYING operations was based on
the fact that it had consistently incurred a net loss from these operations, its principal line of business, although its
audited financial statement showed a net profit after tax from 1990 to 1993 based on over-all operations.

Moreover, respondent points out that as the Luris group and the DOLE were served a written notice at least one (1)
month before the intended date of closure effective on Sept. 15, 1994, the due process requirement was met.

Viewed from the above, respondent cannot prosper.

On the other hand, the Lubat group declare that originally there were seven complainants but eight were added.

Being seasonal workers, they were hired by respondent to operate the Balintawak factory from January to September,
averaging 6 to 8 months annually.

As alleged by them, when they reported for their annual shift, respondent refused to extend them assignment for no
apparent reason up to the end of the season in August, 1994. When they ask[ed] for separation pay, respondent told
them that because they were not in the payroll for 1994, no such benefit would be paid to them.

It is their contention that complainants are entitled to separation pay [of] at least one-half month pay for every year of
service[,] as they were illegally dismissed[,] to be computed each season ranging from 6 to 8 months [which] should
be considered as one year, contrary to the respondents basis which is the total no. of days they actually rendered
service.

To back up the above, complainants cite a case wherein the Supreme Court held that seasonal employees are not
strictly speaking, separated from the service but merely considered on leave of absence without pay until reemployed.
Their employment relationship is never severed but only suspended.

For the prosecution of this case, complainants were forced to hire the services of counsel for which they claim xxx
attorneys fees.

As far as the Luris group are concerned, they state that they were factory workers of respondents numbering one
hundred (100) whose names, periods of employment and latest salaries are contained in the lists attached to their
position paper.

As claimed by this group, on August 3, 1994, respondents told them that their services were already terminated and
all of them dismissed as the factory would be transferred to Candon, Ilocos Sur.

Letter-notices dated August 3, 1994, (Annexes F, F-1 and F-2 to their position paper) showing that the date when they
were notified of the closure was the same date they were instantly dismissed although it is admitted in the notice that
their decision to transfer was made as early as March 5, 1994.

Furthermore, complainants question the basis of the computations of their separation benefits which should include
the period when there [was] no work to be done in a year. [B]ecause of necessity, they received the short amount as
their separation pay by way of voucher but under protest as shown in Annexes C-C-1 to C-5 to their pleading.

66
With the sudden transfer of the machiner[y] of respondents without giving them advance notice leaving them with
insufficient separation pay, complainants experienced serious anxiety and wounded feelings for which they p[r]ay for
damages including attorneys fees.

Consequently, complainants also pray for backwages, allowance and other benefits from the date of their illegal
dismissal up to the final disposition of the case.

Furthermore, complainants maintain that since the company is being transferred to the province, the formers
separation may be considered compulsory retirement under R.A. 7641, providing for one-half month pay benefit for
every year of service, and under Section 3, Rule V, Book III of the Labor Code, as amended for which they also
demand payment thereof.

Complainants also submitted the computation of their differential in separation pay (addendum and supplemental
addendum to their position paper) Annex G, G-1 to G-4.

To state the facts simply, there are two groups of employees, namely, the Lubat group and the Luris group. The
Lubat group is composed of petitioners seasonal employees who were not rehired for the 1994 tobacco season. At the
start of that season, they were merely informed that their employment had been terminated at the end of the 1993
season. They claimed that petitioners refusal to allow them to report for work without mention of any just or
authorized cause constituted illegal dismissal. In their Complaint, they prayed for separation pay, back wages,
attorneys fees and moral damages.
On the other hand, the Luris group is made up of seasonal employees who worked during the 1994 season. On
August 3, 1994, they received a notice informing them that, due to serious business losses, petitioner planned to close
its Balintawak plant and transfer its tobacco processing and redrying operations to Ilocos Sur. Although the closure
was to be effective September 15, 1994, they were no longer allowed to work starting August 4, 1994. Instead,
petitioner awarded them separation pay computed according to the following formula:

total no. of days actually worked

----------------------------------------------------- x daily rate x 15 days
total no. of working days in one year

In their Complaint, they claimed that the computation should be based not on the above mathematical equation, but on
the actual number of years served. In addition, they contended that they were illegally dismissed, and thus they prayed
for back wages.
Against these factual antecedents, the labor arbiter ordered the petitioner to pay complainants separation pay
differential plus attorneys fees in the total amount of P3,092,896.76. Dissatisfied with said Decision, Philippine
Tobacco and the complainants filed their respective appeals before the NLRC.[5]
As noted earlier, the NLRC affirmed the labor arbiters Decision. Before this Court, only Philippine Tobacco filed
the present recourse, as the complainants did not question the NLRC Decision.[6]

Ruling of the NLRC

The NLRC agreed with the labor arbiter that the closure by petitioner herein of its operations at Balintawak and
its transfer thereof to Ilocos Sur were due to serious financial losses.Nonetheless, both labor agencies held that the
Luris and Lubat groups were entitled to separation pay equivalent to one-half (1/2) month salary for every year of
service, provided that the employee worked at least one month in a given year.
The NLRC further ruled that private respondents were not entitled to back wages and damages, since the closure
of the factory and the termination of their employment were due to a legally recognized cause.

Issues

Petitioner raises the following issues:

67
 SUBSTANTIAL AND UNDISPUTED EVIDENCE ON RECORD PROVES THAT THE CLOSURE OF
PETITIONERS OPERATION WAS DUE TO SERIOUS BUSINESS LOSSES AND FINANCIAL REVERSES.
PRIVATE RESPONDENTS ARE NOT LEGALLY ENTITLED TO SEPARATION PAY. THE PAYMENT OF
SEPARATION PAY TO THE LURIS GROUP IS BASED ONLY ON PETITIONERS LIBERALITY.

B.
EVEN ASSUMING THAT PETITIONERS CLOSURE WAS NOT DUE TO SERIOUS BUSINESS
LOSSES AND FINANCIAL REVERSES, THE LUBAT GROUP WORKERS ARE STILL NOT
ENTITLED [TO] SEPARATION PAY. THE LUBAT GROUP WERE NOT EMPLOYED WITH
PETITIONER AT THE TIME OF PETITIONERS CLOSURE.
C
EVEN ASSUMING THAT THE LURIS GROUP IS ENTITLED TO SEPARATION PAY, PETITIONER
MUST NOT AND CANNOT BE LEGALLY COMPELLED TO PAY MORE THAN THE AMOUNTS
ALREADY GIVEN TO THE [SAID] LURIS GROUP.[7]
In the Courts view, three issues must be tackled: First, did petitioner prove serious business losses, its
justification for the nonpayment of separation pay? Second, was the dismissal of the employees valid? Third, how
should the separation pay of illegally dismissed seasonal employees be computed?

The Courts Ruling

The petition is not meritorious.

First Issue: Serious Business Losses Not Proven

Petitioner asserts that it submitted before the labor arbiter a Statement of Income and Expenses, as well as a
recasted version thereof, showing that it had suffered serious business losses in its tobacco processing and redrying
operations. Citing Article 283 of the Labor Code, it concludes that it is not obligated to award separation pay to its
dismissed workers (whether belonging to the Lubat or the Luris group), because the closure of its tobacco business
was due to an authorized cause.
Petitioner further claims that it complied with the procedural requirements in closing the aforementioned aspect
of its business. It filed at the DOLE on August 2, 1994, a Petition for Closure.On August 3, 1994, it also sent to its
employees letters informing them of its desire to close its tobacco operations in Balintawak effective September 15,
1994. The fact that it did award separation pay to private respondents was solely out of generosity, and not out of
legal duty.
Article 283 of the Labor Code, which we quote below, prescribes the requisites and the procedure for an
employees dismissal arising from the closure or cessation of operation of the establishment.

ART. 283. Closure of establishment and reduction of personnel.-- The employer may also terminate the employment
of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of
labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.

It must be noted that the present case involves the closure of merely a unit or division, not the whole business of
an otherwise viable enterprise. Although Article 283 uses the phrase closure or cessation of operation of an
establishment or undertaking, this Court previously ruled in Coca-Cola Bottlers (Phils.), Inc. v. NLRC that said
statutory provision applies in cases of both complete and partial cessation of the business operation:

68
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees there assigned is
a matter that is left to the determination of the employer in the good faith exercise of its management prerogatives.
The applicable law in such a case is Article 283 of the Labor Code which permits closure or cessation of operation of
an establishment or undertaking not due to serious business losses or financial reverses, which, in our reading,
includes both the complete cessation of operations and the cessation of only part of a companys business.[8]

In Somerville Stainless Steel Corporation v. NLRC,[9] the Court held that [t]he loss referred to in Article 283
cannot be just any kind or amount of loss; otherwise, a company could easily feign excuses to suit its whims and
prejudices or to rid itself of unwanted employees. To guard against this possibility of abuse, the Court laid down the
following standard which a company must meet to justify retrenchment:

x x x Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character,
the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss
apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the
employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a
drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid off. Because
of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent
the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs other than labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or so-called golden parachutes, can
scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional
policy of providing full protection to labor, the employers prerogative to bring down labor costs by retrenching must
be exercised essentially as a measure of last resort, after less drastic means -- e.g., reduction of both management and
rank-and-file- bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc. -- have been tried and found wanting.

Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and convincing evidence.The reason for requiring this quantum
of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for
termination of services of employees. x x x

To repeat, petitioner did not actually close its entire business. It merely transferred or relocated its tobacco
processing and redrying operations. Moreover, it was also engaged in, among others, corn and rental operations,
which were unaffected by the closure of its Balintawak plant.
Tested against the aforecited standards, we hold that herein petitioner was not able to prove serious financial
losses arising from its tobacco operations. A close examination of its Statement of Income and Expenses and its
recasted version thereof, which were presented in support of its contention, suggests its failure to show business
losses.
In the recasted Statement, petitioner tried to prove that there was a net loss from its tobacco processing and
redrying operations. It did so by subtracting all of its selling, administrative and interest expenses for a given year
from the earnings in its tobacco sales for the corresponding year. This formula, however, is at best illogical and
misleading. Petitioner would have us believe that all of its expenses -- selling, administrative and interest expenses --
resulted only from its tobacco processing and redrying operations, and that it incurred no expense in its other profit
centers.
On the contrary, the Statement of Income and Expenses shows that the selling and administrative expenses
pertain not only to the tobacco business of petitioner, but also to its corn and rental operations, and that the interest
expenses pertain to all of its business operations. In fact, the aforementioned Statement shows that there was a net
gain from operations in each year covered by the report. In other words, the recasted financial statement effectively
modified the Statement of Income and Expenses by deducting from the tobacco operations alone the operating costs
pertaining to all businesses of petitioner.
The contention of petitioner that tobacco was its main business does not justify the devious contents of the
recasted financial statement. It is difficult to accept that it could not have incurred any expense in its other
operations. Common sense revolts against such proposition.
Misleading is petitioners argument that public respondent cannot recognize petitioners aforesaid Statement as the
normal and reliable method of proof of the profit and loss, and at the same time inconsistently assert that the same
does not show that the losses were serious or incurred solely by petitioners tobacco operations. [10] An audited
financial statement is indeed the normal method of proof. But this norm does not compel this Court to accept
the contents of the said documents blindly and without thinking. As stated already, the above documents failed to
69
show that petitioner had incurred from its tobacco operations serious losses sufficient to justify the termination of
the employment of its workers sans separation pay.

Defective Notice

Article 283 of the Labor Code also requires the employer to furnish
both the employee and the Department of Labor and Employment a written Notice of Closure at least one month prior
to closure. True, in the present case the Notices of Termination were given to the employees on August 3, 1994, and
the intended date of closure was September 15, 1994. However, the employees were in fact not allowed to work after
August 3, 1994. Therefore, the termination notices to the employees were given in violation of the requisite one-
month prior notice under Article 283 of the Labor Code.
Petitioners contention that the tobacco season was about to end anyway is without merit, because the law clearly
provides, without any qualification, that the employees must be given one-month notice prior to closure. At the very
least, respondent members of the Luris group were deprived of work for the remaining days of the 1994 tobacco
season. Petitioner could have easily complied with the aforesaid requirement by sending the notices earlier. In fact,
according to petitioner, the decision to cease its tobacco operations was made as early as March 5, 1994; hence,
petitioner had plenty of time within which to send the notices.
Given the illogical and misleading entries in the Statement of Income and Expenses, as well as the recasted
version thereof, and the defective Notice of Closure, this Court holds that petitioner was not able to establish that the
closure of its business operations in its Balintawak plant was in fact due to serious financial losses. Therefore, under
the last two sentences of Article 283 of the Labor Code, the dismissed employees belonging to the Luris group are
entitled to separation pay equivalent to one (1) month pay or at least one half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Second Issue: Lubat Group Illegally Dismissed

Petitioner relies upon our ruling in Mercado v. NLRC[11] hat the employment [of seasonal employees] legally
ends upon completion of the x x x season, a statement which was subsequently reiterated in Magcalas v.
NLRC.[12] Thus, petitioner argues that it was not obliged to rehire the members of the Lubat group for the 1994
season, because their employment had been terminated at the end of the 1993 season. Since they were not employed
for the 1994 season when the Balintawak plant was closed, it follows that petitioner has no obligation to award them
separation pay due to the said closure.
We are not persuaded. From the facts, we are convinced that petitioner illegally dismissed the members of the
Lubat group when it refused to allow them to work during the 1994 season.
This Court has previously ruled in Manila Hotel Company v. CIR[13] that seasonal workers who are called to work
from time to time and are temporarily laid off during off-season are not separated from service in said period, but are
merely considered on leave until reemployed, viz.:

The nature of their relationship x x x is such that during off season they are temporarily laid off but during summer
season they are re-employed, or when their services may be needed. They are not strictly speaking separated from the
service but are merely considered as on leave of absence without pay until they are re-employed.

The above doctrine was echoed by this Court in Industrial-Commercial-Agricultural Workers Organization
(ICAWO) v. CIR[14] and Visayan Stevedore Transportation Company v. CIR.[15]
Petitioner claims that the aforecited ruling has been superseded by Article 280 of the Labor Code, which took
effect on November 1, 1974. We disagree. There is no clear conflict between the above doctrine and Article 280 of
the Labor Code. In fact, the same doctrine was reiterated by this Court in Tacloban Sagkahan Rice and Corn Mills
Co. v. NLRC[16] in 1990, which was promulgated after the Labor Code took effect. Furthermore, in Bacolod-Murcia
Milling Co, Inc. v. NLRC,[17] this Court considered a seasonal worker in regular employment in cases involving the
determination of an employer-employee relationship and security of tenure. The Court ruled:

While under prevailing jurisprudence, Canete may be considered as in regular employment even during those years
when she was merely a seasonal worker, that legal conclusion will hold true only in cases involving the determination
of an employer-employee relationship or security of tenure.

70
 Again in Gaco v. NLRC, petitioner therein was a seasonal worker employed and repeatedly rehired in a business
enterprise similar to that of petitioner herein. Finding that he was in regular employment and thus entitled to
separation pay for having been constructively dismissed, the Court stated:

It may appear that the work in private respondent Orient Leaf Tobacco Corporation is seasonal, however, the records
reveal that petitioner Zenaida Gaco was repeatedly re-hired, sufficiently evidencing the necessity and indispensability
of her services to the formers business or trade. Furthermore, she has been employed since 1974 up to the end of the
season in 1989. Owing to her length of service, she became a regular employee, by operation of law, one year after
she was employed.[18]

From the foregoing, it follows that the employer-employee relationship between herein petitioner and members
of the Lubat group was not terminated at the end of the 1993 season. From the end of the 1993 season until the
beginning of the 1994 season, they were considered only on leave but nevertheless still in the employ of petitioner.
The facts in the above-mentioned cases are different from those in Mercado v. NLRC[19] and in Magcalas v.
NLRC.[20] In Mercado, although respondent constantly availed herself of petitioners services from year to year, it was
clear from the facts therein that they were not in her regular employ. Petitioners therein performed different phases of
agricultural work in a given year. However, during that period, they were free to work for other farm owners, and in
fact they did. In other words, they worked for respondent, but were nevertheless free to contract their services with
other farm owners. The Court was thus emphatic when it ruled that petitioners were mere project employees, who
could be hired by other farm owners. As such, their employment would naturally end upon the completion of each
project or each phase of farm work which has been contracted. In Magcalas v. NLRC, the Court merely cited the
aforequoted ruling to explain the difference among regular, project and seasonal employees. In fact, it concluded that
the employees therein were regular and not project employees.
From the peculiar facts of Mercado and Magcalas, it is clear that the ruling therein is not inconsistent
with Manila Hotel, Gaco and other cases. It is noteworthy that the ponente in Mercadoconcurred in the Courts ruling
in Gaco awarding to the seasonal employee separation pay for every year of service.
Prescinding from the above, we hold that petitioner is liable for illegal dismissal and should be responsible for the
reinstatement of the Lubat group and the payment of their back wages.However, since reinstatement is no longer
possible as petitioner has already closed its Balintawak plant, respondent members of the said group should instead be
awarded normal separation pay (in lieu of reinstatement) equivalent to at least one month pay, or one month pay for
every year of service, whichever is higher. It must be stressed that the separation pay being awarded to the Lubat
group is due to illegal dismissal; hence, it is different from the amount of separation pay provided for in Article 283 in
case of retrenchment to prevent losses or in case of closure or cessation of the employers business, in either of which
the separation pay is equivalent to at least one (1) month or one-half (1/2) month pay for every year of service,
whichever is higher.
However, despite the fact that the respondent members of the Lubat group were entitled to separation pay
equivalent to at least one (1) month pay, or one (1) month pay for every year of service, whichever is higher, they
cannot receive more than the amount awarded to them in the NLRC Decision -- at least one (1) month or one-half
(1/2) month pay for every year of service, whichever is higher -- because they did not appeal from the said
Decision.[21] Therefore, no affirmative award can be given to them. In the same manner, although respondents should
have been entitled to back wages because petitioner illegally deprived them of work during the 1994 season, no such
award can be given to them, since they did not appeal the NLRC Decision. The elementary norms of due process
prevent the grant of such awards, as the employer was not given notice that its filing of its own Petition
for Certiorari would put it in jeopardy of such relief.

Third Issue: Amount of Separation Pay

Petitioner posits that the separation pay of a seasonal worker, who works for only a fraction of a year, should not
be equated with that of a regular worker. Positing that the total number of working days in one year is 303 days,
petitioner submits the following formula for the computation of a seasonal workers separation pay:

Total No. of Days Actually Worked

X Daily Rate X 15 days[22]
Total No. Of Working Days In One Year

Agreeing with the labor arbiter and the NLRC, private respondents, on the other hand, claim that their separation
pay should be based on the actual number of years they have been in petitioners service. They cite the law on service

71
incentive leave,[23] the implementing rules regarding the 13th month pay,[24] Manila Hotel v. CIR,[25] and Chartered
Bank v. Ople[26] which allegedly stated that each season in a year should be construed as one year of service.[27]
The amount of separation pay is based on two factors: the amount of monthly salary and the number of years of
service. Although the Labor Code provides different definitions as to what constitutes one year of service, Book
Six[28] does not specifically define one year of service for purposes of computing separation pay. However, Articles
283 and 284 both state in connection with separation pay that a fraction of at least six months shall be considered one
whole year. Applying this to the case at bar, we hold that the amount of separation pay which respondent members of
the Lubat and Luris groups should receive is one-half (1/2) their respective average monthly pay during the last
season they worked multiplied by the number of years they actually rendered service, provided that they worked for at
least six months during a given year.[29]
The formula that petitioner proposes, wherein a year of work is equivalent to actual work rendered for 303 days,
is both unfair and inapplicable, considering that Articles 283 and 284 provide that in connection with separation pay,
a fraction of at least six months shall be considered one whole year. Under these provisions, an employee who worked
for only six months in a given year -- which is certainly less than 303 days -- is considered to have worked for one
whole year.
In the same manner, Chartered Bank v. Ople,[30] which private respondents cite, does not support their cause. The
said case ruled that regular workers and those who are paid by the month are both entitled to holiday pay. On the
other hand, the law on service incentive leave pay[31] does not necessarily apply to retirement benefits or separation
pay. Likewise, the provision regarding the 13th month pay[32] is not applicable to separation pay. In fact, an employee
who worked for a single month in a year is entitled to a 13th month pay equivalent to only 1/12 of his or her monthly
salary. Finally, Manila Hotel Company v. CIR[33] did not rule that seasonal workers are considered at work during off-
season with regard to the computation of separation pay. Said case merely held that, in regard to seasonal workers, the
employer-employee relationship is not severed during off-season but merely suspended.
WHEREFORE, the assailed Decision of Respondent NLRC is hereby AFFIRMED WITH THE
MODIFICATION that private respondents are hereby awarded separation pay equivalent to one (1) month, or to one-
half (1/2) month pay[34] for each year that they rendered service, whichever is higher, provided that they rendered
service for at least six (6) months in a given year. The separation pay to be awarded to members of the Luris group
shall be taken from the amount which petitioner has already awarded to them, and any excess need not be refunded by
the workers.The ten percent (10%) attorneys fees given by the NLRC and the labor arbiter shall be based on the award
modified herein.
SO ORDERED.

72
HACIENDA BINO/HORTENCIA STARKE, INC./HORTENCIA L. STARKE, petitioners, vs. CANDIDO
CUENCA, FRANCISCO ACULIT, ANGELINA ALMONIA, DONALD ALPUERTO, NIDA
BANGALISAN, ROGELIO CHAVEZ, ELMO DULINGGIS, MERCEDES EMPERADO, TORIBIO
EMPERADO, JULIANA ENCARNADO, REYNALDO ENCARNADO, GENE FERNANDO, JOVEN
FERNANDO, HERNANI FERNANDO, TERESITA FERNANDO, BONIFACIO GADON, JOSE
GALLADA, RAMONITO KILAYKO, ROLANDO KILAYKO, ALFREDO LASTIMOSO, ANTONIO
LOMBO, ELIAS LOMBO, EMMA LOMBO, LAURENCIA LOMBO, LUCIA LOMBO, JOEL
MALACAPAY, ADELA MOJELLO, ERNESTO MOJELLO, FRUCTOSO MOJELLO, JESSICA
MOJELLO, JOSE MOJELLO, MARITESS MOJELLO, MERLITA MOJELLO, ROMEO
MOJELLO, RONALDO MOJELLO, VALERIANA MOJELLO, JAIME NEMENZO, RODOLFO
NAPABLE, SEGUNDIA OCDEN, JARDIOLINA PABALINAS, LAURO PABALINAS, NOLI
PABALINAS, RUBEN PABALINAS, ZALDY PABALINAS, ALFREDO PANOLINO, JOAQUIN
PEDUHAN, JOHN PEDUHAN, REYNALDO PEDUHAN, ROGELIO PEDUHAN, JOSEPHINE
PEDUHAN, ANTONIO PORRAS, JR., LORNA PORRAS, JIMMY REYES, ALICIA ROBERTO,
MARCOS ROBERTO, JR., MARIA SANGGA, RODRIGO SANGGA, ARGENE SERON, SAMUEL
SERON, SR., ANGELINO SENELONG, ARMANDO SENELONG, DIOLITO SENELONG,
REYNALDO SENELONG, VICENTE SENELONG, FEDERICO STA. ANA, ROGELIO SUASIM,
EDNA TADLAS, ARTURO TITONG, JR., JOSE TITONG, JR., NANCY VINGNO, ALMA YANSON,
JIMMY YANSON, MYRNA VILLANUEVA BELENARIO, SALVADOR MALACAPAY, and
RAMELO TIONGCO, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review of the Decision[1] of the Court of Appeals (CA), dated July 31, 2001, and the
Resolution dated September 24, 2001 denying the petitioners motion for reconsideration. The assailed decision
modified the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000099-98.
Hacienda Bino is a 236-hectare sugar plantation located at Barangay Orong, Kabankalan City, Negros
Occidental, and represented in this case by Hortencia L. Starke, owner and operator of the said hacienda.
The 76 individual respondents were part of the workforce of Hacienda Bino consisting of 220 workers,
performing various works, such as cultivation, planting of cane points, fertilization, watering, weeding, harvesting,
and loading of harvested sugarcanes to cargo trucks.[2]
On July 18, 1996, during the off-milling season, petitioner Starke issued an Order or Notice which stated, thus:

To all Hacienda Employees:

Please bear in mind that all those who signed in favor of CARP are expressing their desire to get out of employment
on their own volition.

Wherefore, beginning today, July 18, only those who did not sign for CARP will be given employment by Hda. Bino.

(Sgd.) Hortencia Starke[3]

The respondents regarded such notice as a termination of their employment. As a consequence, they filed a
complaint for illegal dismissal, wage differentials, 13th month pay, holiday pay and premium pay for holiday, service
incentive leave pay, and moral and exemplary damages with the NLRC, Regional Arbitration Branch No. VI, Bacolod
City, on September 17, 1996.[4]
In their Joint Sworn Statement, the respondents as complainants alleged inter alia that they are regular and
permanent workers of the hacienda and that they were dismissed without just and lawful cause. They further alleged
that they were dismissed because they applied as beneficiaries under the Comprehensive Agrarian Reform Program
(CARP) over the land owned by petitioner Starke.[5]
For her part, petitioner Starke recounted that the companys Board of Directors petitioned the Sangguniang Bayan
of Kabankalan for authority to re-classify, from agricultural to industrial, commercial and residential, the whole of
Hacienda Bino, except the portion earmarked for the CARP. She asserted that half of the workers supported the re-
classification but the others, which included the herein respondents, opted to become beneficiaries of the land under
the CARP. Petitioner Starke alleged that in July 1996, there was little work in the plantation as it was off-season; and
so, on account of the seasonal nature of the work, she issued the order giving preference to those who supported the
re-classification. She pointed out that when the milling season began in October 1996, the work was plentiful again
73
and she issued notices to all workers, including the respondents, informing them of the availability of work. However,
the respondents refused to report back to work. With respect to the respondents money claims, petitioner Starke
submitted payrolls evidencing payment thereof.
On October 6, 1997, Labor Arbiter Ray Allan T. Drilon rendered a Decision,[6] finding that petitioner Starkes
notice dated July 18, 1996 was tantamount to a termination of the respondents services, and holding that the petitioner
company was guilty of illegal dismissal. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of the complainants illegal
and ordering respondent Hortencia L. Starke, Inc. represented by Hortencia L. Starke, as President, to:

1. Reinstate the complainants to their former position without loss of seniority rights immediately upon
receipt of this decision;

2. PAY the backwages and wage differentials of the complainants, to wit:

in the total amount of Four Hundred Ninety-Five Thousand Eight Hundred Fifty-Two and 72/100
(P495,852.72) Pesos; and

3. TO PAY the complainants attorney's fee in the amount of Forty-Nine Thousand Five Hundred Eighty-
Five and 27/100 (P49,585.27) Pesos.

Respondents are further directed to deposit to this Office the total judgment award of FIVE HUNDRED FORTY-
FIVE THOUSAND AND FOUR HUNDRED THIRTY-SEVEN AND 99/100 (P545,437.99) PESOS within ten (10)
days from receipt of this decision.

All other claims are hereby DISMISSED for lack of merit.

SO ORDERED.[7]

Both the petitioners and the respondents appealed the case to the NLRC. On July 24, 1998, the NLRC affirmed
with modification the decision of the Labor Arbiter. The dispositive part of its decision reads:

WHEREFORE, premises considered, the Decision of the Labor Arbiter is AFFIRMED WITH
MODIFICATIONS. Respondent is further ordered to pay the complainants listed in the Holiday Pay Payroll the
amounts due them.

SO ORDERED.[8]

A motion for reconsideration of the said decision was denied by the NLRC. [9] Dissatisfied, the respondents
appealed the case to the CA where the following issues were raised:
A. THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION AND POWER BY
VIOLATING THE DOCTRINE OF STARE DECISIS LAID DOWN BY THE SUPREME COURT AND
THE APPLICABLE LAWS AS TO THE STATUS OF THE SUGAR WORKERS.
B. THE HONORABLE COMMISSION COMMITTED SERIOUS ERRORS BY ADMITTING THE
MOTION TO DISMISS AND/OR ANSWER TO PETITIONERS APPEAL MEMORANDUM DATED
MARCH 26, 1998 FILED BY COUNSEL FOR THE HEREIN RESPONDENTS INSPITE OF THE
FACT THAT IT WAS FILED WAY BEYOND THE REGLEMENTARY PERIOD.
C. THE HONORABLE COMMISSION COMMITTED GRAVE ERROR IN GIVING CREDENCE TO
THE SWEEPING ALLEGATIONS OF THE COMPLAINANTS AS TO THE AWARD OF
BACKWAGES AND HOLIDAY PAY WITHOUT ANY BASIS.[10]
On July 31, 2001, the CA rendered a Decision,[11] the dispositive portion of which reads:

WHEREFORE, the decision of the National Labor Relations Commission is hereby MODIFIED by deleting the
award for holiday pay and premium pay for holidays. The rest of the Decision is hereby AFFIRMED.

SO ORDERED.[12]

74
 The CA ruled that the concept of stare decisis is not relevant to the present case. It held that the ruling
in Mercado, Sr. v. NLRC[13] does not operate to abandon the settled doctrine that sugar workers are considered regular
and permanent farm workers of a sugar plantation owner, considering that there are facts peculiar in that case which
are not present in the case at bar. In the Mercado case, the farm laborers worked only for a definite period for a farm
owner since the area of the land was comparatively small, after which they offer their services to other farm owners.
In this case, the area of the hacienda, which is 236 hectares, simply does not allow for the respondents to work for a
definite period only.
The CA also held that the petitioners reliance on Bacolod-Murcia Milling Co. Inc. v. NLRC[14] was misplaced, as
it in fact, bolstered the respondents' posture that they are regular employees. In that case, the Court held that a sugar
worker may be considered as in regular employment even during those years when he is merely a seasonal worker
where the issues concern the determination of an employer-employee relationship and security of tenure.
Further, the CA held that the respondents appeal to the NLRC was not perfected since they failed to accompany
their notice of appeal with a memorandum of appeal, or to timely file a memorandum of appeal. Thus, as to them, the
decision of the Labor Arbiter became final and executory. The NLRC, therefore, gravely abused its discretion when it
modified the decision of the Labor Arbiter and awarded to the respondents holiday pay and premium for holiday pay.
Finally, the CA affirmed the award of backwages, finding no circumstance that would warrant a reversal of the
findings of the Labor Arbiter and NLRC on this point. [15]
On September 24, 2001, the CA denied the motion for reconsideration filed by the petitioners due to their failure
to indicate the date of the receipt of the decision to determine the timeliness of the motion.[16]
Hence, this petition for review.
The petitioners submit the following issues:
A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND POWER BY VIOLATING THE DOCTRINE OF "STARE DECISIS" LAID DOWN
BY THE SUPREME COURT AND THE APPLICABLE LAWS AS TO THE STATUS OF THE
SUGAR WORKERS.
B. WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
DISMISSING THE MOTION FOR RECONSIDERATION FOR FAILURE TO STATE THE DATE OF
THE RECEIPT OF THE DECISION IN THE MOTION FOR RECONSIDERATION.[17]
Petitioner Starke contends that the established doctrine that seasonal employees are regular employees had been
overturned and abandoned by Mercado, Sr. v. NLRC.[18]She stresses that in that case, the Court held that petitioners
therein who were sugar workers, are seasonal employees and their employment legally ends upon completion of the
project or the season. Petitioner Starke argues that the CA violated the doctrine of stare decisis in not applying the
said ruling. She asserts that the respondents, who are also sugar workers, are seasonal employees; hence, their
employment can be terminated at the end of the season and such termination cannot be considered an illegal
dismissal. Petitioner Starke maintains that the determination of whether the workers are regular or seasonal employees
is not dependent on the number of hectares operated upon by them, or the number of workers, or the capitalization
involved, but rather, in the nature of the work. She asserts that the respondents also made their services available to
the neighboring haciendas. To buttress her contention that the respondents are seasonal employees, petitioner Starke
cites Rep. Act 6982, An Act Strengthening the Social Amelioration Program in the Sugar Industry, Providing the
Mechanics for its Implementation, and for other Purposes, which recognizes the seasonal nature of the work in the
sugar industry.[19]
Petitioner Starke also takes exception to the denial of her motion for reconsideration due to failure to state the
date of the receipt of the decision. She asserts that a denial of a motion for reconsideration due to such cause is merely
directory and not mandatory on the part of the CA. Considering that the amount involved in this case and the fact that
the motion was filed within the reglementary period, the CA should have considered the motion for reconsideration
despite such procedural lapse.[20]
On the other hand, the respondents aver that the petitioners erroneously invoke the doctrine of stare decisis since
the factual backdrop of this case and the Mercado case is not similar. The respondents posit that the Mercado case
ruled on the status of employment of farm laborers who work only for a definite period of time for a farm owner, after
which they offer their services to other farm owners. Contrarily, the respondents contend that they do not work for a
definite period but throughout the whole year, and do not make their services available to other farm owners.
Moreover, the land involved in the Mercado case is comparatively smaller than the sugar land involved in this case.
The respondents insist that the vastness of the land involved in this case requires the workers to work on a year-round
basis, and not on an on-and-off basis like the farm workers in the Mercado case.

75
 Finally, the respondents maintain that the requirement that the date of receipt of the decision should be indicated
in the motion for reconsideration is mandatory and jurisdictional and, if not complied with, the court must deny the
motion outright.[21]
The petition is without merit.
On the substantial issue of whether the respondents are regular or seasonal employees, the petitioners contend
that the CA violated the doctrine of stare decisis by not applying the ruling in the Mercado case that sugar workers
are seasonal employees. We hold otherwise. Under the doctrine of stare decisis, when a court has laid down a
principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in
which the facts are substantially the same.[22] Where the facts are essentially different, however, stare decisis does not
apply, for a perfectly sound principle as applied to one set of facts might be entirely inappropriate when a factual
variance is introduced.[23]
The CA correctly found that the facts involved in this case are different from the Mercado case; therefore, the
ruling in that case cannot be applied to the case at bar, thus:

We do not find the concept of stare decisis relevant in the case at bench. For although in the Mercado case, the
Supreme Court held the petitioners who were sugar workers not to be regular but seasonal workers, nevertheless, the
same does not operate to abandon the settled doctrine of the High Court that sugar workers are considered regular and
permanent farm workers of a sugar plantation owner, the reason being that there are facts present that are peculiar to
the Mercado case. The disparity in facts between the Mercado case and the instant case is best exemplified by the fact
that the former decision ruled on the status of employment of farm laborers, who, as found by the labor arbiter, work
only for a definite period for a farm worker, after which they offer their services to other farm owners, considering the
area in question being comparatively small, comprising of seventeen and a half (17) hectares of land, such that the
planting of rice and sugar cane thereon could not possibly entail a whole year operation. The herein case presents a
different factual condition as the enormity of the size of the sugar hacienda of petitioner, with an area of two hundred
thirty-six (236) hectares, simply do not allow for private respondents to render work only for a definite period.

Indeed, in a number of cases, the Court has recognized the peculiar facts attendant in the Mercado case.
In Abasolo v. NLRC,[24] and earlier, in Philippine Tobacco Flue-Curing & Redrying Corporation v. NLRC,[25] the
Court made the following observations:

In Mercado, although respondent constantly availed herself of the petitioners services from year to year, it was clear
from the facts therein that they were not in her regular employ. Petitioners therein performed different phases of
agricultural work in a given year. However, during that period, they were free to work for other farm owners, and in
fact they did. In other words, they worked for respondent, but were nevertheless free to contract their services with
other farm owners. The Court was thus emphatic when it ruled that petitioners were mere project employees, who
could be hired by other farm owners.[26]

Recently, the Court reiterated the same observations in Hacienda Fatima v. National Federation of Sugarcane
Workers-Food and General Trade[27] and added that the petitioners in the Mercado case were not hired regularly and
repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof.
In this case, there is no evidence on record that the same particulars are present. The petitioners did not present
any evidence that the respondents were required to perform certain phases of agricultural work for a definite period of
time. Although the petitioners assert that the respondents made their services available to the neighboring haciendas,
the records do not, however, support such assertion.
The primary standard for determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer.[28] There is no doubt
that the respondents were performing work necessary and desirable in the usual trade or business of an employer.
Hence, they can properly be classified as regular employees.
For respondents to be excluded from those classified as regular employees, it is not enough that they perform
work or services that are seasonal in nature. They must have been employed only for the duration of one
season.[29] While the records sufficiently show that the respondents work in the hacienda was seasonal in nature, there
was, however, no proof that they were hired for the duration of one season only. In fact, the payrolls, [30] submitted in
evidence by the petitioners, show that they availed the services of the respondents since 1991. Absent any proof to the
contrary, the general rule of regular employment should, therefore, stand. It bears stressing that the employer has the
burden of proving the lawfulness of his employees dismissal.[31]
On the procedural issue, petitioner Starke avers that the CA should not have denied outright her motion for
reconsideration, considering its timely filing and the huge amount involved. This contention is already moot.
Petitioner Starke has already aired in this petition the arguments in her motion for reconsideration of the CA decision,
76
which have been adequately addressed by this Court. Assuming arguendo that the CA indeed failed to consider the
motion for reconsideration, petitioner Starke was not left without any other recourse.[32]
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals, dated
July 31, 2001, and its Resolution dated September 24, 2001 are hereby AFFIRMED.
SO ORDERED.

77
G.R. No. L-18873 September 30, 1963

MANILA HOTEL COMPANY, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, ET AL., respondents.

Government Corporate Counsel Simeon M. Gopengco and Trial Attorney Jose S. Gomez for petitioner.
Gregorio E. Fajardo and Jesus Jaramillo for respondent Union.
Mariano B. Tuason for respondent Court.

BAUTISTA ANGELO, J.:

The Pines Hotel Employees Association filed on February 24, 1960 before the Court of Industrial Relations a petition
praying, among other things, that its employees who were working at the Pines Hotel be paid additional compensation
for overtime service rendered due to the exigencies of the business, as well as additional compensation for Sunday,
legal holiday and nighttime work.

The Manila Hotel filed its answer denying the material averments of the petition and alleging, among others, that if
overtime service was rendered the same was not authorized but was rendered voluntarily, for the employees were
interested in the "tips" offered by the patrons of the hotel.

Presiding Judge Jose S. Bautista, to whom the petition was assigned, after trial, rendered judgment stating that the
employees were entitled to the additional compensation demanded, including that for overtime work, because an
employee who renders overtime service is entitled to compensation even if he rendered it without prior authority. A
motion for reconsideration was filed on the ground that the order was contrary to law and the evidence, but the same
was denied by the industrial court en banc.1awphîl.nèt

In compliance with the order of the court, the Examining Division of the Court of Industrial Relations submitted a
report in which it stated that the amount due the employees as additional compensation for overtime and night
services rendered from January to December 31, 1958 was P32,950.69. The management filed its objection to the
report on the ground that it included 22 names of employees who were not employees of the Pines Hotel at the time
the petition was filed so that insofar as said employees are concerned the petition merely involves a money claim
which comes under the jurisdiction of the regular courts. The trial judge, however, overruled this objection holding
that, while the 22 employees were actually not in the service at the time of the filing of the petition, they were
however subsequently employed even during the pendency of the incident, and so their claim comes within the
jurisdiction of the Court of Industrial Relations. Hence, the present petition for review.

There is no merit in this appeal it appearing that while it is true that the 22 employees whose claim is objected to were
not actually in the service at the time the instant petition was filed, they were however, subsequently reemployed even
while the present incident was pending consideration by the trial court. Moreover, it appears that the questioned
employees were never separated from the service. Their status is that of regular seasonal employees who are called to
work from time to time, mostly during summer season. The nature of their relationship with the hotel is such that
during off season they are temporarily laid off but during summer season they are re-employed, or when their services
may be needed. They are not strictly speaking separated from the service but are merely considered as on leave of
absence without pay until they are re-employed. Their employment relationship is never severed but only suspended.
As such, these employees can be considered as in the regular employment of the hotel.

WHEREFORE, the order appealed from is affirmed. No costs.

78
G.R. No. 100333 March 13, 1997

HILARIO MAGCALAS, PROSPERO MARINDA, CELSO GAMALO, EPIFANIO OMEGA, VIRGILIO

CAMPOS, ANTONIO LLAGAS, BERNARD BENDANILLO, SHALDYAUTENCIO, CIRIACO REYES,
JUANITO DE LEON, EDMUNDO GUZMAN, ALFREDO SANTOS, BENEDICTO DAGCUTAN, NORBIE
LOPENA, ISMAEL ALONZO, ELMER BALETA, GENITO DALMERO, and CESAR
LEDESMA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and KOPPEL, INC., respondents.

PANGANIBAN, J.:

May regular employment be restricted to a definite or fixed term? Upon the expiration of such term, may the
employment be deemed terminated upon payment of separation pay? The respondent NLRC answered these questions
in the affirmative but the labor arbiter held otherwise — that such termination constituted illegal dismissal, thereby
entitling the petitioners to reinstatement, backwages and attorney's fees.

This divergence of position between the NLRC and the labor arbiter will now be ruled upon by this Court as it
resolves this petition for certiorari challenging the Decision 1 and Resolution 2 of public respondent 3 promulgated on
April 5, 1991, and May 13, 1991, respectively. The Decision of public respondent reversed that of the labor arbiter
while the Resolution denied the motion for reconsideration. The dispositive portion of the impugned Decision reads:4

WHEREFORE, premises considered, the appealed decision is hereby set aside, and a new judgment is
entered, ordering the respondent to pay separation pay to herein complainants, as explained above.

On the other hand, the dispositive portion of the reversed decision of the labor arbiter5 reads: 6

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered, ordering the
respondent to reinstate all the individual complainants named in the above entitled case to their former
positions without loss of seniority rights and privileges, and to pay them backwages from the time of
their dismissal/termination to their actual reinstatement, plus attorney's fee equivalent to Ten Percent
(10%) of the total monetary award; the claim for legal interest is dismissed for lack of merit.

The Facts

The facts are set out in the decision of the labor arbiter, as follows: 7

In their basic complaint and counter position paper, the complainants alleged (inter alia) that they were
all regular employees of the respondent company, having rendered continuous services in various
capacities, ranging from leadman, tinsmith, tradeshelper to general clerk; that the respondent has been
engaged in the business of installing air conditioning (should be air-conditioning) and refrigeration
equipment in its different projects and jobsites where the complainants have been assigned; that the
complainants have worked for a number of years, the minimum of which was one and a half years and
the maximum (was) eight years under several supervisors; that on August 30, 1988, they were
dismissed (en masse) without prior notice and investigation, and that their dismissals were effected for
no other cause than their persistent demands for payment of money claims (as) mandated by law.

On the other hand, the respondents interposed the defense of contract/project employment and averred
the following statement of facts in support thereof:

The respondent company is engaged in the business of manufacturing and installation of

air(-)conditioning and refrigeration equipments (sic).

The manufacturing aspect of its operation is handled by its regular employees, while the
installation aspect, by reason of its intermittence, is carried out by its project or contract
employees.

The installation of the air(-)conditioning equipment at the Asian Development Bank

Building and (the) Interbank building was awarded to the respondent herein. The
complainants herein were among the contract employees hired by the respondent to
79
 install the air(-)conditioning equipment at the Asian Development Bank and Interbank
projects. Their specific assignments were as follows:

Name Position Project

1. HILARIO MAGCALAS Leadman Asian Dev. Bank

2. PROSPERO MARINDA Tinsmith Asian Dev. Bank
3. VIRGILIO CAMPOS Tradeshelper " " "
4. ANTONIO LLAGAS " " " "
5. BERNARD BENDANILLO " " " "
6. ISMAEL ALONZO " " " "
7. SHALDY AUTENCIO " " " "
8. CIRIACO REYES " Interbank
9. CELSO GAMALO " "
10. EPIFANIO OMEGA " "
11. EDMUNDO GUZMAN " "
12. ALFREDO SANTOS " "
13. JUANITO DE LEON " "
14. BENEDICTO DAGCUTAN " "
15. ELMER BALETA " "
16. GENITO DALMERO " "
17. CESAR LEDESMA Tinsmith "
18. NOR(B)IE LOPENA General Clerk "

The aforesaid employees were engaged to work on (sic) the installation projects until
August 31, 1988, when their task was expected to be completed. This is evidenced by
their respective employment contracts, copies of which are hereto attached as
ANNEXES 1 to 18.

With the completion of their task on August 31, 1988 in their respective installation
projects, the employment of the complainants (ipso facto) expired as they had no more
work to do. They now claim that they were illegally dismissed.

Reply by the respondent and rejoinder by the complainants were subsequently filed, after which the
case was considered as submitted for decision based on the pleadings and evidences (sic) on record.

As earlier stated, public respondent reversed the decision of the labor arbiter favorable to herein petitioners. Hence,
this petition for certiorari.

The Issues

Petitioners raise and argue the following issues in their Memorandum: 8

(a) whether (p)etitioners (were) regular workers under the contemplation of Art. 280 of the Labor
Code; and,

(b) whether (p)etitioners' termination and/or cessation of their employments on August 30th, (sic) 1988
were justified under the contemplation of Art. 279 of the Labor Code as amended.

Petitioners contend that they were regular employees because "(t)he job of installing an(d)/or repairing its
manufactured units and equipments (sic) to its different customers are not merely adjunct but are necessary activities
of (p)rivate (r)espondent's daily business operations."9 They maintain that their employment is regular because of "the
nature of the activities (they) performed," 10 regardless of the stipulation in their job contracts. Petitioners argue that
the phrase "specific project or undertaking" in Article 280 of the Labor Code means "special type of venture or
undertaking" that is not "usually necessary or desirable in the employer's business operation and
activities". 11 Petitioners add that doubts as to their employment status must be resolved in their favor. 12

The Solicitor General ("Sol. Gen."), invoking the case of Orbos vs. Civil Service Commission, 13 sided with
petitioners. He argues that "(t)o say that petitioners (were) regular employees and yet subject to a definite or fixed
term is incongruous, inconsistent, or illogical. . . . . Indeed, a worker is either regular or casual; (i)f he is employed
only for a specific project or undertaking, then he is considered a casual employee and may be dismissed at the time
of the completion of the project." 14 Besides, the "(r)ecords cannot deny that petitioners worked continuously, without
a single day of interruption, in not just one, but on the various jobsites assigned to them. Some of them have even
80
worked continuously for eight (8) years, without any stoppage." 15 Even admitting that petitioners were project
employees, the Sol. Gen. states that "no iota of proof was ever presented by private respondent to refute petitioners'
claim that the ADB and Interbank projects were still in operation when they were terminated or, vice-versa, to support
its claim that these projects were already terminated." 16

On the other hand, private respondent contends that certiorari is not proper in this case. "The findings and
conclusions of fact and law of the respondent NLRC are supported by substantial evidence and were not arrived at
arbitrarily." 17 It adds that "petitioners were project or contract workers who were hired whenever private respondent
was able to obtain sub-contracts for the installation of air(-)conditioning and ventilation system or refrigeration
equipment in construction or building projects . . . . They were last hired in the Asian Development Bank and
Interbank air(-)conditioning and ventilation system projects which were completely turned over in August 1989 and
(on) November 13, 1989, respectively. (Please see Annexes '2' and '3' hereof). 18

Because of the position taken by the Sol. Gen., public respondent filed its own Comment. It argues that "the factual
findings of respondent Commission (were) based on substantial evidence and supported by the clear letter of the law
as well as pertinent jurisprudence on the matter." 19 Thus, public respondent contends that the petition should be
dismissed and the challenged judgment should be upheld as a proper exercise of the powers conferred upon it by
law. 20

Public respondent ruled against petitioners thus: 21

A cursory reading of the Collective Bargaining Agreement between the respondent company and the
Koppel Employees Association shows that it recognized Contract Employees as one of the three
categories of employees in the Company. Article IV, Section 1, of the said Collective Bargaining
Agreement defines a "Contract Employee" as "one hired on individual employment contract basis to
perform work on specific projects or as indicated in his contract of employment. The duration of such
employment is determined by and indicated in his contract of employment." (Record, page 49)

Article 280 of the Labor Code provides:

Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral 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 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. (Emphasis supplied)

The above provision is intended for all industries except the construction industry. Policy Instruction
No. 20 was precisely promulgated for the reason that the problems of regularity of employment in the
construction industry has continued to plague it. The policy implements the exception to Article 280 of
the Labor Code. (Magante v. NLRC, 185 SCRA 21)

Complainant herein were engaged by the respondent to handle the installation of air(-)conditioning and
refrigeration equipments (sic) in the construction projects at the Asian Development Bank and
Interbank buildings. As the nature and character of their work is necessary or desirable of (sic) the
usual business of the respondent, which is to manufacture and install air(-) conditioning and
refrigeration equipments (sic) in buildings, complainants' jobs can be categorized as regular workers
(should be work) but subject to a definite or fixed term. But their services were not terminated at the
end of the project or contract. As the ADB and Interbank projects have been completed, their lay-off
has resulted in the termination of their employment for lack of work; hence, they are entitled to
separation pay equivalent to one month pay or one-half month pay for every year of service, whichever
is greater, and a fraction of six months or more to be considered as one year.

The Court's Ruling

We find for petitioners.

First Issue: Are Petitioners Regular Workers?

In certiorari proceedings under Rule 65, this Court does not, as a rule, evaluate the sufficiency of evidence upon
which the labor arbiter and public respondent based their determinations. The inquiry is limited essentially to whether
or nor said public respondent acted without or in excess of its jurisdiction or with grave abuse of
81
discretion. 22 However, where the findings of the NLRC are contrary to those of the tribunal below, the Court — in
the exercise of its equity jurisdiction — may wade into and reevaluate such findings, 23 as in the present instance.

In this case, Public Respondent NLRC did not sufficiently indicate the evidentiary basis for its reversal of the labor
arbiter's decision. After citing provisions in the collective bargaining agreement (CBA) concerning contract workers
and Policy Instruction No. 20, public respondent correctly stated that petitioners were performing work necessary or
desirable in the usual business of private respondent. From this undisputed fact, the NLRC jumped to strange and
strained inferences. First, it held that the employment of the petitioners was subject to fixed terms. It then leapt to
the non-sequitur conclusion that petitioners were project employees. Going further, it held that they were entitled to
separation pay, overlooking that under the very law it invoked, "project employees are not entitled to termination
pay." 24 This convolution of facts and law cannot reverse the decision of the labor arbiter which is grounded on
documentary evidence submitted by the parties.

Indeed, an examination of the assailed Decision reveals that public respondent failed to back up its conclusions with
substantial evidence, or that which a reasonable mind may accept as adequate to justify a conclusion. This quantum of
evidence is required to establish a fact in cases before administrative and quasi-judicial bodies. 25

Thus, a mere provision in the CBA recognizing contract employment does not sufficiently establish that petitioners
were ipso facto contractual or project employees. In the same vein, the invocation of Policy No. 20 governing the
employment of project employees in the construction industry does not, by itself, automatically classify private
respondent as part of the construction industry and entitle it to dismiss petitioners at the end of each project. These
facts cannot be presumed; they must be supported by substantial evidence.

On the other hand, private respondent did not even allege, much less did it seek to prove, that petitioners had been
hired on a project-to-project basis during the entire length of their employment. Rather, it merely sought to establish
that petitioners had been hired to install the air-conditioning equipment at Asian Development Bank and Interbank
and that they were legally dismissed upon the conclusion of these projects.

Private respondent did not even traverse, and public respondent did not controvert, the labor arbiter's finding that
petitioners were continuously employed without interruption, from the date of their hiring up to the date of their
dismissal, in spite of the alleged completion of the so-called projects in which they had been hired. 26 The undisputed
finding of the labor arbiter on this continuous employment of petitioners is worth quoting: 27

(T)he record discloses that the complainants worked not only in one special project, either at the Asian
Development Bank or the Interbank building, as the evidence of the respondent tends to prove, but also
variably in other projects/jobsites contracted by Koppel Incorporated: such as the PNB on Roxas
Boulevard, Manila; MIA now NAIA; PICC; and San Miguel Complex on Ortigas Avenue, Pasig,
Metro Manila. Some of them, after their tour of duty on these different jobsites were reassigned to the
respondent's plant at Koppel Compound, Para(ñ)aque, Metro Manila, as shown by the individual
complainants(') affidavits attached to their position paper. A close examination of the record further
reveals that the "special projects" at the Asian Development Bank and Interbank to which the
complainants were last assigned by the respondent were still in operation before their alleged
termination from employment. Under these factual milieu, we believe that they had been engaged to
work and perform activities which were necessary and desirable in the air(-) conditioning and
refrigeration installation/repair business of the respondent employer, especially where, as in this case,
the very nature of such trade indicates that it can hardly fall under the exception of Policy Instruction
No. 20 which applies only to the construction industry. For this reason, and considering the facts
narrated in the complainants(') sworn statements were neither disputed nor refuted by contrary
evidence by the respondent, it becomes apparent and increasing(ly) clear that indeed they would and
ought to be classified as regular employees. . . . (Emphasis supplied.)

Petitioners were hired on different dates. Some of them worked for eight (8) years, while others for only one and a
half (1 1/2) years. Private respondent, on the other hand, insisted that petitioners were hired on per-project basis.
Private respondent, however, did not present any evidence to show the termination of the employment contracts at the
end of each project. Only before public respondent and in this petition did private respondent allege, through a
photocopy of an affidavit 28 of Mr. Jose Lecaros, the General Manager of Koppel, Inc., that the Asian Development
Bank and the Interbank projects had been completed. This affidavit as well as the other annexes 29 cannot be given
weight in this petition because this Court is not a trier of facts. In any case, private respondent had not proved, by the
said affidavit, that the termination of each project had invariably resulted in the dismissal of its alleged project
employees.

Regular employees cannot at the same time be project employees. Article 280 of the Labor Code states that regular
employees are those whose work is necessary or desirable to the usual business of the employer. The two exceptions
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following the general description of regular employees refer to either project or seasonal employees. It has been ruled
in the case of ALU-TUCP vs. National Labor Relations Commission that: 30

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 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 (should be distinct) identifiable construction
projects: e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City;
and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their services
may be lawfully terminated at completion of the project." (Emphasis supplied).

The employment of seasonal employees, on the other hand, legally ends upon completion of the project or the season,
thus: 31

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

In terms of terminating employment, this Court has already distinguished project from regular employees, to wit: 32

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. 33 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. 34

The overwhelming fact of petitioners' continuous employment as found by the labor arbiter ineludibly shows that the
petitioners were regular employees. On the other hand, we find that substantial evidence, applicable laws and
jurisprudence do not support the ruling in the assailed Decision that petitioners were project employees. The Court
here reiterates the rule that all doubts, uncertainties, ambiguities and insufficiencies should be resolved in favor of
labor. It is a well-entrenched doctrine that in illegal dismissal cases, the employer has the burden of proof. This
burden was not discharged in the present case.

Second Issue: Is Ground for Dismissal Valid?

As regular employees, petitioners' employment cannot be terminated at the whim of the employer. For a dismissal of
an employee to be valid, two requisites must be met: (1) the employee is afforded due process, meaning, he is given
notice of the cause of his dismissal and an adequate opportunity to be heard and to defend himself; and (2) the
dismissal is for a valid cause as indicated in Article 282 35 of the Labor Code. 36 The services of petitioners
were purportedly terminated at the end of the ADB and Interbank projects, but this could not have been a valid cause
for, as discussed above, they were regular and not project employees. Thus, the Court does not hesitate to conclude
that petitioners were illegally dismissed.

As a consequence of their illegal termination, petitioners are entitled to reinstatement and backwages in accordance
with the Labor Code. The backwages however are to be computed only for three years from August 30, 1988, the date
of their dismissal, without deduction or qualification. Where the illegal dismissal transpired before the effectivity of
RA 6715, 37 or before March 21, 1989, the award of backwages in favor of the dismissed employees is limited to three
(3) years without deduction or qualification. 38

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution are
REVERSED and SET ASIDE and the decision of the labor arbiter is REINSTATED, with backwages to be computed
as above discussed. No costs.

SO ORDERED.

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