G.R. Nos.

168194 & 168603 December 13, 2005

SAN MIGUEL CORPORATION, Petitioner,

vs.
CAROLINE C. DEL ROSARIO, Respondent.

FACTS

Del Rosario was employed by San Miguel Corp as key account specialist.

On March 9, 2001, San Miguel corp. informed respondent that her probationary employment will be severed
at the close of the business hours of March 12, 2001. 7 On March 13, 2001, respondent was refused entry to
petitioner’s premises.

On June 24, 2002, respondent filed a complaint against petitioner for illegal dismissal and underpayment/non-
payment of monetary benefits.

CONTENTION OF SAN MIGUEL

Claimed that Del Rosario was a probationary employee whose services were terminated as a result of the
excess manpower that could no longer be accommodated by the company. Respondent was allegedly
employed on April 17, 20009 as a temporary reliever of Patrick Senen, an account specialist, who met an
accident.

Anticipating an increase in sales volume, petitioner hired respondent as an account specialist on a

probationary status. petitioner’s expected business growth did not materialize, hence, it reorganized its sales
force. This restructuring led to an initial excess of 49 regular employees, who were redeployed to other
positions, including the one occupied by respondent. Her employment was thus terminated effective March
12, 2001.

CONTENTION OF DEL ROSARIO

Respondent alleged that petitioner feigned an excess in manpower because after her dismissal, it hired new
recruits and re-employed two of her batch mates.

LABOR ARBITER – ILLEGALLY DISMISSED

Labor Arbiter rendered a decision declaring respondent a regular employee because her employment
exceeded six months and holding that she was illegally dismissed as there was no authorized cause to
terminate her employment. The Arbiter further ruled that petitioner’s failure to rebut respondent’s claim that
it hired additional employees after she was dismissed belie the company’s alleged redundancy.

NLRC - TERMINATION IS VALID, BUT HAS DEFECTS

On appeal by petitioner to the NLRC, the latter modified the decision of the Labor Arbiter holding that
respondent is a regular employee whose termination from employment was valid but ineffectual for
petitioner’s failure to comply with the 30-day notice to the employee and the Department of Labor and
Employment (DOLE).

COURT OF APPEALS

The Court of Appeals granted the respondent’s petition and reinstated with modification the Labor Arbiter’s
decision finding her to be an illegally dismissed regular employee. The appellate court noted that petitioner
gave no satisfactory explanation for the hiring of employees after respondent’s termination and the absence of
company criteria in determining who among the employees will be dismissed.

ISSUE
The issues for resolution are: (1) whether or not respondent is a regular employee of petitioner(YES)
RULING:

In termination cases, like the present controversy, the burden of proving the circumstances that would justify
the employee’s dismissal rests with the employer.

The best proof that petitioner should have presented to prove the probationary status of respondent is her
employment contract. None, having been presented, the continuous employment of respondent as an account
specialist for almost 11 months, means that she was a regular employee and not a temporary reliever or a
probationary employee.

And while it is true that by way of exception, the period of probationary employment may exceed six
months when the parties so agree, such as when the same is established by company policy, or when it is
required by the nature of the work,20 none of these exceptional circumstance were proven in the present case.
Hence, respondent whose employment exceeded six months is undoubtedly a regular employee of petitioner.
G.R. No. L-63316 July 31, 1984

ILUMINADA VER BUISER, MA. CECILIA RILLOACUÑA and MA. MERCEDES P. INTENGAN, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of the Ministry of Labor & Employment,
and GENERAL TELEPHONE DIRECTORY, CO., respondents.

FACTS

Petioner in this case entered into an "Employment Contract on Probationary Status with GENERAL TELEPHONE
DIRECTORY COMPANY, a corporation engaged in the business of publication and circulation of the directory of
the Philippine Long Distance Telephone Company.

Among others, the "Employment Contract (On Probationary Status)" included the following common
provisions:

 The company hereby employs the employee as telephone representative on a probationary status for
a period of eighteen (18) months
 It is understood that during the probationary period of employment, the Employee may be
terminated at the pleasure of the company without the necessity of giving notice of termination or
the payment of termination pay.

GENERAL TELEPHONE prescribed sales quotas to be accomplished or met by the petitioners. Failing to meet
their respective sales quotas, the petitioners were dismissed from the service by the private respondent.

Thus, on May 27, 1981, petitioners filed with the National Capital Region, Ministry of Labor and Employment, a
complaint for illegal dismissal with claims for backwages, earned commissions and other benefits.

EMPLOYEE’S CONTENTION:

Petitioners contend that under Articles 281-282 of the Labor Code, having served the respondent company
continuously for over six (6) months, they have become automatically regular employees notwithstanding an
agreement to the contrary.

Art. 282. Probationary Employment. — Probationary employment shall not exceed six (6) months
from the date the employee started working, unless it iscCovered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a probationary period shall be considered
a regular employee. (As amended by PD 850).

It is petitioners' contends that probationary employment cannot exceed six (6) months, the only exception
being apprenticeship and learnership agreements as provided in the Labor Code;

that the Policy Instruction of the Minister of Labor and Employment nor any agreement of the parties could
prevail over this mandatory requirement of the law; that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-guaranteed security of tenure of workers; and that
the law does not allow any discretion on the part of the Minister of Labor and Employment to extend the
probationary period for a longer period except in the aforecited instances.
MINISTRY OF LABOR

The Ministry of Labor ruled that the petitioners have not attained permanent status since GENERAL
TELEPHONE was justified in requiring a longer period of probation, and that the termination of petitioners'
services was valid since the latter failed to meet their sales quotas.

ISSUE

WON the employees became regular employees since their probationary contracts exceeded 6 months. (NO)

RULING

Generally, the probationary period of employment is limited to six (6) months. The exception to this general
rule is When the parties to an employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the nature of work to be performed by the
employee.

In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the probationary period was set for eighteen
(18) months, i.e. from May, 1980 to October, 1981 inclusive, especially where the employee must learn a
particular kind of work such as selling, or when the job requires certain qualifications, skills, experience or
training.

Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts on the
period of probationary employment. It states as follows:

Under the Labor Code, six (6) months is the general probationary period ' but the probationary
period is actually the period needed to determine fitness for the job. This period, for lack of a better
measurement is deemed to be the period needed to learn the job.

In the case at bar, it is shown that private respondent Company needs at least eighteen (18) months to
determine the character and selling capabilities of the petitioners as sales representatives. The Company is
engaged in advertisement and publication in the Yellow Pages of the PLDT Telephone Directories.

Publication of solicited ads are only made a year after the sale has been made and only then will the company
be able to evaluate the efficiency, conduct, and selling ability of its sales representatives, the evaluation being
based on the published ads.

Moreover, an eighteen month probationary period is recognized by the Labor Union in the private respondent
company, which is Article V of the Collective Bargaining Agreement, ... thus:

Probationary Period — New employees hired for regular or permanent shall undergo a
probationary or trial period of six (6) months, except in the cases of telephone or sales
representatives where the probationary period shall be eighteen (I 8) months.
G.R. No. 149859             June 9, 2004

RADIN C. ALCIRA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, MIDDLEBY PHILIPPINES CORPORATION/FRANK THOMAS,
XAVIER G. PEÑA and TRIFONA F. MAMARADLO, respondents.

FACTS

Middleby Corporation hired ON May 20, 1996, ALCIRA, as engineering support services supervisor on a
probationary basis for six months. Apparently unhappy with petitioner’s performance, respondent Middleby
terminated petitioner’s services, HE WAS DISMISSED November 20, 1996.

petitioner filed on November 21, 1996 a complaint in the National Labor Relations Commission (NLRC) against
respondent Middleby

CONTENTION OF ALRICA

Petitioner claims that under the terms of his contract, his probationary employment was only for five months
as indicated by the remark "Please be informed that after five months, your performance shall be evaluated
and any adjustment in salary shall depend on your work performance."

Petitioner insists that he already attained the status of a regular employee when he was dismissed on
November 20, 1996 because, having started work on May 20, 1996, the six-month probationary period ended
on November 16, 1996. According to petitioner’s computation, since Article 13 of the Civil Code provides that
one month is composed of thirty days, six months total one hundred eighty days. As the appointment provided
that petitioner’s status was "probationary (6 mos.)" without any specific date of termination, the 180th day fell
on November 16, 1996. Thus, when he was dismissed on November 20, 1996, he was already a regular
employee.

CONTENTION OF MIDDLEBY

In their defense, respondents claim that, during petitioner’s probationary employment, he showed poor
performance in his assigned tasks, incurred ten absences, was late several times and violated company rules
on the wearing of uniform. Since he failed to meet company standards, petitioner’s application to become a
regular employee was disapproved and his employment was terminated. Termination was done before his 6
month probationary period ended.

LABOR ARBITER

Dismissed the complaint on the ground that petitioner’s dismissal on November 20, 1996 was before his
"regularization," considering that, counting from May 20, 1996, the six-month probationary period ended on
November 20, 1996.

NLRC

the NLRC affirmed the decision of the labor arbiter.

CA
the Court of Appeals affirmed the judgment of the NLRC.

STATING THAT Even assuming, arguendo, that petitioner was not informed of the reasonable standards
required of him by Middleby, the same is not crucial because there is no termination to speak of but rather
expiration of contract.

While probationary employees enjoy security of tenure such that they cannot be removed except for just
cause as provided by law, such protection extends only during the period of probation. Once that period
expired, the constitutional protection could no longer be invoked. Legally speaking, petitioner was not illegally
dismissed. His contract merely expired.8

ISSUE:

WON ALRICA IS A REGULAR EMPLOYEE

RULING
Petitioner claims that under the terms of his contract, his probationary employment was only for five months
as indicated by the remark "Please be informed that after five months, your performance shall be evaluated
and any adjustment in salary shall depend on your work performance." The argument lacks merit

As correctly held by the labor arbiter, the appointment contract also stated in another part thereof that
petitioner’s employment status was "probationary (6 mos.)." The five-month period referred to the evaluation
of his work.10

Petitioner insists that he already attained the status of a regular employee when he was dismissed on
November 20, 1996 because, having started work on May 20, 1996, the six-month probationary period ended
on November 16, 1996. According to petitioner’s computation, since Article 13 of the Civil Code provides that
one month is composed of thirty days, six months total one hundred eighty days. As the appointment provided
that petitioner’s status was "probationary (6 mos.)" without any specific date of termination, the 180th day fell
on November 16, 1996. Thus, when he was dismissed on November 20, 1996, he was already a regular
employee. Petitioner’s contention is incorrect.

(O)ur computation of the 6-month probationary period is reckoned from the date of appointment up to the
same calendar date of the 6th month following.(italics supplied)

In short, since the number of days in each particular month was irrelevant, petitioner was still a probationary
employee when respondent Middleby opted not to "regularize" him on November 20, 1996.
G.R. No. 178835               February 13, 2009

MAGIS YOUNG ACHIEVERS' LEARNING CENTER and MRS. VIOLETA T. CARIÑO, Petitioners,

vs.
ADELAIDA P. MANALO, Respondent.

FACTS

The pertinent facts are as follows:

MANALO was hired as a teacher and acting principal of petitioner Magis Young Achievers’ Learning Center.

It appears on record that respondent, on March 29, 2003, wrote a letter of resignation addressed to Violeta T.
Cariño, directress of petitioner.

DAYS AFTER HER RESIGNATION, SHE RECEIVED A TERMINATION LETTER.

On April 4, 2003, respondent instituted against petitioner a Complaint 3 for illegal dismissal and non-payment of
13th month pay, with a prayer for reinstatement, award of full backwages and moral and exemplary damages.

CONTENTION OF MANALO
She also claimed that she was terminated from service for the alleged expiration of her employment, but that
her contract did not provide for a fixed term or period.

CONTENTION OF MAGIS

Petitioner, in its position paper,7 countered that respondent was legally terminated because the one-year
probationary period, from April 1, 2002 to March 3, 2003, had already lapsed and she failed to meet the
criteria set by the school pursuant to the Manual of Regulation for Private Schools, adopted by the then
Department of Education, Culture and Sports (DECS).

LABOR ARBITER

dismissed the complaint for illegal dismissal.

It is our considered opinion [that] complainant was not dismissed, much less, illegally. On the contrary, she
resigned. It is hard for us to imagine complainant would accede to sign a resignation letter as a precondition to
her hiring considering her educational background.

NLRC

Reversed the Arbiter’s judgment. Petitioner was ordered to reinstate respondent as a teacher

CA

affirmed the NLRC decision and dismissed the petition.

ISSUE:

WON MANALO IS A PROBATIONARY EMPLOYEE (YES)

RULING:

For "academic personnel" in private schools, colleges and universities, probationary employment is governed
by Section 92 of the 1992 Manual of Regulations for Private Schools15 (Manual), which reads:

Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school
requirements, the probationary period for academic personnel

shall not be more than three (3) consecutive years of satisfactory service for those in the elementary

and secondary levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary
level, and

nine (9) consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses
are offered on a trimester basis.16

Over the years, even with the enactment of a new Labor Code and the revision of the Manual, the rule has not
changed.

Thus, for academic personnel in private elementary and secondary schools, it is only after one has
satisfactorily completed the probationary period of three (3) school years and is rehired that he acquires full
tenure as a regular or permanent employee.

There should be no question that the employment of the respondent, as teacher, in petitioner school on April
18, 2002 is probationary in character, consistent with standard practice in private schools. In light of our
disquisition above, we cannot subscribe to the proposition that the respondent has acquired regular or
permanent tenure as teacher. She had rendered service as such only from April 18, 2002 until March 31, 2003.
She has not completed the requisite three-year period of probationary employment, as provided in the
Manual. She cannot, by right, claim permanent status.

As above discussed, probationary employees enjoy security of tenure during the term of their probationary
employment such that they may only be terminated for cause as provided for by law, or if at the end of the
probationary period, the employee failed to meet the reasonable standards set by the employer at the time of
the employee’s engagement.

Undeniably, respondent was hired as a probationary teacher and, as such, it was incumbent upon petitioner to
show by competent evidence that she did not meet the standards set by the school. This requirement,
petitioner failed to discharge. To note, the termination of respondent was effected by that letter stating that
she was being relieved from employment because the school authorities allegedly decided, as a cost-cutting
measure, that the position of "Principal" was to be abolished. Nowhere in that letter was respondent informed
that her performance as a school teacher was less than satisfactory.

in the absence of an express period of probation for private school teachers, the three-year probationary
period provided by the Manual of Regulations for Private Schools must apply likewise to the case of
respondent.
In other words, absent any concrete and competent proof that her performance as a teacher was
unsatisfactory from her hiring on April 18, 2002 up to March 31, 2003, respondent is entitled to continue her
three-year period of probationary period, such that from March 31, 2003, her probationary employment is
deemed renewed for the following two school years.

G.R. No. 177937               January 19, 2011

ROBINSONS GALLERIA/ROBINSONS SUPERMARKET CORPORATION and/or JESS MANUEL, Petitioners,

vs.
IRENE R. RANCHEZ, Respondent.

FACTS

RANCHEZ was a probationary employee of petitioner Robinsons Galleria/Robinsons Supermarket Corporation

(petitioner Supermarket) for a period of five (5) months. She underwent six (6) weeks of training as a cashier
before she was hired as such on October 15, 1997.

Two weeks after she was hired, or on October 30, 1997, RANCHEZ reported to her supervisor the loss of cash.
The Operations Manager of petitioner Supermarket, ordered that respondent be strip-searched by the
company guards. However, the search on her and her personal belongings yielded nothing.

An information for Qualified Theft was filed AGAINST RANCHEZ. Respondent was constrained to spend two
weeks in jail for failure to immediately post bail in the amount of Forty Thousand Pesos (₱40,000.00).7

On November 25, 1997, respondent filed a complaint for illegal dismissal and damages.

On March 12, 1998, petitioners sent to respondent by mail a notice of termination and/or notice of expiration
of probationary employment dated March 9, 1998.

LABOR ARBITER

dismissed the claim of illegal dismissal for lack of merit.

the Labor Arbiter ratiocinated that at the time respondent filed the complaint for illegal dismissal, she was not
yet dismissed by petitioners.

NLRC

reversed the decision of the Labor Arbiter

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent was denied due process by
petitioners. Strip-searching respondent and sending her to jail for two weeks certainly amounted to
constructive dismissal because continued employment had been rendered impossible, unreasonable, and
unlikely. The wedge that had been driven between the parties was impossible to ignore. 15 Although
respondent was only a probationary employee, the subsequent lapse of her probationary contract of
employment did not have the effect of validly terminating her employment because constructive dismissal had
already been effected earlier by petitioners.16

CA

AFFIRMED NLRC DECISION.

ISSUE

The sole issue for resolution is whether respondent was illegally terminated from employment by petitioners.
RULING

YES.

There is probationary employment when the employee upon his engagement is made to undergo a trial period
during which the employer determines his fitness to qualify for regular employment based on reasonable
standards made known to him at the time of engagement.

Article 283, the employer shall furnish the worker, whose employment is sought to be terminated, a written
notice containing a statement of the causes of termination, and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of a representative if he so desires, in accordance with
company rules and regulations pursuant to the guidelines set by the Department of Labor and Employment.

In the instant case, based on the facts on record, petitioners failed to accord respondent substantive and
procedural due process. The haphazard manner in the investigation of the missing cash, which was left to the
determination of the police authorities and the Prosecutor’s Office, left respondent with no choice but to cry
foul.

Administrative investigation was not conducted by petitioner Supermarket. On the same day that the
missing money was reported by respondent to her immediate superior, the company already pre-judged her
guilt without proper investigation, and instantly reported her to the police as the suspected thief, which
resulted in her languishing in jail for two weeks.

Thus, as an illegally or constructively dismissed employee, respondent is entitled to: (1) either reinstatement, if
viable, or separation pay, if reinstatement is no longer viable; and (2) backwages. These two reliefs are
separate and distinct from each other and are awarded conjunctively.25lavvphil

In this case, since respondent was a probationary employee at the time she was constructively dismissed by
petitioners, she is entitled to separation pay and backwages. Reinstatement of respondent is no longer viable
considering the circumstances.1avvphi1

However, the backwages that should be awarded to respondent shall be reckoned from the time of her
constructive dismissal until the date of the termination of her employment, i.e., from October 30, 1997 to
March 14, 1998. The computation should not cover the entire period from the time her compensation was
withheld up to the time of her actual reinstatement. This is because respondent was a probationary employee,
and the lapse of her probationary employment without her appointment as a regular employee of petitioner
Supermarket effectively severed the employer-employee relationship between the parties.

In all cases involving employees engaged on probationary basis, the employer shall make known to its
employees the standards under which they will qualify as regular employees at the time of their engagement.
Where no standards are made known to an employee at the time, he shall be deemed a regular
employee,26 unless the job is self-descriptive, like maid, cook, driver, or messenger. However, the
constitutional policy of providing full protection to labor is not intended to oppress or destroy
management.27 Naturally, petitioner Supermarket cannot be expected to retain respondent as a regular
employee considering that she lost ₱20,299.00 while acting as a cashier during the probationary period. The
rules on probationary employment should not be used to exculpate a probationary employee who acts in a
manner contrary to basic knowledge and common sense, in regard to which, there is no need to spell out a
policy or standard to be met.28
G.R. No. 117040           January 27, 2000

RUBEN SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE, respondents.

FACTS

Petitioner was hired by private respondent Isetann Department Store as a security checker HE WAS HIRED on
contractual basis, petitioner eventually became a regular employe. In 1988, he became head of the Security
Checkers Section of private respondent.2

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security
section and engage the services of an independent security agency. SERRANO WAS TERMINATED FROM HIS
EMPLOYMENT.

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay.4

CONTENTION OF SERRANO

Petitioner contends that abolition of private respondent's Security Checkers Section and the employment of an
independent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of the
Labor Code.

LABOR ARBITER

rendered a decision finding petitioner to have been illegally dismissed.

He ruled that private respondent failed to establish that it had retrenched its security section to prevent or
minimize losses to its business; instead, the day after petitioner's dismissal, private respondent employed a
safety and security supervisor with duties and functions similar to those of petitioner.1âwphi1.nêt

NLRC

reversed the decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one
month pay for every year of service, unpaid salary, and proportionate 13th month pay.

ISSUE:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO REPLACE ITS
CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE
LATTER?
RULING

YES.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of
promoting efficiency and attaining economy by a study of what units are essential for its operation. To it
belongs the ultimate determination of whether services should be performed by its personnel or contracted to
outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what
management decides."11 Consequently, absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer. 12

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private
respondent's real purpose was to avoid payment to the security checkers of the wage increases provided in
the collective bargaining agreement approved in 1990.13 Such an assertion is not sufficient basis for concluding
that the termination of petitioner's employment was not a bona fide decision of management to obtain
reasonable return from its investment, which is a right guaranteed to employers under the Constitution.14 

Indeed, that the phase-out of the security section constituted a "legitimate business decision" is a factual
finding of an administrative agency which must be accorded respect and even finality by this Court since
nothing can be found in the record which fairly detracts from such finding. 15

Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e.,
redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the
rate of one month pay for every year of service.
G.R. No. 170054               January 21, 2013

GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.

FACTS

Sometime in January 2004, petitioner Goya, Inc. (Company), hired contractual employees from PESO
Resources Development Corporation (PESO) to perform temporary and occasional services in its factory.

This prompted respondent Goya, Inc. Employees Union–FFW (Union) to request for a grievance conference on
the ground that the contractual workers do not belong to the categories of employees stipulated in the
existing Collective Bargaining Agreement (CBA).5 When the matter remained unresolved, the grievance was
referred to the National Conciliation and Mediation Board (NCMB) for voluntary arbitration.

During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator (VA)
Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to submit for
resolution the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in engaging the
services of PESO, a third party service provider, under the existing CBA, laws, and jurisprudence."6 Both parties
thereafter filed their respective pleadings.

CONTENTION OF THE UNION

The Union asserted that the hiring of contractual employees from PESO is not a management prerogative and
in gross violation of the CBA tantamount to unfair labor practice (ULP). It noted that the contractual workers
engaged have been assigned to work in positions previously handled by regular workers and Union members,
in effect violating Section 4, Article I of the CBA, which provides for three categories of employees in the
Company, WHICH ARE PROBATIONARY, REGULAR AND CASUAL.

CONTENTION OF GOYA

In countering the Union’s allegations, the Company argued that: (a) the law expressly allows contracting and
subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the Union, since not a single employee
was terminated and neither did it result in a reduction of working hours nor a reduction or splitting of the
bargaining unit;

VOLUNTARY ARBITRATOR

dismissed the Union’s charge of ULP for being purely speculative and for lacking in factual basis, but the
Company was directed to observe and comply with its commitment under the CBA.

It is clear that the parties agreed that in the event that the Company needs to engage the services of additional
workers who will perform "occasional or seasonal work directly connected with the regular operations of the
COMPANY," or "specific projects of limited duration not connected directly with the regular operations of the
COMPANY", the Company can hire casual employees which is akin to contractual employees. If we note the
Company’s own declaration that PESO was engaged to perform "temporary or occasional services" (See the
Company’s Position Paper, at p. 1), then it should have directly hired the services of casual employees rather
than do it through PESO.

CA

CA dismissed the petition

ISSUE

WON Goya’s act of contracting third-party service provider is a valid exercise of Management prerogative
despite the existence of CBA (NO, MP is subject to limitations)

RULING

The Company kept on harping that both the VA and the CA conceded that its engagement of contractual
workers from PESO was a valid exercise of management prerogative. It is confused.

To emphasize, declaring that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise thereof.

What the VA and the CA correctly ruled was that the Company’s act of contracting out/outsourcing is within
the purview of management prerogative.

Both did not say, however, that such act is a valid exercise thereof. Obviously, this is due to the recognition
that the CBA provisions agreed upon by the Company and the Union delimit the free exercise of management
prerogative pertaining to the hiring of contractual employees.

Indeed, the VA opined that "the right of the management to outsource parts of its operations is not totally
eliminated but is merely limited by the CBA," while the CA held that "this management prerogative of
contracting out services, however, is not without limitation. x x x These categories of employees particularly
with respect to casual employees serve as limitation to the Company’s prerogative to outsource parts of its
operations especially when hiring contractual employees."

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are
obliged to comply with its provisions.
G.R. No. 176240              October 17, 2008

ROLANDO SASAN, SR., LEONILO DAYDAY, MODESTO AGUIRRE, ALEJANDRO ARDIMER, ELEUTERIO SACIL,
WILFREDO JUEGOS, PETRONILO CARCEDO and CESAR PACIENCIA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION 4 TH DIVISION, EQUITABLE-PCI BANK and HELPMATE,
INC., respondents.

FACTS

Respondent Equitable-PCI Bank entered into a Contract for Services4 with HI, a domestic corporation primarily
engaged in the business of providing janitorial and messengerial services. The contract was impliedly renewed
year after year. Petitioners Rolando Sasan, Sr.,5 Leonilo Dayday,6 Modesto Aguirre,7 Alejandro
Ardimer,8 Eleuterio Sacil,9 Wilfredo Juegos,10 Petronilo Carcedo,11 and Cesar Peciencia12 were among those
employed and assigned to E-PCIBank at its branch along Gorordo Avenue, Lahug, Cebu City, as well as to its
other branches in the Visayas.13

The Contract for Services between HI and E-PCIBank expired on 15 July 2000. E-PCIBank no longer renewed
said contract with HI and, instead, bidded out its janitorial requirements to two other job contractors, Able
Services and Puritan.

ON 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate
complaints14 against E-PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive
leave pay, allowances, damages, attorney’s fees and costs. Their complaints were docketed as NLRC RAB-VII
Case No. 07-1381-2001 and raffled to Labor Arbiter Jose G. Gutierrez (Labor Arbiter Gutierrez) for their proper
disposition. Subsequently, on 22 August 2001, the petitioners15 amended their complaints to include a claim
for 13th month-pay.

CONTENTION OF PETITIONERS

In their position papers, petitioners claimed that they had become regular employees of E-PCIBank with
respect to the activities for which they were employed, having continuously rendered janitorial and
messengerial services to the bank for more than one year; that E-PCIBank had direct control and supervision
over the means and methods by which they were to perform their jobs; and that their dismissal by HI was
null and void because the latter had no power to do so since they had become regular employees of E-
PCIBank.

CONTENTION OF EQUITABLE PCI

It was HI that paid petitioners’ wages, monitored petitioners’ daily time records (DTR) and uniforms, and
exercised direct control and supervision over the petitioners and that therefore HI has every right to terminate
their services legally. E-PCIBank could not be held liable for whatever misdeed HI had committed against its
employees.

CONTENTION OF HI
HI designated petitioners to new work assignments, but the latter refused to comply with the same.
Petitioners were not dismissed by HI, whether actually or constructively, thus, petitioners’ complaints before
the NLRC were without basis.

LABOR ARBITER

Labor Arbiter rendered a Decision finding that HI was not a legitimate job contractor on the ground that it did
not possess the required substantial capital or investment to actually perform the job, work, or service under
its own account and responsibility as required under the Labor Code. 16 HI is therefore a labor-only contractor
and the real employer of petitioners is E-PCIBank which is held liable to petitioners.

And having worked with respondent Equitable-PCI Bank for more than one (1) year, they are deemed regular
employees. They cannot, therefore, be removed from employment without cause and without due process,
which is wanting in this case. Hence, the severance of their employment in the guise of termination of contract
is illegal.17

NLRC

NLRC took into consideration the documentary evidence presented by HI for the first time on appeal and, on
the basis thereof, declared HI as a highly capitalized venture with sufficient capitalization, which cannot be
considered engaged in "labor-only contracting."

CA

the Court of Appeals affirmed the findings of the NLRC that HI was a legitimate job contractor and that it did
not illegally dismiss petitioners.

ISSUE

whether HI is a labor-only contactor and E-PCIBank should be deemed petitioners’ principal employer; and
whether petitioners were illegally dismissed from their employment.

RULING:

HI is a legitimate job contractor.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to

put out or farm out to a contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the principal. 35 A person is
considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) 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;

(b) The contractor or subcontractor has substantial capital or investment; and

 (c) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.36

In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or

subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal.37 In labor-only contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility; and

(b) 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.38

In distinguishing between permissible job contracting and prohibited labor-only contracting, 39 we elucidated
in Vinoya v. National Labor Relations Commission,40 that it is not enough to show substantial capitalization or
investment in the form of tools, equipment, etc. Other facts that may be considered include the following:
whether or not the contractor is carrying on an independent business;

the nature and extent of the work; the skill required;

the term and duration of the relationship;

the right to assign the performance of specified pieces of work;

the control and supervision of the work to another;

the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control
of the premises;

the duty to supply premises, tools, appliances, materials and labor;

and the mode and manner or terms of payment.41 

Simply put, the totality of the facts and the surrounding circumstances of the case are to be
considered.42 Each case must be determined by its own facts and all the features of the relationship are to
be considered.43

We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of
Registration44 Numbered VII-859-1297-048.

Having been issued by a public officer, this certification carries with it the presumption that it was issued in
the regular performance of official duty. 46 In the absence of proof, petitioner’s bare assertion cannot prevail
over this presumption. Moreover, the DOLE being the agency primarily responsible for regulating the business
of independent job contractors, we can presume in the absence of evidence to the contrary that it thoroughly
evaluated the requirements submitted by HI as a precondition to the issuance of the Cerificate of Registration.

The evidence on record also shows that HI is carrying on a distinct and independent business from E-PCIBank.
The employees of HI are assigned to clients to perform janitorial and messengerial services, clearly
distinguishable from the banking services in which E-PCIBank is engaged.

An independent contractor must have either substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others. The law does not require both substantial capital and investment
in the form of tools, equipment, machineries, etc.48 It is enough that it has substantial capital. In the case of HI,
it has proven both.
Etched in an unending stream of cases are four standards in determining the existence of an employer-
employee relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the
mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or
absence of control of the putative employee’s conduct. Most determinative among these factors is the so-
called "control test."52

The presence of the first requisite for the existence of an employer-employee relationship to wit, the selection
and engagement of the employee is shown by the fact that it was HI which selected and engaged the services
of petitioners as its employees. This is fortified by the provision in the contract of services between HI and E-
PCIBank which states:

Selection, Engagement, Discharge. [HI] shall have exclusive discretion in the selection, engagement,
investigation, discipline and discharge of its employees.53

On the second requisite regarding the payment of wages, it was HI who paid petitioners their wages and who
provided their daily time records and uniforms and other materials necessary for the work they performed.
Therefore, it is HI who is responsible for petitioner’s claims for wages and other employee’s benefits. Precisely,
the contract of services between HI and E-PCIBank reveals the following:

Indemnity for Salaries and Benefits, etc. [HI] shall be responsible for the salaries, allowances, overtime and
holiday pay, and other benefits of its personnel including withholding taxes.54

As to the third requisite on the power to control the employee’s conduct, and the fourth requisite regarding
the power of dismissal, again E-PCIBank did not have the power to control petitioners with respect to the
means and methods by which their work was to be accomplished. It likewise had no power of dismissal over
the petitioners. All that E-PCIBank could do was to report to HI any untoward act, negligence, misconduct or
malfeasance of any employee assigned to the premises.
G.R. No. 164257               July 5, 2010

SAN MIGUEL CORPORATION, Petitioner,

vs.
VICENTE B. SEMILLANO, NELSON MONDEJAR, JOVITO REMADA, ALILGILAN MULTI-PURPOSE COOP (AMPCO)
and MERLYN V. POLIDARIO, Respondents.

FACTS

AMPCO hired the services of Vicente et al AND WERE assigned to work in SMC’s Bottling Plant, in order to
perform the following tasks: segregating bottles, removing dirt therefrom, filing them in designated places,
loading and unloading the bottles to and from the delivery trucks, and performing other tasks as may be
ordered by SMC’s officers. [They] were required to work inside the premises of SMC using [SMC’s] equipment.
[They] rendered service with SMC for more than 6 months.

Subsequently, SMC entered into a Contract of Services5 with AMPCO designating the latter as the employer of
Vicente, et al. As a result, Vicente et al. failed to claim the rights and benefits ordinarily accorded a regular
employee of SMC. In fact, they were not paid their 13th month pay. On June 6, 1995, they were not allowed to
enter the premises of SMC. The project manager of AMPCO, Merlyn Polidario, told them to wait for further
instructions from the SMC’s supervisor. Vicente et al. waited for one month, unfortunately, they never heard a
word from SMC.

Consequently, Vicente et al., as complainants, filed on July 17, 1995 a COMPLAINT FOR ILLEGAL DISMISSAL
with the Labor Arbiter against AMPCO AND SMC They claim that they were under the control and supervision
of SMC personnel and have worked for more than 6 months in the company. As such, they assert that they are
regular employees of SMC.

CONTENTION OF EMPLOYEE

CONTENDS THAT SMC utilized AMPCO making it appear that the latter was their employer, so that SMC may
evade the responsibility of paying the benefits due them under the law.

CONTENTION OF SMC

On the other hand, respondent SMC raised the defense that it is not the employer of the complainants.
According to SMC, AMPCO is their employer because the latter is an independent contractor xxx. Also SMC
alleged that it was AMPCO that directly paid their salaries and remitted their contributions to the SSS. Finally,

LABOR ARBITER
declared complainants as regular employees of San Miguel Corporation.

NLRC

Absolved SMC from liability and instead held AMPCO, as employer of respondents.

In holding that AMPCO was an independent contractor, NLRC was of the view that the law only required
substantial capital or investment. Since AMPCO had "substantial capital of nearly one (1) million" then it
qualified as an independent contractor. The NLRC added that even under the control test, AMPCO would be
the real employer of the respondents, since it had assumed the entire charge and control of respondents’
services. Hence, an employer-employee relationship existed between AMPCO and the respondents.

CA

OVERTURNED THE NLRC RULING. SMC IS THE EMPLOYER

The CA, however, found that petitioner SMC wielded (i) the power of control over respondent, as SMC
personnel supervised respondents’ performance of loading and unloading of beer bottles, and (ii) the power of
dismissal, as respondents were refused entry by SMC to its premises and were instructed by the AMPCO
manager "to wait for further instructions from the SMC’s supervisor." The CA added that AMPCO was a labor-
only contractor since "a capital of nearly one million pesos" was insufficient for it to qualify as an independent
contractor.

ISSUE

whether or not AMPCO is a legitimate job contractor

RULING

NO.

The test to determine the existence of independent contractorship is whether or not the one claiming to be an
independent contractor has contracted to do the work according to his own methods and without being
subject to the control of the employer, except only as to the results of the work.15

The existence of an independent and permissible contractor relationship is generally established by the
following criteria:

whether or not the contractor is carrying on an independent business;

the nature and extent of the work; the skill required;

the term and duration of the relationship;

the right to assign the performance of a specified piece of work;

the control and supervision of the work to another;

the employer's power with respect to the hiring, firing and payment of the contractor's workers;

the control of the premises;

the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of
payment.16
AMPCO’s main business activity is trading, maintaining a store catering to members and the public. Its job
contracting with SMC is only a minor activity or sideline. The component of AMPCO’s substantial capital are
[sic]in fact invested and used in the trading business.

Neither did petitioner prove that AMPCO had substantial equipment, tools, machineries, and supplies actually
and directly used by it in the performance or completion of the segregation and piling job. In fact, as correctly
pointed out by the NLRC in its original decision, there is nothing in AMPCO’s list17 of fixed assets, machineries,
tools, and equipment which it could have used, actually and directly, in the performance or completion of its
contracted job, work or service with petitioner. For said reason, there can be no other logical conclusion but
that the tools and equipment utilized by respondents are owned by petitioner SMC. It is likewise noteworthy
that neither petitioner nor AMPCO has shown that the latter had clients other than petitioner. Therefore,
AMPCO has no independent business.

Petitioner cannot rely either on AMPCO’s Certificate of Registration as an Independent Contractor issued by
the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such status. The
fact of registration simply prevents the legal presumption of being a mere labor-only contractor from
arising.22 In distinguishing between permissible job contracting and prohibited labor-only contracting, the
totality of the facts and the surrounding circumstances of the case are to be considered.
[ G.R. No. 217301, June 06, 2018 ]

CONSOLIDATED BUILDING MAINTENANCE, INC. AND SARAH DELGADO, PETITIONERS, VS. ROLANDO ASPREC,
JR. AND JONALEN BATALLER, RESPONDENTS.

DECISION

FACTS

CBMI provides kitchen, delivery, sanitation and other related services to Pizza Hut (PPI).

Rolando Asprec, Jr. (Asprec) and Jonalen Bataller (Bataller) (collectively referred to as the respondents) alleged
that they are regular employees of PPI.

THEY WERE ADVISED BY PIZZHUT UPON THE EXPIRATION OF THEIR CONTRACT, THEY WERE ADVISED TO GO
ON VACATION LEAVES AND UPON THE END OF SAID VACATION TO PROCEED TO CBMI TO SIGN THEIR
CONTRACTS.

AFTER WHICH THEY resumed THEIR employment, being assigned at the same branch, performing THEIR usual
duties, and receiving the same salary.[11]

On November 12, 2010, the respondents filed their Complaint against the petitioners for constructive illegal
dismissal, illegal suspension, and non-payment of separation pay.[14]

In their Complaint, the respondents argued two points: first, that their transfer from PPI to CBMI constituted
labor-only contracting and was a mere scheme by PPI to prevent their regularization; and second, that they
were illegally dismissed without cause and due process of law.[15]

CONTENTION OF CBMI

posited that the respondents are its employees. CBMI claimed that the respondents were investigated based
on an Incident Report by PPI's Store Manager Karl Clemente of an attempted theft.
In support of its position that it is engaged in legitimate job contracting, CBMI attached for the Court's
reference, its Certificate of Registration[38] with the Department of Labor and Employment (DOLE).
Furthermore, it cites that it has been in operation for almost 50 years, counting various institutions among its
clients.

LABOR ARBITER

the respondent companies are found liable for having illegally  dismissed the respondents.

the LA applied the four-fold test and ruled that the respondents are employees of PPI. Consequently, the LA
held that the arrangement between CBMI and PPI constitutes labor-only contracting and imposed upon them
solidary liability for the respondents' claim.[19]

The LA ruled that as the employer, the burden is upon PPI to prove that the dismissal was based on a just
cause and that there has been compliance with procedural due process, which it failed to do. Thus, the LA
concluded that the respondents have been illegally dismissed.[20

NLRC

ONLY CBMI IS THE EMPLOYER, NOT PIZZA HUT.

the NLRC held that the respondents are regular employees of CBMI.

the NLRC relied heavily on the employment contract and CBMI's admission of the respondents' employment.
[24]
 In this regard, and considering that there is no allegation of under payment or non-payment of wages, the
NLRC ordered PPI to be dropped from the case.

CA

The CA held that the NLRC erred in dropping PPI as a party to the case, as contrary to its findings, CBMI failed
to prove that it was an independent contractor, or was engaged in permissible job contracting.

According to the CA, the totality of the circumstances surrounding the case established that it was PPI and not
CBMI which has the discretion and control over the manner and method by which the respondents' works are
to be accomplished.

Furthermore, considering that the respondents performed tasks which are necessary and desirable to the
usual trade or business of PPI, and use tools and equipment of the latter in their work, the CA concluded that
CBMI falls under the definition of a "labor only contractor," which is prohibited under Article 106 of the Labor
Code.

ISSUE

whether or not the respondents are employees of CBMI

RULING

the Court finds that CBMI has established compliance with the requirements of legitimate job contracting.

Job contracting is deemed legitimate and permissible when the contractor has substantial capital or
investment, and runs a business that is independent and free from control by the principal.

Further, in Norkis Trading Co., Inc. v. Gnilo,[41] it is required that

 "the agreement between the principal and the contractor or subcontractor assures the contractual
employees' entitlement to all labor and occupational safety and health standards, free exercise of the right
to self-organization, security of tenure, and social welfare benefits." [42] The absence of any of these elements
results in a finding that the contractor is engaged in labor-only contracting.

In addition to the foregoing, DO No. 18-02 requires that contractors and subcontractors be registered with the
DOLE Regional Offices. The absence of registration merely gives rise to the presumption  that the contractor is
engaged in labor-only contracting.[45] Conversely, in the absence of evidence to the contrary, flowing from the
presumption of regularity in the performance of official functions, the existence of registration in favor of a
contractor is a strong badge of legitimacy in favor of the contractor.

As the primary agency tasked to regulate job contracting, DOLE is presumed to have acted in accordance with
its mandate and after due evaluation of rules and regulations in its registration of CBMI. [47] The Certificate of
Registration issued by DOLE recognizes CBMI as an independent contractor as of February 13, 2008, and
regards the validity of the latter's registration as such until February 14, 2011,[48] well within the period
relevant to this appeal. In this light, it then becomes incumbent upon the respondents to rebut the
presumption of regularity to prove that CBMI is not a legitimate contractor as determined by the DOLE, which
they failed to do.[49]

While the Certificate of Registration offered as evidence pertains only to a period of three years from February
13, 2008 until February 14, 2011, case law dictates that the status of CBMI may be evaluated on the basis of
the corporation's activities and status prior to their registration.[

CBMI has substantial capital to maintain its manpower business. From the evidence adduced by CBMI, it is also
clear that it runs a business independent from the PPI. Based on its registration with the Securities and
Exchange Commission (SEC), CBMI has been in existence since 1967; [58] and has since provided a variety of
services to entities in various fields, such as banking, hospitals, and even government institutions. CBMI counts
among its clients, De La Salle University (DLSU), Philippine National Bank (PNB), Smart Communications, Inc.,
SM Supermalls, and the United States (US) Embassy. In the case of the US Embassy for instance, CBMI has
been a service contractor for seven years.[59]

Above all, CBMI maintains the "right of control" over the respondents. For purposes of determining whether a
job contractor is engaged in legitimate contracting or prohibited labor-only contracting, DO No. 18-02, defines
the "right of control" as:

[T]he right reserved to the person for whom the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner and means in achieving that
end.[60]