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BUSTAMANTE vs.

NLRC (1996) o Then came the Mercury Drug ruling, where the Court ruled that a fixed
Padilla, J. amount of backwages without further qualifications should be awarded
to an illegally dismissed employee, for the purposes of expediency.
FACTS: o A permutation of the aforementioned rule, the 3-year rule formulated by
Teehankee was adopted, where backwages are always computed for the
Private respondent moves to reconsider the earlier decision of the Supreme Court First fixed period of 3 years.
Division on grounds that (a) petitioners are not entitled to recover backwages because they - Post-Labor Code
were not actually dismissed but their probationary employment was not converted to o Art. 279 provided that an unjustly dismissed employee shall be entitled
permanent employment; and (b) assuming that petitioners are entitled to backwages,
to his back wages computed from the time his compensation was
computation thereof should not start from cessation of work up to actual reinstatement, and
withheld from him up to the time of his reinstatement.
that salary earned elsewhere (during the period of illegal dismissal) should be deducted from
o Despite the express provision that it should be computed from the time
the award of such backwages.
compensation was withheld up to reinstatement, the Mercury Drug rule
with the 3-year constant was still applied.
ISSUE: How should backwages be computed?
o On March 1989, Republic Act No. 6715 took effect, amending the Art. 279
HELD: of the LC. This added other benefits to the computation of backwages,
which should also be computed from the time compensation was
withheld up to reinstatement.
- The prevailing rule is that backwages to be awarded to an illegally dismissed
o In 1993, the Court in the Pines City Educational Center went back to the
employee, should not be diminished or reduced by the earnings derived by him
elsewhere during the period of his illegal dismissal. The underlying reason of this pre-Mercury Drug rule, where the total amount derived from
ruling is that the employee, while litigating the legality (illegality) of his dismissal, employment elsewhere by the employee from the date of dismissal up to
must still earn a living to support himself and family, while his backwages have to the date of reinstatement, if any, should be deducted therefrom. The
be paid by the employer as part of the price or penalty he has to pay for illegally rationale in allowing the deduction was to prevent unjust enrichment by
dismissing his employee. the employee at the expense of the employer.
- Under Art. 279, as amended, the provision handling for "full backwages" to illegally
o In the present case, the Court overrules the Pines City case, and adopts as
a general rule that employees are entitled to full backwages from the
dismissed employees is clear, plain and free from ambiguity and, therefore, must be
time it was withheld up to the time of reinstatement, without any
applied without attempted or strained interpretation. Index animi sermo est.
deductions or limitatations as to period/amount.
- Therefore, petitioners are entitled on their full backwages, inclusive of allowances
and other benefits or their monetary equivalent, from the time their actual
compensation was withheld on them up to the time of their actual reinstatement.

HISTORY:

- Pre-Labor Code
o Under RA 875, the CIR was given wide discretion to determine the
amount of backwages. Thus, in the exercise of its jurisdiction, the CIR
increased or diminished the award of backpay, depending on several
circumstances, among them, the good faith of the employer, the
employee's employment in other establishments during, the period of
illegal dismissal, or the probability that the employee could have realized
net earnings from outside employment if he had exercised due diligence
to search for outside employment. In labor cases decided during the
effectivity of R.A. No. 875, the Supreme Court acknowledged and upheld
the CIR's authority to deduct any amount from the employee's
backwages, including the discretion to reduce such award of backwages
whatever earnings were obtained by the employee elsewhere during the
period of his illegal dismissal (Itogon-Suyoc ruling).
BUSTAMANTE ET AL VS. in September 1989. Previously, they were hired to
do the same work for periods lasting a month or
NLRC DIGEST more, from 1985 to 1989. Before the contracts of
DECEMBER 19, 2016 ~ VBDIAZ employment expired on 2 July 1990, petitioners
G.R. No. 111651 March 15, 1996 employments were terminated on 25 June 1990
on the ground of poor performance on account of
OSMALIK S. BUSTAMANTE, PAULINO A. age, as not one of them was allegedly below forty
BANTAYAN, FERNANDO L. BUSTAMANTE, (40) years old.
MARIO D. SUMONOD, and SABU J. LAMARAN
v. NATIONAL LABOR RELATIONS
COMMISSION, FIFTH DIVISION and Petitioners filed a complaint for illegal dismissal.
EVERGREEN FARMS, INC.

PADILLA, J.: ISSUE: Whether or not private respondent


exercises its power to terminate in good faith so
FACTS: Respondent company is engaged in the as to make the award of backwages improper in
business of producing high grade bananas in its this case.
plantation in Davao del Norte. Petitioners Paulino
Bantayan, Fernando Bustamante, Mario Sumonod
and Osmalik Bustamante were employed as RULING: We do not sustain public respondents
laborers and harvesters while petitioner Sabu theory that private respondent should not be
Lamaran was employed as a laborer and sprayer made to compensate petitioners for backwages
in respondent companys plantation. All the because its termination of their employment was
petitioners signed contracts of employment for a not made in bad faith. The act of hiring and re-
period of six (6) months from 2 January 1990 to 2 hiring the petitioners over a period of time
July 1990, but they had started working sometime without considering them as regular employees
employees and the casual employees. The regular
evidences bad faith on the part of private
employees consist of the following: 1) those engaged to
respondent. The public respondent made a perform activities which are usually necessary or desirable
finding to this effect when it stated that the in the usual business or trade of the employer; and 2) those
who have rendered at least one year of service whether
subsequent rehiring of petitioners on a such service is continuous or broken.
probationary status clearly appears to be a 2. ID.; ID.; ID.; ID.; ID.; REASON. - The law distinguishes
convenient subterfuge on the part of between the two (2) kinds of employees to protect the
interests of labor. Thus, in the case of Baguio Country Club
management to prevent complainants Corporation vs. NLRC, the Court declared: Its language
(petitioners) from becoming regular employees. 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
FIRST DIVISION as long as convenient x x x.
3. ID.; ID.; ID.; ID.; ID.; EMPLOYEES IN CASE AT BAR ARE
CONSIDERED REGULAR EMPLOYEES. - In the case at
[G.R. No. 111651. March 15, 1996] bar, petitioners were employed at various periods from 1985
to 1989 for the same kind of work they were hired to
perform in September 1989. Both the labor arbiter and the
respondent NLRC agree that petitioners were employees
OSMALIK S. BUSTAMANTE, PAULINO A. engaged to perform activities necessary in the usual
BANTAYAN, FERNANDO L. BUSTAMANTE, business of the employer. As laborers, harvesters or
MARIO D. SUMONOD, and SABU J. sprayers in an agricultural establishment which produces
high grade bananas, petitioners tasks are indispensable to
LAMARAN, petitioners, vs. NATIONAL LABOR the year-round operations of respondent company. This
RELATIONS COMMISSION, FIFTH DIVISION, belies the theory of respondent company that the
and EVERGREEN FARMS, INC., respondents. employment of petitioners was terminated due to the
SYLLABUS expiration of their probationary period in June 1990. If at all
significant, the contract for probationary employment was
1. LABOR AND SOCIAL LEGISLATION; TERMINATION OF utilized by respondent company as a chicanery to deny
EMPLOYMENT; REGULAR AND CASUAL petitioners their status as regular employees and to evade
EMPLOYMENT; REGULAR EMPLOYEES; paying them the benefits attached to such status. Some of
DISTINGUISHED. - Article 280 of the Labor Code draws a the petitioners were hired as far back as 1985, although the
line between regular and casual employment, a distinction hiring was not continuous. They were hired and re-hired in a
however often abused by employers. The provision span of from two to four years to do the same type of work
enumerates two (2) kinds of employees, the regular which conclusively shows the necessity of petitioners
service to the respondent companys business. Petitioners full backwages and other benefits from the time their
have, therefore, become regular employees after performing compensation was withheld from them up to the time of their
activities which are necessary in the usual business of their actual reinstatement.
employer. But, even assuming that the activities of
APPEARANCES OF COUNSEL
petitioners in respondent companys plantation were not
necessary or desirable to its business, we affirm the public Lucio V. Pocot for petitioners.
respondents finding that all of the complainants (petitioners) The Solicitor General for public respondent.
have rendered non-continuous or broken service for more J. V. Yap Law Office for private respondent.
than one (1) year and are consequently considered regular
employees. DECISION
4. ID.; ID.; ID.; ID.; ID.; THE ACT OF HIRING AND RE-HIRING PADILLA, J.:
THE EMPLOYEES OVER A PERIOD OF TIME WITHOUT
CONSIDERING THEM AS REGULAR EMPLOYEES This petition for certiorari seeks to reverse the 3 May 1993
EVIDENCES BAD FAITH ON THE PART OF THE resolution of the National Labor Relations Commission (NLRC)
EMPLOYER. - We do not sustain public respondents theory which set aside its earlier resolution dated 8 March 1993 and
that private respondent should not be made to compensate deleted the award of backwages in favor of petitioners.
petitioners for backwages because its termination of their
employment was not made in bad faith. The act of hiring The focal issue therefore in this case is whether or not
and re-hiring the petitioners over a period of time without petitioners are entitled to backwages after a finding by the
considering them as regular employees evidences bad faith NLRC itself that they had become regular employees after
on the part of private respondent. The public respondent serving for more than one (1) year of broken or non-continuous
made a finding to this effect when it stated that the service as probationary employees.
subsequent rehiring of petitioners on a probationary status The facts are not in dispute. Respondent company is
clearly appears to be a convenient subterfuge on the part of engaged in the business of producing high grade bananas in its
management to prevent complainants (petitioners) from plantation in Davao del Norte. Petitioners Paulino Bantayan,
becoming regular employees. Fernando Bustamante, Mario Sumonod and Osmalik
5. ID.; ID.; ID.; ID.; ID.; RIGHTS OF ILLEGALLY DISMISSED Bustamante were employed as laborers and harvesters while
EMPLOYEES; CASE AT BAR. - Reliance by public petitioner Sabu Lamaran was employed as a laborer and
respondent on the case of Manila Electric Company vs. sprayer in respondent companys plantation. All the petitioners
NLRC is misplaced. In that case, the Court ordered the signed contracts of employment for a period of six (6) months
reinstatement of an employee, without backwages because, from 2 January 1990 to 2 July 1990, but they had started
although there was a valid cause for dismissal, the penalty working sometime in September 1989. Previously, they were
was too severe for an employee who had rendered service hired to do the same work for periods lasting a month or more,
for an uninterrupted period of twenty (20) years with two from 1985 to 1989. Before the contracts of employment expired
commendations for honesty. In the case at bar, there is no on 2 July 1990, petitioners employment were terminated on 25
valid cause for dismissal. The employees (petitioners) have June 1990 on the ground of poor performance on account of
not performed any act to warrant termination of their age, as not one of them was allegedly below forty (40) years
employment. Consequently, petitioners are entitled to their old.
Petitioners filed a complaint for illegal dismissal before the It is undisputed that petitioners were illegally dismissed from
Regional Arbitration Branch, Branch XI of the NLRC in Davao employment. Article 280 of the Labor Code, states:
City. On 26 April 1991, the labor arbiter rendered judgment in
favor of petitioners, thus ART. 280. Regular and Casual Employment. - The provisions
of written agreement to the contrary notwithstanding and
WHEREFORE, judgment is hereby rendered: regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
1. Declaring the dismissal of the complainants as illegal;
engaged to perform activities which are usually necessary or
2. Ordering respondent Evergreen Farms, Inc. to desirable in the usual business or trade of the employer, except
immediately reinstate complainants to their former position
with six (6) months backwages computed as follows
where the employment has been fixed for a specific project or
(26.17 x P79.00 per day equals P2,067.43 x 6 months undertaking the completion or termination of which has been
equals P12,404.58 times 5 complainants equals Sixty Two determined at the time of the engagement of the employee or
Thousand Four Hundred Four & 58/100 (P62,404.58) where the work or services to be performed is seasonal in
PESOS. However, if reinstatement is no longer feasible an nature and the employment is for the duration of the season.
additional one (1) month salary shall be awarded as a
form of separation pay;
An employment shall be deemed to be casual if it is not
3. The claims for underpayment of wages is hereby covered by the preceding paragraph: Provided, that, any
dismissed for lack of merit. employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
SO ORDERED. [1]
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
On 8 March 1993, public respondent dismissed the appeal such activity exists.
of private respondent company for lack of merit. Private
respondent filed a motion for reconsideration dated 1 April This provision draws a line between regular and casual
1993. Acting on said motion, public respondent issued a second employment, a distinction however often abused by
resolution on 3 May 1993 affirming its earlier resolution on employers. The provision enumerates two (2) kinds of
illegal dismissal but deleting the award of backwages on the employees, the regular employees and the casual
ground that the termination of petitioners employments was the employees. The regular employees consist of the following:
result of the latters (private respondent) mistaken interpretation
of the law and that the same was therefore not necessarily 1) those engaged to perform activities which are usually
attended by bad faith, nor arbitrariness, x x x. [2] necessary or desirable in the usual business or trade of the
employer; and
In their present petition, petitioners argue that the public
respondent gravely abused its discretion in rendering the
second resolution which removed the award of backwages in 2) those who have rendered at least one year of service
their favor. whether such service is continuous or broken.
We rule in favor of petitioners.
The law distinguishes between the two (2) kinds of We do not sustain public respondents theory that private
employees to protect the interests of labor. Thus, in the case respondent should not be made to compensate petitioners for
of Baguio Country Club Corporation vs. NLRC, the Court
[3]
backwages because its termination of their employment was not
declared: Its language evidently manifests the intent to made in bad faith. The act of hiring and re-hiring the petitioners
safeguard the tenurial interest of the worker who may be denied over a period of time without considering them as regular
the rights and benefits due a regular employee by virtue of employees evidences bad faith on the part of private
lopsided agreements with the economically powerful employer respondent. The public respondent made a finding to this effect
who can maneuver to keep an employee on a casual status for when it stated that the subsequent re-hiring of petitioners on a
as long as convenient x x x. probationary status clearly appears to be a convenient
subterfuge on the part of management to prevent complainants
In the case at bar, petitioners were employed at various
(petitioners) from becoming regular employees. [5]

periods from 1985 to 1989 for the same kind of work they were
hired to perform in September 1989. Both the labor arbiter and Reliance by public respondent on the case of Manila
the respondent NLRC agree that petitioners were employees Electric Company vs. NLRC is misplaced. In that case, the
[6]

engaged to perform activities necessary in the usual business of Court ordered the reinstatement of an employee, without
the employer. As laborers, harvesters or sprayers in an backwages because, although there was a valid cause for
agricultural establishment which produces high grade bananas, dismissal, the penalty was too severe for an employee who had
petitioners tasks are indispensable to the year-round operations rendered service for an uninterrupted period of twenty (20)
of respondent company. This belies the theory of respondent years with two commendations for honesty. In the case at bar,
company that the employment of petitioners was terminated due there is no valid cause for dismissal. The employees
to the expiration of their probationary period in June 1990. If at (petitioners) have not performed any act to warrant termination
all significant, the contract for probationary employment was of their employment. Consequently, petitioners are entitled to
utilized by respondent company as a chicanery to deny their full backwages and other benefits from the time their
petitioners their status as regular employees and to evade compensation was withheld from them up to the time of their
paying them the benefits attached to such status. Some of the actual reinstatement.
petitioners were hired as far back as 1985, although the hiring
WHEREFORE, the Resolution of the National Labor
was not continuous. They were hired and re-hired in a span of
Relations Commission dated 3 May 1993 is modified in that its
from two to four years to do the same type of work which
deletion of the award for backwages in favor of petitioners, is
conclusively shows the necessity of petitioners service to the
SET ASIDE. The decision of the Labor Arbiter dated 26 April
respondent companys business. Petitioners have, therefore,
1991 is AFFIRMED with the modification that backwages shall
become regular employees after performing activities which are
be paid to petitioners from the time of their illegal dismissal
necessary in the usual business of their employer. But, even
on 25 June 1990 up to the date of their reinstatement. If
assuming that the activities of petitioners in respondent
reinstatement is no longer feasible, a one-month salary shall be
companys plantation were not necessary or desirable to its
paid the petitioners as ordered in the labor arbiters decision; in
business, we affirm the public respondents finding that all of the
addition to the adjudged backwages.
complainants (petitioners) have rendered non-continuous or
broken service for more than one (1) year and are consequently SO ORDERED.
considered regular employees. [4]

Bellosillo, Vitug, Kapunan, and Hermosisima, Jr.,


JJ., concur.
[1]
Rollo, pp. 37-38.
[2]
Rollo, p. 71.
[3]
G.R. No. 71664, 28 February 1992, 206 SCRA 643, citing the case of De
Leon vs. NLRC, G.R. No. 70705,21 August 1989, 176 SCRA 615.
[4]
Rollo, p. 70.
[5]
Rollo, p. 71.
[6]
G.R. No. 78763, 12 July 1989, 175 SCRA 277.