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G.R. No. 74004. August 10, 1989 A.M. ORETA & CO., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and SIXTO GRULLA JR., respondents. Siguion Reyna, Montecillo & Ongsiako for petitioner MEDIALDEA, J.: This is a petition for certiorari under Rule 65 of the Rules of Court seeking annulment of the resolution of the respondents National Labor Relations Commission dated January 17, 1986 (p. 24, rollo) in BES Case no. 8-1371 entitled , "SIXTO GRULLA, JR., Complainant, versus A.M. ORETA & COMPANY INC. and/or ENGINEERING CONSTRUCTION & INDUSTRIAL DEVELOPMENT CO. (ENDECO), Respondents", affirming the decision of the Philippine Overseas Employment Administration (POEA) awarding to private respondents herein Sixto Grulla the salaries corresponding to the unexpired portion of his employment contract. The antecedent facts are as follows: Private respondent Grulla was engaged by Engineering Construction and Industrial Development Company (ENDECO) through A.M. Oreta and Co., Inc., as a carpenter in its projects in Jeddah, Saudi Arabia. The contract of employment, which was entered into June 11, 1980 was for a period of twelve (12) months. Respondent Grulla left the Philippines for Jeddah, Saudi Arabia on August 5, 1980. On August 15, 1980, Grulla met an accident which fractured his lumbar vertebra while working at the jobsite. He was rushed to the New Jeddah Clinic and was confined there for twelve (12) days. On August 27, 1980, Grulla was discharged from the hospital and was told that he could resume his normal duties after undergoing physical therapy for two weeks. On September 18, 1980, respondent Grulla reported back to his Project Manager and presented to the latter a medical certificate declaring the former already fit for work. Since then, he started working again until he received a notice of termination of his employment on October 9, 1980. In December, 1981, respondent Grulla filed a complaint for illegal dismissal, recovery of medical benefits, unpaid wages for the unexpired ten (10) months of his contract and the sum of P1,000.00 as reimbursement of medical expenses against A.M. Oreta and Company, Inc., and Engineering Construction and Industrial Development Co. (ENDECO) with the Philippine Overseas Employment Administration (POEA).lwph1.t The petitioner A.M. Oreta and Company, Inc and ENDECO filed their answer and alleged that the contract of employment entered into between petitioners and Grulla provides, as one of the grounds for termination, violations of the rules and regulations promulgated by the contractor; and that Grulla was dismissed because he has not performed his duties satisfactorally within the probationary period of three months. On August 8, 1985, the POEA rendered a decision (pp. 97-107, Rollo) the dispositive portion of which states, inter alia: In view of the foregoing, this Office finds and so holds that complainants dismissal was illegal and warrants the award of his wages for the unexpired portion of the contract. 2. Anent the complainant's claim for medical expenses, this Office finds the same well-taken. Respondent did not deny either specifically or generally said claim. Hence, it is deemed admitted. Wherefore, judgment is hereby rendered ordering repondents A.M. Oreta and Company, Inc , and its foreign principal Engineering Construction and Industrial Development Company (ENDECO) jointly and severally to pay the complainant within ten (10) days from receipt of this Order the sum of THREE THOUSAND SEVEN HUNDRED U.S. DOLLARS (U.S.$ 3,700.00) or its equivalent at the time of payment representing complainant's salaries for the unexpired portion of his contract for ten (10) months and the sum of ONE THOUSAND PESOS ( P1,00.00 ) representing reimbursement of medical expenses. Respondent is likewise ordered to pay attorney's fees equivalent to ten (10%) percent of total award SO ORDERED. Petitioner appealed from the adverse decision to respondent Commission. On January 17, 1986, respondent Commission dismissed the appeal for lack of merit and affirmed in toto the decision of the POEA. On April 1, 1986, the instant petition was filed on the ground that the respondent Commission commited grave abuse of discretion in affirming the decision of the POEA. A temporary restraining order was issued by this court on April 23, 1986, enjoining the respondents from enforcing the questioned resolution of the respondent Commission. The issue to be resolved in the instant case are whether or not the employment of respondent Grulla was illegaly terminated by the petitioner; and whether or not the respondent Grulla is entitled to salaries corresponding to the unexpired portion of his employment contract. Petitioner contends that the respondent Grulla was validly dismissed because the latter was still a probationary employee; and that his dismissal was justified on the basis of his unsatisfactory performance of his job during the probationary period. This contention has no merit. Article 280 (formerly Article 281) of the Labor Code, as amended, provides: Article 280. Regular and Casual Employment The provisions of written agreement to the contrary not withstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desireable in the usual business or trade of employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employment or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, that any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. It may be well to cite at this point Policy Instructions No. 12 of the then Minister of Labor (Now Secretary of Labor and Employment) which provides: PD 850 has defined the concept of regular and casual employment. What determines regularity or casualness is not employment contract, written or otherwise, but the nature of the job. If the job is usually necessary or desireable to the main business of the employer, the employment is regular. . . Petitioner admitted that respondent Grulla was employed in the company as carpenter for a period of twelve (12) months before he was dismissed on October 9, 1980. A perusal of the employment contract reveals that although the period of employment of respondent Grulla is twelve (12) months, the contract is renewable subject to future agreements of the parties. It is clear from the employment contract that the respondent Grulla was hired by the company as a regular employee and not just mere probationary employee. On the matter of probationary employment, the law in point is Article 281 (formerly 282) of the Labor Code which provides in part: Art. 281 Probationary Employment . . .The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. (Italics supplied) The law is clear to the effect that in all cases involving employees engaged on probationary period basis, the employer shall make known to the employee at the time he is hired, the standards by which he will qualify as a regular employee. Nowhere in the employment contract executed between petitioner company and respondent Grulla is there a stipulation that the latter shall undergo a probationary period for three months before he can qualify as a regular employee. There is also no evidence on record showing that the respondent Grulla has been appraised of his probationary status and the requirements which he should comply in order to be a

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regular employee. In the absence of this requisites, there is justification in concluding that respondent Grulla was a regular employee at the time he was dismissed by petitioner. As such, he is entitled to security of tenure during his period of employment and his services cannot be terminated except for just and authorized causes enumerated under the Labor Code and under the employment contract. Granting, in gratia argumenti, that respondent is a probationary employee, he cannot, likewise, be removed except for cause during the period of probation. Although a probationary or temporary employee has limited tenure, he still enjoys security of tenure. During his tenure of employment or before his contract expires, he cannot be removed except for cause as provided by law (Euro-Linea Phils., Inc. v. NLRC, No. L-75782, December 1, 1987, 156 SCRA 78; Manila Hotel Corporation v. NLRC, No. L-53453, January 22, 1986, 141 SCRA 169).lwph1.t Article 282 of the Labor Code sets forth the following just causes for which an employer may terminate an employment, namely: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other cause analogous to the foregoing The alleged ground of unsatisfactory performance relied upon by petitioner for dismissing respondent Grulla is not one of the just causes for dismissal provided in the Labor Code. Neither is it included among the grounds for termination of employment under Article VII of the contract of employment executed by petitioner company and respondent Grulla (p. 18, Rollo). Moreover, petitioner has failed to show proof of the particular acts or omissions constituting the unsatisfactory performance of Grulla of his duties, which was allegedly due to his poor physical state after the accident. Contrary to petitioner's claims, records show that the medical certificate issued by the hospital where respondent Grulla was confined as a result of the accident, clearly and positively stated that Grulla was already physically fit for work after he was released from the hospital (p. 102, Rollo).lwph1.t Anent the respondent Commission's finding of lack of due process in the dismissal of Grulla, the petitioner claims that notice and hearing are important only if the employee is not aware of the problems affecting his employment; that the same is not true in the instant case where respondent Grulla knew all along that he could no longer effectively perform his job due to his physical condition. We find that this contention has no legal basis. The twin requirements of notice and hearing constitute essential elements of due process in cases of employee dismissal: the requirement of notice is intended to inform the employee concerned of the employer's intent to dismiss and the reason for the proposed dismissal, while the requirement of hearing affords the employee an opportunity to answer his employer's charges against him and accordingly to defend himself therefrom before dismissal is effected. Neither of these requirements can be dispensed with without running afoul of the due process requirement of the Constitution (Century Textile Mills, Inc., et al. v. NLRC, et al., G.R. No. 77859, May 25,1988). In the case at bar, respondent Grulla was not, in any manner, notified of the charges against him before he was outrightly dismissed. Neither was any hearing or investigation conducted by the company to give the respondent a chance to be heard concerning the alleged unsatisfactory performance of his work. In view of the foregoing, the dismissal of respondent Grulla violated the security of tenure under the contract of employment which specifically provides that the contract term shall be for a period of twelve (12) calendar months. Consequently the respondent Grulla should be paid his salary for the unexpired portion of his contract of employment which is ten (10) months (See Cuales v. NLRC, et al., No. L-57379 April 28, 1983, 121 SCRA 812). The findings of the POEA and the respondent Commission that the respondent Grulla is entitled to salaries in the amount of US$ 3,700.00 or its equivalent in Philippine currency for the unexpired portion of his contract and the sum of P1,000.00 as reimbursement of medical expenses bear great weight. Well-established is the principle that findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases does not go so far as to evaluate the sufficiency of the evidence upon which the labor officer or office based his or its determination but are limited to issues of jurisdiction or grave abuse of discretion (Special Events and Central Shipping Office Workers Union v. San Miguel Corporation, Nos. L-51002-06, May 30, 1983, 122 SCRA 557). In the instant case, the assailed Resolution of the respondent Commission is not tainted with arbitrariness that would amount to grave abuse of discretion or lack of jurisdiction and therefore, We find no reason to disturb the same. ACCORDINGLY, premises considered, the instant petition is dismissed for lack of merit and the resolution of the respondent Commission dated January 17, 1986 is hereby AFFIRMED. The temporary restraining order issued on April 23, 1986 is lifted. SO ORDERED.

G.R. No. L-77629 May 9, 1990 KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVISM AND NATIONALISM-ORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE (KILUSAN-OLALIA), ROQUE JIMENEZ, MARIO C. RONGALEROS and OTHERS, petitioners, vs. HON. FRANKLIN M. DRILON, KIMBERLY-CLARK PHILIPPINES, INC., RODOLFO POLOTAN, doing business under the firm name "Rank Manpower Co." and UNITED KIMBERLY-CLARK EMPLOYEES UNION-PHILLIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (UKCEU-PTGWO), respondents. KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM AND NATIONALISM-OLALIA (KILUSANOLALIA), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA. ESTRELLA ALDA, CAPT. REY L. LANADA, COL. VIVENCIO MANAIG and KIMBERLY-CLARK PHILIPPINES, INC., respondents. REGALADO, J.: Before us are two consolidated petitions for certiorari filed by the above-named petitioner union (hereinafter referred to as KILUSANOLALIA, for conciseness) and individual complainants therein, to wit (a) G.R. 77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the resolution, dated January 9, 1987, 2 respectively handed down by the two former Ministers of Labor, both rendered in BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of the resolutions of the National Labor Relations Commission, dated May 25, 1987 3 and June 19,1987 4 issued in Injunction Case No. 1442 thereof. Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective bargaining agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport and General Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986. Within the 60-day freedom period prior to the expiration of and during the negotiations for the renewal of the aforementioned CBA, some members of the bargaining unit formed another union called "Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized Labor Association in Line Industries and Agriculture (KILUSAN-OLALIA)."

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On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in Regional Office No. IV, Ministry of Labor and Employment (MOLE), docketed as Case No. RO4-OD-M-415-86. 5 KIMBERLY and (UKCEU-PTGWO) did not object to the holding of a certification election but objected to the inclusion of the so-called contractual workers whose employment with KIMBERLY was coursed through an independent contractor, Rank Manpower Company (RANK for short), as among the qualified voters. Pending resolution of the petition for certification election by the med-arbiter, KILUSAN-OLALIA filed a notice of strike on May 7, 1986 with the Bureau of Labor Relations, docketed as BLR Case No. NS-5-164-86, 6 charging KIMBERLY with unfair labor practices based on the following alleged acts: (1) dismissal of union members (KILUSAN-OLALIA); (2) non-regularization of casuals/contractuals with over six months service; (3) non-implementation of appreciation bonus for 1982 and 1983; (4) non-payment of minimum wages; (5) coercion of employees; and (6) engaging in CBA negotiations despite the pendency of a petition for certification election. This was later amended to withdraw the charge of coercion but to add, as new charges, the dismissal of Roque Jimenez and the non-payment of backwages of the reinstated Emerito Fuentes . 7 Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared a strike at KIMBERLY's premises in San Pedro, Laguna on May 23, 1986. On May 26, 1986, KIMBERLY petitioned MOLE to assume jurisdiction over the labor dispute. On May 30, 1986, finding that the labor dispute would adversely affect national interest, then Minister Augusto S. Sanchez issued an assumption order, the dispositive portion whereof reads: Wherefore, premises considered, immediately upon receipt of this order, the striking union and its members are hereby enjoined to lift the picket and remove all obstacles to the free ingress to and egress from the company premises and to return to work, including the 28 contractual workers who were dismissed; likewise, the company is directed to resume its operations immediately thereafter and to accept all the employees back under the same terms and conditions of employment prevailing prior to the industrial action. Further, all issues in the notice of strike, as amended, are hereby assumed in this assumption order, except for the representation issue pending in Region IV in which the Med-Arbiter is also enjoined to decide the same the soonest possible time. 8 In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing activities effective June 1, 1986 after a compliance agreement was entered into by it with KIMBERLY. 9 On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election case (RO4-OD-M-4-1586), issued an order 10 declaring the following as eligible to vote in the certification election, thus: 1. The regular rank-and-file laborers/employees of the respondent company consisting of 537 as of May 14, 1986 should be considered qualified to vote; 2. Those casuals who have worked at least six (6) months as appearing in the payroll months prior to the filing of the instant petition on April 21, 1986; and 3. Those contractual employees who are allegedly in the employ of an independent contractor and who have also worked for at least six (6) months as appearing in the payroll month prior to the filing of the instant petition on April 21, 1986. During the pre-election conference, 64 casual workers were challenged by KIMBERLY and (UKCEU-PTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It was agreed by all the parties that the 64 voters shall be allowed to cast their votes but that their ballots shall be segregated and subject to challenge proceedings. The certification election was conducted on July I., 1986, with the following results: 11 1. KILUSAN-OLALIA = 246 votes 2. (UKCEU-PTGWO) = 266 votes 3. NO UNION = 1 vote 4. SPOILED BALLOTS = 4 votes 5. CHALLENGED BALLOTS = 64 votes TOTAL 581 votes On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and Count Challenged Votes" 12 on the ground that the 64 workers are employees of KIMBERLY within the meaning of Article 212(e) of the Labor Code. On July 7, 1986, KIMBERLY filed an opposition to the protest and motion, asserting that there is no employer-employee relationship between the casual workers and the company, and that the med-arbiter has no jurisdiction to rule on the issue of the status of the challenged workers which is one of the issues covered by the assumption order. The med-arbiter opted not to rule on the protest until the issue of regularization has been resolved by MOLE. 13 On November 13, 1986, then Minister Sanchez rendered a decision in BLR Case No. NS-5-164-86, 14 the disposition wherein is summarized as follows: 1. The service contract for janitorial and yard maintenance service between KIMBERLY and RANK was declared legal; 2. The other casual employees not performing janitorial and yard maintenance services were deemed laboronly contractual and since labor-only contracting is prohibited, such employees were held to have attained the status of regular employees, the regularization being effective as of the date of the decision; 3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as the exclusive bargaining representative of KIMBERLY's employees; 4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered; 5. Roque Jimenez was ordered reinstated without backwages, the period when he was out of work being considered as penalty for his misdemeanor; 6. The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes with backwages was declared as already final and unappealable; and 7. KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983. On November 25, 1986, KIMBERLY flied a motion for reconsideration with respect to the regularization of contractual workers, the appreciation bonus and the reinstatement of Roque Jimenez. 15 In a letter dated November 24, 1986, counsel for KILUSAN-OLALIA demanded from KIMBERLY the implementation of the November 13, 1986 decision but only with respect to the regularization of the casual workers. 16 On December 11, 1986, KILUSAN-OLALIA filed a motion for reconsideration questioning the authority of the Minister of Labor to assume jurisdiction over the representation issue. In the meantime, KIMBERLY and UKCEU-PTGWO continued with the negotiations on the new collective bargaining agreement (CBA), no restraining order or junctive writ having been issued, and on December 18, 1986, a new CBA was concluded and ratified by 440 out of 517 members of the bargaining unit. 17 In an order dated January 9, 1987, former Labor Minister Franklin Drilon denied both motions for reconsideration filed by KIMBERLY and KILUSAN-OLALIA. 18 On March 10, 1987, the new CBA executed between KIMBERLY and UKCEU-PTGWO was signed. On March 16, 1987, KILUSAN-OLALIA filed a petition for certiorari in this Court docketed as G.R. No. 77629, seeking to set aside the aforesaid decision, dated November 13, 1986, and the order, dated January 9, 1987, rendered by the aforesaid labor ministers. On March 25, 1987, this Court issued in G.R. No. 77629 a temporary restraining order, enjoining respondents from enforcing and/or carrying out the decision and order above stated, particularly that portion (1) recognizing respondent UKCEU-PTGWO as the exclusive bargaining representative of all regular rank-and-file employees in the establishment of respondent company, (2) enforcing and/or implementing the alleged CBA which is detrimental to the interests of the members of the petitioner union, and (3) stopping respondent company from deducting monthly dues and other union assessments from the wages of all regular rank-and-file employees of respondent company and from remitting the said collection to respondent UKCEU-PTGWO issued in BLR Case No.

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NS-5-164-86, entitled, "In Re: Labor Dispute at Kimberly-Clark Philippines, Inc.," of the Department of Labor and Employment, Manila, 19 In its comment, 20 respondent company pointed out certain events which took place prior to the filing of the petition in G.R. No. 77629, to wit: 1. The company and UKCEU-PTGWO have concluded a new collective bargaining agreement which had been ratified by 440 out of 517 members of the bargaining unit; 2. The company has already granted the new benefits under the new CBA to all its regular employees, including members of petitioner union who, while refusing to ratify the CBA nevertheless readily accepted the benefits arising therefrom; 3. The company has been complying with the check-off provision of the CBA and has been remitting the union dues to UKCEU-PTGWO 4. The company has already implement the decision of November 13, 1986 insofar as the regularization of contractual employees who have rendered more than one (1) year of service as of the filing of the Notice of Strike on May 7, 1986 and are not engaged in janitorial and yard maintenance work, are concerned 5. Rank Manpower Company had already pulled out, reassigned or replaced the contractual employees engaged in janitorial and yard maintenance work, as well as those with less than one year service; and 6. The company has reinstated Roque Jimenez as of January 11, 1987. In G.R. No. 78791, the records 21 disclose that on May 4, 1987, KILUSAN-OLALIA filed another notice of strike with the Bureau of Labor Relations charging respondent company with unfair labor practices. On May 8, 1987, the bureau dismissed and considered the said notice as not filed by reason of the pendency of the representation issue before this Court in G.R. No. 77629. KILUSAN-OLALIA moved to reconsider said order, but before the bureau could act on said motion, KILUSAN-OLALIA declared a strike and established a picket on respondent company's premises in San Pedro, Laguna on May 17, 1987. On May 18, 1987, KIMBERLY filed a petition for injunction with the National Labor Relations Commission (NLRC), docketed as Injunction Case No. 1442. A supplement to said petition was filed on May 19, 1987. On May 26, 1987, the commission en banc issued a temporary restraining order (TRO) on the basis of the ocular inspection report submitted by the commission's agent, the testimonies of KIMBERLY's witnesses, and pictures of the barricade. KILUSAN-OLALIA moved to dissolve the TRO on the ground of lack of jurisdiction. Immediately after the expiration of the first TRO on June 9, 1987, the striking employees returned to their picket lines and reestablished their barricades at the gate. On June 19, 1987, the commission en banc issued a second TRO. On June 25, 1987, KILUSAN-OLALIA filed another petition for certiorari and prohibition with this Court, docketed as G.R. No. 78791, questioning the validity of the temporary restraining orders issued by the NLRC on May 26, 1987 and June 19, 1987. On June 29, 1987, KILUSAN-OLALIA filed in said case an urgent motion for a TRO to restrain NLRC from implementing the questioned orders. An opposition, as well as a reply thereto, were filed by the parties. Meanwhile, on July 3, 1987, KIMBERLY filed in the NLRC an urgent motion for the issuance of a writ of preliminary injunction when the strikers returned to the strike area after the second TRO expired. After due hearing, the commission issued a writ of preliminary injunction on July 14, 1987, after requiring KIMBERLY to post a bond in the amount of P20,000.00. Consequently, on July 17, 1987, KILUSAN-OLALIA filed in G.R. No. 78791 a second urgent motion for the issuance of a TRO by reason of the issuance of said writ of preliminary injunction, which motion was opposed by KIMBERLY. Thereafter, in its memorandum 22 filed on December 28, 1989 and in its motion for early resolution 23 filed on February 28, 1990, both in G.R. No. 78791, KILUSAN-OLALIA alleged that it had terminated its strike and picketing activities and that the striking employees had unconditionally offered to return to work, although they were refused admission by KIMBERLY. By reason of this supervening development, the petition in G.R. No. 78791, questioning the propriety of the issuance of the two temporary restraining orders and the writ of injunction therein, has been rendered moot and academic. In G.R. No. 77629, the petition of KILUSAN-OLALIA avers that the respondent Secretary of Labor and/or the former Minister of Labor have acted with grave abuse of discretion and/or without jurisdiction in (1) ruling on the issue of bargaining representation and declaring respondent UKCEU-PTGWO as the collective bargaining representative of all regular rank-and-file employees of the respondent company; (2) holding that petitioners are not entitled to vote in the certification election; (3) considering the regularization of petitioners (who are not janitors and maintenance employees) to be effective only on the date of the disputed decision; (4) declaring petitioners who are assigned janitorial and yard maintenance work to be employees of respondent RANK and not entitled to be regularized; (5) not awarding to petitioners differential pay arising out of such illegal work scheme; and (6) ordering the mere reinstatement of petitioner Jimenez. The issue of jurisdiction actually involves a question of whether or not former Minister Sanchez committed a grave abuse of discretion amounting to lack of jurisdiction in declaring respondent UKCEU-PTGWO as the certified bargaining representative of the regular employees of KIMBERLY, after ruling that the 64 casual workers, whose votes are being challenged, were not entitled to vote in the certification election. KILUSAN-OLALIA contends that after finding that the 64 workers are regular employees of KIMBERLY, Minister Sanchez should have remanded the representation case to the med-arbiter instead of declaring UKCEU-PTGWO as the winner in the certification election and setting aside the med-arbiter's order which allowed the 64 casual workers to cast their votes. Respondents argue that since the issues of regularization and representation are closely interrelated and that a resolution of the former inevitably affects the latter, it was necessary for the former labor minister to take cognizance of the representation issue; that no timely motion for reconsideration or appeal was made from his decision of November 13, 1986 which has become final and executory; and that the aforesaid decision was impliedly accepted by KILUSAN-OLALIA when it demanded from KIMBERLY the issuance of regular appointments to its affected members in compliance with said decision, hence petitioner employees are now stopped from questioning the legality thereof. We uphold the authority of former Minister Sanchez to assume jurisdiction over the issue of the regularization of the 64 casual workers, which fact is not even disputed by KILUSAN-OLALIA as may be gleaned from its request for an interim order in the notice of strike case (BLR-NS-5-164-86), asking that the regularization issue be immediately resolved. Furthermore, even the med-arbiter who ordered the holding of the certification election refused to resolve the protest on the ground that the issue raised therein correctly pertains to the jurisdiction of the then labor minister. No opposition was offered by KILUSAN-OLALIA. We hold that the issue of regularization was properly addressed to the discretion of said former minister. However, the matter of the controverted pronouncement by former Minister Sanchez, as reaffirmed by respondent secretary, regarding the winner in the certification election presents a different situation. It will be recalled that in the certification election, UKCEU-PTGWO came out as the winner, by garnering a majority of the votes cast therein with the exception of 64 ballots which were subject to challenge. In the protest filed for the opening and counting of the challenged ballots, KILUSAN-OLALIA raised the main and sole question of regularization of the 64 casual workers. The med-arbiter refused to act on the protest on the ground that the issue involved is within the jurisdiction of the then Minister of Labor. KILUSANOLALIA then sought an interim order for an early resolution on the employment status of the casual workers, which was one of the issues included in the notice of strike filed by KILUSAN-OLALIA in BLR Case No. NS-5-164-86. Consequently, Minister Sanchez rendered the questioned decision finding that the workers not engaged in janitorial and yard maintenance service are regular employees but that they became regular only on the date of his decision, that is, on November 13, 1986, and, therefore, they were not entitled to vote in the certification election. On the basis of the results obtained in the certification election, Minister Sanchez declared UKCEU-PTGWO as the winner. The pivotal issue, therefore, is when said workers, not performing janitorial or yard maintenance service, became regular employees of KIMBERLY. We find and so hold that the former labor minister gravely abused his discretion in holding that those workers not engaged in janitorial or yard maintenance service attained the status of regular employees only on November 13, 1986, which thus deprived them of their constitutionally protected right to vote in the certification election and choose their rightful bargaining representative. The Labor Code defines who are regular employees, as follows:

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Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary not withstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or under the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. The individual petitioners herein who have been adjudged to be regular employees fall under the second category. These are the mechanics, electricians, machinists machine shop helpers, warehouse helpers, painters, carpenters, pipefitters and masons It is not disputed that these workers have been in the employ of KIMBERLY for more than one year at the time of the filing of the Petition for certification election by KILUSAN-OLALIA. Owing to their length of service with the company, these workers became regular employees, by operation of law, one year after they were employed by KIMBERLY through RANK. While the actual regularization of these employees entails the mechanical act of issuing regular appointment papers and compliance with such other operating procedures as may be adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to instead make their regularization dependent on the happening of some contingency or the fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by law. That the first stated position is the situation contemplated and sanctioned by law is further enhanced by the absence of a statutory limitation before regular status can be acquired by a casual employee. The law is explicit. As long as the employee has rendered at least one year of service, he becomes a regular employee with respect to the activity in which he is employed. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction should be drawn. The submission that the decision of November 13, 1986 has become final and executory, on the grounds that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly acceded thereto, is untenable. Rule 65 of the Rules of Court allows original petitions for certiorari from decisions or orders of public respondents provided they are filed within a reasonable time. We believe that the period from January 9, 1987, when the motions for reconsideration separately filed by KILUSAN-OLALIA and KIMBERLY were denied, to March 16, 1987, when the petition in G.R. No. 77629 was filed, constitutes a reasonable time for availing of such recourse. We likewise do not subscribe to the claim of respondents that KILUSAN-OLALIA has impliedly accepted the questioned decision by demanding compliance therewith. In the letter of KILUSAN-OLALIA dated November 24, 1986 24 addressed to the legal counsel of KIMBERLY, it is there expressly and specifically pointed out that KILUSAN-OLALIA intends to file a motion for reconsideration of the questioned decision but that, in the meantime, it was demanding the issuance of regular appointments to the casual workers who had been declared to be regular employees. The filing of said motion for reconsideration of the questioned decision by KILUSAN-OLALIA, which was later denied, sustains our position on this issue and denies the theory of estoppel postulated by respondents. On the basis of the foregoing circumstances, and as a consequence of their status as regular employees, those workers not perforce janitorial and yard maintenance service were performance entitled to the payment of salary differential, cost of living allowance, 13th month pay, and such other benefits extended to regular employees under the CBA, from the day immediately following their first year of service in the company. These regular employees are likewise entitled to vote in the certification election held in July 1, 1986. Consequently, the votes cast by those employees not performing janitorial and yard maintenance service, which form part of the 64 challenged votes, should be opened, counted and considered for the purpose of determining the certified bargaining representative. G.R. No. 149011 June 28, 2005 We do not find it necessary to disturb the finding of then Minister Sanchez holding as legal the service contract executed between KIMBERLY and RANK, with respect to the workers performing janitorial and yard maintenance service, which is supported by substantial and convincing evidence. Besides, we take judicial notice of the general practice adopted in several government and private institutions and industries of hiring a janitorial service on an independent contractor basis. Furthermore, the occasional directives and suggestions of KIMBERLY are insufficient to erode primary and continuous control over the employees of the independent contractor. 25 Lastly, the duties performed by these workers are not independent and integral steps in or aspects of the essential operations of KIMBERLY which is engaged in the manufacture of consumer paper products and cigarette paper, hence said workers cannot be considered regular employees. The reinstatement of Roque Jimenez without backwages involves a question of fact best addressed to the discretion of respondent secretary whose finding thereon is binding and conclusive upon this Court, absent a showing that he committed a grave abuse in the exercise thereof. WHEREFORE, judgment is hereby rendered in G.R. No. 77629: 1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged votes, and that the union with the highest number of votes be thereafter declared as the duly elected certified bargaining representative of the regular employees of KIMBERLY; 2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with respect to minimum wage, cost of living allowance, 13th month pay, and benefits provided for under the applicable collective bargaining agreement from the time they became regular employees. All other aspects of the decision appealed from, which are not so modified or affected thereby, are hereby AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made permanent. The petition filed in G.R. No. 78791 is hereby DISMISSED. SO ORDERED.

SAN MIGUEL CORPORATION, petitioner vs. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C.

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PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents. DECISION CARPIO-MORALES, J.: Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract of Services1 commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of the contract read: 1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive basis for a period of one year the following services for the Bacolod Shrimp Processing Plant: A. Messengerial/Janitorial B. Shrimp Harvesting/Receiving C. Sanitation/Washing/Cold Storage2 2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the necessary personnel and provide adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily accomplish the work and services undertaken by the cooperative. xxx 3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates per activity: A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00) B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher, with provisions as follows: P25.00 Fixed Fee per person Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal. This will be pre-set every harvest based on harvest plan approved by the Senior Buyer. C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts. One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each month. The cooperative shall pay taxes, fees, dues and other impositions that shall become due as a result of this contract. The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. xxx 4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any of its members, or the company and any members of the cooperative. The cooperative is an association of self-employed members, an independent contractor, and an entrepreneur. It is subject to the control and direction of the company only as to the result to be accomplished by the work or services herein specified, and not as to the work herein contracted. The cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to provide the services contracted for and its realization of profit or loss from its undertaking, in relation to all its other undertakings, will depend on how efficiently it deploys and fields its members and how they perform the work and manage its operations. 5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under this contract shall be performed. 6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or otherwise in the direction and control thereof. The determination of the wages, salaries and compensation of the memberworkers of the cooperative shall be within its full control. It is further understood that the cooperative is an independent contractor, and as such, the cooperative agrees to comply with all the requirements of all pertinent laws and ordinances, rules and regulations. Although it is understood and agreed between the parties hereto that the cooperative, in the performance of its obligations, is subject to the control or direction of the company merely as a (sic) result to be accomplished by the work or services herein specified, and not as to the means and methods of accomplishing such result, the cooperative hereby warrants that it will perform such work or services in such manner as will be consistent with the achievement of the result herein contracted for. xxx 8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and protection in accordance with the provisions of the labor code, cooperative code and other applicable laws and decrees and the rules and regulations promulgated by competent authorities, assuming all responsibility therefor. The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement made, signed and sworn to by its duly authorized representative before a notary public or other officer authorized by law to administer oaths, to the effect that the cooperative has paid all wages or salaries due to its employees or personnel for services rendered by them during the month immediately preceding, including overtime, if any, and that such payments were all in accordance with the requirements of law. xxx 12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-to-month basis until terminated by either party by sending a written notice to the other at least thirty (30) days prior to the intended date of termination. xxx3 (Underscoring supplied) Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995. In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees. Private respondents subsequently filed on September 25, 1995 an Amended Complaint4 to include illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp Processing Plant on September 15, 19955 which resulted in the termination of their services. SMC filed a Motion for Leave to File Attached Third Party Complaint6 dated November 27, 1995 to implead Sunflower as Third Party Defendant which was, by Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon. In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment (DOLE) a Notice of Closure8 of its aquaculture operations effective on even date, citing serious business losses. By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint for lack of merit, ratiocinating as follows: We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract out the preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken regarding the general

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practice adopted in government and private institutions and industries of hiring independent contractors to perform special services. xxx xxx Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions and we do not see how this activity could not be legally undertaken by an independent service cooperative like the third-party respondent herein. There is no basis to the demand for regularization simply on the theory that complainants performed activities which are necessary and desirable in the business of respondent. It has been held that the definition of regular employees as those who perform activities which are necessary and desirable for the business of the employer is not always determinative because any agreement may provide for one (1) party to render services for and in behalf of another for a consideration even without being hired as an employee. The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization and completely unsubstantiated. xxx In the absence of clear and convincing evidence showing that third-party respondent acted merely as a labor only contractor, we are firmly convinced of the legitimacy and the integrity of its service contract with respondent SMC. In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by economic factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to close his business or cease his operations for bonafide reasons, as much as it recognizes the right of the employer to terminate the employment of any employee due to closure or cessation of business operations, unless the closing is for the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly been established, is a management prerogative which could hardly be interfered with. xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are concerned, resulted in the termination of SMCs service contract with their cooperative xxx9(Underscoring supplied) Private respondents appealed to the NLRC. By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party respondent Sunflower was an independent contractor in light of its observation that "[i]n all the activities of private respondents, they were under the actual direction, control and supervision of third party respondent Sunflower, as well as the payment of wages, and power of dismissal."10 Private respondents Motion for Reconsideration11 having been denied by the NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition for certiorari12 before the Court of Appeals (CA). Before the CA, SMC filed a Motion to Dismiss13 private respondents petition for non-compliance with the Rules on Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC. SMC subsequently filed its Comment14 to the petition on March 30, 2000. By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private respondents, disposing as follows: WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998 decision and 10 September 1999 resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners: (a) separation pay in accordance with the computation given to the regular SMC employees working at its Bacolod Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11 September 1995, the time their actual compensation was withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September 1995; and ORDERING private respondent SMC to PAY unto the petitioners attorneys fees equivalent to ten (10%) percent of the total award. No pronouncement as to costs. SO ORDERED.15 (Underscoring supplied) Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned: Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to abstain from establishing an employer-employee relationship between SMC and [Sunflower] or the latters members, the extent to which the parties successfully realized this intent in the light of the applicable law is the controlling factor in determining the real and actual relationship between or among the parties. xxx With respect to the power to control petitioners conduct, it appears that petitioners were under the direct control and supervision of SMC supervisors both as to the manner they performed their functions and as to the end results thereof. It was only after petitioners lodged a complaint to have their status declared as regular employees of SMC that certain members of [Sunflower] began to countersign petitioners daily time records to make it appear that they (petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would never have allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside SMC employees discharging similar or identical activities unless it exercised a substantial degree of control and supervision over the petitioners not only as to the manner they performed their functions but also as to the end results of such functions. xxx xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and the petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work premises, et cetera necessary to actually perform the service under their own account, responsibility, and method. The only "work premises" maintained by [Sunflower] was a small office within the confines of a small "carinderia" or refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523). In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and supervision of SMC both as to the manner and method in discharging their functions and as to the resultsthereof. Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and handlers were directly related to the aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract from January 1993 to September 1995, a period of close to three (3) years. Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the suspicion that the non-exclusive service contract between SMC and [Sunflower] was "designed to evade the obligations inherent in an employeremployee relationship" (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259). Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p. 9). xxx With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow these two entities through the convenience of a non-exclusive service contract to stipulate on the existence of employer-employee relation. Such existence is a question of law which cannot be made the subject of agreement to the detriment of the petitioners (Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500). xxx

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There being a finding of "labor-only" contracting, liability must be shouldered either by SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however should be held solelyliable for [Sunflower] became non-existent with the closure of the aquaculture business of SMC. Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer feasible. Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay (in the computation similar to those given to regular SMC employees at its Bacolod Shrimp Processing Plant) "with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them" up to the time of the finality of this decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the discussion mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September 1995.16 (Emphasis and underscoring supplied) SMCs Motion for Reconsideration17 having been denied for lack of merit by Resolution of July 11, 2001, it comes before this Court via the present petition for review on certiorari assigning to the CA the following errors: I THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS. II THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT. III THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC. IV THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES.18 (Underscoring supplied) SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the ninety seven named petitioners signed the verification and certification against forum-shopping. While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient,19 this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.20 Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded.21 It does not, however, thereby interdict substantial compliance with its provisions under justifiable circumstances.22 Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association,23 this Court held: Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by their homeowners association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was the breach of contractual obligations and payment of damages. They shared a common interest in the subject matter of the case, being the aggrieved residents of the poorly constructed and developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it is highly impractical to require all the plaintiffs to sign the certificate of nonforum shopping, it is sufficient, in order not to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate provided that xxx the plaintiffs share a common interest in the subject matter of the case or filed the case as a "collective," raising only one common cause of action or defense.24 (Emphasis and underscoring supplied) Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial compliance with the Rules.25 That the three indeed represented their co-petitioners before the appellate court is, as it correctly found, "subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing in their memorandum filed before Us."26 Additionally, the merits of the substantive aspects of the case may also be deemed as "special circumstance" or "compelling reason" to take cognizance of a petition although the certification against forum shopping was not executed and signed by all of the petitioners.27 SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by "copies of all pleadings and documents relevant and pertinent thereto" in contravention of Section 1, Rule 65 of the Rules of Court.28 This Court is not persuaded. The records show that private respondents appended the following documents to their petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,29 their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before the NLRC,30 the December 29, 1998 NLRCD E C I S I O N,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC32 and the September 10, 1999 NLRC Resolution.33 It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima facie case.34 It discerns whether on the basis of what have been submitted it could already judiciously determine the merits of the petition.35 In the case at bar, the CA found that the petition was adequately supported by relevant and pertinent documents. At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.36 Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.37 SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and the NLRC as "findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality," and that this principle acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the same factual findings. The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular field of its endeavor are accorded great weight on appeal.38 The rule is not absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of the case.39 SMC further faults the appellate court in giving due course to private respondents petition despite the fact that the complaint filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private respondents position paper40 was verified by only six41 out of the ninety seven complainants; and that their Joint-Affidavit42 was executed only by twelve43 of the complainants. Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been considered by the appellate court in establishing the claims of those who did not sign the same, citing this Courts ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.44 SMCs position does not lie.

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A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus the first sentence of their complaint alleges: "xxx complainants, by counsel and unto this Honorable Office respectfully state xxx." And the complaint was signed by Atty. Jose Max S. Ortiz as "counsel for the complainants." Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint. That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the preparation of the complaint "with the authority of my co-complainants" indubitably shows that Talite was representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states: Section 7. Authority to bind party. Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial discharge of a clients claim. (Underscoring supplied) As regards private respondents position paper which bore the signatures of only six of them, appended to it was an Authority/Confirmation of Authority45 signed by the ninety one others conferring authority to their counsel "to file RAB Case No. 06-0710316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City" and appointing him as their retained counsel to represent them in the said case. That there has been substantial compliance with the requirement on verification of position papers under Section 3, Rule V of the 1990 NLRC Rules of Procedure46 is not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads: Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and examination of well-informed persons. (underscoring supplied) As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some complainants to affix their signatures thereon, this Court quotes with approval the appellate courts ratiocinations: A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads: "Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor appear during trial and in whose favor no other independent evidence was adduced, no award for back wages could have been validly and properly made for want of factual basis. There is no showing at all that any of the affidavits of the thirty-four (34) complainants were offered as evidence for those who did not submit their affidavits, or that such affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondents position paper was not of any help to these delinquent complainants. The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not submit theirs, or the affidavits were material and relevant to the rights and interest of the latter, such affidavits may be sufficient to establish the claims of those who did not give their affidavits. Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein) would readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the complainants. (These ninetyseven (97) individuals were previously identified during the mandatory conference as the only complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest of all of the complainants as it supported their claim of the existence of an employer-employee relationship between them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the complainants.47 (Emphasis supplied, underscoring in the original) In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins: ART. 221. Technical rules not binding and prior resort to amicable settlement. In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. xxx As such, their application may be relaxed to serve the demands of substantial justice.48 On the merits, the petition just the same fails. SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand, private respondents assert that Sunflower is a labor-only contractor. Article 106 of the Labor Code provides: ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the 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. Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor-only contracting: Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service. Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) 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 ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.

10
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. The "right to control" shall refer to the 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 to be used in reaching that end. The test to determine the existence of independent contractorship is whether 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.49 In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.50 In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.51 The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employeremployee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties relationship; rather it is the totality of the facts and surrounding circumstances of the case.52 A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.53 SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no substantial capital.54 While indeed Sunflower was issued Certificate of Registration No. IL0-87555 on February 10, 1992 by the Cooperative Development Authority, this merely shows that it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of Article 1456 of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be considered substantial capitalization. What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other materials to qualify it as an independent contractor. On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private respondents in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted allegations of private respondents in the Joint Affidavit: [Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery, equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and working facilities are owned by respondent SMC. The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by respondent SMC. The gloves and boots used by the complainants were also owned by respondent SMC. Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners were all owned and provided by respondent SMC. Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities used in said prawn processing xxx The alleged office of [Sunflower] is found within the confines of a small "carinderia" or "refreshment" (sic) owned by the mother of the Cooperative Chairman Roy Asong. xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. 57 And from the job description provided by SMC itself, the work assigned to private respondents was directly relatedto the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting, receiving and packing formed an integral part of the shrimp processing operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer58 has been jurisprudentially recognized. Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC. Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its employees.59 And control of the premises in which private respondents worked was by SMC. These tend to disprove the independence of the contractor.60 More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors.61 This circumstance is another indicium of the existence of a labor-only contractorship.62 And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC,63 and with the closure of SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.64 is thus instructive. xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers.65(Underscoring supplied) All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and private respondents. Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter66 and as such are entitled to all the benefits and rights appurtenant to regular employment.67 They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMCs other regular employees.1awphi1.zw+ Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with approval the appellate courts ruling thereon: Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v. NLRC, supra, p. 359).68 The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.69 As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service.70 Regarding the closure of SMCs aquaculture operations and the consequent termination of private respondents, Article 283 of the Labor Code provides:

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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 Department 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 to 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. (Underscoring supplied) In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an on-going and highly viable business concern.71 Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.72 For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.73 In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense.74 Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents.75 In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMCs Agribusiness Division accumulated losses amounting toP145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental,P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995. SMC has thus proven substantial business reverses justifying retrenchment of its employees. For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date of the retrenchment,76 in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.77 Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would be closing its operations.78 Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.79 In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as nominal damages. The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a statutory obligation on the part of the employer and a demandable right on the part of the employee. Private respondents should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents. Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well settled that backwages may be granted only when there is a finding of illegal dismissal.80 The appellate court thus erred in awarding backwages to private respondents upon the authority of Bustamante v. NLRC,81 what was involved in that case being one of illegal dismissal. With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests,82 a maximum of ten percent (10%) of the total monetary award83 by way of attorneys fees is justifiable under Article 111 of the Labor Code,84 Section 8, Rule VIII, Book III of its Implementing Rules,85 and paragraph 7, Article 2208 of the Civil Code.86 Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.87 Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 1988 of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents. WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION. Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and severally pay each private respondent differential pay from the time they became regular employees up to the date of their termination; separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents; and ten percent (10%) attorneys fees based on the herein modified award. Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process. The award of backwages is DELETED. SO ORDERED.

G.R. No. L-48494 February 5, 1990 BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE, respondents. Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners. Mauricio G. Domogon for respondent Alegre.

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NARVASA, J.: The question presented by the proceedings at bar is whether or not the provisions of the Labor Code, as anathematized "fixed period employment" or employment for a term.
1 2

amended, 3

have

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 TheThompson case involved an executive who had been engaged for a fixed period of three (3) years. Bibosoinvolved teachers in a private school as regards whom, the following pronouncement was made: What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a limited duration. Upon its termination, both parties to the employment relationship were free to renew it or to let it lapse. (p. 254) Under American law 15 the principle is the same. "Where a contract specifies the period of its duration, it terminates on the expiration of such period." 16 "A contract of employment for a definite period terminates by its own terms at the end of such period." 17 The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained explicit references to fixed period employment, or employment with a fixed or definite period. Nevertheless, obscuration of the principle of licitness of term employment began to take place at about this time Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment of probationary employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the employee to be secured in their employment as provided . . . (in the Code)." Article 321 prescribed the just causes for which an employer could terminate "an employment without a definite period." And Article 319 undertook to define "employment without a fixed period" in the following manner: 18 An employment shall be deemed to be without a definite period for purposes of this Chapter where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual

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 anapplication for clearance to terminate employment (not a report of termination), and accepting the recommendation of the Labor Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent employee," to his former position without loss of seniority rights and with full back wages. The Director pronounced "the ground relied upon by the respondent (Brent) in terminating the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the Bureau of Private Schools. 7 Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded the case to the Secretary of Labor for review. 8 The latter sustained the Regional Director. 9 Brent appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who could not be dismissed except for just cause, and expiration of the employment contract was not one of the just causes provided in the Labor Code for termination of services. 10 The School is now before this Court in a last attempt at vindication. That it will get here. The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did not come into effect until November 1, 1974, some three years after the perfection of the employment contract, and rights and obligations thereunder had arisen and been mutually observed and enforced. At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787. 12 Basically, this statute provided that In cases of employment, without a definite period, in a commercial, industrial, or agricultural establishment or enterprise, the employer or the employee may terminate at any time the employment with just cause; or without just cause in the case of an employee by serving written notice on the employer at least one month in advance, or in the case of an employer, by serving such notice to the employee at least one month in advance or onehalf 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.

13
business or trade of the employer." The definition seems a non sequitur. From the premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be "that which must necessarily come, although it may not be known when." 19 Seasonal employment, and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied. Of course, the term period has a definite and settled signification. It means, "Length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A time of definite length. . . . the period from one fixed date to another fixed date . . ." 20 It connotes a "space of time which has an influence on an obligation as a result of a juridical act, and either suspends its demandableness or produces its extinguishment." 21 It should be apparent that this settled and familiar notion of a period, in the context of a contract of employment, takes no account at all of the nature of the duties of the employee; it has absolutely no relevance to the character of his duties as being "usually necessary or desirable to the usual business of the employer," or not. Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were amended by Presidential Decree No. 850, effective December 16, 1975. Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the reference to persons "employed with a fixed period," and was renumbered (becoming Article 271). The article 22 now reads: . . . Probationary employment.Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment. As revised, said article, renumbered 270, 23 now reads: . . . Regular and Casual Employment.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to he casual if it is not covered by the preceding paragraph:provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been added, to wit: "The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties . . ." The clause would appear to be addressed inter alia to agreements fixing a definite period for employment. There is withal no clear indication of the intent to deny validity to employment for a definite period. Indeed, not only is the concept of regular employment not essentially inconsistent with employment for a fixed term, as above pointed out, Article 272 of the Labor Code, as amended by said PD 850, still impliedly acknowledged the propriety of term employment: it listed the "just causes" for which "an employer may terminate employment without a definite period," thus giving rise to the inference that if the employment be with a definite period, there need be no just cause for termination thereof if the ground be precisely the expiration of the term agreed upon by the parties for the duration of such employment. Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa Bilang 130, 24to 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. 26Under 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 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,

14
without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objecionable mischievous, undefensible, wrongful, evil and injurious consequences. 28 Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That s a principle that does back to In re Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would lead to an absurdity is another argument for rejecting it. . . ." 29 . . . We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. 30 Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed period of employment as still good rulea rule reaffirmed in the recent case of Escudero vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her school a notice of termination following the expiration of the last of three successive fixed-term employment contracts, the Court held: Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be renewed. It is not a letter of termination. The interpretation that the notice is only a reminder is consistent with the court's finding in Labajo supra. ... 32 Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of termination, nor an application for clearance to terminate which needed the approval of the Department of Labor to make the termination of his services effective. In any case, such clearance should properly have been given, not denied. WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as to costs. SO ORDERED.

G.R. No. 150478. April 15, 2005 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 Decision1 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:

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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 Starke3 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 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 dismissa l. 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 The CA ruled that the concept of stare decisis is not relevant to the present case. It held that the ruling inMercado, Sr. v. NLRC13 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. NLRC14 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 decisisin not applying the said ruling. She asserts that the respondents, who are also

16
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 Mercadocase 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. 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 decisisdoes 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. InAbasolo 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 Trade27 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,30submitted 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, 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.

G.R. No. 168052

February 20, 2006

POSEIDON FISHING/TERRY DE JESUS, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and JIMMY S. ESTOQUIA, Respondents. DECISION CHICO-NAZARIO, J.: Article 280 of the Labor Code, in its truest sense, distinguishes between regular and casual employees to protect the interests of labor. Its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient.1

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This petition assails the Decision2 of the Court of Appeals dated 14 March 2005 in CA-G.R. SP No. 81140 entitled, "Poseidon Fishing/Terry De Jesus v. National Labor Relations Commission and Jimmy S. Estoquia" which affirmed that of the National Labor Relations Commission (NLRC). The NLRC had affirmed with modification the Decision dated 5 December 2000 of Labor Arbiter Melquiades Sol D. Del Rosario in NLRC-NCR Case No. 00-07-03625-00, declaring private respondent to have been illegally dismissed and entitled to backwages and separation pay. As thoroughly told by the Court of Appeals and the Labor Arbiter, the particulars are beyond dispute: Petitioner Poseidon Fishing is a fishing company engaged in the deep-sea fishing industry. Its various vessels catch fish in the outlying islands of the Philippines, which are traded and sold at the Navotas Fish Port. One of its boat crew was private respondent Jimmy S. Estoquia.3 Petitioner Terry de Jesus is the manager of petitioner company. Private respondent was employed by Poseidon Fishing in January 1988 as Chief Mate. After five years, he was promoted to Boat Captain. In 1999, petitioners, without reason, demoted respondent from Boat Captain to Radio Operator of petitioner Poseidon.4 As a Radio Operator, he monitored the daily activities in their office and recorded in the duty logbook the names of the callers and time of their calls.5 On 3 July 2000, private respondent failed to record a 7:25 a.m. call in one of the logbooks. However, he was able to record the same in the other logbook. Consequently, when he reviewed the two logbooks, he noticed that he was not able to record the said call in one of the logbooks so he immediately recorded the 7:25 a.m. call after the 7:30 a.m. entry.6 Around 9:00 oclock in the morning of 4 July 2000, petitioner Terry de Jesus detected the error in the entry in the logbook. Subsequently, she asked private respondent to prepare an incident report to explain the reason for the said oversight.7 At around 2:00 oclock in the afternoon of that same day, petitioner Poseidons secretary, namely Nenita Laderas, summoned private respondent to get his separation pay amounting to Fifty-Five Thousand Pesos (P55,000.00). However, he refused to accept the amount as he believed that he did nothing illegal to warrant his immediate discharge from work.8 Rising to the occasion, private respondent filed a complaint for illegal dismissal on 11 July 2000 with the Labor Arbiter, alleging nonpayment of wages with prayer for back wages, damages, attorneys fees, and other monetary benefits. In private respondents position paper, he averred that petitioner Poseidon employed him as a Chief Mate sometime in January 1988. He claimed that he was promoted to the position of Boat Captain five years after. However, in 1999, he was demoted from Boat Captain to Radio Operator without any reason and shortly, he was terminated without just cause and without due process of law. Conversely, petitioners Poseidon and Terry de Jesus strongly asserted that private respondent was a contractual or a casual employee whose services could be terminated at the end of the contract even without a just or authorized cause in view of Article 280 of the Labor Code, which provides: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied.) Petitioners further posited that when the private respondent was engaged, it was made clear to him that he was being employed only on a "por viaje" or per trip basis and that his employment would be terminated at the end of the trip for which he was being hired. As such, the private respondent could not be entitled to separation pay and other monetary claims. On 5 December 2000, following the termination of the hearing of the case, the Labor Arbiter decided in favor of private respondent. The Labor Arbiter held that even if the private respondent was a casual employee, he became a regular employee after a period of one year and, thereafter, had attained tenurial security which could only be lost due to a legal cause after observing due process. The dispositive portion of the Decision reads: CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding complainant to have been illegally dismissed and so must immediately be reinstated to his former position as radio operator and paid by respondent[s] in solidum his backwages which as of December 3, 2000 had already accumulated in the sum ofP35,880.00 plus his unpaid one (1) week salary in the sum of P1,794.00. Respondents are further ordered to pay attorneys fees in a sum equivalent to 10% of the awarded claims.9 Consequently, the petitioners filed their Memorandum of Appeal with the NLRC for the reversal of the aforesaid decision. On 24 September 2002, the NLRC affirmed the decision of the Labor Arbiter with the modification, inter alia, that: (a) the private respondent would be paid his separation pay equivalent to one-half of his monthly pay for every year of service that he has rendered in lieu of reinstatement; and (b) an amount equivalent to six months salary should be deducted from his full backwages because it was his negligence in the performance of his work that brought about his termination. It held: WHEREFORE, the decision is modified as follows: 1. The amount equivalent to six (6) months salary is to be deducted from the total award of backwages; 2. The respondent is ordered to pay complainant separation pay equivalent to one-half (1/2) month pay for every year of service counted from 1998; x x x 3. The respondent is ordered to pay complainants unpaid wages in the amount of P1,794.00; and 4. Respondent is ordered to pay attorneys fees in a sum equivalent to ten percent (10%) of the awarded claims. 10 Petitioners moved for the reconsideration of the NLRC decision, but were denied in a Resolution dated 29 August 2003. Petitioners filed a Petition for Certiorari with the Court of Appeals, imputing grave abuse of discretion, but the Court of Appeals found none. The following is the fallo of the decision: WHEREFORE, the foregoing premises considered, the instant petition is hereby DENIED.11 In a last attempt at vindication, petitioners filed the present petition for reviewhttp://elibrary.supremecourt.gov.ph/dtSearch/ - _ftn with the following assignment of errors: I. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENT WAS A REGULAR EMPLOYEE WHEN IN TRUTH HE WAS A CONTRACTUAL/PROJECT/SEASONAL EMPLOYEE. II. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT WAS ILLEGALLY DISMISSED FROM EMPLOYMENT. III. THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THE RESPONDENT A SEASONAL EMPLOYEE AND APPLYING THE RULING IN RJL MARTINEZ FISHING CORPORATION vs. NLRC THAT "the activity of fishing is a continuous process and could hardly be considered as seasonal in nature." IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT IS ENTITLED TO BACKWAGES, SEPARATION PAY, ATTORNEYS FEES AND OTHER MONETARY BENEFITS. V.

18
THE HONORABLE COURT OF APPEALS ERRED IN NOT RESOLVING THE PRAYER FOR THE ISsuance of preliminary injunction and/or temporary restraining order.12 The fundamental issue entails the determination of the nature of the contractual relationship between petitioners and private respondent, i.e., was private respondent a regular employee at the time his employment was terminated on 04 July 2000? Asserting their right to terminate the contract with private respondent per the "Kasunduan" with him, petitioners pointed to the provision thereof stating that he was being employed only on a por viaje basis and that his employment would be terminated at the end of the trip for which he was being hired, to wit: NA, kami ay sumasang-ayon na MAGLINGKOD at GUMAWA ng mga gawaing magmula sa pag-alis ng lantsa sa pondohan sa Navotas patungo sa palakayahan; pabalik sa pondohan ng lantsa sa Navotas hanggang sa paghango ng mga kargang isda.13 Petitioners lament that fixed-term employment contracts are recognized as valid under the law notwithstanding the provision of Article 280 of the Labor Code. Petitioners theorize that the Civil Code has always recognized the validity of contracts with a fixed and definite period, and imposes no restraints on the freedom of the parties to fix the duration of the contract, whatever its object, be it species, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order and public policy. Quoting Brent School Inc. v. Zamora,14 petitioners are hamstrung on their reasoning that under the Civil Code, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those that by their nature are seasonal or for specific projects with pre-determined dates of completion as they also include those to which the parties by free choice have assigned a specific date of termination. Hence, persons may enter into such contracts as long as they are capacitated to act, petitioners bemoan. We are far from persuaded by petitioners ratiocination. Petitioners construal of Brent School, Inc. v. Zamora, has certainly gone astray. The subject of scrutiny in the Brent case was the employment contract inked between the school and one engaged as its Athletic Director. The contract fixed a specific term of five years from the date of execution of the agreement. This Court upheld the validity of the contract between therein petitioner and private respondent, fixing the latters period of employment. This Court laid down the following criteria for judging the val idity of such fixed-term contracts, 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 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. 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.15 (Emphasis supplied.) Brent cited some familiar examples of employment contracts which may neither be for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance, i.e., overseas employment contracts, appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity without which no reasonable rotation would be possible.16 Thus, in Brent, the acid test in considering fixed-term contracts as valid is: if from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be disregarded for being contrary to public policy. On the same tack as Brent, the Court in Pakistan International Airlines Corporation v. Ople,17 ruled in this wise: It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the employment agreement, or upon evidence aliunde of the intent to evade. Consistent with the pronouncements in these two earlier cases, the Court, in Cielo v. National Labor Relations Commission,18 did not hesitate to nullify employment contracts stipulating a fixed term after finding that "the purpose behind these individual contracts was to evade the application of the labor laws." In the case under consideration, the agreement has such an objective - to frustrate the security of tenure of private respondent- and fittingly, must be nullified. In this case, petitioners intent to evade the application of Article 280 of the Labor Code is unmis takable. In a span of 12 years, private respondent worked for petitioner company first as a Chief Mate, then Boat Captain, and later as Radio Operator. His job was directly related to the deep-sea fishing business of petitioner Poseidon. His work was, therefore, necessary and important to the business of his employer. Such being the scenario involved, private respondent is considered a regular employee of petitioner under Article 280 of the Labor Code, the law in point, which provides: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied.) Moreover, unlike in the Brent case where the period of the contract was fixed and clearly stated, note that in the case at bar, the terms of employment of private respondent as provided in the Kasunduan was not only vague, it also failed to provide an actual or specific date or period for the contract. As adroitly observed by the Labor Arbiter: There is nothing in the contract that says complainant, who happened to be the captain of said vessel, is a casual, seasonal or a project worker. The date July 1 to 31, 1998 under the heading "Pagdating" had been placed there merely to indicate the possible date of arrival of the vessel and is not an indication of the status of employment of the crew of the vessel. Actually, the exception under Article 280 of the Labor Code in which the respondents have taken refuge to justify its position does not apply in the instant case. The proviso, "Except where the employment has been fixed for a specific project or undertaking the completion or determination 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." (Article 280 Labor Code), is inapplicable because the very contract adduced by respondents is unclear and uncertain. The kasunduan does not specify the duration that complainant had been hired x x x.19 (Emphasis supplied.) Furthermore, as petitioners themselves admitted in their petition before this Court, private respondent was repeatedly hired as part of the boats crew and he acted in various capacities onboard the vessel. In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,20 we held that the test to determine whether employment is regular or not is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. And, 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. 21 In Bustamante v. National Labor Relations Commission,22 the Court expounded on what are regular employees under Article 280 of the Labor Code, viz: It is undisputed that petitioners were illegally dismissed from employment. Article 280 of the Labor Code, states: 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

19
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. This provision draws a line between regular and casual employment, a distinction however often abused by employers. The provision enumerates two (2) kinds of employees, the regular employees and the casual employees. The regular employees consist of the following: 1) those engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and 2) those who have rendered at least one year of service whether such service is continuous or broken.23 Ostensibly, in the case at bar, at different times, private respondent occupied the position of Chief Mate, Boat Captain, and Radio Operator. In petitioners interpretation, however, this act of hiring and re-hiring actually highlight private respondents contractual status saying that for every engagement, a fresh contract was entered into by the parties at the outset as the conditions of employment changed when the private respondent filled in a different position. But to this Court, the act of hiring and re-hiring in various capacities is a mere gambit employed by petitioner to thwart the tenurial protection of private respondent. Such pattern of rehiring and the recurring need for his services are testament to the necessity and indispensability of such services to petitioners business or trade.24 Petitioners would brush off private respondents length of service by stating that he had worked for the company merely for several years25 and that in those times, his services were not exclusive to petitioners. On the other hand, to prove his claim that he had continuously worked for petitioners from 1988 to 2000, private respondent submitted a copy of his payroll 26 from 30 May 1988 to October 1988 and a copy of his SSS Employees Contributions27 as of the year 2000. These documents were submitted by private respondent in order to benchmark his claim of 12 years of service. Petitioners, however, failed to submit the pertinent employee files, payrolls, records, remittances and other similar documents which would show that private respondents work was not continuous and for less than 12 years. Inasmuch as these documents are not in private respondents possession but in the custody and absolute control of petitioners, their failure to refute private respondents evidence or even categorically deny private respondents allegations lead us to no other conclusion than that private respondent was hired in 1988 and had been continuously in its employ since then. Indeed, petitioners failure to submit the necessary documents, which as employers are in their possession, gives rise to the presumption that their presentation is prejudicial to its cause.28 To recapitulate, it was after 12 long years of having private respondent under its wings when petitioners, possibly sensing a brewing brush with the law as far as private respondents employment is concerned, finally found a loophole to kick private responden t out when the latter failed to properly record a 7:25 a.m. call. Capitalizing on this faux pas, petitioner summarily dismissed private respondent. On this note, we disagree with the finding of the NLRC that private respondent was negligent on account of his failure to properly record a call in the log book. A review of the records would ineluctably show that there is no basis to deduct six months worth of salary from the total separation pay that private respondent is entitled to. We note further that the NLRCs finding clashes with that of the Labor Arbiter which found no such negligence and that such inadvertence on the part of private respondent, at best, constitutes simple negligence punishable only with admonition or suspension for a day or two. As the records bear out, private respondent himself seasonably realized his oversight and in no time recorded the 7:25 a.m. call after the 7:30 a.m. call. Gross negligence under Article 282 of the Labor Code, 29 as amended, connotes want of care in the performance of ones duties, while habitual neglect implies repeated failure to perform ones duties for a period of time, depending upon the circumstances.30 Here, it is not disputed that private respondent corrected straight away the recording of the call and petitioners failed to prove the damage or injury that such inadvertence caused the company. We find, as the Labor Arbiter31 had found, that there is no sufficient evidence on record to prove private respondents negligence, gross or simple for that matter, in the performance of his duties to warrant a reduction of six months salary from private respondents separation pay. Moreover, respondent missed to properly record, not two or three calls, but just a single call. It was also a first infraction on the part of private respondent, not to mention that the gaffe, if at all, proved to be innocuous. Thus, we find such slip to be within tolerable range. After all, is it not a rule32 that in carrying out and interpreting the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be primordial? Petitioners next assert that deep-sea fishing is a seasonal industry because catching of fish could only be undertaken for a limited duration or seasonal within a given year. Thus, according to petitioners, private respondent was a seasonal or project employee. We are not won over. As correctly pointed out by the Court of Appeals, the "activity of catching fish is a continuous process and could hardly be considered as seasonal in nature."33 In Philex Mining Corp. v. National Labor Relations Commission,34we defined project employees as those workers hired (1) for a specific project or undertaking, and (2) the completion or termination of such project has been determined at the time of the engagement of the employee. The principal test for determining whether particular employees are "project employees" as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time the employees were engaged for that project. In this case, petitioners have not shown that private respondent was informed that he will be assigned to a "specific project or undertaking." As earlier noted, neither has it been established that he was informed of the duration and scope of such project or undertaking at the time of their engagement. More to the point, in Maraguinot, Jr. v. National Labor Relations Commission,35 we ruled that once a project or work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee. In fine, inasmuch as private respondents functions as described above are no doubt "usually necessary or desirable in the usual business or trade" of petitioner fishing company and he was hired continuously for 12 years for the same nature of tasks, we are constrained to say that he belongs to the ilk of regular employee. Being one, private respondents dismissal without valid cause was illegal. And, where illegal dismissal is proven, the worker is entitled to back wages and other similar benefits without deductions or conditions.36 Indeed, it behooves this Court to be ever vigilant in checking the unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on investments at the expense of the lowly workingman.37 WHEREFORE, the present petition is hereby DENIED. The Decision of the Court of Appeals dated 14 March 2005 in CA-G.R. SP No. 81140 is hereby AFFIRMED WITH MODIFICATION by deleting the reduction of an amount equivalent to six months of pay from private respondents separation pay. The case is remanded to the Labor Arbiter for further proceedings solely for the purpose of determining the monetary liabilities of petitioners in accordance with the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with copies furnished to the parties. Costs against petitioners. SO ORDERED.

G.R. No. 79255 January 20, 1992 UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs. BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents. Jose C. Espinas for petitioner.

20
Siguion Reyna, Montecillo & Ongsiako for private respondent. GUTIERREZ, JR., J.: This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor in the computation of benefits from 251 to 261 days. On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]). Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator. On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to: pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo, p. 31) Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145) Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished. On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor. Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130. However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1, 1986. Hence, this petition. The petitioner union raises the following issues: 1) Whether or not Nestle's sales personnel are entitled to holiday pay; and 2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay. The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The respondent company controverts this assertion. Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty." The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based. The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working hours which can be determined with reasonable certainty. The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work. We concur with the following disquisition by the respondent arbitrator: The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing administrative control over such personnel. This does not in any manner provide a reasonable level of determination on the actual field work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which are subject to their individual capacity and industry and which "cannot be determined with reasonable certainty." This is the reason why effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37) Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides: Rule IV Holidays with Pay Sec. 1. Coverage This rule shall apply to all employees except: xxx xxx xxx (e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis supplied) While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55). Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer.

21
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m. Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984. The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their performance is proof that their actual hours of work in the field can be determined with reasonable certainty. The Court thinks otherwise. The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190). The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to determination. In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated: The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra compensation. He works away from his employer's place of business, is not subject to the personal supervision of his employer, and his employer has no way of knowing the number of hours he works per day. While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay benefits also applies. The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor. Arbitrator Vivar's rationale for his decision is as follows: . . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of interpretation which accounts for what is claimed as falling within the concept of "solutio indebti." When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34) The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held: It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise. One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251. In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows: monthly rate x 12 months 251 days Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261. It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays. The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay. Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake. Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised by Nestle. Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious. In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added the "divisor" test.

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However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction. In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to a legislative or executive act subsequently declared invalid: xxx xxx xxx . . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435) The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case. Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to Nestle's fault. The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case. WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED. SO ORDERED.