THIRD DIVISION

G.R. No. 103586 July 21, 1994 NATIONAL FEDERATION OF LABOR, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and FRANKLIN BAKER COMPANY OF THE PHILIPPINES (DAVAO PLANT), respondents. Jose Espinas for petitioner. Siguion-Reyna, Montecillo & Ongsiako for private respondent.

FELICIANO, J.: Between 1 November 1983 and 1 November 1984, Wage Orders Nos. 3, 4, 5 and 6 were promulgated by the then President Ferdinand E. Marcos. Wage Order No. 3 became effective as of 1 November 1983; Wage Order No. 4, as of 1 May 1984; Wage Order No. 5, as of 16 June 1984; and Wage Order No. 6 went into effect on 1 November 1984. All these Wage Orders increased the statutory minimum wages of workers with differing increases being specified for agricultural plantation and nonagricultural workers. Before the effectivity of Wage Order No. 3, the wage rates of regular employees and of casual (or non-regular) employees of private respondent Franklin Baker Company of the Philippines (Davao Plant) ("Company") were such that there was a positive differential between the two (2) in the amount of P4.56. The effect of the implementation of the successive Wage Orders upon the daily wage rates of these two (2) groups of employees was summarized by petitioner in the following table:
Effectivity Wage of Wage of Gap Date Regulars Casuals Before W.O. No. 3 P22.56 P18.00 P4.56 After W.O. No. 3 1 Nov. 1983 22.56 20.00 2.56 After W.O. No. 4 1 May 1984 32.64 31.00 1.64 After W.O. No. 5 16 June 1984 34.00 34.00 0.00 1

Upon the effectivity of Wage Order No. 5, grievance meetings were held by petitioner National Federation of Labor ("NFL") and private respondent Company sometime in June 1984, addressing the impact which implementation of the various Wage Orders had on the wage structure of the Company.

On 21 June 1984, all the casual or non-regular employees of private respondent Company (at least in its Davao Plant) were "regularized," or converted into regular employees, pursuant to the request of petitioner NFL. On 1 July 1984, the effectivity date of the 1984 Collective Bargaining Agreement between NFL and the Company, all regular employees of the Company received an increase of P1.84 in their daily wage; the regular daily wage of the regular employees thus became P35.84 as against P34.00 per day for non-regular employees. As a result of the implementation of Wage Order No. 6, casual employees received an increase of their daily wage from P34.00 to P36.00. At the same time, the Company unilaterally granted an across-the-board increase of P2.00 in the daily rate of all regular employees, thus increasing their daily wage from P35.84 to P37.84. Further, on 1 July 1985, the anniversary date of the increases under the CBA, all regular employees who were members of the collective bargaining unit got a raise of P1.76 in their basic daily wage, which pushed that daily wage from P37.84 to P39.60, as against the nonregular's basic wage of P36.00 per day. Finally, by November 1987, the lowest paid regular employee had a basic daily rate of P64.64, or P10.64 more than the statutory minimum wage paid to a non-regular employee. The development of the wage scales of the Company's employees after the effectivity date of Wage Order No. 5 is presented in the following table:
Effectivity Wage of Wage of Gap Date Regulars Casuals After W.O. No. 5 16 June 1984 34.00 34.00 0.00 CBA Increase 1 July 1984 35.84 34.00 1.84 After W.O. No. 6 1 Nov. 1984 37.84 36.00 1.84 CBA Anniversary 1 July 1985 39.60 36.00 3.60 Increase

Meantime, while the above wage developments were unfolding, the Company experienced a work output slow down. The Company directed some 205 workers to explain the reduction in their work output. The workers failed to comply and they were accordingly issued notices of dismissal by the Company. As a response to its decreasing productivity levels, the Company suspended operations on 16 August 1984. Operations were resumed on 14 September 1984; the Company, however, refused to take back the 205 dismissed employees. Petitioner Union then went on strike alleging a lock-out on the part of the Company and demanding rectification of the wage distortion. The case was certified by the Secretary of Labor to the National Labor Relations Commission ("NLRC") for compulsory conciliation. On 19 June 1985, the Union and the Company reached an agreement with respect to the lock-out issue. The agreement, which was approved by the NLRC En Banc, granted

the 205 employees "financial assistance" equivalent to thirty (30) days' separation pay. This left unresolved only the wage distortion issue. On 11 November 1987, the NLRC En Banc rendered a decision which in effect found the existence of wage distortion and required the Company to pay a P1.00 wage increase effective 1 May 1984:
In the computation submitted by the Union, there is a need to restore the P2.56 gap between non-regulars or "casuals" and "regular workers." This difference in the basic wage of these workers was existing at the time of the conclusion of the collective bargaining agreement and before the implementation of Wage Orders No. 4 & 5. The imprecise claim of respondent that there is P3.60 gap between non-regular and regulars may not be sustained because as aforestated, this amount represents negotiated wage increase which should not be considered covered and in compliance with the wage orders. Considering, however, the present economic conditions and the outlay involved in correcting the distortion in the wages of respondent's workers, this Commission, in the exercise of its arbitral powers, feels that an increase of P1 .00 on the present basic wage of regular workers would significantly rectify or minimize the distortion in the wage structure of respondent company caused by the implementation of the various wage orders. Respondent is, therefore, required to implement the P1 .00 wage increase effective May 1, 1984 when Wage Order 4 took effect. 2 (Emphasis supplied)

On motion for partial reconsideration filed by the Company, the above quoted portion of the NLRC En Banc's decision was reconsidered and set aside by the NLRC Fifth Division. 3 The Fifth Division of the NLRC in effect found that while a wage distortion did exist commencing 16 June 1984, the distortion persisted only for a total of fifteen (15) days and accordingly required private respondent company to pay "a wage increase of P2.00 per day to all regular workers effective June 16, 1984 up to June 30, 1984 or a total of fifteen (15) days." 4 The rest of the decision of 11 November 1987 was left untouched. In its decision dated 16 December 1991, the NLRC (Fifth Division) said:
. . . At the time Wage Order No. 4 was implemented on May 1, 1984, casual employees were increased to P34.00 per day, placing them on equal salary footing with the regular employees who were likewise receiving P34.00 per day. But effective July 1, 1984 when the 1984 CBA took effect, the regular employees of the company admittedly received the basic wage of P35.84 or an increase of P1.84 as against the daily wage of P34.00 of the casual employees. Thus, the apparent wage distortion did not last long but only for 15 days, that is from June 16, 1984 when Wage Order No. 5 took effect and lasted only up to June 30, 1984 . From July 1, 1984, the regular employees received an increase of P1 .84 making their daily wage P35.84 as against the wage of casual employees of P34 .00 per day. And as rightly pointed out respondent-movant, the difference in the wage scale between the two (2) groups of employees was maintained even after the implementation of Wage Order No. 6 which took effect on November 1, 1984. 5 (Emphasis supplied)

The bottom line issue presented to the Court is thus whether or not, under the facts as summarized above, the NLRC (Fifth Division) committed a grave abuse of discretion

amounting to lack or excess of jurisdiction, when it concluded that the wage distortion had ceased to exist, after 1 July 1984. The principal contention of petitioner NFL is that a wage distortion in the wage structure of private respondent Company continued to exist although a gap of P1.84 between the daily wage rate of regular employees and that of casual employees had been reestablished upon the effectivity of the CBA increase on 1 July 1984. The original claim of NFL was that the initial prior to effectivity of Wage Order No. 3 differential of P4.56 in the wage rate of regular employees and that of casual employees, should be re-created this time between the wage rates of the newly "regularized" employees (i.e., the casual employees regularized by the Company on 21 June 1984) and the "old" regular employees (employees who, allegedly, had been regular employees for at least three [3] years before the "regularization" of the casuals). 6 NFL stresses that seniority is a valid basis of distinction between differing groups of employees, under the Labor Code. We note that neither the Wage Orders noted above, nor the Implementing Rules promulgated by the Department of Labor and Employment, set forth a clear and specific notion of "wage distortion." What the Wage Orders and the Implementing Rules did was simply to recognize that implementation of the Wage Orders could result in a "distortion of the wage structure" of an employer, and to direct the employer and the union to negotiate with each other to correct the distortion. Thus, Section 6 of Wage Order No. 3, dated 7 November 1983, provided as follows:
Sec. 6. Where the application of the minimum wage rate prescribed herein results in distortions of the wage structure of an establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement or through conciliation. In case where there is no collective bargaining agreement or recognized labor organization, the employer shall endeavor to correct such distortions in consultation with their workers. Any dispute shall be resolved through conciliation by the appropriate Regional Office of the Ministry of Labor and Employment or through arbitration by the NLRC Arbitration Branch having jurisdiction over the work-place. 7 (Emphasis supplied)

In its Resolution dated 11 November 1987, the NLRC En Banc provided some elaboration of the notion of wage distortion, in the following terms:
Wage distortion presupposes a classification of positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a disparity [should be "parity"] between the lowest level [and] the next higher level or rank, between new entrants and old hires, there exists a wage distortion.

The various issuances on wages anticipated this occurrence so that it had been commonly provided for in these issuances that negotiations may be initiated for the purposes of correcting the resulting distortion. 8 (Emphases and brackets supplied)

A statutory definition of "wage distortion" is now found in Article 124 of the Labor Code as amended by Republic Act. No. 6727 (dated 9 June 1989) which reads as follows:
Article 124. Standards/Criteria for Minimum Wage Fixing . . . xxx xxx xxx As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases of differentiation. 9 (Emphasis supplied)

From the above quoted material, it will be seen that the concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees. The wage distortion anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a "distortion" (or "compression") which ensued from the impact of those Wage Orders upon the different wage rates of the several classes of employees. Thus distortion ensued where the result of implementation of one or another of the several Wage Orders was the total elimination or the severe reduction of the differential or gap existing between the wage rates of the differing classes of employees. 10 It is important to note that the remedy contemplated in the Wage Orders, and now in Article 124 of the Labor Code, for a wage distortion consisted of negotiations between employer and employees for the rectification of the distortion by re-adjusting the wage rates of the differing classes of employees. As a practical matter, this ordinarily meant a wage increase for one or more of the affected classes of employees so that some gap or differential would be re-established. There was no legal requirement that the historical gap which existed before the implementation of the Wage Orders be restored in precisely the same form or amount. Applying the above concept to the case at bar, we note that there did exist a two-fold classification of employees within the private respondent Company: regular employees on the one hand and casual (or non-regular) employees on the other. As can be seen from the figures referred to earlier, the differential between these two (2) classes of employees existing before Wage Order No. 3 was reduced to zero upon the effectivity of Wage Order No. 5 on 16 June 1984. Obviously, distortion consisting of complete elimination of the wage rate differential had occurred. It is equally clear, however, that fifteen (15) days later, on 1 July 1984, upon effectivity of the wage increase stipulated in the collective bargaining agreement between the parties, a gap or

differential of P1.84 was re-created. This restored differential persisted after the effectivity of Wage Order No. 6 on 1 November 1984. By operation of the same CBA, by 1 July 1985, the wage differential had grown to P3.60. We believe and so hold that the re-establishment of a significant gap or differential between regular employees and casual employees by operation of the CBA was more than substantial compliance with the requirements of the several Wage Orders (and of Article 124 of the Labor Code). That this re-establishment of a significant differential was the result of collective bargaining negotiations, rather than of a special grievance procedure, is not a legal basis for ignoring it. The NLRC En Banc was in serious error when it disregarded the differential of P3.60 which had been restored by 1 July 1985 upon the ground that such differential "represent[ed] negotiated wage increase[s] which should not be considered covered and in compliance with the Wage Orders." 11 The Wage Orders referred to above had provided for the crediting of increases in wages or allowances granted or paid by employers within a specified time against the statutorily prescribed increases in minimum wages. 12 A similar provision recognizing crediting of increases in daily basic wage rates granted by employers pursuant to collective bargaining agreements, is set out in Section 4(d) of R.A. No. 6727, a statute which sought to "rationalize wage policy determination by establishing the mechanism and proper standards therefor ." In Apex Mining Company, Inc. v. National Labor Relations Commission, 13 the Supreme Court said:
It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation . To obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require. 14 (Emphases in the original)

We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions. We consider, still further, that the "regularization" of the casual or non-regular employees on 21 June 1984 which was unilaterally effected by the Company (albeit upon the request of petitioner NFL), in conjunction with the coming into effect of the increases in daily wage stipulated in the CBA, had the effect of rendering the whole problem of wage distortion academic. The act of "regularization" eliminated the classification scheme in respect of which the wage distortion had existed .

Petitioner NFL's principal contention that the wage distortion persisted with respect to the "old" regular employees and the "newly regularized" employees, is realistically a claim or demand that the classification of "regular" employees be broken down into a sub-classification of "new regulars" and "old regulars." A basic problem with this contention is that, per the record of this case and during the period of time here relevant, there was in fact no pre-existing sub-classification of regular employees into "new regulars" and "old regulars" (i.e., on the basis of seniority or longevity) in the Company. It follows that, as pointed out by the Solicitor-General, 15 no wage distortion within the meaning of Wage Orders Nos. 3 through 6 (and of Article 124 of the Labor Code) continued beyond the "regularization" of the casual employees on 21 June 1984. It may be though here again the record is silent that the Company had some other sub-grouping of regular employees on the basis, for instance, of the kind of functions discharged by employees (e.g., rank and file; supervisory; middle management; senior management; highly technical, etc.). The basic point which needs to be stressed is that whether or not a new or additional scheme of classification of employees for compensation purposes should be established by the Company (and the legitimacy or viability of the bases of distinction there embodied) is properly a matter for management judgment and discretion, and ultimately, perhaps, a subject matter for bargaining negotiations between employer and employees. It is assuredly something that falls outside the concept of "wage distortion." The Wage Orders and Article 124 as amended do not require the establishment of new classifications or sub-classifications by the employer. The NLRC is not authorized unilaterally to impose, directly or indirectly, under the guise of rectifying a "wage distortion," upon an employer a new scheme of classification of employees where none has been established either by management decision or by collective bargaining. We conclude that petitioner NFL has not shown any grave abuse of discretion amounting to lack of excess of jurisdiction on the part of the NLRC in rendering its decision (through its Fifth Division) dated 16 December 1991. WHEREFORE, the Petition for Certiorari is hereby DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED. Bidin, Romero, Melo and Vitug, JJ., concur.

FIRST DIVISION [G.R. No. 147816. May 9, 2003] EFREN P. PAGUIO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, METROMEDIA TIMES CORPORATION, ROBINA Y. GOKONGWEI, LIBERATO GOMEZ, JR., YOLANDA E. ARAGON, FREDERICK D. GO and ALDA IGLESIA, respondents. DECISION VITUG, J.: On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth time, into an agreement with petitioner Efren P. Paguio, appointing the latter to be an account executive of the firm. [1] Again, petitioner was to solicit advertisements for "The Manila Times," a newspaper of general circulation, published by respondent company. Petitioner, for his efforts, was to receive
1

1[1] The letter contract dated 22 June 1992 read Dear Mr. Paguio: This letter is to appoint you as Account Executive for The Manila Times for a period of twelve (12) months effective July 1, 1992 to June 30, 1993, and to set forth the terms and conditions of your contract. 1. As account executive, you will use your best efforts to obtain advertisements exclusively for us and for such projects that The Manila Times may decide to do from time to time. 2. You are authorized to solicit advertisements and quote advertising rates in accordance with and subject to all the terms and conditions in our rate cards. 3. All advertisements are subject to acceptance by us and we reserve the right in our absolute discretion to reject or omit any advertisements. 4. You will be paid fifteen (15) percent commission on direct advertisements less corresponding withholding tax. 5. You will be paid ten (10) percent commission on agency advertisements based on gross ad revenues less agency commission and corresponding withholding tax. 6. Walk-in advertisements, not solicited by the Advertising staff, are not commissionable. 7. All payments must be paid direct to Metromedia Times Corporation. In no case, however, will commission be paid until and unless the advertisements, whether agency or direct, have been paid for, subject to the corresponding withholding taxes authorized by law.

compensation consisting of a 15% commission on direct advertisements less withholding tax and a 10% commission on agency advertisements based on gross revenues less agency commission and the corresponding withholding tax. The commissions, released every fifteen days of each month, were to be given to petitioner only after the clients would have paid for the advertisements. Apart from commissions, petitioner was also entitled to a monthly allowance of P2,000.00 as long as he met the P30,000.00-monthly quota. Basically, the contentious points raised by the parties had something to do with the following stipulations of the agreement; viz: 12. You are not an employee of the Metromedia Times Corporation nor does the company have any obligations towards anyone you may employ, nor any responsibility for your operating expenses or for any liability you may incur. The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended or modified in any way except with the duly authorized consent in writing of both parties. 13. Either party may terminate this agreement at any time by giving written notice to the other, thirty (30) days prior to effectivity of termination. [2]
2

8. Commissions earned on paid advertisements covering the period from the first (1st) to the fifteenth (15) of every month shall be payable at the end of the same month; commissions earned on paid advertisements covering the period from the sixteenth (16th ) to the end of the month shall be payable on the fifteenth (15) of the succeeding month. 9. You will be entitled to a monthly allowance of P2,000.00 provided that you meet a monthly quota of P30,000.00 in advertising lineage. But should you fail to meet your quota, your allowance shall be charged against your future account. 10 For all ex-deal arrangements, the barter agreement and your commission will be subject to the written approval of the President and Treasurer on a case-to-case basis. 11. You will be paid your approved commission only after the payment for the liquidation (sold and/or consumed) of the goods received from the advertiser has been completed. 12. You are not an employee of Metromedia Times Corporation nor does the Company have any obligations towards anyone you may employ, nor any responsibility for your operating expenses or for any liability you may incur. The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended or modified in any way except with the duly authorized consent in writing of both parties. 13. Either party may terminate this agreement at any time by giving written notice to the other thirty (30) days prior to the effectivity of termination. If these terms and conditions are acceptable to you, please indicate your conformity by signing below. (Rollo, pp. 41-42.) 2[2] Rollo, p. 42.

On 15 August 1992, barely two months after the renewal of his contract, petitioner received the following notice from respondent firm Dear Mr. Paguio, Please be advised of our decision to terminate your services as Account Executive of Manila Times effective September 30, 1992. This is in accordance with our contract signed last July 1, 1992. [3]
3

Apart from vague allegations of misconduct on which he was not given the opportunity to defend himself, i.e., pirating clients from his co-executives and failing to produce results, no definite cause for petitioners termination was given. Aggrieved, petitioner filed a case before the labor arbiter, asking that his dismissal be declared unlawful and that his reinstatement, with entitlement to backwages without loss of seniority rights, be ordered. Petitioner also prayed that respondent company officials be held accountable for acts of unfair labor practice, for P500,000.00 moral damages and for P200,000.00 exemplary damages. In their defense, respondent Metromedia Times Corporation asserted that it did not enter into any agreement with petitioner outside of the contract of services under Articles 1642 and 1644 of the Civil Code of the Philippines. [4] Asserting their right to terminate the contract with petitioner, respondents pointed to the last provision thereof stating that both parties could opt to end the contract provided that either party would serve, thirty days prior to the intended date of termination, the corresponding notice to the other.
4

The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter ordered respondent Metromedia Times Corporation and its officers to reinstate petitioner to his former position, without loss of seniority rights, and to pay him his commissions and other remuneration accruing from the date of dismissal on 15 August 1992 up until his reinstatement. He likewise adjudged that Liberato I. Gomez, general manager of respondent corporation, be held liable to petitioner for moral damages in the amount of P20,000.00. On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and declared the contractual relationship between the parties as being for a fixed-term employment. The NLRC declared a fixed-term employment to be lawful as long as it was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the worker and absent any other circumstances vitiating his 3[3] Rollo, p. 43. 4[4] Article 1642 of the Civil Code provides: "The contract of lease may be of things, or of work and service." Article 1644 provides: "In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them."

consent." [5] The finding of the NLRC was primarily hinged on the assumption that petitioner, on account of his educated stature, having indeed personally prepared his pleadings without the aid of counsel, was an unlikely victim of a lopsided contract. Rejecting the assertion of petitioner that he was a regular employee, the NLRC held: "The decisive determinant would not be the activities that the employee (was) called upon to perform but rather, 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 (would) necessarily come, although it (might) not be known when." [6]
5 6

Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld in toto the findings of the commission. In his petition for review on certiorari, petitioner raised the following issues for resolution: WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE RESPONDENTS COMPANY IS FOR A FIXED PERIOD. WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL. WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES AND MORAL DAMAGES. [7]
7

The crux of the matter would entail the determination of the nature of contractual relationship between petitioner and respondent company - was it or was it not one of regular employment? A regular employment, whether it is one or not, is aptly gauged from the concurrence, or the non-concurrence, of the following factors - a) the manner of selection and engagement of the putative employee, b) the mode of payment of wages, c) the presence or absence of the power of dismissal; and d) the presence or absence of the power to control the conduct of the putative employee or the power to control the employee with respect to the means or methods by which his work is to be accomplished. [8] The "control test" assumes primacy in the overall consideration. Under this test, an employment relation obtains where work is performed or services are rendered under the control and supervision of the party contracting for the service, not only as to the result of the work but also as to the manner and details of the performance desired. [9]
8 9

5[5] Rollo, NLRC Decision dated 15 December 1998, p. 82. 6[6] Rollo, p. 85. 7[7] Rollo, p. 18. 8[8] Hijos de F. Escano, Inc., vs. NLRC G.R. No. 59229, 22 August 1991, 201 SCRA 63; Ecal vs. NLRC, G.R. Nos. 92777-78, 13 March 1991, 195 SCRA 224. 9[9] Iloilo Chinese Commercial School vs. Fabrigar, L-16600, 27 December 1961, 3 SCRA 712.

An indicum of regular employment, rightly taken into account by the labor arbiter, was the reservation by respondent Metromedia Times Corporation not only of the right to control the results to be achieved but likewise the manner and the means used in reaching that end. [10] Metromedia Times Corporation exercised such control by requiring petitioner, among other things, to submit a daily sales activity report and also a monthly sales report as well. Various solicitation letters would indeed show that Robina Gokongwei, company president, Alda Iglesia, the advertising manager, and Frederick Go, the advertising director, directed and monitored the sales activities of petitioner.
10

The Labor Code, in Article 280 thereof, provides: ART. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the proceeding 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. Thus defined, a regular employee is one who is engaged to perform activities which are necessary and desirable in the usual business or trade of the employer as against those which are undertaken for a specific project or are seasonal. Even in these latter cases, where such person has rendered at least one year of service, regardless of the nature of the activity performed or of whether it is continuous or intermittent, the employment is considered regular as long as the activity exists, it not being indispensable that he be first issued a regular appointment or be formally declared as such before acquiring a regular status. [11]
11

That petitioner performed activities which were necessary and desirable to the business of the employer, and that the same went on for more than a year, could hardly be denied. Petitioner was an account executive in soliciting advertisements, clearly necessary and desirable, for the survival and continued operation of the business of respondent corporation. Robina Gokongwei, its President, herself admitted that the income generated from paid advertisements was the lifeblood of the newspaper's existence. Implicitly, respondent corporation recognized petitioners invaluable contribution to the business when it renewed, not just once but five times, its contract with petitioner. 10[10] Cosmopolitan Funeral Homes, Inc., vs. Maalat, G.R. No. 86693, 02 July 1990, 187 SCRA 108. 11[11] Article 280, Labor Code.

Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been called upon to perform. [12] The law affords protection to an employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to deprive the employee of his security of tenure. [13] The sheer inequality that characterizes employer-employee relations, where the scales generally tip against the employee, often scarcely provides him real and better options.
12 13

The real question that should thus be posed is whether or not petitioner has been justly dismissed from service. A lawful dismissal must meet both substantive and procedural requirements; in fine, the dismissal must be for a just or authorized cause and must comply with the rudimentary due process of notice and hearing. It is not shown that respondent company has fully bothered itself with either of these requirements in terminating the services of petitioner. The notice of termination recites no valid or just cause for the dismissal of petitioner nor does it appear that he has been given an opportunity to be heard in his defense. The evidence, however, found by the appellate court is wanting that would indicate bad faith or malice on the part of respondents, particularly by respondent Liberato I. Gomez, and the award of moral damages must thus be deleted. WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in C.A. G.R. SP No. 527773 and that of the National Labor Relations Commission are hereby SET ASIDE and that of the Labor Arbiter is REINSTATED except with respect to the P20,000.00 moral damages adjudged against respondent Liberato I. Gomez which award is deleted. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

12[12] A.M. Oreta and Co., Inc., vs. NLRC, et al., G.R. No. 74004, 10 August 1989, 176 SCRA 218. 13[13] Cielo vs. NLRC, G.R. No. 78693, 28 January 1991, 193 SCRA 410.

SPECIAL FIRST DIVISION [G.R. No. 110524. July 29, 2002] DOUGLAS MILLARES and ROGELIO LAGDA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY, INC. and ESSO INTERNATIONAL SHIPPING CO., LTD. respondents. RESOLUTION KAPUNAN, J.: On March 14, 2000, the Court promulgated its decision in the above-entitled case, ruling in favor of the petitioners. The dispositive portion reads, as follows: WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new judgment is hereby rendered ordering the private respondents to: (1) Reinstate petitioners Millares and Lagda to their former positions without loss of seniority rights, and to pay full backwages computed from the time of illegal dismissal to the time of actual reinstatement; (2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda separation pay equivalent to one months salary for every year of service; and, (3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive Plan. SO ORDERED. [1]
i

A motion for reconsideration was consequently filed [2] by the private respondents to which petitioners filed an Opposition thereto. [3]
ii iii

In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for reconsideration with finality. [4]
iv

Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a Motion for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention. Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion for Reconsideration of our decision.

In both motions, the private respondents and FAME respectively pray in the main that the Court reconsider its 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. The Court resolved to set the case for oral arguments to enable the parties to present their sides. To recall, the facts of the case are, as follows: Petitioner Douglas Millares was employed by private respondent ESSO International Shipping Company LTD. (Esso International, for brevity) through its local manning agency, private respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for brevity) on November 16, 1968 as a machinist. In 1975, he was promoted as Chief Engineer which position he occupied until he opted to retire in 1989. He was then receiving a monthly salary of US $1,939.00. On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9 to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of private respondent Trans-Global, approved the request for leave of absence. On June 21, 1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International Co., (now Esso International) through Michael J. Estaniel, informing him of his intention to avail of the optional retirement plan under the Consecutive Enlistment Incentive Plan (CEIP) considering that he had already rendered more than twenty (20) years of continuous service. On July 13, 1989 respondent Esso International, through W.J. Vrints, Employee Relations Manager, denied petitioner Millares request for optional retirement on the following grounds, to wit: (1) he was employed on a contractual basis; (2) his contract of enlistment (COE) did not provide for retirement before the age of sixty (60) years; and (3) he did not comply with the requirement for claiming benefits under the CEIP, i.e., to submit a written advice to the company of his intention to terminate his employment within thirty (30) days from his last disembarkation date. On August 9, 1989, petitioner Millares requested for an extension of his leave of absence from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager, Ship Group A, Trans-global, wrote petitioner Millares advising him that respondent Esso International 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, respondent Esso International, through H. Regenboog, Personnel Administrator, advised petitioner 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, petitioner Lagda was employed by private respondent Esso International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a position he continued to occupy until his last COE expired on April 10, 1989. He was then receiving a monthly salary of US$1,939.00.

On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up to the whole month of August 1989. On June 14, 1989, respondent Trans-Globals President, Michael J. Estaniel, approved petitioner Lagdas leave of absence from June 22, 1989 to July 20, 1989 and advised him to report for re-assignment on July 21, 1989. On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of respondent Esso International, through respondent Trans-Globals President Michael J. Estaniel, informing him of his intention to avail of the optional early retirement plan in view of his twenty (20) years continuous service in the complaint. On July 13, 1989, respondent Trans-global denied petitioner Lagdas request for availment of the optional early retirement scheme on the same grounds upon which petitioner Millares request was denied. On August 3, 1989, he requested for an extension of his leave of absence up to August 26, 1989 and the same was approved. However, on September 27, 1989, respondent Esso International, through H. Regenboog, Personnel Administrator, advised petitioner Lagda 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, petitioners Millares and Lagda filed a complaint-affidavit, docketed as POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits against private respondents Esso International and Trans-Global, before the POEA. [5]
v

On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of merit. On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the following disquisition: The first issue must be decided in the negative. Complainants-appellants, as seamen and overseas contract workers are not covered by the term regular employment as defined under Article 280 of the Labor Code. The POEA, which is tasked with protecting the rights of the Filipino workers for overseas employment to fair and equitable recruitment and employment practices and to ensure their welfare, prescribes a standard employment contract for seamen on board ocean-going vessels for a fixed period but in no case to exceed twelve (12) months (Part 1, Sec. C). This POEA policy appears to be in consonance with the international maritime practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had held that a fixed term is essential and natural appurtenance of overseas employment contracts to which the concept of regular employment with all that it implies is not applicable, Article 280 of the Labor Code notwithstanding. There is, therefore, no reason to disturb the POEA Administrators finding that complainants-appellants were hired on a contractual basis and for a definite period. Their employment is thus governed by the contracts they sign each time they are re-hired and is terminated at the expiration of the contract period. [6]
vi

Undaunted, the petitioners elevated their case to this Court favorable action, which is now vehemently being assailed.

vii

[7]

and successfully obtained the

At the hearing on November 15, 2000, the Court defined the issues for resolution in this case, namely: I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF EMPLOYMENT EXPIRE? II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF THEIR TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT INCENTIVE PLAN (CEIP)? III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT) PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR EMPLOYEES? IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION? V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE FROM ITS RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)? [8]
viii

In answer to the private respondents Second Motion for Reconsideration and to FAMEs Motion for Reconsideration in Intervention, petitioners maintain that they are regular employees as found by the Court in the March 14, 2000 Decision. Considering that petitioners performed activities which are usually necessary or desirable in the usual business or trade of private respondents, they should be considered as regular employees pursuant to Article 280, Par. 1 of the Labor Code. [9] Other justifications for this ruling include the fact that petitioners have rendered over twenty (20) years of service, as admitted by the private respondents; [10] that they were recipients of Merit Pay which is an express acknowledgment by the private respondents that petitioners are regular and not just contractual employees; [11] that petitioners were registered under the Social Security System (SSS).
ix x xi

The petitioners further state that the case of Coyoca v. NLRC [12] which the private respondents invoke is not applicable to the case at bar as the factual milieu in that case is not the same. Furthermore, private respondents fear that our judicial pronouncement will spell the death of the manning industry is far from real. Instead, with the valuable contribution of the manning industry to our economy, these seafarers are supposed to be considered as Heroes of the Republic whose rights must be protected. [13] Finally, the first motion for reconsideration has already been denied with finality by this Court and it is about time that the Court should write finis to this case.
xii xiii

The private respondents, on the other hand, contend that: (a) the ruling holding petitioners as regular employees was not in accord with the decision in Coyoca v. NLRC, 243 SCRA 190; (b)

Art. 280 is not applicable as what applies is the POEA Rules and Regulations Governing Overseas Employment; (c) seafarers are not regular employees based on international maritime practice; (d) grave consequences would result on the future of seafarers and manning agencies if the ruling is not reconsidered; (e) there was no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and reinstatement, that being not allowed under the POEA rules and the Migrant Workers Act; and, (g) petitioners are not entitled to claim the total amount credited to their account under the CEIP. [14]
xiv

Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that our decision, if not reconsidered, will have negative consequences in the employment of Filipino Seafarers overseas which, in turn, might lead to the demise of the manning industry in the Philippines. As intervenor FAME puts it: xxx 7.1 Foreign principals will start looking for alternative sources for seafarers to man their ships. AS reported by the BIMCO/ISF study, there is an expectancy that there will be an increasing demand for (and supply of) Chinese seafarers, with some commentators suggesting that this may be a long-term alternative to the Philippines. Moreover, the political changes within the former Eastern Bloc have made new sources of supply available to the international market. Intervenors recent survey among its members shows that 50 Philippine manning companies had already lost some 6,300 slots to other Asian, East Europe and Chinese competition for the last two years; 7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE THOUSAND (US$ 274,549,000.00) from the manning industry and another US DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$ 4,650,760,000.00) from the land-based sector if seafarers and equally situated land-based contract workers will be declared regular employees; 7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered jobless should we lose the market; 7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be doing business with them will close their shops; 7.5 The contribution to the Overseas Workers Welfare Administration by the sector, which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$ 4,000,000.00)annually, will be drastically reduced. This is not to mention the processing fees paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign Affairs (DFA) and Maritime Industry Authority (MARINA) for the documentation of these seafarers; 7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as their breadwinners will be rendered jobless; and

7.7 It will considerably slow down the governments program of employment generation, considering that, as expected foreign employers will now avoid hiring Filipino overseas contract workers as they will become regular employees with all its concomitant effects. [15]
xv

Significantly, the Office of the Solicitor General, in a departure from its original position in this case, has now taken the opposite view. It has expressed its apprehension in sustaining our decision and has called for a re-examination of our ruling. [16]
xvi

Considering all the arguments presented by the private respondents, the Intervenor FAME and the OSG, we agree that there is a need to reconsider our position with respect to the status of seafarers which we considered as regular employees under Article 280 of the Labor Code. We, therefore, partially grant the second motion for reconsideration. In Brent School Inc. v. Zamora, [17] the Supreme Court stated that Article 280 of the Labor Code does not apply to overseas employment.
xvii

In the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixed-period employment that the question posed in the opening paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy? On the other hand, there is the gradual and progressive elimination of references to term or fixedperiod employment in the Labor Code, and the specific statement of the rule that: Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employee is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; provided that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specific, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. Under the Civil code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by natural 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. Some familiar examples may be cited of employment contract which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment with all that it implies does not appear ever to have been applied. Article 280 of the Labor Code notwithstanding also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fix periods, at the expiration of which they would have to stand down, in providing that these officials, xxx may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not reelect them. There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregard as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exists, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted to prevent the circumvention of the right of the employee to be secured in xxx his employment As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate within his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of 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 of the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences.

Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That is a principle that goes back to In re Allen decided on October 27, 1902, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: the appellants would lead to an absurdity is another argument for rejecting it. Xxx We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor code clearly appears to have been, as already observed, to prevent circumvention of the employees right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out; agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Again, in Pablo Coyoca v. NLRC, [18] the Court also held that a seafarer is not a regular employee and is not entitled to separation pay. His employment is governed by the POEA Standard Employment Contract for Filipino Seamen.
xviii

XXX. In this connection, it is important to note that neither does the POEA standard employment contract for Filipino seamen provide for such benefits. As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment and the said Rules do not provide for separation or termination pay. What is embodied in petitioners contract is the payment of compensation arising from permanent partial disability during the period of employment. We find that private respondent complied with the terms of contract when it paid petitioner P42,315.00 which, in our opinion, is a reasonable amount, as compensation for his illness. Lastly, petitioner claims that he eventually became a regular employee of private respondent and thus falls within the purview of Articles 284 and 95 of the Labor Code. In support of this contention, petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC, et al.,

wherein we held that the crew members of the shipping company had attained regular status and thus, were entitled to separation pay. However, the facts of said case differ from the present. In Worth, we held that the principal and agent had operational control and management over the MV Orient Carrier and thus, were the actual employers of their crew members. From the foregoing cases, 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 everytime 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. [19] 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.
xix

Petitioners insist that they should be considered regular employees, since they have rendered services which are usually necessary and desirable to the business of their employer, and that they have rendered more than twenty(20) years of service. While this may be true, the Brent case has, however, held that there are certain forms of employment which also require the performance of usual and desirable functions and which exceed one year but do not necessarily attain regular employment status under Article 280. [20] Overseas workers including seafarers fall under this type of employment which are governed by the mutual agreements of the parties.
xx

In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer than 12 months. It reads: Section C. Duration of Contract The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the parties. Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can not stay for a long and an indefinite period of time at sea. [21] Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew during the COE is a reality that necessitates the limitation of its period. [22]
xxi xxii

Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before the contracts expired (which has admittedly been going on for twenty (20) years). By such circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it. Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical considerations that experienced crew members are more preferred. Petitioners were only given priority or preference because of their experience and qualifications but this does not detract the fact that herein petitioners are contractual employees. They can not be considered regular employees. We quote with favor the explanation of the NLRC in this wise: Xxx The reference to permanent and probationary masters and employees in these papers is a misnomer and does not alter the fact that the contracts for enlistment between complainantsappellants and respondent-appellee Esso International were for a definite periods of time, ranging from 8 to 12 months. Although the use of the terms permanent and probationary is unfortunate, what is really meant is eligible for-re-hire. This is the only logical conclusion possible because the parties cannot and should not violate POEAs requirement that a contract of enlistment shall be for a limited period only; not exceeding twelve (12)months. [23]
xxiii

From all the foregoing, we hereby state that 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. With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we hold that the petitioners are still entitled to receive 100% of the total amount credited to him under the CEIP. Considering that we have declared that petitioners are contractual employees, their compensation and benefits are covered by the contracts they signed and the CEIP is part and parcel of the contract. The CEIP was formulated to entice seamen to stay long in the company. As the name implies, the program serves as an incentive for the employees to renew their contracts with the same company for as long as their services were needed. For those who remained loyal to them, they were duly rewarded with this additional remuneration under the CEIP, if eligible. While this is an act of benevolence on the part of the employer, it can not, however, be denied that this is part of the benefits accorded to the employees for services rendered. Such right to the benefits is vested upon them upon their eligibility to the program. The CEIP provides that an employee becomes covered under the Plan when he completes thirtysix (36) months or an equivalent of three (3) years of credited service with respect to employment after June 30, 1973. [24] Upon eligibility, an amount shall be credited to his account as it provides, among others:
xxiv

III.

Distribution of Benefits

A.

Retirement, Death and Disability When the employment of an employee terminates because of his retirement, death or permanent and total disability, a percentage of the total amount credited to his account will be distributed to him (or his eligible survivor(s) in accordance with the following:

Reason for Termination a) Attainment of mandatory retirement age of 60. b) Permanent and total disability, while under contract, that is not due to accident or misconduct.

Percentage 100% 100%

c) Permanent and total disability, 100% while under contract, that is due to accident, and not due to misconduct. xxx B. Voluntary Termination

When an employee voluntary terminates his employment with at least 36 months of credited service without any misconduct on his part, 18 percent of the total amount credited to his account, plus an additional of one percent for each month (up to a maximum of 164 months of credited service in excess of 36, will be distributed to him provided (1) the employee has completed his last Contract of Enlistment and (2) employee advises the company in writing, within 30 days, from his last disembarkation date, of his intention to terminate his employment. (To advise the Company in writing means that the original letter must be sent to the Companys agent in the Philippines, a copy sent to the Company in New York). xxx C. Other Terminations When the employment of an employee is terminated by the Company for a reason other than one in A and B above, without any misconduct on his part, a percentage of the total amount credited to his account will be distributed to him in accordance with the following. Credited Service 36 months Percentage 50%

48 60

100%

75%

When the employment of an employee is terminated due to his poor-performance, misconduct, unavailability, etc., or if employee is not offered re-engagement for similar reasons, no distribution of any portion of employees account will ever be made to him (or his eligible survivor[s]). It must be recalled that on June 21, 1989, Millares wrote a letter to his employer informing his intention to avail of the optional retirement plan under the CEIP considering that he has rendered more than twenty (20) years of continuous service. Lagda, likewise, manifested the same intention in a letter dated June 26, 1989. Private respondent, however, denied their requests for benefits under the CEIP since: (1) the contract of enlistment (COE) did not provide for retirement before 60 years of age; and that (2) petitioners failed to submit a written notice of their intention to terminate their employment within thirty (30) days from the last disembarkation date pursuant to the provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped from the roster of crew members and on grounds of abandonment and unavailability for contractual sea service, respectively, they were disqualified from receiving any benefits under the CEIP. [25]
xxv

In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda were not guilty of abandonment or unavailability for contractual sea service, as we have stated: The absence of petitioners was justified by the fact that they secured the approval of private respondents to take a leave of absence after the termination of their last contracts of enlistment. Subsequently, petitioners sought for extensions of their respective leaves of absence. Granting arguendo that their subsequent requests for extensions were not approved, it cannot be said that petitioners were unavailable or had abandoned their work when they failed to report back for assignment as they were still questioning the denial of private respondents of their desire to avail of the optional early retirement policy, which they believed in good faith to exist. [26]
xxvi

Neither can we consider petitioners guilty of poor performance or misconduct since they were recipients of Merit Pay Awards for their exemplary performances in the company. Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which private respondent considered as belated written notices of termination, we find such assertion specious. Notwithstanding, we could conveniently consider the petitioners eligible under Section III-B of the CEIP (Voluntary Termination), but this would, however, award them only a measly amount of benefits which to our mind, the petitioners do not rightfully deserve under the facts and circumstances of the case. As the CEIP provides: III. Distribution of Benefits xxx E. Distribution of Accounts

When an employee terminates under conditions that would qualify for a distribution of more than one specified in A, B or C above, the largest single amount, only, will be distributed. Since petitioners termination of employment under the CEIP do not fall under Section III-A (Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor could they be considered under the second paragraph of Section III-C, as earlier discussed; it follows that their termination falls under the first paragraph of Section III-C for which they are entitled to 100% of the total amount credited to their accounts. The private respondents can not now renege on their commitment under the CEIP to reward deserving and loyal employees as the petitioners in this case. In taking cognizance of private respondents Second Motion for Reconsideration, the Court hereby suspends the rules to make them conformable to law and justice and to subserve an overriding public interest. IN VIEW OF THE FOREGOING, THE COURT Resolved to Partially GRANT Private Respondents Second Motion for Reconsideration and Intervenor FAMES Motion for Reconsideration in Intervention. The Decision of the National Labor Relations Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The Private Respondents, Trans-Global Maritime Agency, Inc. and Esso International Shipping Co.,Ltd. are hereby jointly and severally ORDERED to pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive Plan(CEIP). SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, and Ynares-Santiago, JJ., concur. Austria-Martinez, J., no part. Did not participate in the Decision.

FIRST DIVISION G.R. No. 74246 January 26, 1989 MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners, vs. HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor and Employment judgment, and JOAQUIN A. DEQUILA, respondents. Cruz, Agabin, Atienza & Alday for petitioners. The Solicitor General of public respondent. Norberto M. Alensuela, Sr. for private respondent.

NARVASA, J.: There is no dispute about the facts in this case, and the only question for the Court is whether or not, Article 282 of the Labor Code notwithstanding, probationary employment may validly be extended beyond the prescribed six-month period by agreement of the employer and the employee. Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a general utility worker on January 10, 1979. Upon the expiration of the probationary period of six 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 three 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. 1 Dequila thereupon filed with the Ministry of Labor against Mariwasa and its VicePresident for Administration, Angel T. Dazo, a complaint for illegal dismissal and violation of Presidential Decrees Nos. 928 and 1389. 2 His complaint was dismissed after hearing by Director Francisco L. Estrella, Director of the Ministry's National Capital Region, who ruled that the termination of Dequila's employment was in the circumstances justified and rejected his money claims for insufficiency of evidence. 3 On appeal to the Office of the Minister, however, said disposition was reversed. Respondent Deputy Minister Vicente 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. 4 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. 5 Mariwasa and Dazo, now petitioners, thereafter be sought this Court to review Hon. Leogardo's decision on certiorari and prohibition, urging its reversal for having been rendered with grave abuse of discretion and/or without or in excess of jurisdiction. 6 The petition, as well as the parties' comments subsequently submitted all underscore the fact that the threshold issue here is, as first above stated, the legal one of whether employer and employee may by agreement extend the probationary period of employment beyond the six months prescribed in Art. 282 of the Labor Code, which provides that:
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.'

The Court agrees with the Solicitor General, who takes the same position as the petitioners, that such an extension may lawfully be covenanted, notwithstanding the seemingly restrictive language of the cited provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating longer probationary periods as constituting lawful exceptions to the statutory prescription limiting such periods to six months, when it upheld as valid an employment contract between an employer and two of its employees that provided for an eigthteen-month probation period. This Court there held:
'It is petitioners' submission that probationary employment cannot exceed six (6) months, the only exception being apprenticeship and learnership agreements as provided in the Labor Code; that the Policy Instruction of the Minister of Labor and Employment nor any agreement of the parties could prevail over this mandatory requirement of the law; that this six months prescription of the Labor Code was mandated to give further efficacy to the constitutionally-guaranteed security of tenure of workers; and that the law does not allow any discretion on the part of the Minister of Labor and Employment to extend the probationary period for a longer period except in the aforecited instances. Finally, petitioners maintain that since they are regular employees, they can only be removed or dismissed for any of the just and valid causes enumerated under Article 283. of the Labor Code. We reject petitioners' contentions. They have no basis in law. 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. xxx We therefore, hold and rule that the probationary employment of petitioners set to eighteen (18) months is legal and valid and that the Regional Director and the Deputy Minister of Labor and Employment committed no abuse of discretion in ruling accordingly.

The single difference between Buiser and the present case: that in the former involved an eighteen-month probationary period stipulated in the original contract of employment, whereas the latter refers to an extension agreed upon at or prior to the expiration of the statutory six-month period, is hardly such as to warrant or even suggest a different ruling here. In both cases the parties' agreements in fact resulted in extensions of the period prescribed by law. That in this case the inability of the probationer to make the grade became apparent only at or about the end of the six-month period, hence an extension could not have been pre-arranged as was done in Buiser assumes no adverse significance, given the lack, as pointed out by the Solicitor General, of any indication that the extension to which Dequila gave his agreement was a mere stratagem of petitioners to avoid the legal consequences of a probationary period satisfactorily completed. For aught that appears of record, 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. Having reached the foregoing conclusions, the Court finds it unnecessary to consider and pass upon the additional issue raised in the Supplemental Petition 8 that the back wages adjudged in favor of private respondent Dequila were erroneously computed. 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 Presidential Decrees 928 and 1389 is dismissed for lack of merit, without pronouncement as to costs.

SO ORDERED. Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

THIRD DIVISION G.R. No. 72222 January 30, 1989 INTERNATIONAL CATHOLIC MIGRATION COMMISSION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BERNADETTE GALANG, respondents.

FERNAN, C.J.: The issue to be resolved in the instant case is whether or not an employee who was terminated during the probationary period of her employment is entitled to her salary for the unexpired portion of her six-month probationary employment. The facts of the case are undisputed. Petitioner International Catholic Migration Commission (ICMC), a non-profit organization dedicated to refugee service at the Philippine Refugee Processing Center in Morong, Bataan engaged the services of private respondent Bernadette Galang on January 24, 1983 as a probationary cultural orientation teacher with a monthly salary of P2,000.00. Three (3) months thereafter, or on April 22, 1983, private respondent was informed, orally and in writing, that her services were being terminated for her failure to meet the prescribed standards of petitioner as reflected in the performance evaluation of her supervisors during the teacher evaluation program she underwent along with other newly-hired personnel. Despite her termination, records show that private respondent did not leave the ICMC refugee camp at Morong, Bataan, but instead stayed thereat for a few days before leaving for Manila, during which time, she was observed by petitioner to be allegedly acting strangely. On July 24, 1983, private respondent returned to Morong, Bataan on board the service bus of petitioner to accomplish the clearance requirements. In the evening of that same day, she was found at the Freedom Park of Morong wet and shivering from the rain and acting bizarrely. She was then taken to petitioner's hospital where she was given the necessary medical attention. Two (2) days later, or on July 26, 1983, she was taken to her residence in Manila aboard petitioner's service bus. Thru a letter, her father expressed appreciation to petitioner for taking care of her daughter. On that same day, her father received, on her

behalf, the proportionate amount of her 13th month pay and the equivalent of her two week pay. On August 22, 1983, private respondent filed a complaint 1 for illegal dismissal, unfair labor practice and unpaid wages against petitioner with the then Ministry of Labor and Employment, praying for reinstatement with backwages, exemplary and moral damages. On October 8, 1983, after the parties submitted their respective position papers and other pleadings, Labor Arbiter Pelagio A. Carpio rendered his decision dismissing the complaint for illegal dismissal as well as the complaint for moral and exemplary damages but ordering the petitioner to pay private respondent the sum of P6,000.00 as payment for the last three (3) months of the agreed employment period pursuant to her verbal contract of employment. 2 Both parties appealed the decision to the National Labor Relations Commission. In her appeal, private respondent contended that her dismissal was illegal considering that it was effected without valid cause. On the other hand, petitioner countered that private respondent who was employed for a probationary period of three (3) months could not rightfully be awarded P6,000.00 because her services were terminated for failure to qualify as a regular employee in accordance with the reasonable standards prescribed by her employer. On August 22, 1985, the NLRC, by a majority vote of Commissioners Guillermo C. Medina and Gabriel M. Gatchalian, sustained the decision of the Labor Arbiter and thus dismissed both appeals for lack of merit. Commissioner Miguel Varela, on the other hand, dissented and voted for the reversal of the Labor Arbiter's decision for lack of legal basis considering that the termination of services of complainant, now private respondent, was effected during her probationary period on valid grounds made known to her. 3 Dissatisfied, petitioner filed the instant petition. Petitioner maintains that private respondent is not entitled to the award of salary for the unexpired three-month portion of the probationary period since her services were terminated during such period when she failed to qualify as a regular employee in accordance with the reasonable standards prescribed by petitioner; that having been terminated on valid grounds during her probationary period, or specifically on April 24, 1983, petitioner is not liable to private respondent for services not rendered during the unexpired three-month period, otherwise, unjust enrichment of her part would result; that under Article 282 (now Article 281) of the Labor Code, if the employer finds that the probationary employees does not meet the standards of employment set for the position, the probationary employee may be terminated at any time within the six-month period, without need of exhausting raid entire six-month term. 4

The Solicitor General, on the other hand, contends that a probationary employment for six (6) months, as in the case of herein private respondent, is an employment for a definite period of time and, as such, the employer is duty-bound to allow the probationary employee to work until the termination of the probationary employment before her re- employment could be refused; that when petitioner disrupted the probationary employment of private respondent, without giving her the opportunity to improve her method of instruction within the said period, it held itself liable to pay her salary for the unexpired portion of such employment by way of damages pursuant to the general provisions of civil law that he who in any manner contravenes the terms of his obligation without any valid cause shall be liable for damages; 5 that, as held in Madrigal v. Ogilvie, et al, 6 the damages so awarded are equivalent to her salary for the unexpired portion of her employment for a fixed period. 7 We find for petitioner. There is justifiable basis for the reversal of public respondent's award of salary for the unexpired three-month portion of private respondent's six-month probationary employment in the light of its express finding that there was no illegal dismissal. There is no dispute that private respondent was terminated during her probationary period of employment for failure to qualify as a regular member of petitioner's teaching staff in accordance with its reasonable standards. Records show that private respondent was found by petitioner to be deficient in classroom management, teacher-student relationship and teaching techniques. 8 Failure to qualify as a regular employee in accordance with the reasonable standards of the employer is a just cause for terminating a probationary employee specifically recognized under Article 282 (now Article 281) of the Labor Code which provides thus:
ART. 281. Probationary employment. Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employer who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employer in accordance with reasonable standard made known by the employer to the employer at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. (Emphasis supplied.)

It must be noted that notwithstanding the finding of legality of the termination of private respondent, public respondent justified the award of salary for the unexpired portion of the probationary employment on the ground that a probationary employment for six (6) months is an employment for a "definite period" which requires the employer to exhaust the entire probationary period to give the employee the opportunity to meet the required standards. The legal basis of public respondent is erroneous. A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain

whether he will become a proper and efficient employee. 9 The word "probationary", as used to describe the period of employment, implies the purpose of the term or period, but not its length. 10 Being in the nature of a "trial period" 11 the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment. It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. The equality of right that exists between the employer and the employee as to the nature of the probationary employment was aptly emphasized by this Court in Grand Motor Parts Corporation v. Minister of Labor, et al. , 130 SCRA 436 (1984), citing the 1939 case of Pampanga Bus. Co., Inc. v. Pambusco Employees Union, Inc . 68 Phil. 541, thus:
The right of a laborer to sell his labor to such persons as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the Constitution. If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression.

As the law now stands, Article 281 of the Labor Code gives ample authority to the employer to terminate a probationary employee 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. There is nothing under Article 281 of the Labor Code that would preclude the employer from extending a regular or a permanent appointment to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of the probationary period. Conversely, if the purpose sought by the employer is neither attained nor attainable within the said period, Article 281 of the Labor Code does not likewise preclude the employer from terminating the probationary employment on justifiable causes as in the instant case. We find unmeritorious, therefore, public respondents argument that the security of tenure of probationary employees within the period of their probation, as in the case of herein private respondent, justified the award of salary for the unexpired portion of her probationary employment. The termination of private respondent predicated on a just cause negates the application in this case of the pronouncement in the case of Biboso

v. Victories Milling Co., Inc., 12 on the right of security of tenure of probationary employees. Upon inquiry by the then Ministry of Labor and Employment as a consequence of the illegal dismissal case filed by private respondent before it, docketed as Case No. NLRC NCR-8-3786-83, it was found that there was no illegal dismissal involved in the case, hence, the circumvention of the rights of the probationary employees sought to be regulated as pointed out in Biboso v. Victorias Milling Co., Inc., 13 is wanting. There was no showing, as borne out by the records, that there was circumvention of the rights of private respondent when she was informed of her termination. Her dismissal does not appear to us as arbitrary, fanciful or whimsical. Private respondent was duly notified, orally and in writing, that her services as cultural orientation teacher were terminated for failure to meet the prescribed standards of petitioner as reflected in the performance evaluation conducted by her supervisors during the teacher evaluating program. The dissatisfaction of petitioner over the performance of private respondent in this regard is a legitimate exercise of its prerogative to select whom to hire or refuse employment for the success of its program or undertaking. More importantly, private respondent failed to show that there was unlawful discrimination in the dismissal. It was thus a grave abuse of discretion on the part of public respondent to order petitioner to pay private respondent her salary for the unexpired three-month portion of her six-month probationary employment when she was validly terminated during her probationary employment. To sanction such action would not only be unjust, but oppressive on the part of the employer as emphasized in Pampanga Bus Co., Inc., v. Pambusco Employer Union, Inc. 14 WHEREFORE, in view of the foregoing, the petition is GRANTED. The Resolution of the National Labor Relations Commission dated August 22, 1985, is hereby REVERSED and SET ASIDE insofar as it ordered petitioner to pay private respondent her P6,000.00 salary for the unexpired portion of her six-month probationary employment. No cost. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

FIRST DIVISION

G.R. No. 109114 September 14, 1993 HOLIDAY INN MANILA and/or HUBERT LINER and BABY DISQUITADO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (Second Division) and ELENA HONASAN, respondents. Inocentes, De Leon, Leogardo, Atienza, Manaye & Azucena Law Office for petitioners. Florante M. Yambot for private respondent.

CRUZ, J.: The employer has absolute discretion in hiring his employees in accordance with his standards of competence and probity. This is his prerogative. Once hired, however, the employees are entitled to the protection of the law even during the probation period and more so after they have become members of the regular force. The employer does not have the same freedom in the hiring of his employees as in their dismissal. Elena Honasan applied for employment with the Holiday Inn and was on April 15, 1991, accepted for "on-the-job training" as a telephone operator for a period of three weeks. 1 For her services, she received food and transportation allowance. 2 On May 13, 1992, after completing her training, she was employed on a "probationary basis" for a period of six months ending November 12, 1991. 3 Her employment contract stipulated that the Hotel could terminate her probationary employment at any time prior to the expiration of the six-month period in the event of her failure (a) to learn or progress in her job; (b) to faithfully observe and comply with the hotel rules and the instructions and orders of her superiors; or (c) to perform her duties according to hotel standards. On November 8, 1991, four days before the expiration of the stipulated deadline, Holiday Inn notified her of her dismissal, on the ground that her performance had not come up to the standards of the Hotel. 4

Through counsel, 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. 5 The complaint was dismissed on April 22, 1992 by the Labor Arbiter, 6 who held that her separation was justified under Article 281 of the Labor Code providing as follows:
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.

On appeal, this decision was reversed by the NLRC, which held that Honasan had become a regular employee and so could not be dismissed as a probationer. 7 In its own decision dated November 27, 1992, the NLRC ordered the petitioners to reinstate Honasan "to her former position without loss of seniority rights and other privileges with backwages without deduction and qualification." Reconsideration was denied in a resolution dated January 26, 1993. 8 The petitioners now fault the NLRC for having entertained Honasan's appeal although it was filed out of time and for holding that Honasan was already a regular employee at the time of her dismissal, which was made 4 days days before the expiration of the probation period. The petition has no merit. On the timeliness of the appeal, it is well-settled that all notices which a party is entitled to receive must be coursed through his counsel of record. Consequently, the running of the reglementary period is reckoned from the date of receipt of the judgment by the counsel of the appellant. 9 Notice to the appellant himself is not sufficient notice. 10 Honasan's counsel received the decision of the Labor Arbiter on May 18, 1992. 11 Before that, however, the appeal had already been filed by Honasan herself, on May 8, 1992. 12 The petitioners claim that she filed it on the thirteenth but this is irrelevant. Even if the latter date was accepted, the appeal was nevertheless still filed on time, in fact even before the start of the reglementary period. On the issue of illegal dismissal, we find that Honasan was placed by the petitioner on probation twice, first during her on-the-job training for three weeks, and next during another period of six months, ostensibly in accordance with Article 281. Her probation clearly exceeded the period of six months prescribed by this article. 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.

Honasan was certainly under observation during her three-week on-the-job training. If her services proved unsatisfactory then, she could have been dropped as early as during that period. But she was not. On the contrary, her services were continued, presumably because they were acceptable, although she was formally placed this time on probation. Even if it be supposed that the probation did not end with the three-week period of onthe-job training, there is still no reason why that period should not be included in the stipulated six-month period of probation. Honasan was accepted for on-the-job training on April 15, 1991. Assuming that her probation could be extended beyond that date, it nevertheless could continue only up to October 15, 1991, after the end of six months from the earlier date. Under this more lenient approach, she had become a regular employee of Holiday Inn and acquired full security of tenure as of October 15, 1991. The consequence is that she could no longer be summarily separated on the ground invoked by the petitioners. As a regular employee, she had acquired the protection of Article 279 of the Labor Code stating as follows:
Art. 279. Security of Tenure In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

The grounds for the removal of a regular employee are enumerated in Articles 282, 283 and 284 of the Labor Code. The procedure for such removal is prescribed in Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code. These rules were not observed in the case at bar as Honasan was simply told that her services were being terminated because they were found to be unsatisfactory. No administrative investigation of any kind was undertaken to justify this ground. She was not even accorded prior notice, let alone a chance to be heard. We find in the Hotel's system of double probation a transparent scheme to circumvent the plain mandate of the law and make it easier for it to dismiss its employees even after they shall have already passed probation. The petitioners had ample time to summarily terminate Honasan's services during her period of probation if they were deemed unsatisfactory. Not having done so, they may dismiss her now only upon proof of any of the legal grounds for the separation of regular employees, to be established according to the prescribed procedure. The policy of the Constitution is to give the utmost protection to the working class when subjected to such maneuvers as the one attempted by the petitioners. This Court is fully committed to that policy and has always been quick to rise in defense of the rights of labor, as in this case.

WHEREFORE, the petition is DISMISSED, with costs against petitioners. It is so ordered. Grio-Aquino, Davide, Jr., Bellosillo and Quiason, JJ., concur.

FIRST DIVISION

PHILIPPINE DAILY INQUIRER, INC., Petitioner,

G.R. No. 164532 Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ. Promulgated:

- versus -

July 24, 2007

LEON M. MAGTIBAY, JR. and PHILIPPINE DAILY INQUIRER EMPLOYEES UNION (PDIEU), Respondents. x----------------------------------------------------x

DECISION

GARCIA, J.:

By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Philippine Daily Inquirer, Inc. (PDI) seeks the reversal and setting aside of the decision14[1] dated May 25, 2004 of the Court of Appeals (CA) in CA G.R. SP No. 78963, affirming the resolution dated September 23, 2002 of the National Labor Relations Commission (NLRC) in NLRC Case No. 00-03-01945-96. The affirmed NLRC resolution reversed an earlier decision dated July 29, 1996 of the Labor Arbiter in NLRC Case No. 011800-96, which dismissed the complaint for illegal dismissal filed by the herein respondent Leon Magtibay, Jr. against the petitioner.

The factual antecedents are undisputed:

On February 7, 1995, PDI hired Magtibay, on contractual basis, to assist, for a period of five months from February 17, 1995, the regular phone operator. Before the expiration of Magtibays contractual employment, he and PDI agreed to a fifteen-day contract extension, or from July 17, 1995 up to July 31, 1995, under the same conditions as the existing contract.

14

Penned by Associate Justice Mariano C. del Castillo with Associate Justices Marina L. Buzon and Magdangal M. de Leon, concurring; rollo, pp. 58-69.
[1]

After the expiration of Magtibays contractual employment, as extended, PDI announced the creation and availability of a new position for a second telephone operator who would undergo probationary employment. Apparently, it was PDIs policy to accord regular employees preference for new vacancies in the company. Thus, Ms. Regina M. Layague, a PDI employee and member of respondent PDI Employees Union (PDIEU), filed her application for the new position. However, she later withdrew her application, paving the way for outsiders or non-PDI employees, like Magtibay in this case, to apply.

After the usual interview for the second telephone operator slot, PDI chose to hire Magtibay on a probationary basis for a period of six (6) months. The signing of a written contract of employment followed.

On March 13, 1996, or a week before the end the agreed 6-month probationary period, PDI officer Benita del Rosario 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 anchored his case principally on the postulate 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. He also claimed that he was not apprised at the beginning of his

employment of the performance standards of the company, hence, there was no basis for his dismissal. Finally, he described his dismissal as tainted with bad faith and effected without due process.

PDI, for its part, denied all the factual allegations of Magtibay, adding that his previous contractual employment was validly terminated upon the expiration of the period stated therein. Pressing the point, PDI 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 operators 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.

After due proceedings, the Labor Arbiter found for PDI and accordingly dismissed Magtibays complaint for illegal dismissal. The Labor Arbiter premised his holding on the validity of the previous contractual employment of Magtibay as an independent contract. He also declared as binding the stipulation in the contract specifying a fixed period of employment. According to the Labor Arbiter, upon termination of the period stated therein, the contractual employment was also effectively terminated, implying that Magtibay was merely on a probationary status when his services were terminated inasmuch as the reckoning period for probation should be from September 21, 1995 up to March 31, 1996 as expressly provided in

their probationary employment contract. In fine, it was the Labor Arbiters position that Magtibays previous contractual employment, as later extended by 15 days, cannot be considered as part of his subsequent probationary employment.

Apart from the foregoing consideration, the Labor Arbiter further ruled that Magtibays dismissal from his probationary employment was for a valid reason. Albeit the basis for termination was couched in the abstract, i.e., you did not meet the standards of the company, there were three specific reasons for Magtibays termination, to wit: (1) he repeatedly violated the company rule prohibiting unauthorized persons from entering the telephone operators room; (2) he intentionally omitted to indicate in his application form his having a dependent child; and (3) he exhibited lack of sense of responsibility by locking the door of the telephone operators room on March 10, 1996 without switching the proper lines to the company guards so that incoming calls may be answered by them.

The Labor Arbiter likewise dismissed allegations of denial of due process and the commission by PDI of unfair labor practice.

PDIEU and Magtibay appealed the decision of the Labor Arbiter to the NLRC. As stated earlier, the NLRC reversed and set aside said decision, effectively ruling that Magtibay was illegally dismissed. According to the NLRC, Magtibays probationary employment had ripened into a regular one.

With the NLRCs denial of its motion for reconsideration, PDI went to the CA on a petition for certiorari. Eventually, the CA denied due course to PDIs petition on the strength of the following observations:

We agree with the findings of respondent NLRC. 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. Particularly, as regards the first stated infraction xxx petitioner PDI, contrary to its assertion, stated in its position paper, motion for reconsideration and in this petition that respondent Magtibay failed to abide by the rules and regulations of the company issued by Ms. Benita del Rosario regarding the entry of persons in the operators booth when respondent was already working for petitioner PDI. Further, nowhere can it be found in the list of Basic Responsibility and Specific Duties and Responsibilities (Annex D of the petition) of respondent Magtibay that he has to abide by the duties, rules and regulations that he has allegedly violated. The infractions considered by petitioner PDI as grounds for the dismissal of respondent Magtibay may at most be classified as just causes for the termination of the latters employment. x x x. xxx xxx xxx

Finally, the three questionable grounds also relied upon by petitioner PDI in dismissing respondent Magtibay may be considered as just causes. However, petitioner PDI did not raise the same as an issue in the present petition because the procedure it adopted in dismissing respondent Magtibay fell short of the minimum requirements provided by law.

PDI filed a motion for reconsideration but to no avail.

Hence, this recourse by PDI on the following submissions:

I. THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FINDING THAT A PROBATIONARY EMPLOYEES FAILURE TO FOLLOW AN EMPLOYERS RULES AND REGULATIONS CANNOT BE DEEMED FAILURE BY SAID EMPLOYEE TO MEET THE STANDARDS OF HIS EMPLOYER THUS EMASCULATING PETITIONERS RIGHT TO CHOOSE ITS EMPLOYEES. II. THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN REFUSING TO FIND THAT PROCEDURAL DUE PROCESS AS LAID DOWN IN SECTION 2, RULE XXIII OF THE IMPLEMENTING RULES OF THE LABOR CODE HAD BEEN OBSERVED BY THE PETITIONER.

We GRANT the petition.

This Court, to be sure, has for a reason, consistently tended to be partial in favor of workers or employees in labor cases whenever social legislations are involved. However, in its quest to strike a balance between the employers prerogative to choose his employees and the employees right to security of tenure, the Court remains guided by the gem of a holding in an old but still applicable case of Pampanga Bus, Co. v. Pambusco Employees Union, Inc. 15[2] In it, the Court said:

The right of a laborer to sell his labor to such persons as he may choose is, in its essence, the same as the right of an employer to purchase labor from any 15[2] 68 Phil. 541 (1939).

person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the Constitution. If the employer can compel the employee to work against the latters will, this is servitude. If the employee can compel the employer to give him work against the employers will, this is oppression.

Management and labor, or the employer and the employee are more often not situated on the same level playing field, so to speak. Recognizing this reality, the State has seen fit to adopt measures envisaged to give those who have less in life more in law. Article 279 of the Labor Code which gives employees the security of tenure is one playing field leveling measure:

Art. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. x x x.

But hand in hand with the restraining effect of Section 279, the same 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 employers prerogative is spelled out in the following provision:

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.

In International Catholic Migration Commission v. NLRC,16[3] we have elucidated what probationary employment entails:

x x x. A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. The word probationary, as used to describe the period of employment, implies the purpose of the term or period but not its length. Being in the nature of a trial period the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment. It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. x x x.

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.17[4]
16[3] 17[4] G.R. No. 72222, January 30, 1989, 169 SCRA 606. Agoy v. NLRC, G.R. No. 112096, January 30, 1996, 252 SCRA 588.

PDI invokes the second ground under the premises. In claiming 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, Ms. Rachel Isip-Cuzio. PDI also pointed to Magtibays direct superior, Benita del Rosario, who diligently briefed him about his responsibilities in PDI. These factual assertions were never denied nor controverted by Magtibay. Neither did he belie the existence of a specific rule prohibiting unauthorized persons from entering the telephone operators booth and that he violated that prohibition. This notwithstanding, the NLRC and the CA proceeded nonetheless to rule that the records of the case are bereft of any evidence showing that these rules and regulations form part of the so-called company standards.

We do not agree with the appellate court when it cleared the NLRC of commission of grave abuse of discretion despite the latters disregard of clear and convincing evidence that there were reasonable standards made known by PDI to Magtibay during his probationary employment. 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 CAs 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 CAs 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 Magtibays probationary employment effective upon the end of the 6month 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 six-month 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. It is in apprising him of the standards against which his performance shall be continuously assessed where due process regarding the second ground lies, and not in notice and hearing as in the case of the first ground.

Even if perhaps he wanted to, Magtibay cannot deny as he has not denied PDIs assertion that he was duly apprised of the employment standards expected of him at the time of his probationary employment when he underwent a one-onone orientation with PDIs personnel assistant, Ms. Rachel Isip-Cuzio. Neither has he denied nor rebutted PDIs further claim that his direct superior, Benita del Rosario, briefed him regarding his responsibilities in PDI.

Lest it be overlooked, Magtibay had previously worked for PDI as telephone operator from February 7, 1995 to July 31, 1995 as a contractual employee. Thus, the Court entertains no doubt that when PDI took him in on September 21, 1995, Magtibay 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. This was established during the proceedings before the labor arbiter and borne out by the records and the pleadings before the Court. When the NLRC disregarded the substantial evidence establishing the legal termination of Magtibays probationary employment and rendered judgment grossly and directly contradicting such clear evidence, the NLRC commits grave abuse of discretion amounting to lack or excess of jurisdiction. It was, therefore, reversible error on the part of the appellate court not to annul and set aside such void judgment of the NLRC.

WHEREFORE, the assailed decision dated May 25, 2004 of the CA in CA G.R. SP No. 78963 is hereby REVERSED and SET ASIDE, and the earlier resolution dated September 23, 2002 of the NLRC in NLRC Case No. 00-0301945-96 is declared NULL and VOID. The earlier decision dated July 29, 1996 of the Labor Arbiter in NLRC Case No. 011800-96, dismissing respondent Leon Magtibay, Jr.s complaint for alleged illegal dismissal, is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION

LOLITA R. LACUESTA, Petitioner,

G.R. No. 152777

Present:

Davide, Jr., C.J., (Chairman), - versus Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ.

ATENEO

DE

MANILA

Promulgated:

UNIVERSITY, DR. LEOVINO MA. GARCIA and DR. MARIJO RUIZ, Respondents. December 9, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.: This petition for review on certiorari assails the Decision[1] dated October 12, 2001 of the Court of Appeals in CA-G.R. SP No. 61173 and its Resolution[2] dated February 21, 2002, denying the motion for reconsideration. The appellate court affirmed the Decision[3] dated February 24, 2000 of the National Labor Relations Commission (NLRC), which had reversed the Decision dated March 20, 1998 of the Labor Arbiter. The facts are undisputed. Respondent Ateneo de Manila University (Ateneo) hired, on a contractual basis, petitioner Lolita R. Lacuesta as a part-time lecturer in its English Department for the second semester of school year 1988-1989. She was re-hired, still on a contractual basis, for the first and second semesters of school year 1989-1990.

On July 13, 1990, the petitioner was first appointed as full-time instructor on probation, in the same department effective June 1, 1990 until March 31, 1991. Thereafter, her contract as faculty on probation was renewed effective April 1, 1991

until March 31, 1992. She was again hired for a third year effective April 1, 1992 until March 31, 1993. During these three years she was on probation status.

In a letter dated January 27, 1993, respondent Dr. Leovino Ma. Garcia, Dean of Ateneos Graduate School and College of Arts and Sciences, notified petitioner that her contract would no longer be renewed because she did not integrate well with the English Department. Petitioner then appealed to the President of the Ateneo at the time, Fr. Joaquin Bernas, S.J.

In a letter dated February 11, 1993, Fr. Bernas explained to petitioner that she was not being terminated, but her contract would simply expire. He also stated that the university president makes a permanent appointment only upon recommendation of the Dean and confirmation of the Committee on Faculty Rank and Permanent Appointment. He added that any appointment he might extend would be tantamount to a midnight appointment. In another letter dated March 11, 1993, Fr. Bernas offered petitioner the job as book editor in the University Press under terms comparable to that of a faculty member. On March 26, 1993, petitioner applied for clearance to collect her final salary as instructor. Petitioner also signed a Quitclaim, Discharge and Release on April 16, 1993.[4]

Petitioner worked as editor in the University Press from April 1, 1993 to March 31, 1994 including an extension of two months after her contract expired. Upon expiry of her contract, petitioner applied for clearance to collect her final salary as

editor. Later, she agreed to extend her contract from June 16, 1994 to October 31, 1994. Petitioner decided not to have her contract renewed due to a severe back problem. She did not report back to work, but she submitted her clearance on February 20, 1995. On December 23, 1996, petitioner filed a complaint for illegal dismissal with prayer for reinstatement, back wages, and moral and exemplary damages. Dr. Leovino Ma. Garcia and Dr. Marijo Ruiz were sued in their official capacities as the previous and present deans of the College of Arts and Sciences, respectively. Labor Arbiter Manuel P. Asuncion held that petitioner may not be terminated by mere lapse of the probationary period but only for just cause or failure to meet the employers standards. Moreover, said the Labor Arbiter, the quitclaim,

discharge and release executed by petitioner was not a bar to filing a complaint for illegal dismissal.[5] Thus, he ordered reinstatement with payment of full back wages. The NLRC upon appeal of respondents reversed the Labor Arbiters decision and ruled that petitioner was not illegally dismissed, and that her quitclaim was valid. Petitioner sought reconsideration but it was denied. She then filed a petition for certiorari before the Court of Appeals assailing the NLRC decision. The appellate court dismissed the petition saying there was no grave abuse of discretion and affirmed the NLRC decision. It ruled: WHEREFORE, the petition is hereby denied and accordingly DISMISSED.[6] Hence, this instant petition where petitioner assigns the following as errors:

1. The Court of Appeals erred in ruling that it is the Manual of Regulations For Private Schools, not the Labor Code, that determines the acquisition of regular or permanent status of faculty members in an educational institution; 2. The Court of Appeals erred in upholding the Quitclaim that was signed by the Petitioner and in taking that against her claims for illegal dismissal and for moral and exemplary damages against the respondents.[7] Simply put, the issue in this case is whether the petitioner was illegally dismissed.

Petitioner contends that Articles 280 and 281 of the Labor Code, [8] not the Manual of Regulations for Private Schools, is the applicable law to determine whether or not an employee in an educational institution has acquired regular or permanent status. She argues that (1) under Article 281, probationary employment shall not exceed six (6) months from date of employment unless a longer period had been stipulated by an apprenticeship agreement; (2) under Article 280, if the apprenticeship agreement stipulates a period longer than one year and the employee rendered at least one year of service, whether continuous or broken, the employee shall be considered as regular employee with respect to the activity in which he is employed while such activity exists; and (3) it is with more reason that petitioner be made regular since she had rendered services as part-time and fulltime English teacher for four and a half years, services which are necessary and desirable to the usual business of Ateneo. [9]

Furthermore, the petitioner contends that her clearance was granted and completed only after she signed the quitclaim on April 16, 1993. She contends also that the respondents failed to show that her quitclaim was voluntary. Respondents, for their part, contend that the Manual of Regulations for Private Schools is controlling. In the Manual, full-time teachers who have rendered three consecutive years of satisfactory service shall be considered permanent. Respondents also claim that the petitioner was not terminated but her employment contract expired at the end of the probationary period. Further, institutions of higher learning, such as respondent Ateneo, enjoy the freedom to choose who may teach according to its standards. Respondents also argue that the quitclaim,

discharge and release by petitioner is binding and should bar her complaint for illegal dismissal. After considering the contentions of the parties in the light of the circumstances in this case, we find for respondents. The Manual of Regulations for Private Schools, and not the Labor Code, determines whether or not a faculty member in an educational institution has attained regular or permanent status. [10] In University of Santo Tomas v.

National Labor Relations Commission the Court en banc said that under Policy Instructions No. 11 issued by the Department of Labor and Employment, the probationary employment of professors, instructors and teachers shall be subject to the standards established by the Department of Education and Culture. Said

standards are embodied in paragraph 75[11] (now Section 93) of the Manual of Regulations for Private Schools.[12]

Section 93[13] of the 1992 Manual of Regulations for Private Schools provides that full-time teachers who have satisfactorily completed their

probationary period shall be considered regular or permanent. [14] Moreover, for those teaching in the tertiary level, the probationary period shall not be more than six consecutive regular semesters of satisfactory service. [15] The requisites to acquire permanent employment, or security of tenure, are (1) the teacher is a fulltime teacher; (2) the teacher must have rendered three consecutive years of service; and (3) such service must have been satisfactory. [16]

As previously held, a part-time teacher cannot acquire permanent status.

[17]

Only when one has served as a full-time teacher can he acquire permanent

or regular status. The petitioner was a part-time lecturer before she was appointed as a full-time instructor on probation. As a part-time lecturer, her employment as such had ended when her contract expired. Thus, the three semesters she served as part-time lecturer could not be credited to her in computing the number of years she has served to qualify her for permanent status. Petitioner posits that after completing the three-year probation with an above-average performance, she already acquired permanent status. On this point, we are unable to agree with petitioner. Completing the probation period does not automatically qualify her to become a permanent employee of the university. Petitioner could only qualify to become a permanent employee upon fulfilling the reasonable standards for permanent employment as faculty member.[18] Consistent with academic

freedom and constitutional autonomy, an institution of higher learning has the prerogative to provide standards for its teachers and determine whether these standards have been met.[19] At the end of the probation period, the decision to re-hire an employee on probation, belongs to the university as the employer alone. We reiterate, however, that probationary employees enjoy security of tenure, but only within the period of probation. Likewise, an employee on probation can only be dismissed for just cause or when he fails to qualify as a regular employee in accordance with the reasonable standards made known by the employer at the time of his hiring. Upon expiration of their contract of employment, academic personnel on probation cannot automatically claim security of tenure and compel their employers to renew their employment contracts. [20] In the instant case,

petitioner, did not attain permanent status and was not illegally dismissed. As found by the NLRC, her contract merely expired. Lastly, we find that petitioner had already signed a valid quitclaim, discharge and release which bars the present action. This Court has held that not all

quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. [21] In this case, there is no showing that petitioner was coerced into signing the quitclaim. In her sworn quitclaim, she freely declared that she received to her full satisfaction all that is due her by reason of her employment and that she was voluntarily releasing respondent Ateneo from all claims in relation to her employment. [22] Nothing on the face of her quitclaim has been shown as unconscionable.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated October 12, 2001 of the Court of Appeals in CA-G.R. SP No. 61173 and its Resolution dated February 21, 2002 are AFFIRMED. SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

WOODRIDGE SCHOOL (now known as WOODRIDGE COLLEGE, INC.), Petitioner,

G.R. No. 160240

Present:

YNARES-SANTIAGO, J., - versus Chairperson, CARPIO,* AZCUNA,** CHICO-NAZARIO, and NACHURA, JJ. JOANNE C. PE BENITO and RANDY T. BALAGUER, Respondents. October 29, 2008

Promulgated:

x------------------------------------------------------------------------------------x

* Additional member in lieu of Associate Justice Ma. Alicia Austria-Martinez per Special Order No. 531 dated October 20, 2008. ** Additional member in lieu of Associate Justice Ruben T. Reyes per Special Order No. 521 dated September 29, 2008.

DECISION

NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Court of Appeals (CA) Decision18[1] dated June 30, 2003 and its Resolution19[2] dated September 26, 2003 in CA-G.R. SP No. 75249. The assailed decision in turn set aside the Resolution 20[3] of the National Labor Relations Commission (NLRC) dated June 28, 2002 in NLRC Case No. RAB-IV-3-13593-01-C (CA No. 030579-02).

The factual and procedural antecedents follow:

18[1] Penned by Associate Justice Martin S. Villarama, Jr., with Associate Justices Elvi John S. Asuncion and Mario L. Guaria III, concurring; rollo, pp. 47-61. 19[2] 20[3] Rollo, pp. 63-65. Id. at 256-270.

Petitioner

Woodridge

School

is

private

educational

institution located at Woodwinds Village, Molino 6, Bacoor, Cavite. Respondents Joanne C. Pe Benito (Pe Benito) and Randy T. Balaguer (Balaguer) were hired as probationary high school teachers effective June 1998 and June 1999, respectively. 21[4] Their contracts of employment covered a three (3) year probationary period. Pe Benito handled Chemistry and Physics while Balaguer taught Values Education and Christian Living. 22[5]

On February 19, 2001, respondents, together with twenty other teachers, presented petitioner with a Manifesto Establishing Relevant Issues Concerning the School 23[6] raising various issues which they wanted addressed, among which were:

I.

NSAT/NEAT ANOMALY:

We emphatically condemn the schools grave act of wrongdoing when it involved itself on the NSAT and NEAT anomaly. We demand that we be given assurance in writing that this illegal and immoral conduct will never happen again, otherwise, we will be obligated as moral guardians of the youth to make more proper action.

II.

TEACHERS RIGHT FOR A DUE PROCESS:

21[4] 22[5] 23[6]

Evidenced by their respective Contracts of Employment, id. at 92-93. Rollo, p. 48. Id. at 132-134.

We felt betrayed when one of our former colleague[s] who was then regularly employed and was perceived to be harmless and an asset to the school, for no solid basis or apparent investigation conducted by the school, was suddenly expelled from his job.

xxxx

III.

ISSUANCE OF INDIVIDUAL CONTRACTS:

We wonder until now even after a number of years have already passed, our copies of individual contracts with the school have not yet been furnished to us. We demand that this legal document will be (sic) issued to us for job security and other legal purposes it may serve.

We also demand that AN APPOINTMENT OF PERMANENCY shall be (sic) given to a permanent teacher from the time the teacher is qualified to be permanent based on the duly set terms/standards of permanency of the school.

IV.

NON-CLEAR-CUT SCHOOL POLICIES:

It has been observed and experienced from the past school years and until the present that there are a lot of inconsistencies regarding the schools policies like:

A.

Changing of:

The narrative forms of students Grades, and Behavioral rating sheets

With these experiences, the teachers felt cheated and that these affect (sic) their sense of worth and credibility. We then ask that the school should as always respect what the teachers deemed to be right and just fitting for the students. After all, the teachers are the ones meeting and facing the students and they know what is due to the students better that (sic) anyone else in the school.

B.

Others.24[7]

A confrontation between the school administrators and the concerned teachers was held, but no settlement was arrived at.

For failure of the parties to resolve the issues, especially the alleged NSAT/NEAT anomaly, respondents filed a formal complaint against petitioner with the Department of Education, Culture and Sports (DECS)25[8] requesting the latter to undertake a formal investigation, institute appropriate charges, and impose proper sanctions against petitioner. 26[9] During the pendency of the DECS case, and for lack of a positive action from petitioner, respondents appeared on television and spoke over the radio on the alleged NEAT/NSAT anomaly.

On

February

28,

2001,

petitioner

sent

two

separate

Memoranda27[10] to respondents placing them under preventive

24[7] 25[8] 26[9] Id. at 132-133. Now Department of Education. Rollo, pp. 135-136.

27[10] Id. at 100-103.

suspension for a period of thirty days on the following grounds: 1) uttering defamatory remarks against the school principal in the presence of their co-teachers; 2) announcing to the students and teachers their alleged immediate termination from service; 3) tardiness; 4) spreading false accusations against petitioner; 5) absence without official leave; and 6) appearing on television and speaking over the radio to malign petitioner. In the same memoranda, respondents were required to explain in writing within seventy-two (72) hours why they should not be terminated from their employment. This prompted respondents to commence an action for illegal suspension before the NLRC. The case was docketed as NLRC NCR CASE NO. RAB-IV-3-13593-01-C.

On March 19, 2001, petitioner issued respondents their Notice of Termination,28[11] each to take effect similarly on March 31, 2001, citing the foregoing grounds. In addition, petitioner informed respondents that they did not qualify as regular employees for their failure to meet the performance standards made known to them at the start of their probationary period.

Respondents then amended their initial complaint, to include illegal dismissal.

28[11] Id. at 105-108.

After the submission of the parties position papers, on November 29, 2001, Labor Arbiter Vicente R. Layawen rendered a Decision dismissing the complaint.29[12] He concluded that the termination of the respondents probationary employment was justified because of their failure to submit vital teaching documents. Specifically, Pe Benito failed to submit her day book/lesson plans; while Balaguer failed to submit the subject syllabi and he had no record of class requirements as to quizzes, seatworks, homeworks, and recitation which were supposed to be the bases in rating the students performance. 30[13] More importantly, the Labor Arbiter found respondents guilty of serious misconduct warranting their dismissal from service because of maliciously spreading false accusation against the school through the mass media. These acts, according to the Labor Arbiter, made them unfit to remain in the schools roster of teachers. 31 [14] The Labor Arbiter also validated the preventive suspension of respondents for their having used the classroom as venue in spreading uncorroborated charges against petitioner, thus posing a serious threat to petitioners business and reputation as a respectable institution.32[15]
29[12] CA rollo, pp. 35-43. 30[13] Id. at 41. 31[14] Id. at 41-43. 32[15] Id. at 43.

On appeal to the NLRC, the Commission affirmed 33[16] the Labor Arbiters disposition in its entirety. The Commission concluded that respondents acts, taken together, constitute serious misconduct, warranting their dismissal from service.

Aggrieved, respondents elevated the matter to the CA in CAG.R. SP No. 75249. The CA granted the petition and set aside the NLRC ruling in a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE and the writ prayed for accordingly GRANTED. Consequently, the assailed Resolutions of public respondent NLRC are hereby SET ASIDE and a new one is hereby entered declaring the thirty (30)-day suspension of petitioners on February 28, 2001 as illegal and ordering private respondent Woodridge School to pay to both petitioners Joanne C. Pe Benito and Randy T. Balaguer their salaries and benefits accruing during said period of illegal suspension. Woodridge School is also ordered to pay to petitioner Balaguer back wages for the period April 1, 2001 up to March 31, 2002. Finally, it is further ordered to pay each of the petitioners the sums of P50,000.00 as moral damages, P50,000.00 as exemplary damages and attorneys fees equivalent to ten percent (10%) of the total amount due.

No pronouncement as to costs.

33[16] Penned by Commissioner Tito F. Genilo, with Presiding Commissioner Lourdes C. Javier and Commissioner Ireneo B. Bernardo, concurring; id. at 45-58.

SO ORDERED.34[17]

The appellate court declared the preventive suspension of respondents invalid because it was based on the alleged violation of school regulations on the wearing of uniform, tardiness or absence, and maliciously spreading false accusations against the school, grounds that do not pose a serious threat to the life or property of the employer or of the workers. 35[18] Contrary to the Labor Arbiter and the Commissions findings, the CA concluded that respondents acts do not constitute serious misconduct. Respondents act of exposing the alleged NSAT/NEAT anomaly, as well as raising the other issues haunting the school administration, only indicates their concern for the integrity of the government examination and of the school. The use of the mass media was simply the respondents response to the petitioners inaction on their grievances.36[19] No bad faith could be attributed to respondents in acting the way they did.

The appellate court likewise refused to sustain petitioners contention that respondents failed to qualify for permanent employment, as there was no sufficient evidence to prove the
34[17] Rollo, pp. 60-61. 35[18] Id. at 53-54. 36[19] Id. at 55-59.

same.37[20] respondents

The are

appellate

court

emphasized

that

because protection

probationary

employees,

legal

extends only to the period of their probation. 38[21] The dismissal breached their probationary employment, and being tainted with bad faith, the court upheld the award of moral and exemplary damages.39[22]

Aggrieved, petitioner comes before this Court in this petition for review on certiorari, raising the sole issue of:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN GRANTING RESPONDENTS PETITION FOR CERTIORARI AND IN SETTING ASIDE THE FINDINGS OF BOTH THE NLRC AND THE LABOR ARBITER A QUO.40[23]

We deny the petition.

Petitioner asserts that the CA should have outrightly dismissed the petition, because the verification and certificate of
37[20] Id. at 59. 38[21] Id. at 60. 39[22] Id. 40[23] Id. at 407.

non-forum shopping was signed by only one of the respondents, without the authority of the other.41[24]

Time and again, we have said that the lack of verification is merely a formal defect that is neither jurisdictional nor fatal. In a proper case, the court may order the correction of the pleading, or act on the unverified pleading, if the attending circumstances are such that the rule may be dispensed with in order to serve the ends of justice. It should be stressed that rules of procedure were conceived and promulgated to effectively aid the court in the dispensation of justice.42[25] Verification is mainly intended to secure the assurance that the allegations in the petition are done in good faith or are true and correct and not mere speculation. 43 [26]

In the instant case, this requirement was substantially complied with when one of the petitioners (respondents herein), who undoubtedly had sufficient knowledge and belief to swear to
41[24] Id. at 425-428.

42[25] Ballao v. Court of Appeals, G.R. No. 162342, October 11, 2006, 504 SCRA 227, 233. 43[26] Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN) Organized Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals, G.R. Nos. 149158-59, July 24, 2007, 528 SCRA 45, 60; Ateneo de Naga University v. Manalo, G.R. No. 160455, May 9, 2005, 458 SCRA 325, 334.

the truth of the allegations in the petition, signed the verification attached to it. Indeed, the Court has ruled in the past that a pleading required by the Rules of Court to be verified may be given due course even without a verification, if the circumstances warrant the suspension of the rules in the interest of justice, as in the present case.
44

[27]

As to the certification against forum shopping, the CA correctly relaxed the Rules in order to serve the ends of justice. While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient, this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with absolute literalness as to subvert its own ultimate and legitimate objective. Strict compliance with the provisions regarding the certificate of nonforum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. interdict substantial compliance with justifiable circumstances.45[28] It does not, however, its provisions under

44[27] Linton Commercial Co., Inc. v. Hellera, G.R. No. 163147, October 10, 2007, 535 SCRA 434,446. 45[28] San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 411.

In fact, we have relaxed the rules in a number of cases for two compelling reasons: social justice considerations 46[29] and the apparent merit47[30] of the petition. In light of these jurisprudential pronouncements, the CA should not be faulted in setting aside the procedural infirmity, allowing the petition to proceed and deciding the case on the merits. justice, courts have always been, as they In rendering ought to be,

conscientiously guided by the norm that on the balance, technicalities take a backseat vis--vis substantive rights, and not the other way around.48[31]

Now on the substantive issue of the validity of the dismissal and preventive suspension of respondents.

46[29] Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN) Organized Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals, supra note 26; Estribillo v. Department of Agrarian Reform , G.R. No. 159674, June 30, 2006, 494 SCRA 218; Damasco v. National Labor Relations Commission , G.R. Nos. 115755 & 116101, December 4, 2000, 346 SCRA 714. 47[30] Estribillo v. Department of Agrarian Reform, supra; San Miguel Corporation v. Aballa, supra note 28; De Guia v. De Guia, G.R. No. 135384, April 4, 2001, 356 SCRA 287. 48[31] Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN) Organized Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals, supra note 26, at 60; Ballao v. Court of Appeals, supra note 25, at 233.

Petitioner insists that respondents dismissal from service was lawful and justified by the following grounds: 1) as probationary employees, respondents failed to meet the reasonable standards for their permanent employment; and 2) in publicly accusing petitioner on radio and national television, of dishonesty and wrongdoing, of during the the pendency of the acts, administrative investigation alleged dishonest

undertaken by the proper government agency. 49[32]

Initially, it should be clarified that this controversy revolves only on respondents probationary employment. On March 31, 2001, the effective date of their dismissal, 50[33] respondents were not regular or permanent employees; they had not yet completed three (3) years of satisfactory service as academic personnel which would have entitled them to tenure as permanent employees in accordance with the Manual of Regulations for Private Schools.51[34] On that date, Pe Benitos contract of employment still had two months to run, while Balaguers
49[32] Rollo, pp. 412-423. 50[33] Per Notices of Termination issued by the petitioner; see rollo, pp. 105-108. 51[34] Section 92, Manual of Regulations for Private Schools, (1995 ed.) provides: Section 92. Probationary Period. Subject in all instances to compliance with Department and school requirements, the probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are offered on the trimester basis.

probationary employment was to expire after one year and two months.

A probationary employee is one who, for a given period of time, is being observed and evaluated to determine whether or not he is qualified for permanent employment. A probationary The word appointment affords the employer an opportunity to observe the skill, competence and attitude of a probationer. probationary, as used to describe the period of employment, implies the purpose of the term or period. While the employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer at the same time, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment.52[35]

Probationary employees enjoy security of tenure in the sense that during their probationary employment, they cannot be dismissed except for cause or when he fails to qualify as a regular employee.53[36] However, upon expiration of their contract of employment, probationary employees cannot claim security of tenure and compel their employers to renew their employment
52[35] Escorpizo v. University of Baguio, 366 Phil. 166, 175-176 (1999). 53[36] Lacuesta v. Ateneo de Manila University, G.R. No. 152777, December 9, 2005, 477 SCRA 217, 225; Escorpizo v. University of Baguio, id. at 33.

contracts.

In fact, the services of an employee hired on

probationary basis may be terminated 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. There is nothing that would hinder the employer from extending a regular or permanent appointment to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of the probationary period. Conversely, if the purpose sought by the employer is neither attained nor attainable within the said period, the law does not preclude the employer from terminating the probationary employment on justifiable ground. 54[37]

The notices of termination sent by petitioner to respondents stated that the latter failed to qualify as regular employees. 55[38] However, nowhere in the notices did petitioner explain the details of said failure to qualify and the standards not met by respondents. We can only speculate that this conclusion was based on the alleged acts of respondents in uttering defamatory remarks against the school and the school principal; 56[39] failure to report for work for two or three times; 57[40] going to class
54[37] Escorpizo v. University of Baguio, supra, at 33. 55[38] Rollo, pp. 105-108. 56[39] Id. at 100. 57[40] Id. at 100-101.

without wearing proper uniform; 58[41] delay in the submission of class records; and non-submission of class syllabi. Yet, other than bare allegations, petitioner failed to substantiate the same by documentary evidence. Considering that respondents were on probation for three years, and they were subjected to yearly evaluation by the students and by the school administrators (principal and vice-principal), it is safe to assume that the results thereof were definitely documented. have presented of the evaluation As such, petitioner should and other related reports The

documents to support its claim, instead of relying solely on the affidavits their witnesses. unavoidable inference, therefore, remains that the respondents dismissal is invalid.

If respondents could not be dismissed on the abovementioned ground, could their services have been validly terminated on the ground of serious misconduct?

The Labor Code commands that before an employer may legally dismiss an employee from the service, the requirement of substantial and procedural due process must be complied with. 59
58[41] Id. at 100.

59[42] National Labor Relations Commission v. Salgarino, G.R. No. 164376, July 31, 2006, 497 SCRA 361, 374.

[42]

Under the requirement of substantial due process, the

grounds for termination of employment must be based on just60[43] or authorized causes.61[44]

Misconduct is defined as improper or wrong conduct. It is the transgression of some established and definite rule of action,
60[43] The following are the just causes of termination of employment, as provided for in Article 282 of the Labor Code, thus: Art. 282. TERMINATION BY EMPLOYER An employer may terminate an employment for any of the following causes: a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; b) Gross and habitual neglect by the employee of his duties; c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and e) Other causes analogous to the foregoing. 61[44] The following are the authorized causes of termination as provided for in Articles 283 and 284 of the Labor Code, viz.: ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of the Title, x x x. ART. 284. DISEASE AS GROUND FOR TERMINATION An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: x x x.

a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. The misconduct to be serious within the meaning of the Act, must be of such a grave and aggravated character and not merely trivial or unimportant.62[45] Such misconduct, however serious, must nevertheless be in connection with the work of the employee to constitute just cause for his separation. 63[46] It is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and required that the act or conduct must have been performed with wrongful intent.64[47]

Petitioner anchored its imputation of serious misconduct principally on the respondents expose of the NSAT/NEAT anomaly. Petitioner argues that by appearing on television and speaking over the radio, respondents were undeserving to become part of the school community, and the school, therefore, could not be compelled to retain in its employ such undisciplined teachers.

62[45] National Labor Relations Commission v. Salgarino, supra note 42, at 375; Colegio de San Juan de Letran Calamba v. Villas, 447 Phil. 692, 699 (2003). 63[46] National Labor Relations Commission v. Salgarino, supra note 42, at 375-376. 64[47] Id. at 376.

In this regard, we find it necessary to go back to where the controversy started, when the concerned teachers, including respondents, presented to petitioner a manifesto , setting forth the issues they wanted the school to address. As correctly observed by the CA, the tenor of the manifesto indicated good faith, as the teachers, in fact, expressly stated that their ultimate objective was not to put the school down, but to work for some changes which would be beneficial to the students, teachers, the school and the country as a whole. 65[48] In their effort to settle the issues amicably, the teachers (including respondents) asked for a dialogue with petitioner but the latter, instead of engaging in creative resolution of the matter, uttered unnecessary statement against respondents. This incident was followed by subsequent acts of petitioner showing abuse of its power over the teachers, especially respondents, who at that time, were under probation. Notwithstanding its claim that respondents were remiss in their duties as teachers during the whole period of probation, it was only after the NSAT/NEAT expos when petitioner informed respondents of their alleged substandard performance. chronology of events, therefore, supports the view The that

respondents suspension and eventual dismissal from service were tainted with bad faith, as obvious retaliatory acts on the part of petitioner.

65[48] Rollo, p. 56.

The

totality

of

the

acts

of

respondents

cannot

be

characterized as misconduct under the law, serious enough to warrant the severe penalty of dismissal. This is especially true because there is no finding of malice or wrongful intent attributable to respondents. ratiocination in this wise: We quote with approval the CAs

Petitioners [respondents herein], along with their colleagues, initiated the dialogue and brought the above issues to the school authorities but the School Principals reaction was far from what the teachers expected. Instead of taking serious concern and properly addressing the teachers grievances as expressed in the Manifesto, Mrs. Palabrica got angry and hysterical accusing the petitioners [respondents] of malice and bad faith and even threatened to dismiss them. Petitioners [respondents] subsequent media expos and filing of a formal complaint was necessitated by private respondents [petitioners] inaction and refusal to heed their legitimate complaint. Being but a legitimate exercise of their rights as such teachers/educators and as citizens, under the circumstances, We cannot readily impute malice and bad faith on the part of the petitioners [respondents] who, in fact, risked such the harsh consequence of loss of their job and non-renewal of their probationary employment contract just so the issue of the NEAT/NSAT anomaly involving their school would be ventilated in the proper forum as to compel or somehow pressure not only their school but more important, the governments education officials at the DECS to undertake proper and urgent measures. Hardly would such acts in relation to a matter impressed with public interest i.e. the integrity of the NEAT/NSAT process as a tool designed by the DECS to measure or gauge the achievement level of pupils and students in the schools nationwide be considered as showing moral depravity or ill will on the part of the petitioners. x x x66[49]

66[49] Id. at 58-59.

In light of this disquisition, it is settled that petitioner failed to comply with the requirement of substantial due process in terminating the employment of respondents.

We now determine whether petitioner had complied with the procedural aspect of lawful dismissal.

In the termination of employment, the employer must (a) give the employee a written notice specifying the ground or grounds of termination, giving to said employee reasonable opportunity within which to explain his side; (b) conduct a hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) give the employee a written notice of termination indicating that upon due consideration of all circumstances, grounds have been established to justify his termination. 67[50]

Suffice it to state that respondents were afforded their rights to answer to petitioners allegation and were given the opportunity to present evidence in support of their defense.
67[50] National Labor Relations Commission v. Salgarino, supra note 42, at 381-382, citing Agabon v. National Labor Relations Commission, 442 SCRA 573, 608 (2004).

Nowhere in any of their pleadings did they question the procedure for their termination except to challenge the ground relied upon by petitioner. Ostensibly, therefore, petitioner had complied with the procedural aspect of due process in terminating the employment of respondents. However, we still hold that the dismissal is illegal, because of petitioners failure to satisfy the substantive aspect thereof, as discussed above.

We are not unmindful of the equally important right of petitioner, as employer, under our Constitution, to be protected in their property and interest. Nevertheless, the particular circumstances surrounding this case convince us that the supreme penalty of dismissal upon respondents is not justified. The law regards the workers with compassion. This is not only because of the laws concern for the workingman. addition, his family to consider. earner.68[51] There is, in Unemployment brings untold

hardships and sorrows on those dependent upon the wage-

Respondents validity.

likewise

questioned

their

preventive

suspension, but the Labor Arbiter and the NLRC sustained its The CA, on the other hand, declared the same to be illegal. Thus, petitioner insists that respondents preventive
68[51] National Labor Relations Commission v. Salgarino, supra note 42.

suspension was proper, in view of the latters acts of utilizing their time, not to teach, but to spread rumors that the former was about to cease operation.69[52]

The law is clear on this matter.

While the employer may

place the worker concerned under preventive suspension, it can do so only if the latters continued employment poses a serious and imminent threat to the life or property of the employer or of his co-workers.70[53] In this case, the grounds relied upon by petitioner in placing respondents under preventive suspension were the alleged violation of school rules and regulations on the wearing of uniform, tardiness or absence, and maliciously spreading false accusations against the school. 71[54] These grounds do not, in any way, pose a threat to the life or property of the school, of the teachers or of the students and their parents. Hence, we affirm the CAs conclusion that respondents preventive suspension was illegal.

69[52] Rollo, pp. 423-425. 70[53] Omnibus Rules Implementing the Labor Code, Book V, Rule XXIII, Sec. 8; Gatbonton v. National Labor Relations Commission, G.R. No. 146779, January 23, 2006, 479 SCRA 416, 422; Valiao v. Court of Appeals, 479 Phil. 459, 472 (2004).

71[54] Rollo, pp. 53-54.

As probationary employees, respondents security of tenure is limited to the period of their probation for Pe Benito, until June 200172[55] and for Balaguer, June 2002. 73[56] reinstatement and full backwages. As they were no longer extended new appointments, they are not entitled to Rather, Pe Benito is only entitled to her salary for her 30-day preventive suspension. 74[57] As to Balaguer, in addition to his 30-day salary during his illegal preventive suspension, he is entitled to his backwages for the unexpired term of his contract of probationary employment.

Lastly, petitioner faults the appellate court for awarding moral and exemplary damages in favor of respondents despite lack of sufficient basis to support the award. 75[58]

A dismissed employee is entitled to moral damages when the dismissal is attended by bad faith or fraud; or constitutes an
72[55] The contract of employment specifically stated that the probationary period was three (3) years and the contract was to take effect for three (3) years. Since the contract took effect in June 1998, it expired in June 2001; id. at 92. 73[56] The contract of employment specifically stated that the probationary period was three (3) years and the contract was to take effect for three (3) years. Since the contract took effect in June 1999, it expired in June 2002; id. at 93. 74[57] Although Pe Benitos contract expired in June 2001 and she was dismissed from the service effective March 31, 2001, she is not entitled to her salary for the months of April and May because it was specifically stated in her contract of employment that she was only entitled to her 10-month salary which is the period when she actually rendered her service; id. at 92. 75[58] Rollo, pp. 428-429.

act oppressive to labor; or is done in a manner contrary to good morals, good customs or public policy. Exemplary damages, on the other hand, may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner. 76[59] The award of said damages cannot be justified solely upon the premise that the employer fired his employee without just cause or due process. It is necessary that additional facts be pleaded and proven that the act of dismissal was attended by bad faith, fraud, et al., and that social humiliation, wounded feelings and grave anxiety resulted therefrom.77[60]

Be that as it may, we find the award of moral and exemplary damages proper, as we quote with approval the CAs justification for the award, thus:

At any rate, there is no question that both petitioners [respondents herein] are entitled to the award of moral and exemplary damages, in view of the proven acts done in bad faith on the part of private respondents [petitioner herein] who threatened petitioners [respondents] immediate dismissal when the Manifesto was presented by petitioners [respondents], berating and verbally castigating petitioner [respondent] Pe Benito, portraying them as mere detractors in an open letter to the parents who were merely motivated by the design to malign the integrity of the school. x x x We find such bad faith on the part of private respondents [petitioner] in effectively exerting pressure to silence the petitioners [respondents] regarding

76[59] Quadra v. Court of Appeals, G.R. No. 147593, July 31, 2006, 497 SCRA 221, 227. 77[60] Gatbonton v. National Labor Relations Commission , supra note 53, at 426, citing Cocoland Development Corporation v. NLRC, 328 Phil. 351, 365-366 (1996).

their legitimate grievances against the school as sufficiently established in the records, private respondents [petitioners] actuations having sullied the professional integrity of the petitioners [respondents] and divided the faculty members on the controversy. For such unjustified acts in relation to the NEAT/NSAT controversy that resulted to loss, prejudice and damage to petitioners [respondents], private respondents [petitioner] are liable for moral and exemplary damages.78[61]

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision and Resolution dated June 30, 2003 and September 26, 2003, respectively, in CA-G.R. SP No. 75249, are AFFIRMED. SO ORDERED.

ANTONIO EDUARDO B. NACHURA Associate Justice

78[61] Rollo, p. 60.

i[1] 328 SCRA 79(2000). Rollo, p.1026. ii[2] Id., at 1032. iii[3] Id., at 1074. iv[4] Id., at 1110. v[5] Id., at 1010-1012. vi[6] Rollo, p. 99. vii[7] A Petition for Certiorari was filed on August 4, 1993, docketed as G.R. No. 110524. viii[8] Id., at 1245. ix[9] Id., at 2178. x[10] Id., at 1279. xi[11] Id., at 2180. xii[12] Supra. xiii[13] Id., at 2206. xiv[14] Id., at 1740. xv[15] Id., at 1695-1697. xvi[16] Id., at 2258. xvii[17] 181 SCRA 702 (1990). xviii[18] 243 SCRA 190 (1995). xix[19] Article 280, Labor Code. xx[20] Rollo, p..2258. xxi[21] Id., at 1723. xxii[22] Id., at 2270. xxiii[23] Rollo, p. 102. xxiv[24] CEIP, Par. I. Eligibility.

xxv[25] Second paragraph under Section III-C on Other Terminations. xxvi[26] Decision, p, 13.