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Facts: The petitioner started working with

said corporation as a messenger way back in 1949.
He held various positions therein, such as
bookkeeper, accountant, general office supervisor
and Assistant-Manager. He then rose to the position
as Assistant VicePresident-Manager (Makati Office) in
1913 and held it continuously up to 1977. Prior to his
dismissal, he was in the service for more than 28

In October 1976, the petitioner was sent to Korea on
an officialbusiness for the respondent corporation.
Before that, the respondentAlfredo
Benedicto, president and general manager of
thecorporation, verbally intimated to petitioner that the
latter would soon be appointed as Assistant
Vice President for Finance, preparatory to his
assuming the position of Vice President for Finance
upon the resignation of the then incumbent. In early
November 1976, petitioner was instructed to attend
the staff meeting at Bacolod every second and fourth
Tuesdays of every month starting January 1977.

The petitioner alleged that he had not at any time or in
any manner applied for retirement and that the
requirement of due process was not observed, thus
making his dismissal illegal and unjustified. Also, he
stated that the respondents did not explain to him any
cause or reason for his dismissal, that no specific
charges were made against him and no formal
investigation was conducted to afford him opportunity
to acquit himself of any charges. Finally, the money
offered by the corporation does not constitute
estoppel or waiver on his part, considering that his
acceptance was without prejudice to all his rights
resulting from his illegal dismissal.

Issue: Whether or not the acceptance of separation
pay is a bar to contesting the legality of dismissal.

Held: No. The contention of respondents that
petitioner is barred from contesting the illegality of his
dismissal since he has already received his
separation pay cannot be sustained. Since he was
forced to retire, he suddenly found himself jobless
with a family of eight (8) children to support. He had
no alternative but to accept what was offered to him;
he needed money to support his family. He had to
grab whatever was offered as he accepted less than
what was offered to show his non-acquiescence to
what amounted to dismissal.

Employees who received their separation pay are not
barred from contesting the legality of their dismissal.
The acceptance of those benefits would not amount
to estoppels. Having been illegally dismissed, the
petitioner is entitled to reinstatement with back wages
corresponding to a period of three (3) years without
qualification minus the amount of P26, 492. 63 he
was forced to receive as retirement gratuity pay.

G.R. Nos. 82643-67 August 30, 1990
VARGAS, et al., respondents.
Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles for petitioner.
Napoleon Banzuela, Jr. for private respondents.

This is a petition for review on certiorari seeking to annul and set aside; (a) the Resolution of
the National Labor Relations Commission * dated November 9, 1987 in Labor Cases Nos.
RAB-403-85 to 427-85 and RAB Nos. 0392-85 to 0393-85 entitled Teodulo C. Cuebillas, et.
al. vs. Philippine Geothermal, Inc. et al. and Efren N. Clerigo et. al. vs. Phil. Geothermal Inc.
respectively which declared respondent employees as regular and permanent employees of
petitioner company and ordered their reinstatement and (b) the Resolution dated March
9,1988 which denied the Motion for Reconsideration.
The facts of the case are as follows:
Petitioner Philippine Geothermal, Inc. is a U.S. corporation engaged in the exploration and
development of geothermal energy resources as an alternative source of energy. It is duly
authorized to engage in business in the Philippines and at present is the prime contractor of
the National Power Corporation at the latter's operation of the Tiwi, Albay and the Makiling-
Banahaw Geothermal Projects.

Private respondents, on the other hand, are employees of herein petitioner occupying
various positions ranging from carpenter to Clerk II who had worked with petitioner company
under individual contracts, categorized as contractual employment, for a period ranging from
fifteen (15) days to three (3) months. These contracts were regularly renewed to the extent
that individual private respondents had rendered service from three (3) to five (5) years until
1983 and 1984 when petitioner started terminating their employment by not renewing their
individual contracts. Subsequently petitioner entered into job contracting agreement with Dra.
Generosa Gonzales who supplies it with skilled

Sometime in July 1983, herein private respondents organized a separate labor union in view
of their exclusion in the bargaining unit of the regular rank and file employees represented by
the Federation of Free Workers. In August 1983, they filed a petition for certification election
with the Ministry of Labor and Employment, NCR, docketed as Case No. NCD-LRD-8-242-
84. Because of this, herein petitioner allegedly started harassing them and replaced them
with so called "contract workers". Thus, complainant union and herein respondent
employees filed a case for illegal lock-out and unfair labor practice, docketed as Case No.
1420-83 and the instant consolidated cases RAB Case Nos. 0403-85 to 427-85 and RAB
Cases Nos. 0392-85 to 0393-85, involving 26 workers, for unfair labor practice and/or illegal
dismissal, reinstatement backwages and service incentive.

On March 3, 1987, Labor Arbiter Voltaire A. Balitaan rendered a decision in favor of the
respondents the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioners and
they are hereby declared regular and permanent employees of the
respondent and finding their dismissal from the service illegal, respondent is
ordered to reinstate them to their former positions without loss of seniority
rights and with one year backwages without qualification or deduction in the
amount of P590,021.76.

On Appeal, the National Labor Relations Commission on November 9, 1987 rendered a
decision dismissing the appeal and affirming the decision of the Labor Arbiter.
A motion for
reconsideration was denied on March 9, 1988 for lack of merit.

Hence, this petition which was filed on April 22, 1988.
In the meantime, a writ of execution was issued by Executive Arbiter Gelacio L. Rivera, Jr.
on April 11, 1988 on the ground that no appeal was interposed hence the decision of the
Labor Arbiter had become final and executory.

On April 20, 1988, petitioner filed a motion for the issuance of a Temporary Restraining
Order as the Sheriff tried to enforce the Writ of Execution dated April 11, 1988 against
petitioner on April 18, 1988. They further alleged that they are ready, willing and able to post
a supersedeas bond to answer for damages which respondents may suffer.

On June 29, 1988, this Court issued a Temporary Restraining Order enjoining respondents
from enforcing the Resolution dated November 9, 1987, any writ of execution or notice of
garnishment issued in RAB Cases Nos. 0403-85 to 427-85 and RAB Cases Nos. 0392-85 to
393-85 of the National Labor Relations Commission, Department of Labor and

On April 17, 1989, this Court resolved to dismiss the petition for failure to sufficiently show
that the respondent commission had committed grave abuse of discretion in rendering the
questioned judgment and lifted the Temporary Restraining Order issued on June 29,
A motion for reconsideration was filed by petitioner on May 25, 1989.

On June 5, 1989, this Court granted the motion; and set aside the resolution dated April 17,
1989; gave due course to the petition and required the patties to submit simultaneously, their
respective memoranda.

Private respondents filed their memorandum on August 8, 1989
while public respondent
filed its memorandum on September 1, 1989.
Petitioner filed its memorandum on September 8,

The main issue in the case at bar is whether or not private respondents may be considered
regular and permanent employees due to their length of service in the company despite the
fact that their employment is on contractual basis.
Petitioner alleges that it engaged the services of private respondents on a monthly basis to
ensure that manpower would be available when and where needed. Private respondents
were fully aware of the nature of their employment as this was clearly spelled out in the
employment contracts. What happened to them was not a case of unwarranted dismissal but
simply one of expiration of the tenure of employment contracts and the completion of the
phase of the project for which their services were hired.

In the recent case of Kimberly Independent Labor Union for Solidarity, Activism, and
Nationalism-Olalia vs. Hon. Franklin M. Drilon, G.R. Nos. 77629 and 78791 promulgated last
May 9, 1990, this Court classified the two kinds of regular employees, as: 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 (1) year of service,
whether continuous or broken with respect to the activity in which they are employed. 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 employee on the day immediately
after the end of his first year of service.
Assuming therefore, that an employee could properly be regarded as a casual (as
distinguished from a regular employee) he becomes entitled to be regarded as a regular
employee of the employer as soon as he has completed one year of service. Under the
circumstances, employers may not terminate the service of a regular employee except for a
just cause or when authorized under the Labor Code. It is not difficult to see that to uphold
the contractual arrangement between the employer and the employee would in effect be to
permit employers to avoid the necessity of hiring regular or permanent employees indefinitely
on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106
of the Labor Code is precisely designed to prevent such result.

It is the policy of the state to assure the right of workers to "security of tenure."
guarantee is an act of social justice. When a person has no property, his job may possibly be his
only possession or means of livelihood. Therefore, he should be protected against any arbitrary
deprivation of his job. Article 280 of the Labor Code has construed "security of tenure" as
meaning that "the employer shall not terminate the services of the employee except for a just
cause or when authorized by the Code."

PREMISES CONSIDERED, the decision of the National Labor Relations Commission is
hereby AFFIRMED and the Temporary Restraining Order issued on June 29, 1988 is hereby
LIFTED permanently.
Melencio-Herrera (Chairman), Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.

Maraguinot v. NLRCFACTS:
Petitioner maintains that he was employed by respondents as part of the filming crew. He
was laterpromoted as an electrician. Petitioners’ tasks contained of loading movie equipment
in the shoothing area.Petitioners sought the assistance of their supervisor, Cesario, to
facilitate their request that respondents adjusttheir salary in accordance with the minimum
wage law. Mrs. Cesario informed petitioners that del Rosario wouldagree to increase their
salary only if they signed a blank employment contract. As petitioner refused to
sign,respondents forced Enero (the other petitioner who worked as a crew member) to go on
leave. However, when hereported to work, respondent refused to take him back. Maraguinot
was dropped from the company payroll butwhen he returned, he was again asked to sign a
blank employment contract, and when he still refused,respondent’s terminated his services.
Petitioners thus sued for illegal dismissal.Private respondents assert that they contract
persons called producers to produce or make movies forprivate respondents and contend
that petitioners are project employees of the associate producers, who act asindependent
contractors. Thus, there is no ER-EE relationship.However, petitioners cited that their
performance of activities is necessary in the usual trade or business of respondents and their
work in continuous.
W/N ER-EE relationship exists
Yes.With regards to VIVA’s contention that it does not make movies but merely distributes
motion pictures,there is no sufficient proof to prove this contention.In respect to respondents’
allegation that petitioners are project employees, it is a settled rule that thecontracting out of
labor is allowed only in case of job contracting. However, assuming that the associate
producersare job contactors, they must then be engaged in the business of making motion
pictures. Associate producersmust have tools necessary to make motion pictures. However,
the associate producers in this case have none of these. The movie-making equipment are
supplied to the producers and owned by VIVA. Thus, it is clear that theassociate producer
merely leases the equipment from VIVA.In addition, the associate producers of VIVA cannot
be considered labor-only contractors as they did notsupply, recruit nor hire the workers. It
was Cesario, the Shooting Supervisor of VIVA, who recruited crew members. Thus, the
relationship between VIVA and its producers or associate producers seems to be that of
agency.With regards to the issue of illegal dismissal, petitioners assert that they were regular
employees who wereillegally dismissed. Petitioners in this case had already attained the
status of regular employees in view of VIVA’sconduct. Thus, petitioners are entitled to back
wages.A project employee or a member of a work pool may acquire the status of a regular
employee when:a.there is a continuous rehiring of project employees even after a cessation
of projectb.the tasks performed by the alleged project employee are vital and necessary to
the business of employer The tasks of petitioners in loading movie equipment and returning it
to VIVA’s warehouse and fixing thelighting system were vital, necessary and indispensable
to the usual business or trade of the employer.Wherefore, petition is granted.

Mercado v. NLRC

1. Petitioners were agricultural workers of the private respondent's sugar land who were
dismissed. They had worked in all agriculture phases for several years in the said sugar
land. The respondent denied that petitioners were regular employees alleging that their
services were engaged through 'mandarols' or supply workers to do a particular phase of
the agricultural work.

2. As a result, the petitioners filed a complaint for illegal dismissal. The Labor Arbiter held
that the petitioners were not regular employees and the NLRC affirmed this ruling.

Issue: W/N the petitioners are regular and permanent farm workers

RULING: No, they are project/seasonal employees. A project employee is one whose
employment has been fixed for a specific project or undertaking, the completion has been
determined at the time of engagement, or where work or service is seasonal in nature and
employment is for the duration of the season.

As such, the termination of employment cannot be considered as illegal dismissal. The
petitioners are free to contract their services to work for other farm owners.

G.R. No. L-48494 February 5, 1990 en banc


Private respondent Doroteo R. Alegre was engaged as athletic director by petitioner Brent
School, Inc. at a yearly compensation of P20,000.00. The contract fixed a specific term for its
existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to
July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973,
and September 14, 1974 reiterated the same terms and conditions, including the expiry date,
as those contained in the original contract of July 18, 1971.

On April 20,1976, Alegre was given a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his services effective on July 16, 1976.
The stated ground for the termination was "completion of contract, expiration of the definite
period of employment." Although protesting the announced termination stating that his
services were necessary and desirable in the usual business of his employer, and his
employment lasted for 5 years - therefore he had acquired the status of regular employee -
Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the
phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of

The Regional Director considered Brent School's report as an application for clearance to
terminate employment (not a report of termination), and accepting the recommendation of
the Labor Conciliator, refused to give such clearance and instead required the reinstatement
of Alegre, as a "permanent employee," to his former position without loss of seniority rights
and with full back wages.


Whether or not the provisions of the Labor Code, as amended, have anathematized "fixed
period employment" or employment for a term.


Respondent Alegre's contract of employment with Brent School having lawfully terminated
with and by reason of the expiration of the agreed term of period thereof, he is declared not
entitled to reinstatement.

The employment contract between Brent School and Alegre was executed on July 18, 1971,
at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated.
At that time, the validity of term employment was impliedly recognized by the Termination
Pay Law, R.A. 1052, as amended by R.A. 1787. Prior, thereto, it was the Code of Commerce
(Article 302) which governed employment without a fixed period, and also implicitly
acknowledged the propriety of employment with a fixed period. The Civil Code of the
Philippines, which was approved on June 18, 1949 and became effective on August
30,1950, itself deals with obligations with a period. No prohibition against term-or fixed-
period employment is contained in any of its articles or is otherwise deducible therefrom.

It is plain then that when the employment contract was signed between Brent School and
Alegre, it was perfectly legitimate for them to include in it a stipulation fixing the duration
thereof Stipulations for a term were explicitly recognized as valid by this Court.

The status of legitimacy continued to be enjoyed by fixed-period employment contracts under
the Labor Code (PD 442), which went into effect on November 1, 1974. The Code contained
explicit references to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment began to take
place at about this time.

Article 320 originally stated that the "termination of employment of probationary employees
and those employed WITH A FIXED PERIOD shall be subject to such regulations as the
Secretary of Labor may prescribe." Article 321 prescribed the just causes for which an
employer could terminate "an employment without a definite period." And Article 319
undertook to define "employment without a fixed period" in the following manner: …where
the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the

Subsequently, the foregoing articles regarding employment with "a definite period" and
"regular" employment were amended by Presidential Decree No. 850, effective December
16, 1975.

Article 320, dealing with "Probationary and fixed period employment," was altered by
eliminating the reference to persons "employed with a fixed period," and was renumbered
(becoming Article 271).

As it is evident that Article 280 of the Labor Code, under a narrow and literal interpretation,
not only fails to exhaust the gamut of employment contracts to which the lack of a fixed
period would be an anomaly, but would also appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal interpretation should be eschewed or
avoided. The law must be given a reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and subverting to boot the
principle of freedom of contract to remedy the evil of employer's using it as a means to
prevent their employees from obtaining security of tenure is like cutting off the nose to spite
the face or, more relevantly, curing a headache by lopping off the head.

Such interpretation puts the seal on Bibiso upon the effect of the expiry of an agreed period
of employment as still good rule—a rule reaffirmed in the recent case of Escudero vs. Office
of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a
teacher being served by her school a notice of termination following the expiration of the last
of three successive fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her
employment was probationary, contractual in nature, and one with a definitive period. At the
expiration of the period stipulated in the contract, her appointment was deemed terminated
and the letter informing her of the non-renewal of her contract is not a condition sine qua non
before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is
a mere reminder that Reyes' contract of employment was due to expire and that the contract
would no longer be renewed. It is not a letter of termination.

Paraphrasing Escudero, respondent Alegre's employment was terminated upon the
expiration of his last contract with Brent School on July 16, 1976 without the necessity of any
notice. The advance written advice given the Department of Labor with copy to said
petitioner was a mere reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the approval of the
Department of Labor to make the termination of his services effective. In any case, such
clearance should properly have been given, not denied.

[G.R. No. 122653 December 12, 1997]

FACTS: The private respondents were hired by petitioner Pure Foods to work for a fixed
period of five months at its tuna cannery plant in General Santos City. After the expiration of
their respective contracts of employment, their services were terminated. They forthwith
executed a "Release and Quitclaim" stating that they had no claim whatsoever against the
petitioner. Private respondents then filed before the NLRC-Sub-RAB a complaint for illegal
dismissal against the petitioner.

The Labor Arbiter dismissed the complaint on the ground that the private respondents were
mere contractual workers, and not regular employees; hence, they could not avail of the law
on security of tenure. The termination of their services by reason of the expiration of their
contracts of employment was, therefore, justified.

The private respondents appealed the decision to the NLRC which affirmed the LA’s
decision. However, on private respondents' motion for reconsideration, the NLRC rendered
another decision holding that the private respondent and their co-complainants were regular
employees. It declared that the contract of employment for five months was a "clandestine
scheme employed by the petitioner to stifle private respondents' right to security of tenure"
and should therefore be struck down and disregarded for being contrary to law, public policy,
and morals. Hence, their dismissal on account of the expiration of their respective contracts
was illegal. Its motion for reconsideration having been denied, the petitioner came to this
Court contending that respondent NLRC committed grave abuse of discretion amounting to
lack of jurisdiction in reversing the decision of the Labor Arbiter.

ISSUE: Whether or not private respondents are regular employees of petitioner company or
mere contractual employees.

HELD: The SC held that the petition devoid of merit. Under Art. 280, there are two kinds of
regular employees are (1) those who are engaged to perform activities which are necessary
or desirable in the usual business or trade of the employer; and (2) those casual employees
who have rendered at least one year of service, whether continuous or broken, with respect
to the activity in which they are employed.

In the instant case, the private respondents' activities consisted in the receiving, skinning,
loining, packing, and casing-up of tuna fish which were then exported by the petitioner.
Indisputably, they were performing activities which were necessary and desirable in
petitioner's business or trade. Contrary to petitioner's submission, the private respondents
could not be regarded as having been hired for a specific project or undertaking. The term
"specific project or undertaking" under Article 280 of the Labor Code contemplates an activity
which is not commonly or habitually performed or such type of work which is not done on a
daily basis but only for a specific duration of time or until completion; the services employed
are then necessary and desirable in the employer's usual business only for the period of time
it takes to complete the project. The fact that the petitioner repeatedly and continuously hired
workers to do the same kind of work as that performed by those whose contracts had
expired negates petitioner's contention that those workers were hired for a specific project or
undertaking only.

Although, this Court has upheld the legality of fixed-term employment, none of the criteria
had been met in the present case. It could not be supposed that private respondents and all
other so-called "casual" workers of the petitioner KNOWINGLY and VOLUNTARILY agreed
to the 5-month employment contract. Cannery workers are never on equal terms with their
employers. Almost always, they agree to any terms of an employment contract just to get
employed considering that it is difficult to find work given their ordinary qualifications. Their
freedom to contract is empty and hollow because theirs is the freedom to starve if they
refuse to work as casual or contractual workers. Indeed, to the unemployed, security of
tenure has no value. It could not then be said that petitioner and private respondents "dealt
with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter.

The petitioner does not deny or rebut private respondents' averments (1) that the main bulk
of its workforce consisted of its so-called "casual" employees; (2) that as of July 1991,
"casual" workers numbered 1,835; and regular employee, 263; (3) that the company hired
"casual" every month for the duration of five months, after which their services were
terminated and they were replaced by other "casual" employees on the same five-month
duration; and (4) that these "casual" employees were actually doing work that were
necessary and desirable in petitioner's usual business. This scheme of the petitioner was
apparently designed to prevent the private respondents and the other "casual" employees
from attaining the status of a regular employee. It was a clear circumvention of the
employees' right to security of tenure and to other benefits like minimum wage, cost-of-living
allowance, sick leave, holiday pay, and 13th month pay. Indeed, the petitioner succeeded in
evading the application of labor laws. Also, it saved itself from the trouble or burden of
establishing a just cause for terminating employees by the simple expedient of refusing to
renew the employment contracts.

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

Petition is dismissed.