15. Price v.

Innodata Phils
G.R. No. 178505. September 30, 2008.
CHICO-NAZARIO, J.:

Doctrine:

The employment status of a person is defined and prescribed by law and not by what the parties say
it should be.

The applicable test to determine whether an employment should be considered regular or non-
regular is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer.

Under the Civil Code, fixed-term employment contracts are not limited, as they are under the present
Labor Code, to those by nature seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free choice have assigned a specific date
of termination—the decisive determinant in term employment is 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. Fixed-term
employment contracts are the exception rather than the general rule.

Where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity therein
should be construed strictly against the party who prepared it.

“Project employees” are those workers hired (1) for a specific project or undertaking, and wherein (2)
the completion or termination of such project has been determined at the time of the engagement of
the employee.

Facts:
Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic
corporation engaged in the data encoding and data conversion business. INNODATA had since
ceased operations due to business losses in June 2002.

Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as formatters
by INNODATA. The parties executed an employment contract denominated as a “Contract of
Employment for a Fixed Period,” stipulating that the contract shall be for a period of one year, to wit:

“CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD

xxxx

TERM/DURATION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE
hereby accepts such appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16,
2000 a period of ONE YEAR.

Xxxx

TERMINATION
6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT
shall also ipso facto terminate on the last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of the month were originally set
 as the termination date of this Contract. Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the project, lack of work (sic)
business losses, introduction of new production processes and techniques, which will negate
the need for personnel, and/or overstaffing, this contract maybe pre-terminated by the
EMPLOYER upon giving of three (3) days notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis the completion of the
project, this contract shall automatically terminate.
6.3 COMPANY’s Policy on monthly productivity shall also apply to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without
cause, by giving at least Fifteen – (15) notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the appropriate clearance in favor of the
said EMPLOYEE. 6.5 Either of the parties may terminate this Contract by reason of the
breach or violation of the terms and conditions hereof by giving at least Fifteen (15) days
written notice. Termination with cause under this paragraph shall be effective without need of
judicial action or approval.”

On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of their
last day of work. According to INNODATA, petitioners’ employment already ceased due to the end of
their contract.

On 22 May 2000, petitioners filed a Complaint for illegal dismissal and damages against
respondents. Petitioners claimed that they should be considered regular employees since their
positions as formatters were necessary and desirable to the usual business of INNODATA as an
encoding, conversion and data processing company. Petitioners finally argued that they could not be
considered project employees considering that their employment was not coterminous with any
project or undertaking, the termination of which was predetermined.
Respondents asserted that petitioners were not illegally dismissed, for their employment was
terminated due to the expiration of their terms of employment. Petitioners’ contracts of employment
with INNODATA were for a limited period only, commencing on 6 September 1999 and ending on 16
February 2000.

On 17 October 2000, the Labor Arbiter issued its Decision finding petitioners’ complaint for illegal
dismissal and damages meritorious. The NLRC, in its Decision dated 14 December 2001, reversed
the Labor Arbiter’s Decision dated 17 October 2000, and absolved INNODATA of the charge of
illegal dismissal. The NLRC found that petitioners were not regular employees, but were fixed-term
employees as stipulated in their respective contracts of employment.

On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling of the
NLRC that petitioners were not illegally dismissed.
Issue: Whether petitioners were hired by INNODATA under valid fixed-term employment contracts.

Ruling:

The Court finds merit in the present Petition. There were no valid fixed-term contracts and petitioners
were regular employees of the INNODATA who could not be dismissed except for just or authorized
cause.

The employment status of a person is defined and prescribed by law and not by what the parties say
it should be.

Regular employment has been defined by Article 280 of the Labor Code, as amended. Based on the
afore-quoted provision, the following employees are accorded regular status: (1) those who are
engaged to perform activities which are necessary or desirable in the usual business or trade of the
employer, regardless of the length of their employment; and (2) those who were initially hired as
casual employees, but have rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed. Undoubtedly, petitioners belong to the first
type of regular employees.

Under Article 280 of the Labor Code, the applicable test to determine whether an employment
should be considered regular or non-regular is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. In the
case at bar, petitioners were employed by INNODATA on 17 February 1999 as formatters. The
primary business of INNODATA is data encoding, and the formatting of the data entered into the
computers is an essential part of the process of data encoding. Formatting organizes the data
encoded, making it easier to understand for the clients and/or the intended end users thereof.
Undeniably, the work performed by petitioners was necessary or desirable in the business or trade
of INNODATA.

However, it is also true that while certain forms of employment require the performance of usual or
desirable functions and exceed one year, these do not necessarily result in regular employment
under Article 280 of the Labor Code. Under the Civil Code, fixed- term employment contracts are not
limited, as they are under the present Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion; they also include those to which the parties by free
choice have assigned a specific date of termination.

The decisive determinant in term employment is 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. Seasonal employment
and employment for a particular project are instances of employment in which a period, where not
expressly set down, is necessarily implied.

After considering petitioners’ contracts in their entirety, as well as the circumstances surrounding
petitioners’ employment at INNODATA, the Court is convinced that the terms fixed therein were
meant only to circumvent petitioners’ right to security of tenure and are, therefore, invalid. The
contracts of employment submitted by respondents are highly suspect for not only being ambiguous,
but also for appearing to be tampered with. While respondents submitted employment contracts with
6 September 1999 as beginning date of effectivity, it is obvious that in one of them, the original
beginning date of effectivity, 16 February 1999, was merely crossed out and replaced with 6
September 1999. The copies of the employment contracts submitted by petitioners bore similar
alterations. The contracts themselves state that they would be effective until 16 February 2000 for a
period of one year. If the contracts took effect only on 6 September 1999, then its period of effectivity
would obviously be less than one year, or for a period of only about five months. Obviously,
respondents wanted to make it appear that petitioners worked for INNODATA for a period of less
than one year. The only reason the Court can discern from such a move on respondents’ part is so
that they can preclude petitioners from acquiring regular status based on their employment for one
year.

Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA contends that
petitioners were project employees whose employment ceased at the end of a specific project or
undertaking. This contention is specious and devoid of merit.

In Philex Mining Corp. v. National Labor Relations Commission, the Court defined “project
employees” as those workers hired (1) for a specific project or undertaking, and wherein (2) the
completion or termination of such project has been determined at the time of the engagement of the
employee.
Scrutinizing petitioners’ employment contracts with INNODATA, however, failed to reveal any
mention therein of what specific project or undertaking petitioners were hired for. Although the
contracts made general references to a “project,” such project was neither named nor described at
all therein.

As a final observation, the Court also takes note of several other provisions in petitioners’
employment contracts that display utter disregard for their security of tenure. Despite fixing a period
or term of employment, i.e., one year, INNODATA reserved the right to pre- terminate petitioners’
employment under the following circumstances:
6.1 x x x Further should the Company have no more need for the EMPLOYEE’s services on
account of completion of the project, lack of work (sic) business losses, introduction of
new production processes and techniques, which will negate the need for personnel, and/or
overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or
without cause, by giving at least Fifteen – (15) [day] notice to that effect. Provided, that
such pre-termination shall be effective only upon issuance of the appropriate clearance in
favor of the said EMPLOYEE. (Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of
tenure, even for the supposedly one-year period of employment provided in their contracts,
because they can still be pre-terminated (1) upon the completion of an unspecified project; or
(2) with or without cause, for as long as they are given a three-day notice. Such contract
provisions are repugnant to the basic tenet in labor law that no employee may be terminated
except for just or authorized cause.

In all, respondents’ insistence that it can legally dismiss petitioners on the ground that their term of
employment has expired is untenable. To reiterate, petitioners, being regular employees of
INNODATA, are entitled to security of tenure.

Considering that reinstatement is no longer possible on the ground that INNODATA had ceased its
operations in June 2002 due to business losses, the proper award is separation pay equivalent to
one month pay for every year of service

16. Biboso v. Victoria’s Milling

L-44360 March 31, 1977
Fernando, J.;

Doctrine:
There is a safeguard as to the duration of employment being respected and to that extent, tenure is
secure. The moment, however, the period expired in accordance with contracts freely entered into,
they could no longer invoke the constitutional protection.

Facts:
Biboso et. al were employed by Victoria’s Milling as academic teachers in its school (St.
Mary Mazzarello). Biboso et. al were notified by the school Directress that they were not going to be
rehired for the school year 1973-74. The necessary report for such was filed by the school with the
DOLE, informing that the teacher’s services were thus terminated. Biboso et. al challenged such
decision and were quite successful with the Arbitrator. Victoria’s Milling then appealed to the Office
of the President OP: Presidential Executive Assistant Clave, dismissed the complaint of Biboso et. al
for reinstatement.
 The OP had examined and analyzed the various contracts. The complainants were hired as
teachers of the school on a year-to year basis and that they reapplied before the expiration of the
contracts and/or signed new ones, as the case may be, if the school decided to renew the same.
They all signed identical contracts which provided for a definite period of employment. The
complainants were hired as temporary and when required or until the contract is supposed to
terminate.
The Labor Code recognizes the policy of the Bureau of Private Schools settling the
maximum probationary period for teachers at three years. The Labor Code does not set the
maximum probationary period at six months. Under the Labor Code, the probationary period is the
period required to learn a skill, trade, occupation or profession. It was likewise held that the
allegation of unfair labor practice is untenable.

Issue:
WON the provision of the assuring worker’s security of tenure is applicable to probationary
employee.

Held:
Yes. Petitioners did not enjoy a permanent status. During such period they could remain in
their positions and any circumvention of their rights, in accordance with the statutory statutory
scheme, subject to inquiry and there after correction by the Department of Labor. Thus there was the
safeguard as to the duration of their employment being respected. To that extent, their tenure was
secure. The moment, however, the period expired in accordance with contracts freely entered into,
they could no longer invoke the constitutional protection. It would be a different matter of course had
the failure to renew the contracts of petitioners been justly attributable to their joining petitioner labor
union. That would be a clear case of an unfair labor practice. However, such was not the case here.

17. International Catholic Migration v. NLRC

G.R. No. 72222

18. ILUMINADA VER BUISER, et. al. petitioners, vs. HON. VICENTE LEOGARDO, JR., in his
capacity as Deputy Minister of the Ministry of Labor & Employment, and GENERAL
TELEPHONE DIRECTORY, CO., respondents.
G.R. No. L-63316 July 31, 1984
GUERRERO, J.:
DOCTRINE: Generally, the probationary period of employment is limited to six (6) months. The
exception to this general rule is when the parties to an employment contract may agree otherwise,
such as when the same is established by company policy or when the same is required by the
nature of work to be performed by the employee. In the latter case, there is recognition of the
exercise of managerial prerogatives in requiring a longer period of probationary employment, such
as in the present case where the probationary period was set for eighteen (18) months, i.e. from
May, 1980 to October, 1981 inclusive, especially where the employee must learn a particular kind of
work such as selling, or when the job requires certain qualifications, skills, experience or training.
FACTS: Petitioners were employed by the private respondent General Telephone Directory
Company as sales representatives and charged with the duty of soliciting advertisements for
inclusion in a telephone directory. Petitioners Buiser and Intengan entered into an "Employment
Contract (on Probationary Status)" on May 26, 1980 with private respondent, a corporation engaged
in the business of publication and circulation of the directory of the Philippine Long Distance
Telephone Company. Petitioner Ma. Cecilia Rillo-Acuna entered into the same employment contract
on June 11, 1980 with the private respondent.
The contract included the following common provisions:
The company hereby employs the employee as telephone representative on a probationary status
for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. It is understood
that during the probationary period of employment, the Employee may be terminated at the pleasure
of the company without the necessity of giving notice of termination or the payment of termination
pay. The Employee recognizes the fact that the nature of the telephone sales representative's job is
such that the company would be able to determine his true character, conduct and selling
capabilities only after the publication of the directory, and that it takes about eighteen (18) months
before his worth as a telephone saw representative can be fully evaluated inasmuch as the
advertisement solicited by him for a particular year are published in the directory only the following
year.
Private respondent prescribed sales quotas to be accomplished or met by the petitioners. Failing to
meet their respective sales quotas, the petitioners were dismissed from the service by the private
respondent. Petitioners, then, filed a complaint for illegal dismissal and claims for back wages,
earned commissions and other benefits
Regional director of MOLE dismissed the complaints of petitioners except for the claim for
allowances. Deputy minister Leogardo of MOLE ruled that the termination was valid, and affirmed
the decision of the regional director citing that the petitioners have not attained permanent status
since private respondent was justified in requiring a longer period of probation.
ISSUE: Whether or not the probationary period of eighteen (18) months is legal and valid
HELD: YES. Generally, the probationary period of employment is limited to six (6) months. The
exception to this general rule is When the parties to an employment contract may agree otherwise,
such as when the same is established by company policy or when the same is required by the
nature of work to be performed by the employee. In the latter case, there is recognition of the
exercise of managerial prerogatives in requiring a longer period of probationary employment, such
as in the present case where the probationary period was set for eighteen (18) months, i.e. from
May, 1980 to October, 1981 inclusive, especially where the employee must learn a particular kind of
work such as selling, or when the job requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the MOLE: Probationary Employment has been the subject of
misunderstanding in some quarter. Some people believe six (6) months is the probationary period in
all cases. On the other hand, employees who have already served the probationary period are
sometimes required to serve again on probation.
Under the Labor Code, six (6) months is the general probationary period ' but the probationary
period is actually the period needed to determine fitness for the job. This period, for lack of a better
measurement is deemed to be the period needed to learn the job. The purpose of this policy is to
protect the worker at the same time enable the employer to make a meaningful employee selection.
This purpose should be kept in mind in enforcing this provision of the Code. This issuance shall take
effect immediately.
The very contracts of employment signed and acquiesced to by the petitioners specifically indicate
that "the company hereby employs the employee as telephone sales representative on a
probationary status for a period of eighteen (18) months, i.e. from May 1980 to October 1981,
inclusive. This stipulation is not contrary to law, morals and public policy.

19. TITLE: Mariwasa Manufacturing, Inc. vs. Leogardo

G.R. No. 74246 January 26, 1989
PONENTE: NARVASA, J.

DOCTRINE: PROBATIONARY; “By voluntarily agreeing to an extension of the probationary

period, the probationer in effect waived any benefit attaching to the completion of said period (of
probation) if he still failed to make the grade during the period of extension.”

FACTS: Private respondent Dequila was hired on probation by petitioner MARIWASA as a

general utility worker. Upon the expiration of the probationary period of 6 months, Dequila was
informed by his employer that his work had proved unsatisfactory and had failed to meet the
required standards. To give him a chance to improve his performance and qualify for regular
employment, instead of dispensing with his service then and there, with his written consent,
MARIWASA extended his probation period for another 3 months from July 10 to October 9, 1979.
His performance, however, did not improve and on that account Mariwasa terminated his
employment at the end of the extended period.
Dequila thereupon filed with the Ministry of Labor against MARIWASA and its Vice-President
for Administration, Dazo, a complaint for illegal dismissal and violation of P.D. Nos. 928 and 1389.
His complaint was dismissed after hearing by Dir. Estrella, who ruled that the termination of
Dequila's employment was in the circumstances justified and rejected his money claims for
insufficiency of evidence. On appeal to the Office of the Minister, however, said disposition was
reversed. Respondent Leogardo, Jr. held that Dequila was already a regular employee at the time of
his dismissal, therefore, could not have been lawfully dismissed for failure to meet company
standards as a probationary worker. He was ordered reinstated to his former position without loss of
seniority and with full back wages from the date of his dismissal until actually reinstated. This last
order appears later to have been amended so as to direct payment of Dequila's back wages from the
date of his dismissal to December 20, 1982 only.

ISSUE/S: Whether or not employer and employee may by agreement extend the probationary
period of employment beyond the 6 months prescribed in Art. 282 of the Labor Code.

HELD: The Supreme Court ruled that employer and employee may by agreement may
lawfully extend the probationary period of employment beyond the 6 months prescribed in Article
282 of the Labor Code notwithstanding the seemingly restrictive language of the cited provision.
“Art. 282. Probationary Employment. — Probationary employment shall not exceed six (6)
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 on a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who is allowed to
work after probationary period shall be considered a regular employee.”
Here, the extension of Dequila's probation was ex gratia, an act of liberality on the part of his
employer affording him a second chance to make good after having initially failed to prove his worth
as an employee. Such an act cannot now unjustly be turned against said employer's account to
compel it to keep on its payroll one who could not perform according to its work standards. The law,
surely, was never meant to produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in effect waived
any benefit attaching to the completion of said period if he still failed to make the grade during the
period of extension. The Court finds nothing in the law which by any fair interpretation prohibits such
a waiver. And no public policy protecting the employee and the security of his tenure is served by
prescribing voluntary agreements which, by reasonably extending the period of probation, actually
improve and further a probationary employee's prospects of demonstrating his fitness for regular
employment.

WHEREFORE, the petition is GRANTED. The orders of the public respondent complained of are
REVERSED and SET ASIDE. Private respondent's complaint against petitioners for illegal dismissal
and violation of P.D. Nos. 928 and 1389 is dismissed for lack of merit, without pronouncement as to
costs.

20. HOLIDAY INN MANILA vs. NLRC

G.R. No. 109114, September 14, 1993
Cruz, J.

Doctrine:

Probationary period shall not exceed 6 months in accordance with Article 281 of the Labor
Code.

Probation is the period where the employer determines if employee is qualified for the inclusion in
the regular force. Even when the employee had undergone on-the-job training and her services were
continued six months thereafter, said employee had become regular and had acquired full security of
tenure. Said employee cannot summarily be separated without just cause.

Facts:

Elena Honasan applied for employment with the Holiday Inn and was accepted for on-the-job
training for a period of three weeks as a telephone operator. After completing her training, she was
employed on a “probationary basis” for a period of six months. Four days before the expiration of her
probation, Holiday Inn notified her of her dismissal on the ground that her performance had not come
up to the standards of the Hotel.

Honasan filed a complaint for illegal dismissal claiming that she was already a regular employee at
the time of her separation and so was entitled to full security of tenure. Complaint was dismissed by
the Labor Arbiter. On appeal, the decision was reversed by the NLRC.

Issue:

Whether or not Honasan was illegally dismissed

Held:

Yes. Honasan was placed by the petitioner on probation twice (double probation), first during her on-
the-job training for three weeks, and next during another period of six months. Her probation clearly
exceeded the period prescribed by Article 281 of the Labor Code.

Probation is the period during which the employer may determine if the employee is qualified for
possible inclusion in the regular force. In the case at bar, the period was for three weeks, during
Honasan’s on-the-job training. When her services were continued after this training, the petitioners in
effect recognized that she had passed probation and was qualified to be a regular employee. The
consequence is that she could no longer be summarily separated on the ground invoked by
petitioners. As a regular employee, she had acquired the protection of Security of Tenure under
Article 279 of the Labor Code.

21. ST. THERESITA'S ACADEMY v. NLRC

GR No. 94523, Oct 27, 1992

Facts:

Lilia G. Ariola had been employed as a school teacher for 22 continuous years. After retiring for
three years she was rehired and she should be considered a regular teacher and not as a newly
hired teacher. She signed a contract with the school which was renewable yearly.

Due to a dispute involving the summer living allowance the school board held a meeting and decided
that no Siervas de San Jose School shall rehire a retired teacher and that any rehired retiree who is
at present a member of the faculty shall be notified that her/his Teacher's Contract will not be
renewed for the coming year.

Private respondent filed in the NLRC a complaint against the petitioner for Illegal Dismissal. The
labor arbiter and later on appeal the NLRC sided with the private respondent.

Hence the petition for certiorari with application for preliminary injunction of the ruling.

Issue:

Does the probationary rule apply?

Ruling:

Yes. When she was rehired in 1979 she did not have to undergo the 3-year probationary
employment for new teachers for her teaching competence had already been tried and tested during
her 22 years of service to the school in 1954 to 1976. She reentered the service in 1979 as a regular
or permanent teacher. She could only be dismissed for cause and with due process.

The NLRC did not abuse its discretion in holding that her dismissal from the service, on account of
the expiration of her annual contract was illegal and that the school is liable to pay her backwages
and separation pay.

Article 280 of the Labor Code defines regular employment as follows:

"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."
With respect to school teachers, paragraph 75 of the Manual of Regulations for Private Schools
provides:

"Full-time teachers who have rendered three (3) years of satisfactory service shall be considered
permanent."

Furthermore, paragraphs 7 and 9 of the Teacher's Contract which the petitioner and the private
respondent signed, categorically stipulated:

"7. This CONTRACT SHALL BE IN FULL FORCE AND EFFECT during the school year 1982-1983
from June to March, unless sooner terminated by either party for valid causes and approved by the
Director of Private Schools. In the absence of valid cause(s) for termination of services, this
CONTRACT shall be rendered for the same period until the teacher shall have gained a Regular or
Permanent Status, pursuant to the pertinent provisions of the Manual of Regulations for Private
Schools.

"9. This CONTRACT shall not affect the Permanent Status of the teacher, even if entered into every
school year; provided that the Probationary Period for new teachers shall be three (3) years."

22. PHILIPPINE DAILY INQUIRER, INC., petitioner, vs. LEON M. MAGTIBAY, JR. and
PHILIPPINE DAILY INQUIRER EMPLOYEES UNION (PDIEU), respondents
G.R. No. 164532; July 27, 2007.
GARCIA, J.:
DOCTRINE/S:
Labor Law; Security of Tenure; Probationary Employees; Dismissals; Within the limited legal six-
month probationary period, probationary employees are still entitled to security tenure; Two Grounds
for Terminating a Probationary Employee.—Within the limited legal six-month probationary period,
probationary employees are still entitled to security of tenure. It is expressly provided in the afore-
quoted Article 281 that a probationary employee may be terminated only on two grounds: (a) for just
cause, or (b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement.
Same; Same; Same; Same; All employees, be they regular or probationary, are expected to comply
with company-imposed rules and regulations.—It is on record that Magtibay committed obstinate
infractions of company rules and regulations, which in turn constitute sufficient manifestations of his
inadequacy to meet reasonable employment norms. The suggestion that Magtibay ought to have
been made to understand during his briefing and orientation that he is expected to obey and comply
with company rules and regulations strains credulity for acceptance. The CA’s observation that
“nowhere can it be found in the list of Basic Responsibility and Specific Duties and Responsibilities
of respondent Magtibay that he has to abide by the duties, rules and regulations that he has
allegedly violated” is a strained rationalization of an unacceptable conduct of an employee. Common
industry practice and ordinary human experience do not support the CA’s posture. All employees, be
they regular or probationary, are expected to comply with company-imposed rules and regulations,
else why establish them in the first place. Probationary employees unwilling to abide by such rules
have no right to expect, much less demand, permanent employment. We, therefore find sufficient
factual and legal basis, duly established by substantial evidence, for PDI to legally terminate
Magtibay’s probationary employment effective upon the end of the 6-month probationary period.
FACTS:
PDI hired Magtibay, on contractual basis, to assist, for a period of five months, the regular phone
operator. His contractual employment was extended for a fifteen-day contract extension under the
same conditions as the existing contract.
After the expiration of Magtibay’s contractual employment, as extended, PDI announced the creation
and availability of a new position for a second telephone operator who would undergo probationary
employment. PDI chose to hire Magtibay on a probationary basis for a period of six (6) months.
On March 13, 1996, or a week before the end the agreed 6-month probationary period, PDI handed
Magtibay his termination paper, grounded on his alleged failure to meet company standards.
Aggrieved, Magtibay immediately filed a complaint for illegal dismissal and damages before the
Labor Arbiter. PDIEU later joined the fray by filing a supplemental complaint for unfair labor practice.
Magtibay claimed that he had become a regular employee by operation of law, considering that he
had been employed by and had worked for PDI for a total period of ten months, i.e., four months
more than the maximum six-month period provided for by law on probationary employment.
PDI denied all the factual allegations of Magtibay, adding that his previous contractual employment
was validly terminated upon the expiration of the period stated therein. It alleged that the period
covered by the contractual employment cannot be counted with or tacked to the period for probation,
inasmuch as there is no basis to consider Magtibay a regular employee. PDI additionally claimed
that Magtibay was dismissed for violation of company rules and policies, such as allowing his lover
to enter and linger inside the telephone operator’s booth and for failure to meet prescribed company
standards which were allegedly made known to him at the start through an orientation seminar
conducted by the company.
The Labor Arbiter found for PDI. It ruled that Magtibay’s previous contractual employment, as later
extended by 15 days, cannot be considered as part of his subsequent probationary employment.
Thus, it implies that Magtibay was merely on a probationary status when his services were
terminated. The Labor Arbiter further ruled that Magtibay’s dismissal from his probationary
employment was for a valid reason.
On appeal, the NLRC reversed and set aside said decision, effectively ruling that Magtibay was
illegally dismissed. According to the NLRC, Magtibay’s probationary employment had ripened into a
regular one. CA affirmed the decision of NLRC. CA ruled that petitioner PDI failed to prove that such
rules and regulations were included in or form part of the standards that were supposed to be made
known to respondent Magtibay at the time of his engagement as telephone operator.
ISSUE: Whether Magtibay was validly dismissed?
RULING: Yes.
The Labor Code also gives the employer a period within which to determine whether a particular
employee is fit to work for him or not. This employer’s prerogative is spelled out under Article 281 of
the Labor Code. It is expressly provided in the said provision that a probationary employee may be
terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee
at the time of his engagement.
PDI invokes the second ground under the premises. It claimed that it had adequately apprised
Magtibay of the reasonable standards against which his performance will be gauged for purposes of
permanent employment, PDI cited the one-on-one seminar between Magtibay and its Personnel
Assistant.
We do not agree with the appellate court when it cleared the NLRC of commission of grave abuse of
discretion despite the latter’s disregard of clear and convincing evidence that there were reasonable
standards made known by PDI to Magtibay during his probationary employment. Common industry
practice and ordinary human experience do not support the CA’s posture. All employees, be they
regular or probationary, are expected to comply with company imposed rules and regulations, else
why establish them in the first place. Probationary employees unwilling to abide by such rules have
no right to expect, much less demand, permanent employment. We, therefore find sufficient factual
and legal basis, duly established by substantial evidence, for PDI to legally terminate Magtibay’s
probationary employment effective upon the end of the 6-month probationary period.
It is undisputed that PDI apprised Magtibay of the ground of his termination, i.e., he failed to qualify
as a regular employee in accordance with reasonable standards made known to him at the time of
engagement, only a week before the expiration of the sixmonth probationary period.
Given this perspective, does this make his termination unlawful for being violative of his right to due
process of law? It does not. Unlike under the first ground for the valid termination of probationary
employment which is for just cause, the second ground does not require notice and hearing. Due
process of law for this second ground consists of making the reasonable standards expected of the
employee during his probationary period known to him at the time of his probationary employment.
By the very nature of a probationary employment, the employee knows from the very start that he
will be under close observation and his performance of his assigned duties and functions would be
under continuous scrutiny by his superiors.
Moreover, Magtibay had previously worked for PDI as telephone operator. Thus, he was already
very much aware of the level of competency and professionalism PDI wanted out of him for the
entire duration of his probationary employment. PDI was only exercising its statutory hiring
prerogative when it refused to hire Magtibay on a permanent basis upon the expiration of the six-
month probationary period.

23. Canadian Opportunities Unlimited, Inc. vs. Dalangin, Jr.

G.R. No. 172223. February 6, 2012.*
Ponente: BRION, J.:

Doctrine: Labor Law; Probationary Employees; A probationary appointment gives the employer an
opportunity to observe the fitness of a probationer while at work, and to ascertain whether he would
be a proper and efficient employee.—In International Catholic Migration Commission v. NLRC, 169
SCRA 606 (1989), the Court explained that a probationary employee, as understood under Article
281 of the Labor Code, is one who is on trial by an employer, during which, the latter determines
whether or not he is qualified for permanent employment. A probationary appointment gives the
employer an opportunity to observe the fitness of a probationer while at work, and to ascertain
whether he would be a proper and efficient employee. Dalangin was barely a month on the job when
the company terminated his employment. He was found wanting in qualities that would make him a
“proper and efficient” employee or, as the company put it, he was unfit and unqualified to continue as
its Immigration and Legal Manager.

The length of time the probationary employee remains on probation depends on the parties’
agreement, but it shall not exceed six (6) months under Article 281 of the Labor Code, unless it is
covered by an apprenticeship agreement stipulating a longer period.—The essence of a
probationary period of employment fundamentally lies in the purpose or objective of both the
employer and the employee during the period. While the employer observes the fitness, propriety
and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the
latter seeks to prove to the former that he has the qualifications to meet the reasonable standards for
permanent employment. The “trial period” or the length of time the probationary employee remains
on probation depends on the parties’ agreement, but it shall not exceed six (6) months under Article
281 of the Labor Code, unless it is covered by an apprenticeship agreement stipulating a longer
period. Article 281 provides: Probationary employment.—Probationary employment shall not exceed
six (6) 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 on a
probationary basis may be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee
at the time of his engagement. An employee who is allowed to work after a probationary period shall
be considered a regular employee.

FACTS:

Respondent filed a complaint for illegal dismissal with prayer for reinstatement and backwages as
well as damages and atty’s fees against petitioner company. Respondent was hired by the company
as Immigration and Legal Manager. He was placed on probation for 6 mos.

Through a memorandum, the company terminated Dalangin’s employment, declaring him “unfit” and
“unqualified” to continue as Immigration and Legal Manager, for the following reasons:
a) Obstinacy and utter disregard of company policies. Propensity to take prolonged and extended
lunch breaks, shows no interest in familiarizing oneself with the policies and objectives.
b) Lack of concern for the company’s interest despite having just been employed in the company.
(Declined to attend company sponsored activities, seminars intended to familiarize company
employees with Management objectives and enhancement of company interest and objectives.)
c) Showed lack of enthusiasm toward work.
d) Showed lack of interest in fostering relationship with his co-
employees.5

At the compulsory arbitration proceedings, the Labor Arbiter declared respondent Dalangain’s
dismissal illegal and awarded him backwages of P75,000.00, moral damages of P50,000.00 and
exemplary damages of P50,000.00, plus 10% attorney’s fees. The labor arbiter found that the
charges against Dalangin, which led to his dismissal, were not established by clear and substantial
proof.

On appeal, NLRC reversed LA’s ruling. The dismissal of Dalangin was found to be a valid exercise
of the company’s management prerogative because Dalangin failed to meet the standards for
regular employment. Dalangin moved for reconsideration, but the NLRC denied the motion,
prompting him to go to the CA on a petition for certiorari under Rule 65 of the Rules of Court.

CA reversed NLRC and affirmed LA’s decision. The CA found that the company failed to support,
with substantial evidence, its claim that Dalangin failed to meet the standards to qualify as a regular
employee. CA denied company’s subsequent MR. Hence, the present appeal.

ISSUE:
Whether or not Dalangin, a probationary employee, was validly dismissed.

HELD:

Yes.

The essence of a probationary period of employment fundamentally lies in the purpose or objective
of both the employer and the employee during the period. While the employer observes the fitness,
propriety and efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the latter seeks to prove to the former that he has the qualifications to meet the
reasonable standards for permanent employment.
The word ‘probationary,’ as used to describe the period of employment, implies the purpose of the
term or period, but not its length. Thus, the fact that Dalangin was separated from the service after
only about four weeks does not necessarily mean that his separation from the service is without
basis.

Contrary to the CA’s conclusions, we find substantial evidence indicating that the company was
justified in terminating Dalangin’s employment, however brief it had been.

Dalangin overlooks the fact, wittingly or unwittingly, that he offered glimpses of his own behavior and
actuations during his four-week stay with the company; he betrayed his negative attitude and regard
for the company, his co-employees and his work. The “Values Formation Seminar” incident is an
eye- opener on the kind of person and employee Dalangin was. His refusal to attend the seminar
brings into focus and validates what was wrong with him. the seminar involved acquainting and
updating the employees with the company’s policies and objectives. Had he attended the seminar,
Dalangin could have broadened his awareness of the company’s policies, in addition to Abad’s
briefing him about the company’s policies on punctuality and attendance, and the procedures to be
followed in handling the clients’ applications. No wonder the company charged him with obstinacy.

We find credence in the company’s submission that Dalangin was unfit to continue as its Immigration
and Legal Manager. As we stressed earlier, we are convinced that the company had seen enough
from Dalangin’s actuations, behavior and deportment during a four-week period to realize that
Dalangin would be a liability rather than an asset to its operations.

In separating Dalangin from the service before the situation got worse, we find the company
not liable for illegal dismissal.

The records support Dalangin’s contention. The notice served on him did not give him a reasonable
time, from the effective date of his separation, as required by the rules. He was dismissed on the
very day the notice was given to him. Although we cannot invalidate his dismissal in light of the valid
cause for his separation, the company’s non-compliance with the notice requirement entitles
Dalangin to indemnity, in the form of nominal damages in an amount subject to our discretion.

24. PEDY CASERES v UNIVERSAL ROBINA SUGAR MILLING

DOCTRINE:

The foregoing provision provides for three kinds of employees: (a) regular employees or those who
have been "engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer"; (b) project employees or those "whose 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"; and (c)
casual employees or those who are neither regular nor project employees.

FACTS:

Petitioners filed a complaint for illegal dismissal, regularization, incentive leave pay, 13th
month pay, damages and attorney's fees against Universal Robina Sugar Milling Corporation.

The petitioners were made to sign a Contract of Employment for Specific Project or
Undertaking. Petitioners' contracts were renewed from time to time and came May 1999 when they
were informed that their contracts will not be renewed anymore.
 Petitioners contend that respondent's repeated hiring of their services qualifies them to the
status of regular employees.

The Labor Arbiter dismissed the petition which was then affirmed by the NLRC upon appeal
by the petitioners.

ISSUE:

Whether or not the petitioners were regular employees of Universal Robina Milling

HELD:

NO. The LA, the NLRC and the CA are one in ruling that petitioners were not illegally
dismissed as they were not regular, but contractual or project employees.

Petitioners' repeated and successive re-employment on the basis of a contract of

employment for more than one year cannot and does not make them regular employees. Length of
service is not the controlling determinant of the employment tenure of a project employee

Even if petitioners were repeatedly and successively re-hired, still it did not qualify them as
regular employees, as length of service is not the controlling determinant of the employment tenure
of a project employee

Further, the proviso in Article 280, stating that an employee who has rendered service for at
least one (1) year shall be considered a regular employee, pertains to casual employees and not to
project employees.

25. DE LEON vs NLRC

176 SCRA 615 GR No. 70705 Aug. 21 1989

DOCTRINE:
When the activities performed by the employee are usually necessary or desirable in the usual
business or trade of the employer, the employment is deemed regular notwithstanding contrary
agreements.
Determination of whether employment is casual or regular does not depend on the will or word of the
employer, and the procedure for hiring and manner of paying, but on the nature of the activities
performed by the employee, and to some extent, the length of performance, and its continued
existence.
FACTS: Petitioner was employed by private respondent La Tondeña, Inc. on December 11, 1981, at
the Maintenance Section of its Engineering Department in Tondo, Manila. His work consisted mainly
of painting company building and equipment, and other odd jobs relating to maintenance. He was
paid on a daily basis through petty cash vouchers. In the early part of January, 1983, after a service
of more than one (1) year, petitioner requested from respondent company that he be included in the
payroll of regular workers, instead of being paid through petty cash vouchers. Private respondent’s
response to this request was to dismiss petitioner from his employment on January 16, 1983. Having
been refused reinstatement despite repeated demands, petitioner filed a complaint for illegal
dismissal, reinstatement and payment of backwages before the Office of the Labor Arbiter of the
then Ministry now Department of Labor and Employment.
Petitioner alleged that he was dismissed following his request to be treated as a regular employee;
that his work consisted of painting company buildings and maintenance chores like cleaning and
operating company equipment, assisting Emiliano Tanque, Jr., a regular maintenance man; and that
weeks after his dismissal, he was re-hired by the respondent company indirectly through the Vitas-
Magsaysay Village Livelihood Council, a labor agency of respondent company, and was made to
perform the tasks which he used to do. Emiliano Tanque, Jr. corroborated these averments of
petitioner in his affidavit.On the other hand, private respondent claimed that petitioner was not a
regular employee but only a casual worker hired allegedly only to paint a certain building in the
company premises, and that his work as a painter terminated upon the completion of the painting
job.
Labor Arbiter = finding the complaint meritorious and the dismissal illegal; National Labor Relations
Commission reversed the same.

ISSUE : WON petitioner is a regular employee.

RULING: YES. The primary standard of determining a regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual
business or trade of the employer. The test is whether the former is usually necessary or desirable in
the usual business or trade of the employer. The connection can be determined by considering the
nature of the work performed and its relation to the scheme of the particular business or trade in its
entirety. Also, if the employee has been performing the job for at least 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. Hence, the employment is also considered regular, but only with respect to such
activity and while such activity exists.
In the case at bar, the respondent company, which is engaged in the business of manufacture and
distillery of wines and liquors, claims that petitioner was contracted on a casual basis specifically to
paint a certain company building and that its completion rendered petitioner's employment
terminated. However, during petitioner's period of employment, the records reveal that the tasks
assigned to him included not only painting of company buildings, equipment and tools but also
cleaning and oiling machines, even operating a drilling machine, and other odd jobs assigned to him
when he had no painting job. A regular employee of respondent company, Emiliano Tanque Jr.,
attested in his affidavit that petitioner worked with him as a maintenance man when there was no
painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company did not even
attempt to negate the above averments of petitioner and his co- employee. Indeed, the respondent
company did not only fail to dispute this vital point, it even went further and confirmed its veracity
when it expressly admitted in its comment that, "The main bulk of work and/or activities assigned to
petitioner was painting and other related activities. Occasionally, he was instructed to do other odd
things in connection with maintenance while he was waiting for materials he would need in his job or
when he had finished early one assigned to him. It is not tenable to argue that the painting and
maintenance work of petitioner are not necessary in respondent's business of manufacturing liquors
and wines, just as it cannot be said that only those who are directly involved in the process of
producing wines and liquors may be considered as necessary employees. Otherwise, there would
have been no need for the regular Maintenance Section of respondent company's Engineering
Department, manned by regular employees like Emiliano Tanque Jr., whom petitioner often worked
with.
Furthermore, the petitioner performed his work of painting and maintenance activities during his
employment in respondent's business which lasted for more than one year, until early January, 1983
when he demanded to be regularized and was subsequently dismissed. Certainly, by this fact alone
he is entitled by law to be considered a regular employee. And considering further that weeks after
his dismissal, petitioner was rehired by the company through a labor agency and was returned to his
post in the Maintenance Section and made to perform the same activities that he used to do, it
cannot be denied that as activities as a regular painter and maintenance man still exist.
It is of no moment that petitioner was told when he was hired that his employment would only be
casual, that he was paid through cash vouchers, and that he did not comply with regular
employment procedure. Precisely, the law overrides such conditions which are prejudicial to the
interest of the worker whose weak bargaining position needs the support of the State. That
determines whether a certain employment is regular or casual is not the will and word of the
employer, to which the desperate worker often accedes, much less the procedure of hiring the
employee or the manner of paying his salary. It is the nature of the activities performed in relation to
the particular business or trade considering all circumstances, and in some cases the length of time
of its performance and its continued existence.

26. KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM AND

NATIONALISM-OLALIA (KILUSAN-OLALIA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA. ESTRELLA ALDA,
CAPT. REY L. LANADA, COL. VIVENCIO MANAIG and KIMBERLY-CLARK PHILIPPINES, INC.,
respondents.

G.R. No. L-77629 May 9, 1990

REGALADO, J.

DOCTRINE:
Those who have rendered at least one year of service, whether continuous or broken are deemed
regular 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 paper 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.

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.

FACTS:
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).

On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in the Ministry of Labor
and Employment (MOLE). 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.
On June 2, 1986, Med-Arbiter Bonifacio Marasigan, who was handling the certification election case,
issued an order declaring 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 as eligible to vote in the
certification election.

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. 6. 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.

On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and
Count Challenged Votes" 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.

On November 13, 1986, then Minister Sanchez rendered a decision declaring that the other casual
employees not performing janitorial and yard maintenance services were deemed labor-only
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.

On November 25, 1986, KIMBERLY filed a motion for reconsideration with respect to the
regularization of contractual workers.

ISSUE:
Whether or not those engaged in janitorial or yard maintenance as well as the other casual
employees attained the status of regular employees of KIMBERLY.

HELD:
YES. 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: Art. 280. Regular and Casual
Employment. — The provisions of written agreement to the contrary notwithstanding and regardless
of the oral agreements of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been fixed for a specific
project or 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.

27. PUREFOODS CORPORATION VS. NLRC, ET. AL

G.R. NO. 122653 DECEMBER 12, 1997
DAVIDE, JR., J

DOCTRINE:
Workers’ contracts specifying five-month period of employment, which have been imposed precisely
to circumvent the constitutional guarantee on security of tenure, are considered as contrary to public
policy or morals.

FACTS:
The private respondents (numbering 906) were hired by petitioner Pure Foods Corporation to work
for a fixed period of five months at its tuna cannery plant in Tambler, General Santos City. After the
expiration of their respective contracts of employment in June and July 1991, their services were
terminated. They forthwith executed a “Release and Quitclaim” stating that they had no claim
whatsoever against the petitioner. On December 1992, Private respondents filed before the NLRC a
complaint for illegal dismissal against the petitioner and its plant manager, Marciano Aganon.

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 private respondents appealed from the decision to the NLRC which affirmed
the Labor Arbiter's decision. On private respondents’ motion for reconsideration, the NLRC rendered
another decision on 30 January 1995 vacating and setting aside its earlier decision and held that the
private respondents and their co-complainants were regular employees. It declared that the contract
of employment for five months was a “clandestine scheme employed by [the petitioner] to stifle
[private respondents’] right to security of tenure” and should therefore be struck down and
disregarded for being contrary to law, public policy, and morals. Hence, their dismissal on account of
the expiration of their respective contracts was illegal.
Petitioner’s motion for reconsideration was denied; hence, this appeal. Petitioner’s submission
before the Court: the private respondents are now estopped from questioning their separation from
petitioner’s employ in view of their express conformity with the five-month duration of their
employment contracts. In the instant case, the private respondents were employed for a period of
five months only. In any event, private respondents' prayer for reinstatement is well within the
purview of the “Release and Quitclaim” they had executed wherein they unconditionally released the
petitioner from any and all other claims which might have arisen from their past employment with the
petitioner.

ISSUE:
Whether the 5-month period specified in private respondents’ employment contract is invalid and is
therefore violative of their constitutional right to security of tenure.

RULING:
The five-month period specified in private respondents’ employment contract is invalid. In the leading
case of Brent School, Inc. v. Zamora, although the Court has upheld the legality
of fixedterm employment, the Court also held that where from the circumstances it is apparent that
the periods have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down or disregarded as contrary to public policy and morals.

Brent also laid down the criteria under which term employment cannot be said to be in circumvention
of the law on security of tenure: 1) The fixed period of employment was knowingly and voluntarily
agreed upon by the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or 2) It satisfactorily
appears that the employer and the employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.

None of these criteria had been met in the present case. 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.

The petitioner does not deny or rebut private respondents' averments (1) that the main bulk of its
workforce consisted of its so-called “casual” employees; (2) that as of July 1991, “casual”
workers numbered 1,835; and regular employees, 263; (3) that the company hired “casual” every
month for the duration of five months, after which their services were terminated and they were
replaced by other “casual” employees on the same five-month duration; and (4) that these “casual”
employees were actually doing work that were necessary and desirable in 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.

The NLRC was correct in finding that the private respondents were regular employees and that they
were illegally dismissed from their jobs. Under Article 279 of the Labor Code and the recent
jurisprudence, the legal consequence of illegal dismissal is reinstatement without loss of seniority
rights and other privileges, with full back wages computed from the time of dismissal up to the time
of actual reinstatement, without deducting the earnings derived elsewhere pending the resolution of
the case.

However, since reinstatement is no longer possible because the petitioner's tuna cannery plant had,
admittedly, been closed in November 1994, the proper award is separation pay equivalent to one
month pay or one-half month pay for every year of service, whichever is higher, to be computed from
the commencement of their employment up to the closure of the tuna cannery plant. The amount of
back wages must be computed from the time the private respondents were dismissed until the time
petitioner's cannery plant ceased operation.

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

28. MAGSALIN v. NATIONAL ORGANIZATION OF WORKING MEN

G.R. No. 148492, May 9, 2003
Vitug, J.

In determining whether an employment should be considered regular or non-regular, the applicable

test is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The repeated rehiring of respondent workers
and the continuing need for their services clearly attest to the necessity or desirability of their
services in the regular conduct of the business or trade of petitioner company.

Facts: Coca-Cola Bottlers Phils., Inc. engaged the services of respondent workers as “sales route
helpers” for a limited period of five months. After five months, respondent workers were employed
by petitioner company on a day-to-day basis. Respondent workers were hired to substitute for
regular sales route helpers whenever the latter would be unavailable or when there would be an
unexpected shortage of manpower in any of its work places or an unusually high volume of work.
The practice was for the workers to wait every morning outside the gates of the sales office of
petitioner company. If thus hired, the workers would then be paid their wages at the end of the day.
Ultimately, respondent workers asked petitioner company to extend to them regular appointments.
Petitioner company refused.

Twenty-three (23) of the “temporary” workers filed with the National Labor Relations Commission
(NLRC) a complaint for the regularization of their employment with petitioner company. Other
complainants were included which ultimately totaled to fifty-eight (58) workers. Claiming that
petitioner company meanwhile terminated their services, respondent workers filed a notice of strike
and a complaint for illegal dismissal and unfair labor practice with the NLRC.

The voluntary arbitrator rendered a decision dismissing the complaint on the thesis that the
complainants were not regular employees of petitioner company. The Court of Appeals reversed
and set aside the ruling of the voluntary arbitrator declaring petitioners as regular employees of
Coca-Cola.
Issue: Whether or not the nature of work of respondents in the company is of such nature as to be
deemed necessary and desirable in the usual business or trade of petitioner that could qualify them
to be regular employees.

Ruling: Yes. The basic law on the case is Article 280 of the Labor Code: 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.

In determining whether an employment should be considered regular or non-regular, the applicable

test is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services rendered and its
relation to the general scheme under which the business or trade is pursued in the usual course.
But, although the work to be performed is only for a specific project or seasonal, where a person
thus engaged has been performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and continuing need for its
performance as being sufficient to indicate the necessity or desirability of that activity to the business
or trade of the employer. The employment of such person is also then deemed to be regular with
respect to such activity and while such activity exist.

The nature of the work performed must be viewed from a perspective of the business or trade in its
entirety and not on a confined scope. The repeated rehiring of respondent workers and the
continuing need for their services clearly attest to the necessity or desirability of their services in the
regular conduct of the business or trade of petitioner company.

29. Millares vs. National Labor Relations Commission

G.R. No. 110524 July 29, 2002
Justice Kapunan

Doctrine:

Seafarers are considered contractual employees. They can not be considered as regular employees
under Article 280 of the Labor Code. Their employment is governed by the contracts they sign every
time they are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the exception of Article
280 whose 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 employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the
season.

Facts:

On March 14, 2000, the court promulgated its decision ruling in favor of the petitioners setting aside
and reversing the decision of NLRC over the case of the case between parties.
A motion for reconsideration was filed by the private respondents to which petitioners filed an
opposition.

Court resolve to deny the motion for reconsideration with finality. Subsequently, FAME filed a motion
for leave to intervene and to admit a motion for reconsideration in intervention. Private respondents
also filed a motion for leave to file a second motion for reconsideration of our decision.

In both petitions of respondent and FAME pray to reconsider the court's ruling that “Filipino seafarers
are considered regular employees within the context of Article 280 of the Labor Code.” They claim
that the decision may establish a precedent that will adversely affect the maritime industry.

Millares was employed by ESSO through its local manning agency, Trans-global on November 1968
as a machinist, in 1975 he was promoted as chief engineer until he retired in 1989.

On June 1989, Millares applied for leave of absence for one month which was approved by trans-
global. Then Millares wrote to the operations manager informing him of his intention to avail the
optional retirement considering that he rendered more than 20 years of service to the company. But
ESSO denied the retirement for the following grounds: (1) he was employed on a contractual basis
(2) his contract of enlistment did not provide for retirement before age of 60 and (3) he did not
comply with requirement for claiming benefits under CEIP.

On August 1989 Millares requested for an extension of his leave of absence and the crewing
manager then wrote to Millares advising him that respondent ESSO “has corrected the deficiency in
its manpower requirement specifically in the Chief Engineer rank by promoting a First Assistant
Engineer to this position as a result of (his) previous leave of absence which expired last August 8,
1989. The adjustment in said rank was required in order to meet manpower schedules as a result of
(his) inability.”

On September 26, 1989, ESSO advised Millares that in view of his absence without leave, which is
equivalent to abandonment of his position, he had been dropped from the roster of crew members
effective September 1, 1989.

On the other hand. Lagda was employed by ESSO as wiper in June 1969, promoted as Chief
engineer in 1980 until his last COE expired on April 10, 1989. On May 1989, Lagda applied for a
leave of absence which was approved by Trans-global and advised him to report for re-assignment
on July 21, 1989.

On June 26, 1989 Lagda wrote to ESSO through Trans-global president informing him of his
intention to avail of the optional retirement plan in vies of his 20 years of service. It was denied by
Trans-global on the same grounds as with Millares. He requested to extend his leave of absence
and was approved but later informed by ESSO that in view of his "unavailability for contractual sea
service" he had been dropped from the roster of crew members effective September 1, 1989.

On October 5, 1989, Millares and Lagda filed a complaint-affidavit before POEA for illegal dismissal
and non-payment of employee benefits against ESSO and Trans-global. POEA dismissed the
complaint for lack of merit, which was affirmed by NLRC. So petitioners elevated their case to this
court and obtained favorable action.

Issue:

Whether the petitioner, Millares and Lagda, can be considered as regular employees.

Held:
Petitioners contend that they performed activities which are usually necessary to the usual business
or trade of the company and the fact that they served for 20 years already is an express
acknowledgment that they are regular employees by the private respondents. Respondents, on the
other hand, invoke that under the POEA rules and regulation governing overseas employment,
seafarers are not regular employees based on international maritime practice. While intervenor
FAME avers that the Courts decision of not reconsidering the March 14, 2000 Decision will have a
negative consequence in the employment of Filipino Seafarers overseas which, in turn, might lead to
the demise of the manning industry in the Philippines.

From the foregoing cases, Brent School Inc. v. Zamora and Pablo Coyoca v. NLRC, it is clear that
seafarers are considered contractual employees. They can not be considered as regular employees
under Article 280 of the Labor Code. Their employment is governed by the contracts they sign every
time they are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the exception of Article
280 whose 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 employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the
season. We need not depart from the rulings of the Court in the two aforementioned cases which
indeed constitute stare decisis with respect to the employment status of seafarers.

From all the foregoing, petitioners are not considered regular or permanent employees under Article
280 of the Labor Code. Petitioners' employment have automatically ceased upon the expiration of
their contracts of enlistment (COE). Since there was no dismissal to speak of, it follows that
petitioners are not entitled to reinstatement or payment of separation pay or backwages, as provided
by law.

30. Brent School vs Zamora

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

NARVASA, J.

Doctrine: The decisive determinant in term employment is not the nature of the activities
performed by the employee, 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.”

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.

Facts: Private respondent Doroteo R. Alegre was engaged as athletic director by petitioner
Brent School, Inc. at a yearly compensation of P20, 000. The contract fixed a specific term of
existence, five years, 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 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 contract.”

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.

Issue: WON the provisions of the Labor Code, as amended, have anathematized “fixed period
employment” or employment for a term.

Held:

No.

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. 1887. 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 of 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.
Stipulation for a term was explicitly recognized as valid by the Supreme Court.

The status of legitimacy continued to be enjoyed by fixed-period employment contracts under

the Labor Code, which went into effect on November 1, 1974.

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 are 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.
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 by 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.

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.

31. PAKISTAN INTERNATIONAL AIRLINES vs. OPLE

G.R. No. 61594 September 28, 1990
FELICIANO, J.

Doctrine: While parties to a contract may establish stipulations, terms and conditions as they may deem
convenient, they may not contract away applicable provisions of law especially peremptory provisions
dealing with matters heavily impressed with public interest.

FACTS
On 2 December 1978, petitioner Pakistan International Airlines Corporation (PIA), a foreign corporation
licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment,
one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C.
Mamasig, both became effective on 9 January 1979.

The contracts, provided in pertinent portion as follows:

5. DURATION OF EMPLOYMENT AND PENALTY - This agreement is for a period of three (3)
years, but can be extended by the mutual consent of the parties.
1. TERMINATION - Notwithstanding anything to contrary as herein provided, PIA reserves the right
to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month
before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one
month's salary.
1. APPLICABLE LAW - This agreement shall be construed and governed under and by the laws of
Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter
arising out of or under this agreement.

Respondents then commenced training in Pakistan. After their training period, they began discharging
their job functions as flight attendants, with base station in Manila and flying assignments to different parts
of the Middle East and Europe.

On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of
employment, PIA through Mr. Oscar Benares, counsel for PIA, sent separate letters both dated 1 August
1980 to private respondents Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the
employment agreement they had executed with PIA."

On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint for illegal
dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor
and Employment (MOLE). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty.
Jose M. Pascual ordered the parties to submit their position papers and evidence supporting their
respective positions. The PIA submitted its position paper, in which they claimed that both private
respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable
quantities of "personal effects"; and that PIA personnel at the Manila International Airport had been
discreetly warned by customs officials to advise private respondents to discontinue that practice. PIA
further claimed that the services of both private respondents were terminated pursuant to the provisions
of the employment contract.

In his Order, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents
with full backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries
for the remainder of the fixed three-year period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA-Manila; and
payment of a bonus to each of the private respondents equivalent to their one-month salary. The Order
stated that private respondents had attained the status of regular employees after they had rendered
more than a year of continued service; that the stipulation limiting the period of the employment contract
to three (3) years was null and void as violative of the provisions of the Labor Code and its implementing
rules and regulations on regular and casual employment; and that the dismissal, having been carried out
without the requisite clearance from the MOLE, was illegal and entitled private respondents to
reinstatement with full backwages.

On appeal, in an Order, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact
and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof
giving PIA the option, in lieu of reinstatement, "to pay each of the complainants private respondents their
salaries corresponding to the unexpired portion of the contracts of employment.”

In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the
Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered
without support in the evidence of record since, allegedly, no hearing was conducted by the hearing
officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's
rights under the employment contracts with private respondents.

ISSUE
Petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents
Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its
contract rather than by the general provisions of the Labor Code.

RULING
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement
between the parties; while paragraph 6 provided that, notwithstanding any other provision in the contract,
PIA had the right to terminate the employment agreement at any time by giving one-month's notice to the
employee or, in lieu of such notice, one-month's salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law
between the parties. The principle of party autonomy in contracts is not, however, an absolute principle.
The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as
they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or
public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally
general rule that provisions of applicable law, especially provisions relating to matters affected with public
policy, are deemed written into the contract. Put a little differently, the governing principle is that parties
may not contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest.

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of
that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at
the time the contract of employment was entered into, and hence refused to give effect to said paragraph
5.
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 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 employers' 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.

Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA
and private respondents, the Court considers that those provisions must be read together and when so
read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the
employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in
effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to
shorten that term, at any time and for any cause satisfactory to itself, to a one -month period, or even less
by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the
agreement here involved is to render the employment of private respondents Farrales and Mamasig
basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were
intended to prevent any security of tenure from accruing in favor of private respondents even during the
limited period of three (3) years, 13 and thus to escape completely the thrust of Articles 280 and 281 of
the Labor Code.

The Court concludes that private respondents Farrales and Mamasig were illegally dismissed and that
public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act
without or in excess of jurisdiction in ordering their reinstatement with backwages. Private respondents
are entitled to three (3) years backwages without qualification or deduction. Should their reinstatement to
their former or other substantially equivalent positions not be feasible in view of the length of time which
has gone by since their services were unlawfully terminated, petitioner should be required to pay
separation pay to private respondents amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service putatively rendered.

ACCORDINGLY, the Petition for Certiorari is hereby DISMISSED for lack of merit, and the Order dated
12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are
entitled to three (3) years backwages, without deduction or qualification; and (2) should reinstatement of
private respondents to their former positions or to substantially equivalent positions not be feasible, then
petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)-month's
salary for every year of service actually rendered by them and for the three (3) years putative service by
private respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED.
SO ORDERED.

32. G.R. No. 78693 January 28, 1991

Cielo vs. NLRC

Doctrine:
There is no question that the purpose behind the individual contracts was to evade the
application of the labor laws by making it appear that the drivers of the trucking company were
not its regular employees.
Even assuming that the original employment was probationary, the Labor Arbiter found that the
petitioner had completed more than six month’s service under trucking company and so had
acquired the status of a regular employee at the time of his dismissal.
Facts: The petitioner is a truck driver who claims he was illegally dismissed by the private
respondent, the Henry Lei Trucking Company. Petitioner were made to sign an agreement
with the private respondent stating that the term of the agreement is six months and that they
don’t have an employer-employee relationship. The agreement was supposed to end on
December 31, 1984 however the petitioner was formally notified by the private respondent of the
termination of his services on the ground of expiration of their contract on December 22, 1984.

The petitioner contends that he was forced to sign an affidavit which states that he received his
salary and allowances from the private respondent. Upon refusal to sign, private respondent
dismissed petitioner on the basis of disrespect and insubordination.

Issue:

Whether the agreement between the parties with a fixed period is valid?

Held:

No. The agreement in question is null and void. The agreement was a clear attempt to exploit
the unwitting employee and deprive him of the protection of the Labor Code by making it appear
that the stipulations of the parties were governed by the Civil Code as in ordinary private
transactions. They were not, to be sure. The agreement was in reality a contract of employment
into which were read the provisions of the Labor Code and the social justice policy mandated by
the Constitution. It was a deceitful agreement cloaked in the habiliments of legality to conceal
the selfish desire of the employer to reap undeserved profits at the expense of its employees.

The private respondent is engaged in the trucking business as a hauler of cattle, crops and
other cargo for the Philippine Packing Corporation. This business requires the services of
drivers, and continuously because the work is not seasonal, nor is it limited to a single
undertaking or operation. Even if ostensibly hired for a fixed period, the petitioner should be
considered a regular employee of the private respondent, conformably to Article 280 of the
Labor Code

The private respondent's argument that the petitioner could at least be considered on probation
basis only and therefore separable at will is self-defeating. The Labor Code clearly provides as
follows:

Art. 281. Probationary employment. — Probationary employment shall not exceed six (6)
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 on a probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his engagement. An employee
who is allowed to work after a probationary period shall be considered a regular employee.

There is no question that the petitioner was not engaged as an apprentice, being already an
experienced truck driver when he began working for the private respondent. Neither has it been
shown that he was informed at the time of his employment of the reasonable standards under
which he could qualify as a regular employee. It is plain that the petitioner was hired at the
outset as a regular employee. At any rate, even assuming that the original employment was
probationary, the Labor Arbiter found that the petitioner had completed more than six
month's service with the trucking company and so had acquired the status of a regular
employee at the time of his dismissal.

33. PHILIPPINE VILLAGE HOTEL V. NLRC

G.R. No. 105033 February 28, 1994
Nocon, J.
DOCTRINE
The fact that private respondents were required to render services usually
necessary or desirable in the operation of petitioner's business for the duration of
the one (1) month dry-run operation period does not in any way impair the validity
of the contractual nature of private respondents' contracts of employment which
specifically stipulated that the employment of the private respondents was only
for one (1) month.
In upholding the validity of a contract of employment with a fixed or specific
period, we have held that the decisive determinant in term employment should
not be the activities that the employee is called upon to perform, but the day
certain agreed upon by the parties for the commencement and termination of
their employment relationship, a day certain being understood to be that which
must necessarily come, although it may not be known when. The
term period was further defined to be the 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 or the period from one fixed date to another
fixed date. This ruling is only in consonance with Article 280 of the Labor Code.
FACTS
Private respondents were employees of petitioner Philippine Village Hotel.
However, petitioner had to close and totally discontinue its operations due to
serious financial and business reverses resulting in the termination of the
services of its employees.
Thereafter, when petitioner decided to carry out a one-month dry run operation to
ascertain the feasibility of resuming its business operations, petitioner hired
casual workers including private respondents.
Upon the lapse of the contractual one-month period, petitioner terminated the
services of private respondents.
Thus, private respondents filed a complaint against petitioner for illegal dismissal
and unfair labor practice.
LA: dismissed the complaint.
NLRC: On appeal, NLRC reversed the decision of the LA; and ordered the
petitioner to reinstate the private respondents to their former or substantially
equivalent positions.
Petitioner’s Motion for Reconsideration was denied for lack of merit.
 Hence, this petition alleging grave abuse of discretion on the part of the public
respondent NLRC in finding that private respondents are regular employees of
petitioner considering that the latter's services were already previously
terminated in 1986 and that their employment contracts specifically provided only
for a temporary one-month period of employment.
ISSUE: WON The contract of employment with a fixed period is valid..
HELD
YES. The contract of employment with a fixed period is valid.
An examination of the contents of the private respondents' contracts of employment
shows that indeed private respondents voluntarily and knowingly agreed to be
employed only for a period of one (1) month or from February 1, 1989 to March 1, 1989.
The fact that private respondents were required to render services usually necessary or
desirable in the operation of petitioner's business for the duration of the one (1) month
dry-run operation period does not in any way impair the validity of the contractual nature
of private respondents' contracts of employment which specifically stipulated that the
employment of the private respondents was only for one (1) month.
In upholding the validity of a contract of employment with a fixed or specific period, we
have held that the decisive determinant in term employment should not be the activities
that the employee is called upon to perform, but the day certain agreed upon by the
parties for the commencement and termination of their employment relationship, a day
certain being understood to be that which must necessarily come, although it may not
be known when. The term period was further defined to be the 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 or the period from one fixed date to
another fixed date. This ruling is only in consonance with Article 280 of the Labor Code.

34. Cartagenas vs. Romago Electric

GR No. 82973
September 15, 1989

Doctrine:
Project employees are employees whose duration of their employment is not permanent
but co-terminus with the projects to which they are assigned and from whose payrolls
they are paid.

FACTS:
Romago is a general contractor engaged in contracting and sub- contracting of specific
building construction projects or undertaking such as electrical, mechanical and civil
engineering aspects in the repair of buildings and from other kindred services.
Complainants are employed by the respondent in connection with particular
construction projects. Some employees were temporarily laid off. Two days after the
meeting they filed an instant case for illegal dismissal but before the respondent could
receive a copy of the complaint and the notification and summons issued by the NLRC
National Capital Region individual complainants re-applied with the Romago and were
assigned to work with its project at Robinson-EDSA. Int their agreement it was
specifically indicated that they were:

“Hired for above project only” and that “employment will terminate upon
completion/stoppage of the project or terminated earlier for cause”.

ISSUE:
Is Cartagenas a regular employee?

HELD:
NO.
They are project employees. The NLRC held that the complainants were project
employees because their appointments were "co-terminus with the phase or item of
work assigned to them in said project," It held further: The fact that the complainants
worked for the respondent under different project employment contracts for so many
years could not be made a basis to consider them as regular employees for they remain
project employees regardless of the number of projects in which they have worked.

Citing Article 280 of the Labor Code emphasizing the exception to wit: 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.

As an electrical contractor, the private respondent depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings. Since
its work depends on the availability of such contracts or "projects," necessarily the
duration of the employment of its work force is not permanent but co-terminus with the
projects to which they are assigned and from whose payrolls they are paid. It would be
extremely burdensome for their employer who, like them, depends on the availability of
projects, if it would have to carry them as permanent employees and pay them wages
even if there are no projects for them to work on.

35. RICARDO FERNANDEZ, petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION and D.M. CONSUNJI, INC., respondents.
G.R. No. 106090. February 28, 1994.
NOCON, J:

DOCTRINE:

Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the
number of projects in which they have been employed by a particular construction company
Policy Instruction No. 20 requires that to qualify as a member of the work pool, the worker must
still be considered an employee of the construction company while in the work pool - There
must be proof to the effect that petitioner was under an obligation to be always available on call
of private respondent and that he was not free to offer his services to other employers.

FACTS:

Petitioner was hired as a laborer at the D.M. Consunji, Inc. He became a skilled welder
and worked for private respondent until March 23, 1986 when his employment was
terminated on the ground that the project petitioner had been assigned to was already
completed and there was no more work for him to do.

On May 12, 1988, Labor Arbiter Fernando V. Cinco rendered a decision, finding that
complainants worked continuously in various projects ranging from five (5) to twenty
(20) years and belonged to a work pool. In view of the lack of evidence on record to
prove the continuous employment of complainants-appellees, and that on the contrary,
what was proven was the intermittent nature of their work as shown by the different
project contracts, the respondent Commission concluded that complainants-appellees
were project employees.

Private respondent questioned on appeal the decision of the Labor Arbiter on the
ground that the complainants were all project employees who were hired on a project-
to-project basis, depending on the availability of projects that the former was able to
close with its clients. Respondent pointed to the gaps in complainants’ respective
employment histories to show that they were indeed hired on an “off-and-on” basis.

Respondent Commission affirmed its finding that complainants- appellees were project
employees. As such, the nature of their employment did not change by the number of
projects in which they have rendered service.

ISSUE:

1) Whether as petitioner claims, the proviso in Article 280 of the Labor Code
supports his claim that he should be regarded as a regular employee
2) Whether Policy Instruction No. 20 issued by Sec. Ople governs petitioner as a
worker in the construction industry and can therefor be considered a regular
employee of private respondent

RULING:

1. No. The proviso in the second paragraph of Article 280 of the Labor Code has
recently been explained in Mercado v. NLRC, where it was held that said proviso deems
4

as regular employees only those “casual” employees who have rendered at least one
year of service regardless of the fact that such service may be continuous or broken. It
is not applicable to “project” employees, who are specifically excepted therefrom. Thus,
the Court therein said:
“The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or
restrain or limit the generality of the clause that it immediately follows. (Statutory Construction by Ruben Agpalo, 1986
ed., p. 173). Thus, it has been held that a proviso is to be construed with reference to the immediately preceding part
of the provision to which it is attached, and not to the statute itself or to other sections thereof. (Chinese Flour
Importers Association v. Price Stabilization Board, 89 Phil. 469 (1951); Arenas v. City of San Carlos, G.R. No. 24024,
April 5, 1978, 82 SCRA 318 (1978). The only exception to the rule is where the clear legislative intent is to restrain or
qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute or even the
statute itself as a whole. (Commissioner of Internal Revenue v. Filipinas Compania de Seguros, 107 Phil. 1055
(1960)”

Indeed, a careful reading of the proviso readily discloses that the same relates to
employment where the employee is engaged to perform activities that are usually
necessary or desirable in the usual business or trade of the employer but hastens to
qualify that project employment is specifically exempted therefrom.

2. No. As correctly observes in its decision that complainants, one of whom is

petitioner, failed to consider the requirement in Policy Instruction No. 20 that to qualify
as member of a work pool, the worker must still be considered an employee of the
construction company while in the work pool. In other words, there must be proof to the
effect that petitioner was under an obligation to be always available on call of private
respondent and that he was not free to offer his services to other employers.
Unfortunately, petitioner miserably failed to introduce any evidence of such nature
during the times when there were no projects.

Noteworthy in this case is the fact that herein private respondent’s lay-off reports and
the termination reports were duly submitted to the then Ministry of Labor and
Employment everytime a project was completed in accordance with Policy Instruction
No. 20, which provides:
“Project employees are not entitled to termination pay if they are terminated as a result of the completion of the
project or any phase thereof in which they are employed, regardless of the number of projects in which they have
been employed by a particular construction company. Moreover, the company is not required to obtain a clearance
from the Secretary of Labor in connection with such termination. What is required of the company is a report to the
nearest Public Employment Office for statistical purposes.”

The presence of this factor makes this case different from the cases decided by the
Court where the employees were deemed regular employees, which uniformly held that
the failure of the employer to report to the nearest employment office the termination of
workers everytime a project is completed proves that the employees are not project
employees. Contrariwise, the faithful and regular effort of private respondent in reporting
every completion of its project and submitting the lay-off list of its employees proves the
nature of employment of the workers involved therein as project employees. Given this
added circumstance behind petitioner’s employment, it is clear that he does not belong
to the work pool from which the private respondent would draw workers for assignment
to other projects at its discretion.

36. TITLE: ALU-TUCP VS. NLRC

109902. August 2, 1994
Ponente: FELICIANO,J
DOCTRINE:
Principal test for determining whether particular employees are properly characterized
as “project employees” as distinguished from “regular employees,” is whether or not the
“project employees” were assigned to carry out “specific project or undertaking”, the
duration (and scope) of which were specified at the time the employees were engaged
for that project. “Project” in the realm of business and industry refer to particular job or
undertaking that is within the regular or usual business of employer, but which is distinct
and separate, and identifiable as such, from the undertakings of the company. Such job
or undertaking begins and ends at determined or determinable times. It could also refer
to a particular job or undertaking that is not within the regular business of the
corporation but such job or undertaking must also be identifiably separate and distinct
from the ordinary or regular business operations of the employer. It also begins and
ends at determined or determinable times. The basic requisite is that the designation of
named employees as “project employees” and their assignment to a specific project, are
effected and implemented in good faith.

FACTS:
Petitioners plead that they had been employed by respondent NSC in connection
with its Five Year Expansion Program (FAYEP I & II)1 for varying lengths of time when
they were separated from NSC’s service. Labor Arbiter in a Decision dated 7 June
1991, declared petitioners “regular project employees who shall continue their
employment as such for as long as such [project] activity exists,” but entitled to the
salary of a regular employee pursuant to the provisions in the collective bargaining
agreement. It also ordered payment of salary differentials. Both parties appealed to the
NLRC from that decision. Petitioners argued that they were regular, not project,
employees. Private respondent, on the other hand, claimed that petitioners are project
employees as they were employed to undertake a specific project—NSC’s Five Year
Expansion Program (FAYEP I & II). The NLRC in its questioned resolutions modified the
Labor Arbiter’s decision. It affirmed the Labor Arbiter’s holding that petitioners were
project employees since they were hired to perform work in a specific undertaking—the
Five Year Expansion Program, the completion of which had been determined at the
time of their engagement and which operation was not directly related to the business of
steel manufacturing. The NLRC, however, set aside the award to petitioners of the
same benefits enjoyed by regular employees for lack of legal and factual basis.
Petitioners argue that they are “regular” employees of NSC because: (i) their jobs are
“necessary, desirable and work-related to private respondent’s main business, steel-
making”; and (ii) they have rendered service for six (6) or more years to private
respondent NSC

37. MERCARDO VS. NLRC

The first paragraph answers the question of who are regular employees. It states
that, regardless of any written or oral agreement to the contrary, an employee is
deemed regular where he is engaged in necessary or desirable activities in the usual
business or trade of the employer, except for project employees.
 The second paragraph of Art. 280 demarcates as “casual” employees, all other
employees who do not fall under the definition of the preceding paragraph. The proviso,
in said second paragraph, deems as regular employees those “casual” employees who
have rendered at least one year of service regardless of the fact that such service may
be continuous or broken.
Hence, the proviso is applicable only to the employees who are deemed
“casuals'” but not to the “project” employees nor the regular employees treated in
paragraph one of Art. 280.
FACTS: Petitioners alleged that they were agricultural workers utilized by private
respondents in all the agricultural phases of work on the hectares of rice land and sugar
land owned by the private respondents; they alleged that they were dismissed from their
employment; they alleged that they are regular employees for they have rendered at
least one year of service.
Respondent denied that petitioners were her regular employees and instead
averred that she engaged their services through mandarols, that is, the persons who
take charge in supplying the number of workers needed by owners of various farms, but
only to do a particular phase of agricultural work necessary in rice production and/or
sugar cane production, after which they would be free to render services to other farm
owners who need their services.
ISSUE: Whether petitioners are regular employees and permanent farm workers.
RULING: No. Petitioners are project employees or seasonal employees, their
employment legally ends upon the completion of the project or season. The termination
of their employment cannot and should not constitute an illegal dismissal.
A project employees has been defined to be one whose 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, as in the present case.
By the very nature of the terms and conditions of their hiring reveal that the
petitioners were required to perform phases of agricultural work for a definite period,
after which their services are available to any farm owner. The planting of rice and
sugar cane does not entail a whole year operation period. Petitioners were only hired as
casuals, on-and-off basis, to render services when needed.

38. Hacienda Fatima v. National Federation of Sugarcane Workers – Food &

General Trade

GR No. 149440, 28 Jan 2003

Doctrine:
The test of whether or not an employee is a regular employee has been laid down in De
Leon v. NLRC, in which this Court held: “The primary standard, therefore, of
determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the
employer. The test is whether the former is usually necessary or desirable in the usual
trade or business of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also if the employee has been performing the job for at
least a year, even if the performance is not continuous and merely intermittent, the law
deems repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the employment
is considered regular, but only with respect to such activity and while such activity
exists.

Facts:
When complainant union (respondents) was certified as the collective bargaining
representative, petitioners refused to sit down w/ the union for the purpose of entering
into a CBA. The workers including complainants were not given work for more than
1month. In protest, they staged a strike w/c was however settled upon the signing of a
MOA.

Subsequently, alleging that complainants failed to load some wagons, petitioners

reneged on its commitment to bargain collectively & employed all means including the
use of private armed guards to prevent the organizers from entering the premises. No
work assignments were given to complainants w/c forced the union to stage a strike.

Due to conciliation efforts by the DOLE, another MOA was signed by the parties & they
met in a conciliation meeting. When petitioners again reneged on its commitment,
complainants filed a complaint. Petitioner accused respondents of refusing to work
& being choosy in the kind of work they have to perform.

The NLRC ruled that petitioners were guilty of ULP & that the respondents were illegally
dismissed.

The CA affirmed that while the work of respondents was seasonal in nature, they were
considered to be merely on leave during the off-season & were therefore still employed
by petitioners.

Issue:

Whether the CA erred in holding that respondents, admittedly seasonal workers, were
regular employees, contrary to the clear provisions of Article 280 of the Labor Code,
which categorically state that seasonal employees are not covered by the definition of
regular employees under paragraph 1, nor covered under paragraph 2 which refers
exclusively to casual employees who have served for at least 1 year.
Held:

No. 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
also been employed only for the duration of one season. The evidence proves the
existence of the first, but not of the second, condition. The fact that respondents
repeatedly worked as sugarcane workers for petitioners for several years is not denied
by the latter. Evidently, petitioners employed respondents for more than one season.
Therefore, the general rule of regular employment is applicable.

If the employee has been performing the job for at least a year, even if the performance
is not continuous & merely intermittent, the law deems the repeated & continuing
need for its performance as sufficient evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment is considered regular, but only
w/respect to such activity & while such activity exists. Seasonal workers who are called
to work from time to time & are temporarily laid off during off-season are not separated
from service in said period, but merely considered on leave until re-employed.

The CA did not err when it ruled that Mercado v. NLRC was not applicable to the case
at bar. In the earlier case, the workers were required to perform phases of agricultural
work for a definite period of time, after which their services would be available to any
other farm owner. They were not hired regularly and repeatedly for the same phase/s of
agricultural work, but on and off for any single phase thereof. On the other hand, herein
respondents, having performed the same tasks for petitioners every season for several
years, are considered the latter’s regular employees for their respective tasks.
Petitioners’ eventual refusal to use their services—even if they were ready, able and
willing to perform their usual duties whenever these were available—and hiring of other
workers to perform the tasks originally assigned to respondents amounted to illegal
dismissal of the latter.

ISSUE:
whether or not petitioners are properly characterized as “project employees” rather than
“regular employees” of NSC

HELD:
Private respondent NSC was not in the business of constructing buildings and
installing plant machinery for the general business community, i.e., for unrelated,
third party, corporations. NSC did not hold itself out to the public as a construction
company or as an engineering corporation. Whichever type of project employment is
found in a particular case, a common basic requisite is that the designation of
named employees as “project employees” and their assignment to a specific project,
are effected and implemented in good faith, and not merely as a means of evading
otherwise applicable requirements of labor laws.
Thus, the particular component projects embraced in the Five Year Expansion Program,
to which petitioners were assigned, were distinguishable from the regular or ordinary
business of NSC which, of course, is the production or making and marketing of steel
products. During the time petitioners rendered services to NSC, their work was limited
to one or another of the specific component projects which made up the FAYEP I and II.
There is nothing in the record to show that petitioners were hired for, or in fact assigned
to, other purposes, e.g., for operating or maintaining the old, or previously installed and
commissioned, steel-making machinery and equipment, or for selling the finished steel
products.
We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter)
that the petitioners were indeed “project employees:” Petitioners next claim that their
service to NSC of more than six (6) years should qualify them as regular employees.
We believe this claim is without legal basis. The simple fact that the employment of
petitioners as project employees had gone beyond one (1) year, does not detract from,
or legally dissolve, their status as project employees

39. PHILIPPINE SINGAPORE TRANSPORT vs NLRC

GR No. 95449 August 18, 1997
Torre, Jr., J.:

DOCTRINE:
Management prerogatives are not absolute prerogatives but are subject to legal
limits, collective bargaining agreements, and the general principles of fair play and
justice.
The dismissal of employees must be made within the parameters of the law and
pursuant to the basic tenets of equity, justice and fair play.

Security of tenure has been construed to mean that “the employer shall not terminate the
services of an employee except for a just cause or when authorized” by the Code.

FACTS: Petitioner, Philippine Singapore Transport (PSTS), is a manning agency

that hired Estrada as captain of the Sea Carrier I for Intra Oil, a foreign principal
engaged in oil drilling in high seas of Bombay, India. Barely two months of being
employed, Estrada was relieved from his job and was repatriated back to the Philippines
while someone immediately took over as captain of the ship. Estrada went to PSTS and
asked about his dismissal as well as corresponding claims for sums of money related to
his terminated contract. He was informed by PSTS that his termination was due to his
incompetence. His claims for sums of money were likewise denied.
Aggrieved, Estrada filed with the POEA Adjudication Department a
complaint against PSTS and Intra-Oil for illegal dismissal. PSTS allege that the
termination of Estrada was based on a valid cause of incompetency and that Intra Oil
was in the best position to determine the qualification of Estrada. In his position paper,
Estrada revealed that his termination was an offshoot of his justified refusal to obey the
charterer to tow another of its vessel because the ropes on board had already suffered
extreme wear and tear. The inadequacy of ropes were communicated by Estrada to
Essar Shipping. Relationship between him and the charterer degraded rapidly from then
on. POEA ruled in favor of Estrada, holding PSTS and Intra Oil liable for his illegal
dismissal. Thus, PSTS appealed to NLRC.
ISSUE: Whether respondent Estrada was validly dismissed from the service on
account of his alleged incompetence as captain of Sea Carrier I
RULING: No. Whereas an employer is free to manage and regulate, according to
his own discretion and judgment, all phases of employment, these prerogatives are not
absolute prerogatives but are subject to legal limits, collective bargaining agreements,
and the general principles of fair play and justice.
Dismissal of the private respondent is done without just cause in violation of Art.
279 in relation to Art 282 of the Labor Code and without due process in contravention to
Art 277 (b) of the said Code.
The petitioner’s imputation of incompetence on the part of the private respondent
due to his lack of foresight to anticipate the number of mooring ropes to be used is
unworthy of being given credence. His refusal to carry out the towing order was on the
basis of his professional opinion that there was a shortage in towing ropes. It would
have been a different story had Estrada refused the towing order simply because he
didn’t know how to, in which case he could be said to be incompetent in that area of
expertise.
Similarly, there was no written notice containing a statement of the causes of the
termination of private respondent in order to afford him to defend himself if he desires to
do so. There was also no written notice from the employer of its decision to terminate
the private respondent stating clearly the reasons thereof. The petitioner’s defense of
using the contractual provision that termination of employment could be done without
notice in cases on serious misconduct is not applicable in this case. Estrada was not
found guilty of any serious misconduct.
ACCORDINGLY, the instant petition is hereby DISMISSED for lack of merit. The
Resolution of the NLRC dated August 17, 1990 and its Resolution dated September 25,
1990 are hereby AFFIRMED.

40. Phil. Telegraph and Telephone Corp. vs. Laplana, et al. G.R. No. 76645
NARVASA, J.:
Doctrine: The Arbiter acknowledges “the inherent right of an employer to transfer or assign an
employee in the pursuit of its legitimate business interests” subject only to the condition that it
be not “motivated by discrimination or (made) in bad faith, or xx effected as a form of
punishment or demotion without sufficient cause.” This is a principle uniformly adhered to by this
Court.
An employee’s right to security of tenure does not give him such a vested right in his position as
would deprive the company of its prerogative to change his assignment or transfer him.—“It is
the employer’s prerogative, based on its assessment and perception of its employees’
qualifications, aptitudes, and competence, to move them around in the various areas of its
business operations in order to ascertain where they will function with maximum benefit to the
company. An employee’s right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or transfer
him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor
prejudicial to him, and it does not involve a demotion in rank or diminution of his salaries,
benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.

Facts:
Laplana was a cashier of the Baguio City Branch Office of the Philippine Telegraph and
Telephone Corporation (PT & T). PT & T's treasurer, Mrs. Alicia A. Arogo, directed Laplana to
transfer to the company's branch office at Laoag City. Laplana refused the reassignment
reasoning that: (a) she has already established her permanent residence in Baguio city and in
view of said reassignment, her salary alone will not be enough; (b) she will be away from my
family which will affect her efficiency; (c) the reassignment would require a long adjustment
period which would affect performance of her job.
PT & T's treasurer reiterated her directive for Laplana's transfer to the Laoag Branch stating that
if she does not report, it shall be considered as her abandonment of her job. Subsequently,
Laplana manifested that she cannot accept the job offer and that she be retrenched instead.
Hence, termination of Laplana's employment on account of retrenchment thereupon followed.
Laplana filed with the Labor Arbiters' Office insisting that when she refused to be transferred,
the Defendants made good its warning by terminating her services on the ground of
"retrenchment," although the truth is, she was forced to be terminated and that there was no
ground at all for the retrenchment company's "act of transferring is baseless and was only
meant to harass and force her to resign eventually. In response, PT&T alleged that it was
exercising management prerogatives and their directive to transfer Laplana was in good faith,
more so that Laplana was terminated on her explicit declaration that "she was willing to be
retrenched rather than be assigned.
LA ruled in Laplana’s favor stating that transferring an employee, as practice of management
prerogatives, is not by itself unlawful. However, such right is not absolute as it must not be
motivated by discrimination or in bad faith, or is effected as a form of punishment or demonition
without sufficient cause. The LA stated that in the instant case, the transfer of Laplana is
patently a demotion and a form of punishment without just cause and would cause untold
suffering on her part. NLRC affirmed the LA’s judgment.
Issue:
Whether an employee’s reason of personal inconvenience or hardship in opposition to
employer's decision to transfer him to another work place is justified and overrules management
prerogative even in the absence of bad faith or underhanded motives on the latter’s part.
Held:
There can be no quarrel with the Arbiter's formulation of the general principle governing an
employer's prerogative to transfer his employees from place to place or from one position to
another subject only to the condition that it be not "motivated by discrimination or (made) in bad
faith, or effected as a form of punishment or demotion without sufficient cause.
The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be
ascribed to the employer, the objection to the transfer being ground solely upon the, personal
inconvenience or hardship that will be caused to the employee by reason of the transfer. What
then?
In this case, the employee had to all intents and purposes resigned from her position. She had
unequivocally asked that she be considered dismissed, herself suggesting the reason therefor
–– retrenchment. She accepted separation pay. On the other hand, the employer has not been
shown to be acting otherwise than in good faith, and in the legitimate pursuit of what it
considered its best interests, in deciding to transfer her to another office. There is no showing
whatever that the employer was transferring Laplana to another work place, not because she
would be more useful there, but merely "as a subterfuge to rid itself of an undesirable worker,"
or "to penalize an employee for union activities.
Certainly, the Court cannot accept the proposition that when an employee opposes his
employer's decision to transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the employee's wishes that should be
made to prevail.

41. YUCO CHEMICAL INDUSTRY v. MINISTRY OF LABOR

G.R. No. L-75656 May 28, 1990
Justice Fernan

Doctrine:

In a number of cases, the Court has recognized and upheld the prerogative of management to
transfer an employee from one office to another within the business establishment provided that
there is no demotion in rank or a diminution of his salary, benefits and other privileges. This is a
privilege inherent in the employer's right to control and manage its enterprise effectively. Even
as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to
exercise what are clearly and obviously management prerogatives. The freedom of
management to conduct its business operations to achieve its purpose cannot be denied.

Facts:

In 1978, private respondents (complainants) George Halili and Amado Magno were employed
by petitioner company which is engaged in the manufacture/assembly of ice boxes in Barangay
Matatalaib, Tarlac, Tarlac. They were assigned to make aluminum handles for the ice boxes.

On August 12,1981, after obtaining a favorable legal opinion from the Tarlac provincial office of
MOLE concerning the legality of moving the production of aluminum handles from Tarlac to
Manila, petitioner addressed a memorandum to private respondents directing them to report for
work within one week from notice at their new place of work at Felix Huertas Street, Sta. Cruz,
Manila. The memorandum further stated that private respondents would be paid with a salary of
P27.00 and an additional allowance of P2.00 "to meet the higher cost of living in Manila. 2

A day after or on August 13, 1981, instead of complying with the memorandum, private
respondents filed a complaint with the provincial labor office for illegal dismissal, 13th month pay
and service incentive leave pay. 3
As a countermove, on August 21, 1981, petitioner filed an application for clearance to terminate
the two employees on the ground of abandonment. On September 25,1981, the OIC of the
Tarlac labor office issued an order directing petitioner to give private respondents their
separation pay within ten (10) days from receipt of notice.

Issue: Whether or not the transfer of the place of work at such a distant place as Manila without
the consent of the employees concerned can no longer be construed as a reasonable exercise
of management prerogative in the assignment of personnel dictated by business exigencies.

Held:

But like all other rights, there are limits. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion and putting to mind the basic elements of justice
and fair play. 5 Having the right should not be confused with the manner in which that right must
be exercised. Thus it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. Nor when the real reason is to penalize an employee for his union activities
and thereby defeat his right to self- organization. But the transfer can be upheld when there is
no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The reassignment of Halili and Magno to Manila is legally indefensible on several grounds.
Firstly, it was grossly inconvenient to private respondents. They are working students. When
they received the transfer memorandum directing their relocation to Manila within seven days
from notice, classes had already started. The move from Tarlac to Manila at such time would
mean a disruption of their studies. Secondly, there appears to be no genuine business urgency
that necessitated their transfer. As well pointed out by private respondents' counsel, the
fabrication of aluminum handles for ice boxes does not require special dexterity. Many workers
could be contracted right in Manila to perform that particular line of work.

Altogether, there is a strong basis for public respondent's conclusion that the controversial
transfer was not prompted by legitimate reasons. Petitioner company had indeed discriminated
against Magno and Halili when the duo was selected for reassignment to Manila. The transfer
was timed at the height of union concerted activities in the firm, deliberately calculated to
demoralize the other union members. Under such questionable circumstances, private
respondents had a valid reason to refuse the Manila re- assignment. 7 Public respondent did not
err or abuse his discretion in upholding the employees' cause.

WHEREFORE, the questioned order dated April 8, 1986 of Deputy Minister Leogardo, Jr. is
hereby AFFIRMED.

42 ALMODIEL VS. NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 100641. June 14, 1993.
NOCON, J.
DOCTRINE: The determination of the qualification and fitness of workers for hiring and firing,
promotion or reassignment are exclusive prerogatives of management.

FACTS: Petitioner Farle P. Almodiel, a Certified Public Accountant, was hired as Cost
Accounting Manager of Private Respondent Raytheon Philippines, Inc. in a probationary or
temporary capacity. After a few months, he was regularized. However, Respondent adopted
and installed a standard cost of accounting system in their operation which Raytheon plants and
subsidiaries worldwide used. As a consequence, the submission of periodic written reports was
no longer needed. Petitioner was notified about the abolition of his position on the ground of
redundancy constraining him to file a complaint for illegal dismissal.

The Labor Arbiter ruled in his favor declaring that complainant's termination on the ground of
redundancy is highly irregular and without legal and factual basis. On appeal. NLRC reversed
the decision and directed Respondent to pay Petitioner separation pay/financial assistance.

Hence, the petition by herein Petitioner claiming his very function was absorbed by the
Payroll/Mis/Finance Department under the management of a certain Danny Ang Tan Chai, a
resident alien who had no working permit issued by the Department of Labor and Employment.
Respondent insists that Petitioner's functions and duties had not been absorbed by Ang Tan
Chai, a permanent resident born in this country because they are occupying entirely different
and distinct positions requiring different sets of expertise or qualifications and discharging
functions altogether different and foreign from that of Petitioner's abolished position.

ISSUE/S: Can the Court invalidate the Respondent’s act of promoting Ang Tan Chai instead of
the Petitioner?

RULING: NO. The Court cannot invalidate the Respondent’s act of promoting Ang Tan Chai
instead of the Petitioner.

Petitioner also assails Respondent’s choice of Ang Tan Chai to head the Payroll/Mis/Finance
Department, claiming that he is better qualified for the position. It should be noted, however, that
Ang Tan Chai was promoted to the position during the middle part of 1988 or before the
abolition of Petitioner’s position in early 1989. Besides the fact that Ang Tan Chai’s promotion
thereto is a settled matter, it has been consistently held that an objection founded on the ground
that one has better credentials over the appointee is frowned upon so long as the latter
possesses the minimum qualifications for the position.

In the case at bar, since Petitioner does not allege that Ang Tan Chai does not qualify for the
position, the Court cannot substitute its discretion and judgment for that which is clearly and
exclusively management prerogative. To do so would take away from the employer what rightly
belongs to him as aptly explained in National Federation of Labor Unions v. NLRC: “It is a well-
settled rule that labor laws do not authorize interference with the employer’s judgment in the
conduct of his business. The determination of the qualification and fitness of workers for hiring
and firing, promotion or reassignment are exclusive prerogatives of management. The Labor
Code and its implementing Rules do not vest in the Labor Arbiters nor in the different Divisions
of the NLRC (nor in the courts) managerial authority. The employer is free to determine, using
his own discretion and business judgment, all elements of employment, “from hiring to firing”
except in cases of unlawful discrimination or those which may be provided by law. There is none
in the instant case.”
Wherefore, petition dismissed.

43. Caltex Refinery Employees Association (CREA) v NLRC

G.R. No. 102993. July 14, 1995

DOCTRINE:
The prerogative of employers to regulate all aspects of employment subject to the limitation of
special laws is recognized. A valid exercise of management prerogative encompasses hiring,
work assignments, working methods, time, place and manner of work, tools to be used,
procedure to be followed, supervision of workers, working regulations, transfer of employees,
discipline, dismissal and recall of workers

This prerogative must, however, be exercised in good faith for the advancement of the
employer’s interest and not for the purpose of defeating the rights of the employees granted by
law or contract.

FACTS:
Petitioner Arnelio M. Clarete was hired by respondent Caltex Philippines, Inc. (Caltex) as
Mechanic C. He was later promoted to the position of Mechanic B and assigned to the
Mechanical/Metal Grades Section of respondent Caltex’s refinery in San Pascual, Batangas.

According to Clarete, when he was on his way to the refinery’s main gate after completing a
day’s work at the Maintenance Area IV, he saw on a pile of rubbish a bottle of lighter fluid, which
mechanics use to remove grease from their hands. He picked up the bottle and placed it in the
basket attached to the handlebar of his bicycle with the intention of asking the security guard at
the gate to allow him to bring it home.

Upon reaching the gate, he took the bottle of lighter fluid from the basket, punched out his time
card at the bundy clock and then asked Juan de Villa, the security guard on duty, permission to
take home the bottle. Replying that he was not authorized to grant the permission sought, de
Villa referred Clarete to Dominador Castillo, the security supervisor. When so approached,
however, Castillo told Clarete to leave the bottle in his office. Clarete complied and left for
home.

Respondent Caltex gave a different version of the incident: On said date, de Villa noticed a
black bag which Clarete did not submit for inspection. When requested by de Villa to open the
same for inspection, Clarete retorted that it was not necessary to inspect the bag as it contained
only dirty clothes. Unconvinced, de Villa opened the bag and found a one-liter sample bottle
filled with lighter fluid surreptitiously hidden inside in the sleeves of Clarete’s working clothes,
which, in turn, were covered by other clothes. When asked if he had a gate pass to bring the
bottle out of the premises, Clarete replied that he did not secure a gate pass as the lighter fluid
was for his personal use.

Clarete received a letter from his immediate supervisor, requiring him to explain in writing why
he should not be subjected to disciplinary action for violation of company rules and regulations.
In his written explanation of April 20, 1989, Clarete stated: (1) that he had no intention of
bringing the bottle of lighter fluid out of the company premises without the guard’s permission;
(2) that he did seek permission but was denied; and (3) that he left the bottle behind with the
guard when told to do so.

Clarete was charged with the crime of theft before the Municipal Trial Court of San Pascual,
Batangas. Subsequently, a decision was rendered in Criminal Case No. 3331, acquitting Clarete
of the crime charged based on the insufficiency of the evidence to establish his guilt beyond
reasonable doubt.
However, Clarete was informed that his services were being terminated effective August 24,
1990 for “serious misconduct and loss of trust and confidence resulting from your having
violated a lawful order of the Company.

ISSUE: Whether there was valid dismissal. -- NO

RULING:
The prerogative of employers to regulate all aspects of employment subject to the limitation of
special laws is recognized. A valid exercise of management prerogative encompasses hiring,
work assignments, working methods, time, place and manner of work, tools to be used,
procedure to be followed, supervision of workers, working regulations, transfer of employees,
discipline, dismissal and recall of workers

There are restrictions to guide the employers in the exercise of management prerogatives,
particularly the right to discipline or dismiss employees, for both the Constitution and the law
guarantee employees’ security of tenure. Thus, employees may be dismissed only in the
manner provided by law. The right of the employer must not be exercised arbitrarily and without
just cause. Otherwise, the constitutional mandate of security of tenure of the workers would be
rendered nugatory.

But while Clarete may be guilty of violation of company rules, we find the penalty of dismissal
imposed upon him by respondent Caltex too harsh and unreasonable. Penalty of dismissal must
be commensurate with the act, conduct or omission imputed to the employee and imposed in
connection with the employer’s disciplinary authority. Even when there exist some rules agreed
upon between the employer and employee on the subject of dismissal the same cannot
preclude the State from inquiring on whether its rigid application would work too harshly on the
employee.

The penalty of dismissal imposed on Clarete is unduly harsh and grossly disproportionate to the
reason for terminating his employment. Clarete has no previous record in his eight years of
service; that respondent Caltex did not lose anything as the bottle of lighter fluid was retrieved
on time; and that there was no showing that Clarete’s retention in the service would work undue
prejudice to the viability of employer’s operations .

44. FIRESTONE TIRE v. LARIOSA

45. Farrol v. CA and Radio Communications of the Philippines, Inc.

325 SCRA 331
G.R. No. 133259, February 10, 2000

Doctrine: Although the employer has the prerogative to discipline or dismiss its
employee, such prerogative cannot be exercised wantonly, but must be controlled by
substantive due process and tempered by the fundamental policy of protection to labor
enshrined in the Constitution. Infractions committed by an employee should merit only
the corresponding sanction demanded by the circumstances. The penalty must be
commensurate with the act, conduct or omission imputed to the employee and imposed
in connection with the employer’s disciplinary authority. Employer’s rules cannot
preclude the State from inquiring whether the strict and rigid application or interpretation
thereof would be harsh to the employee.

Facts: Wenifredo Farrol was employed as station cashier at RCPI’s Cotabato City
station. There was a shortage of P50, 985.37 in their branch’s Peragram, Petty and
General Cash. Farrol was required by the Field Auditor to explain the cash shortage
within 24 hours from notice. The next day, Farrol paid to RCPI P25,000.00 of the cash
shortage. RCPI required Farrol to explain why he should not be dismissed from
employment. Two days thereafter, Farrol wrote a letter to the Field Auditor stating that
the missing funds were used for the payment of the retirement benefits earlier referred
to by the branch manager and that he had already paid P25,000.00 to RCPI. After
making two more payments of the cash shortage to RCPI, Farrol was informed by the
district manager that he is being placed under preventive suspension. RCPI sent a letter
to Farrol informing him of the termination of his services and the reasons for such
termination. Unaware of the termination letter, Farrol requested that he be reinstated
considering that the period of his preventive suspension had expired.

Farrol manifested to RCPI his willingness to settle his case provided he is given his
retirement benefits. However, RCPI informed Farrol that his employment had already
been terminated earlier as contained in the termination letter sent to Farrol. It further
mentioned that the position of cashier requires utmost trust and confidence and that
Farrol’s infraction is punishable by dismissal.

Issue: Was Farrol illegally dismissed?

Held: Yes. In cases involving the illegal termination of employment, the employer has
the burden of proving that the dismissal is for a cause provided by the law and that it
afforded the employee an opportunity to be heard and to defend himself. The employer
must comply with the twin requirements of two notices and hearing. The first notice is
that which apprises the employee of the particular acts or omissions for which his
dismissal is sought, and after affording the employee an opportunity to be heard, a
subsequent notice informing the latter of the employer’s decision to dismiss him from
work.

Although the employer has the prerogative to discipline or dismiss its employee, such
prerogative cannot be exercised wantonly, but must be controlled by substantive due
process and tempered by the fundamental policy of protection to labor enshrined in the
Constitution. Infractions committed by an employee should merit only the corresponding
sanction demanded by the circumstances. The penalty must be commensurate with the
act, conduct or omission imputed to the employee and imposed in connection with the
employer’s disciplinary authority. Employer’s rules cannot preclude the State from
inquiring whether the strict and rigid application or interpretation thereof would be harsh
to the employee. Petitioner has no previous record in his twenty-four long years of
service—this would have been his first offense. The dismissal imposed on petitioner is
unduly harsh and grossly disproportionate to the infraction which led to the termination
of his services. A lighter penalty would have been more just, if not humane. In any case,
petitioner paid back the cash shortage in his accounts. Considering, however, that the
latter is about to retire or may have retired from work, it would no longer be practical to
order his reinstatement.

46. PHILIPPINE AIRLINES, INC vs. NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 85985 August 13, 1993, Melo, J.

Doctrine:

The exercise of managerial prerogatives is not unlimited. It is circumscribed by

limitations found in law, a collective bargaining agreement, or the general principles of
fair play and justice. Moreover, it must be duly established that the prerogative being
invoked is clearly a managerial one.

Facts:

On March 15, 1985, PAL completely revised its 1966 Code of Discipline. The Code was
circulated among the employees and was immediately implemented, and some
employees were forthwith subjected to the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed
a complaint before the NLRC for unfair labor practice with the following remarks: "ULP
with arbitrary implementation of PAL's Code of Discipline without notice and prior
discussion with Union by Management". In its position paper, PALEA contended that
PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice.
PALEA alleged that copies of the Code had been circulated in limited numbers; that
being penal in nature the Code must conform with the requirements of sufficient
publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of
the employees. It prayed that implementation of the Code be held in abeyance; that
PAL should discuss the substance of the Code with PALEA; that employees dismissed
under the Code be reinstated and their cases subjected to further hearing; and that PAL
be declared guilty of unfair labor practice and be ordered to pay damages.

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to
prescribe rules and regulations regarding employees' conduct in carrying out their duties
and functions, and alleging that by implementing the Code, it had not violated the CBA
or any provision of the Labor Code.

The LA rendered finding no bad faith on the part of PAL in adopting the Code and ruling
that no unfair labor practice had been committed.

The NLRC found no evidence of unfair labor practice committed by PAL and affirmed
the dismissal of PALEA's charge.

Issue:
Whether or not the formulation of a Code of Discipline among employees is a shared
responsibility of the employer and the employees.

Ruling:

Industrial peace cannot be achieved if the employees are denied their just participation
in the discussion of matters affecting their rights. Thus, even before Article 211 of the
labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared
a policy of the State, "(d) To promote the enlightenment of workers concerning their
rights and obligations as employees." This was, of course, amplified by Republic Act No
6715 when it decreed the "participation of workers in decision and policy making
processes affecting their rights, duties and welfare." PAL's position that it cannot be
saddled with the "obligation" of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained.

While such "obligation" was not yet founded in law when the Code was formulated, the
attainment of a harmonious labor-management relationship and the then already
existing state policy of enlightening workers concerning their rights as employees
demand no less than the observance of transparency in managerial moves affecting
employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline

considering the nature of its business cannot be overemphasized. In fact, its being a
local monopoly in the business demands the most stringent of measures to attain safe
travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot
be properly implemented in the absence of full cooperation of the employees. Such
cooperation cannot be attained if the employees are restive on account, of their being
left out in the determination of cardinal and fundamental matters affecting their
employment.

47. STAR PAPER CORP. v. SIMBOL

48. DUNCAN ASSOCIATION OF DETAILMAN VS GLAXO WELLCOME PHIL., INC.

G.R. No.162994 - September 17, 2004
TINGA

DOCTRINE: Glaxo’s policy prohibiting an employee from having a relationship with an employee of a
competitor company is a valid exercise of management prerogative.

While our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers; The law also
recognizes that management has rights which are also entitled to respect and enforcement in the interest
of fair play.

FACTS: Petitioner Tecson signed a contract of employment as a medical representative with

Respondent Glaxo which stipulates, among others, that he agrees to study and abide by existing
company rules; to disclose to management any existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies and should management find that such
relationship poses a possible conflict of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a conflict of interest or a potential
conflict between such relationship and the employee’s employment with the company, the management
and the employee will explore the possibility of a “transfer to another department in a non-
counterchecking position” or preparation for employment outside the company after six months. Tecson
was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales area.

Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3 (Astra),
a competitor of Glaxo. She was Astra’s branch coordinator in Albay who supervised the district managers
and medical representatives of her company and prepared marketing strategies for Astra in that area.
Even before getting married, Tecson received several reminders from his District Manager regarding the
conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson
married Bettsy in September 1998.

Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecson’s
superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs.
Tecson requested for more time to comply. He explained that Astra was planning to merge with another
drug company, Zeneca, and Bettsy was planning to avail of the redundancy package offered by Astra,
and with that it will be the separation of Bettsy with a competitor company, the conflict would be elimanted
with regards to the policy.

Tecson asked for more time, and later asked to be transferred to the Milk division of Glaxo since Astra
does not have a milk division. This was denied, and on November 1999, he was transferred to the Butuan
City Sales area. Tecson asked respondent to reconsider but was denied. Tecson went to the Grievance
committee with his concern but Glaxo remained firm. Tecson defied the order and continued acting as a
medrep in the camarines area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued
samples of products which were competing with similar products manufactured by Astra. He was also not
included in product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of onehalf (1⁄2) month pay for
every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo’s policy
on relationships between its employees and persons employed with competitor companies, and affirming
Glaxo’s right to transfer Tecson to another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the
ground that the NCMB did not err in rendering its Decision.

ISSUE: W/N the MANAGEMENT POLICY was valid.

RULING: YES

According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astra’s products were in direct competition with 67% of the products sold by Glaxo.
Hence, Glaxo’s enforcement of the foregoing policy in Tecson’s case was a valid exercise of its
management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and
was even encouraged not to resign but to ask his wife to resign from Astra instead

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo’s policy prohibiting an
employee from having a relationship with an employee of a competitor company is a valid exercise of
management prerogative.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor companies upon
Glaxo’s employees is reasonable under the circumstances because relationships of that nature might
compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims
to protect its interests against the possibility that a competitor company will gain access to its secrets and
procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and growth. Indeed, while our laws endeavor to give
life to the constitutional policy on social justice and the protection of labor, it does not mean that every
labor dispute will be decided in favor of the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest of fair play.

49. G.R. No. 148303 October 17, 2002

UNION OF NESTLE WORKERS CAGAYAN DE ORO FACTORY (UNWCF for
brevity), vs. NESTLE PHILPPINES, INC
FACTS:
On August 1, 1999, Nestle Philippines, Inc. (Nestle) adopted Policy No. HRM 1.8,
otherwise known as the "Drug Abuse Policy." Pursuant to this policy, the management
shall conduct simultaneous drug tests on all employees from different factories and
plants. Thus, on August 17, 1999, drug testing commenced at the Lipa City factory, then
followed by the other factories and plants. However, there was resistance to the policy
in the Nestle Cagayan de Oro factory. Out of 496 employees, only 141 or 28.43%
submitted themselves to drug testing. On August 20, 1999, the Union of Nestle Workers
Cagayan de Oro Factory and its officers, petitioners, wrote Nestle challenging the
implementation of the policy and branding it as a mere subterfuge to defeat the
employees’ constitutional rights.
Nestle claimed that the policy is in keeping with the government’s thrust to eradicate the
proliferation of drug abuse, explaining that the company has the right: (a) to ensure that
its employees are of sound physical and mental health and (b) to terminate the services
of an employee who refuses to undergo the drug test.
ToR was promulgated by the RTC but was later invalidated for it lacked jurisdiction
according to RTC itself via MR. Appeal was taken under Rule 65 to the CA.
On December 28, 2000, the Appellate Court rendered its Decision dismissing the
petition.
ISSUE: WoN the RTC has jurisdiction over issues relating to management policy.
RULE: NO The fact that the complaint was denominated as one for injunction does not
necessarily mean that the RTC has jurisdiction. Well-settled is the rule that jurisdiction is
determined by the allegations in the complaint.
The pertinent allegations of petitioners’ amended complaint read: "x x x x x x x x x 5.
Plaintiffs are aggrieved employees of the Nestle Philippines, Inc. who are subjected to
the new policy of the management for compulsory Drug Test, without their consent and
approval; x x x x x x x x x 8. That the said policy was implemented last August 1, 1999,
and the Union was only informed last August 20, 1999, during a meeting held on that
day, that all employees who are assigned at the CDO Factory will be compulsorily
compelled to undergo drug test, whether they like it or not, without even informing the
Union on this new policy adopted by the Management and no guidelines was set
pertaining to this drug test policy. 9. That there was no consultation made by the
management or even consultation from the employees of this particular policy, as the
nature of the policy is punitive in character, as refusal to submit yourself to drug test
would mean suspension from work for four (4) to seven (7) days, for the first refusal to
undergo drug test and dismissal for second refusal to undergo drug test, hence, they
were not afforded due process x x x; x x x x x x x x x 12. That it is not the question of
whether or not the person will undergo the drug test but it is the manner how the drug
test policy is being implemented by the management which is arbitrary in character. x x
x x x x x x x 16. That the exercise of management prerogative to implement the said
drug test, even against the will of the employees, is not absolute but subject to the
limitation imposed by law x x x;"
It is indubitable from the foregoing allegations that petitioners are not per se questioning
"whether or not the person will undergo the drug test" or the constitutionality or legality
of the Drug Abuse Policy. They are assailing the manner by which respondents are
implementing the policy. According to them, it is "arbitrary in character" because: (1) the
employees were not consulted prior to its implementation; (2) the policy is punitive
inasmuch as an employee who refuses to abide with the policy may be dismissed from
the service; and (3) such implementation is subject to limitations provided by law which
were disregarded by the management. Is the complaint, on the basis of its allegations,
cognizable by the RTC? Respondent Nestle’s Drug Abuse Policy states that "(i)llegal
drugs and use of regulated drugs beyond the medically prescribed limits are prohibited
in the workplace. Illegal drug use puts at risk the integrity of Nestle operations and the
safety of our products. It is detrimental to the health, safety and work-performance of
employees and is harmful to the welfare of families and the surrounding
community."This pronouncement is a guiding principle adopted by Nestle to safeguard
its employees’ welfare and ensure their efficiency and well-being. To our minds, this is a
company personnel policy. In San Miguel Corp. vs. NLRC, this Court held: "Company
personnel policies are guiding principles stated in broad, long-range terms that express
the philosophy or beliefs of an organization’s top authority regarding personnel matters.
They deal with matter affecting efficiency and well-being of employees and include,
among others, the procedure in the administration of wages, benefits, promotions,
transfer and other personnel movements which are usually not spelled out in the
collective agreement." Considering that the Drug Abuse Policy is a company personnel
policy, it is the Voluntary Arbitrators or Panel of Voluntary Arbitrators, not the RTC,
which exercises jurisdiction over this case.
Article 261 of the Labor Code, as amended, pertinently provides: Art. 261. Jurisdiction
of Voluntary Arbitrators or Panel of Voluntary Arbitrators. – The Voluntary Arbitrator or
panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies x x x."

50. GTE DIRECTORIES v. SANCHEZ