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November 5, 2014
B. Project Employees
3. Application of Rule on Reportial Requirement
144. Rod D. Pasos v. Phil. National Construction Corp (2013)
Facts: Pasos started working for PNCC on April 26, 1996. He
was designated as Clerk II (Accounting) and was assigned
to the NAIA-II Project. It was stated in his Personnel Action
Form Appointment for Project Employment: duration is from
April 26, 1996 to July 25, 1996; contract may be terminated at
anytime for causes as provided for by law and/or existing
company policy; maybe terminated if services are
unsatisfactory, or when no longer needed, as determined by the
Company. If services are still needed beyond the validity of the
contract, the company shall extend your services. After services
are terminated, the employee shall be under no obligation to reemploy the employee. But Ps employment was extended until
August 4, 1998 (more than 2 years later).
P was rehired on Nov. 11, 1998 as Accounting Clerk
(Reliever) and assigned to PCSO QI Project. His
employment shall end on February 11, 1999 and may be
terminated for cause or in accordance with Art. 282 of LC. But
his employment was again extended until February 19, 1999.
On February 23, 1999, he was again hired as Accounting
Clerk and was assigned to the SM-Project. It did not
specify the date when his employment will end, but it was
stated that it will be co-terminus with the completion of the
project. Employment supposedly ended on August 19, 1999
since the assigned phase/stage of work was completed. But
employment was again extended as petitioner was again
appointed as Accounting Clerk for SM Project (Package
II). There was no specific date up to when his extended
employment will be, but it was provided that it will be coterminus with the project.
Despite termination of his employment on October 19, 2000,
P claims that his superior told him to report for work the
following day saying that he will again be employed for
succeeding SM projects. Thus P underwent a medical exam
which revealed that he had pneumonitis. He was advised to
take a 14-day sick leave. On Nov. 27, after his leave, P claimed
that he was again referred for med exam where it was
revealed that he has Kochs disease. He was required to take
a 60-day leave of absence. He submitted his application for
sick leave the next day but PNCCs personnel officer Sanchez
told him that he was not entitled to sick leave because he was
not a regular employee. He served a 60-day sick leave, and
was given a clean bill of health and medical clearance that he
was fit to work. He presented his medical clearance to
personnel officer but he was informed that his services were

already terminated on October 19, 2000 and he was already

replaced since his contract has already expired.
P filed a complaint for ID with prayer for reinstatement and
back wages. He argued that he is deemed a regular employee
due to his prolonged employment as a project employee, and
the failure on the part of PNCC to report his termination every
time a project is completed. Also his termination without
admin investigation was tantamount to ID.
PNCC said that P was hired as project employe for several
projects with specific dates of engagement and termination
and had full knowledge and consent that his appointment
was only for the duration of each project. It said that it had
complied with the reportorial requirements to the DOLE. It
submitted photox of 3 Establishment Termination Reports
that it filed with DOLE: 1) PCSO-QI Project; 2) SM Project in
1999; and 3) SM Project in 2000, all of which included P as
among the affected employees. DOLE verified that P was
NOT among the affected employees listed in the reports.
LA: in favour of P. He had attained regular employment,
making his termination illegal since it was not valid or for
authorized causes. Payment of full backwages, less six
months.
Became regular because he was repeatedly hired and rehired.
His services were usual and necessary to PNCCs business.
Also, he was made to work not only in the project he was
assigned, but on other projects as well. Subsequent contracts
did not indicate the date of completion of the contract, and
his first contract was extended way beyond the supposed
completion date.
NLRC: reversed LAs decision. Ordered PNCC to pay
completion bonus to P for P25k. It noted the presence of
project employment indicators: duration of the project for
which P was engaged was determinable and was known to P;
specific service that P rendered in the projects was that of an
accounting clerk and that was made clear to him and the
service was connected with the projects; and PNCC submitted
termination reports to the DOLE and petitioners name was
included in the list of affected employees.
CA: dismissed appeal for lack of merit.
Issue: WON P has become a regular employee. YES
Duration of project employment should be determined at the
time of hiring. See Art. 280 for definition. The principal test to
determine whether employees are project employees is WON
the employees were assigned to carry out a specific project or
undertaking, the duration or scope of which was specified at

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the time the employees were engaged for that project. P
worked for more than 2 years after the supposed 3-month
duration of his project employment for the NAIA II project.
While his appointment for the project allowed extension
(since its provided in the contract), there was no subsequent
contract or appointment that specified a particular duration
for the extension. While for the first 3 months, hes a project
employee, his employment thereafter, when his services were
extended without any specification of as to the duration,
made him a regular employee. His status as a regular
employee was not affected by the fact that he was assigned to
several other projects and there were intervals in between said
projects since he enjoys security of tenure.
Failure of an employer to file termination reports after every
project completion proves that an employee is not a project
employee. PNCC DID NOT report Ps supposed project
employment for the NAIA II Project to the DOLE. DO No. 19
(Guidelines Governing the Employment of Workers in the
Construction Industry) requires employers to submit a report of
an employees termination to the nearest public employment
office every time an employees employment is terminated due
to a completion of a project. DOLE verified that P was not
included in the list of affected workers based on the
termination reports filed by NAIA II Project.
In Tomas Lao Construction v. NLRC, the court emphasized
the indispensability of the reportorial requirement. Policy
instruction no. 20 is explicit that employers of project
employees are exempted from the clearance requirement but
not from the submission of termination report. Failure to file
these reports after every project completion proves that the
employees are not project employees.
A regular employee dismissed for a cause other than the just or
authorized causes provided by law is illegally dismissed. Ps
regular employment was terminated due to expiration or
project completion, which were not among the just or
authorized causes provided in the LC.
There was no basis for LAs finding of strained relations and
order of separation pay in lieu of reinstatement. The doctrine of
strained relations should be strictly applied so as not to
deprive an illegally dismissed employee of his right to
reinstatement.
Other issues:
Substantial compliance with appeal bond requirement. The
perfection of an appeal within the reglementary period and
in the manner prescribed by law is jurisdictional and
noncompliance is fatal and effectively renders the
judgment final and executory. But the Court relaxed this

requirement in order to bring about the immediate and

appropriate resolution of cases on the merits. The Court
held that the bond requirement on appeals may be relaxed
when there is substantial compliance with the rules of
procedure of the NLRC, or when the appellant shows
willingness to post a partial bond.
Validity of the verification and certification signed by a
corporate officer on behalf of the corporation without the
requisite board resolution or secretarys certificate. We have
in many cases recognized the authority of some corporate
officers to sign the verification and certification against
forum-shopping. Mr. Erece, as head of the Personnel
Services Department of PNCC was in a position to assure
that the allegations in the pleading have been prepare d in
good faith and are true and correct.

4. Application of Rule in Non-Construction Industries

145. MacArthur Malicdem and Hermenigildo Flores v. Marulas
Industrial Corp (2014)
Facts: M and F were hired by Marulas (sack-making business)
as extruder operators in 2006. They were responsible for the
bagging of filament yarn, the quality of pp yarn package and
the cleanliness of the work place area. Employment contracts
were for a period of 1 year. Every year thereafter, they would
sign a Resignation/Quitclaim in favour of Marulas a day after
their contracts ended, and then sign another contract for one
year.
On December 16, 2010, F was told not to report for work
anymore after being asked to sign a paper by the HR head to
the effect that he acknowledged the completion of his
contractual status. On February 1, 2011, M was also
terminated after signing a similar document. Thus, both
claimed to have been ID.
Marulas said that their contracts show that they were fixedterm employees for a specific undertaking which was to work
on a particular order of a customer for a specific period.
Severance from employment was due to expiration of
contracts.
LA: no ID. M and F were not terminated and their
employment naturally ceased when contracts expired. LA
ordered Marulas to pay M&F their respective wage
differentials.
NLRC: modified LAs decision; 13th month pay, SIL and holiday
pay for 3 years.

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CA (rule 65): denied petition; no gadalej; issue of WON they
were project employees was factual in nature and is not
within the ambit of a petitioner for certiorari; repeated and
successive rehiring do not qualify them as regulars , as length of
service is not the controlling determinant of the employment
tenure of a project employee, but whether the employment has
been fixed for specific project or undertaking, its completion has
been determined at the time of the engagement of the
employee (William Uy Const. Corp. v Trinidad). The monetary
claims cannot be awarded.
Issue: WON M&F became regular employees. YES
A reading of their Project Employment Agreement revealed
that there was a stipulated 6-month probationary period
from its commencement. If theyre able to comply with the
companys standards and criteria within such period, they
shall be reclassified as project employees with respect to the
remaining period of the effectivity of the contract.
Art. 281 LC: an employee who is allowed to work after a
probationary period shall be considered a regular employee.
When employer renews a contract of employment after the
lapse of the six-month probi period, the employee becomes
regular. No employer is allowed to determine indefinitely the
fitness of its employees. While length of time is not the
controlling test for project employment, it is vital in
determining if the employee was hired for specific
undertaking or tasked to perform functions vital, necessary
and indispensable to the usual business of trade of the
employer.
Maraguinot Jr v. NLRC: Project or work pool employee who
has been: 1) continuously, as opposed to intermittently,
rehired by the same employer for the same tasks or nature of
tasks; and 2) those tasks are vital, necessary and
indispensable to the usual business or trade of the employer,
must be deemed a regular employee. To rule otherwise would
allow circumvention of labor laws in industries not falling
within the ambit of PI No. 20/DO NO. 19, thus allowing the
prevention of acquisition of security of tenure by project or
work pool employees who have already gained the status of
regular employees by the employers conduct.
The test to determine whether employment is regular or not
is the reasonable connection between the particular activity
performed by the employee in relation to the usual business
or trade of the employer. If the employee has been
performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance

as sufficient evidence of the necessity, if not indispensability

of that activity to the business.
Here, there is a deliberate intent to prevent regularization:
There is no actual project. The only stipulations were dates
of their effectivity, duties and responsibilities, rights and
obligations and compensation and allowances. Since there
was no specific project or undertaking to speak of, Marulas
cannot invoke the exception in Art. 280 LC.
Granting that they were PEs, M&F could only be considered
as regulars as the two factors enumerated in Maraguinot,
Jr case are present here. They were hired and rehired
continuously for the same positions. They were responsible
for the operation of machines that produced the sacks
work is vital, necessary and indispensable to the usual
business or trade. Employment cease to be coterminous
with specific projects when the employee is continuously
rehired due to the demands of the employers business and
re-engaged for many more projects without interruption.
Invocation of the William Uy case is misplaced because it is
applicable only in cases involving the tenure of PEs in the
construction industry.
Termination is illegal since it lacks just/authorized causes.
Thus they are entitled to reinstatement without loss of
seniority rights and other privilege and to full backwages,
inclusive of allowances, and to other benefits.
146. Maraguinot v. NLRC (1998)
Facts: Petitioners Alejandro and Paulino worked for
respondent VIVA Films (VIVA). Alejandro was first an
Assistant Electrician with a weekly salary of P450.00 but was
then promoted to an Electrician with a weekly salary of
P593.00 on September 1991. Paulino was a member of the
shooting crew who started with a weekly salary of P375.00,
which was eventually increased to P475.00 on 21 December
1991.
Tasks: loading, unloading and arranging movie equipment in
the shooting area as instructed by the cameraman, returning
the equipment to Viva Films warehouse, assisting in the
fixing of the lighting system, and performing other tasks
that the cameraman and/or director may assign.
In May 1992, petitioners sought assistance from their
supervisor, Alejandria Cesario, to facilitate their request to
their employers to adjust their salary in accordance with
minimum wage law. A month after, she informed them that
their superior, herein respondent Vic Del Rosario, would agree

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to increase their salary only if they signed a blank employment
contract. Both petitioners refused to comply with this request.
Because of this refusal, Paulino was first forced to go on
leave, then was eventually refused to be taken back for work
on 20 July 1992. Meanwhile, Alejandro was first dropped from
the company payroll. He was then taken back but was asked
once again to sign a blank employment contract, which he
refused a second time. He was promptly terminated from his
services. Both of them got terminated. Petitioners filed for
illegal dismissal before the LA.
Respondent: 1. claim that Viva Films is the trade name of Viva
Productions, Inc., and that it is primarily engaged in the
distribution and exhibition of movies but not in the
business of making movies; private respondent del Rosario is
merely an executive producer, i.e., the financier who invests a
certain sum of money for the production of movies distributed
and exhibited by VIVA.
2. They contract persons called producers -- also referred to
as associate producers -- to produce or make movies for
private respondents; and contend that petitioners are project
employees of the associate producers who, in turn, act as
independent contractors. As such, there is no employeremployee relationship between petitioners and private
respondents.
3. It was the associate producer of the film Mahirap Maging
Pogi, who hired Alejandro. The movie shot from 2 July up to
22 July 1992, and it was only then that Alejandro was
released upon payment of his last salary, as his services were
no longer needed. Paulino was hired for the movie Narito
ang Puso. He went on vacation on 8 June 1992, and by the
time he reported for work on 20 July 1992, shooting for the
movie had already been completed.
LA: favor of petitioners. They are employees of VIVA. The
producer cannot be considered as an independent contractor
and they instead act as a mere agent to VIVA. Also, they
receive their salaries from VIVA. Finally, the tasks they
perform are necessary and essential to the business of VIVA,
that of movie-making.
NLRC: Reversed LA. Ruled that based on the circumstances,
petitioners were project employees. 1) they were hired for
specific movie projects and their employment was coterminus with each movie. 2) each shooting unit works on one
movie project at a time, which are not continuous in nature. 3)
Because of this non-continuous nature of shooting, their total
working hours show extreme variations (For instance,
Alejandro worked for 1.45 hours in June 1991 but worked 183

hours in January 1992). 4) they have irregular working days,

which explains the lump sum payments they receive for their
services. This means that they were paid a standard weekly
salary regardless of the number of working days and hours
they logged in. 5) petitioners were never prohibited to work
for other movie companies such as Regal, Seiko, and FPJ
Productions whenever they are not working for VIVA.
Issue: WON there is an ER-EE relationship between
petitioners and respondents. YES. Therefore, petitioners were
illegally dismissed by VIVA.
Ratio
1) Respondents are engaged in the business of movie-making.
VIVAs contention that it does not make movies, but merely
distributes and exhibits them, is untenable and not supported
by evidence.
2) Associate producers are not independent contractors of
petitioners. VIVA has control over Petitioners.
They do not meet the two requisites to be a proper
contractor (Substantial capital and independent work from
principal). They do not have the tools and equipment
needed to make movies. The evidence shows that it is VIVA
who possesses movie-making equipment such as
generators, cables, and cameras. Associate producers
merely lease the equipment of VIVA. If they are to be
deemed contractors, they would fall under labor-only
contracting and are merely VIVAs agent.
using the four-fold test, it is clear that VIVA has control
over the final product of these associate producers. Looking
at the position paper of VIVA before the LA, it is clear that
the final product of these producers has to be accepted by
them. They also exercise supervision through a supervising
producer to monitor the progress of these projects without
exceeding budget.
Ps are not under the control of their movie director. It is
more correct to say that the movie director merely instructs
the petitioners on how to better comply with VIVAs
requirements.
Moreover, the appointment slips of petitioners contain
VIVAs corporate name on the header. These slips also
show that it is VIVA who pays their salaries. All the
circumstances indicate an employment relationship
between petitioners and VIVA alone, thus the inevitable
conclusion is that petitioners are employees only of VIVA.
3) Petitioners had attained status as regular employees, and
are not merely project employees.

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A project employee or a member of a work pool may acquire
the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even
after cessation of a project; 2) The tasks performed by the
alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.
However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as
a badge of regular employment.
Here, Paulino was employed for 2 years and for at least 18
projects, while Alejandro was employed for 3 years and 23
projects. Moreover, their tasks were necessary to the usual
business of VIVA.

necessary or desirable to the employers usual business or

trade.
This ruling does not mean that simply because an employee
is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular
employee. All that was held was that once a project or work
pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same
tasks or nature of tasks; and (2) these tasks are vital,
necessary and indispensable to the usual business or trade
of the employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the Labor
Code and jurisprudence.

4) The ruling in the case of Lao Construction v. NLRC regarding

work pool/project employees applies to this case. (important)
In that case, the court ruled: A work pool may exist
although the workers in the pool do not receive salaries
and are free to seek other employment during temporary
breaks in the business, provided that the worker shall be
available when called to report for a project. Although
primarily applicable to regular seasonal workers, this setup can likewise be applied to project workers insofar as the
effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it
prevents the unjust situation of coddling labor at the
expense of capital and at the same time enables the
workers to attain the status of regular employees.
Also ruled in that case is that even though the end of a
project results in the cessation of work activities, this does
not mean that employees are separated from their service,
but are merely on leave of absence until they are
reemployed for a new project.
In this case, the case of Lao can be applied despite
involving a different business (construction). Even though
Policy Instruction No. 20/D.O. No. 19 regarding work pools
specifically applies to construction businesses, there seems
to be no impediment to applying the underlying principles
to industries other than the construction industry. Neither
may it be argued that a substantial distinction exists
between the projects undertaken in the construction
industry and the motion picture industry. On the contrary,
the raison d' etre of both industries concern projects with a
foreseeable suspension of work.
The import of this decision is not to impose a positive and
sweeping obligation upon the employer to re-hire project
employees. What this decision merely accomplishes is a
judicial recognition of the employment status of a project
or work pool employee in accordance with what is fait
accompli, i.e., the continuous re-hiring by the employer of
project or work pool employees who perform tasks

Conclusion: Petitioners are regular employees and there was

illegal dismissal because the cause of their dismissal
(completion of project) was not a valid cause under Art. 282
of the LC. They are entitled to receive full back wages and
reinstatement.
Procedural issue:
1) Special civil action for certiorari under Rule 65 is the proper
remedy for one who complains that the NLRC acted in total
disregard of evidence. In this case, petitioners allege that the
NLRCs conclusions have no basis in fact and in law, and
therefore this was the proper remedy.

C. Casual Employees
Art. 280 2nd par: 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 as regular employee with respect to the
activity in which he is employed and his employment shall
continue which such activity exists.
OR Book VI Rule 1, Sec. 5 (b): There is casual employment
where an employee is engaged to perform a job, work or
service which is merely incidental to the business of the
employer, and such job, work or service is for a definite period
mad known to the employee at the time of engagement:
Provided, That any employee who has rendered at least one
year of service, whether such service is continuous or not,
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.
1. Nature of Work

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146. Maranaw Hotels and Resort Corp. v. CA (2009)
Facts: Sheryl Oabel was hired by Maranaw as an extra
beverage attendant on April 24, 1995 which lasted until
February 7, 1997. She worked in Century Park Hotel, an
establishment owned by M.
On September 16, 1996, Maranaw contracted with Manila
Resource Development Corp where O was subsequently
transferred. MANRED deported itself as Os employer. For the
duration of her employment, O performed the functions of:
Secretary of PR Dept (Feb 10 to March 6, 1997); Gift Shop
Attendant (April 7-21, 1997); Waitress (April 22-May 20, 1997)
and Shop Attendant (May 21, 1997-July 30, 1998).
On Jul 20, 1998, O filed before the LA a petition for
regularization of employment against M. On August 1, O was
dismissed from employment, thus she converted her petition
into a complaint for ID.

sign pleadings for the corporation. This could only come in

the form of a board resolution.
*even if this procedural infirmity is set aside, the petition is
still bound to fail *
2. Os purported employment with MANRED commenced
only in 1996, way after she was hired by M as extra beverage
attendant in April 24, 1995. The service agreement between
M and Manred is a mere ploy to circumvent the law on
employment with respect to regularization.
Also, the operations of the hotel itself do not cease with the
end of each event or function and that there is an ever
present need for individuals to perform certain tasks
necessary for its business. Thus, although the tasks
themselves may vary, the need for sufficient manpower to
carry them out does not.
MANRED is a labor-only contractor. Real employer of O is M.

LA dismissed Os complaint. It said that Os work was on a per

function basis or on a need basis co-terminus with the
function she was hired for. The hotel considers complainant a
project employee which did not ripen into regular employee.
NLRC: reversed LA decision. 1) MANRED is a labor-only
contractor, and 2) ID

3. Shes a regular employee. She has already rendered more

than one year of service to M (1995-1998). Art. 280 LC.

2. One-year Service
147. Mercado Sr. v. NLRC (1991)

CA: dismissed Ms petition because of failure to append the

board resolution authorizing the counsel for petitioner to file
the petition before CA.
Petition before the SC: filing of MR with the certificate of nonforum shopping attached constitutes substantial compliance
with the requirement.
Issues:
1.
2.
3.

Procedural.
Important: WON MANRED is Os employer. (NO)
WON O became a regular employee (YES)

Ratio:
1. Certificate of NFS is a mandatory requirement. Substantial
compliance applies only with respect to the contents of the
certificate but not as to its presence in the pleading wherein it
is required. The purpose of the certificate is to inform the
court of the pendency of any other case which may present
similar issues and involve similar parties as the one before it.
This applies to both natural and juridical persons.
In BPI Leasing Corp v. CA, the Court said that the lawyer
acting for the corporation must be specifically authorized to

Facts: Petitioners Fortunato Mercado, Sr and 15 others were

agricultural workers utilized by private respondents Aurora
Cruz, Francisco and Leticia Borja in all the agricultural phases
of work on the 7.5 ha of rice land and 10 ha of sugar land
owned by the latter.
Fortunato and Leon have worked since 1949; Fortunato, Jr
and Antonio since 1972; and the rest since 1960 up to 1979.
They were allegedly dismissed from their employment.
Aurora Cruz denied that Ps were her regular employees. She
said that she engaged their services through the Borjas who
were their mandarols (persons who take charge in supplying
the number of workers needed by owners of farms), but only
to do a particular phase of work necessary in rice and/or
sugar cane production, after which they would be free to
render services to other farm owners.
LA: ruled in favour of the private respondents; Ps were not
regular workers for the nature of terms and conditions of their
hiring reveal that they were required to perform phases of
agricultural work for definite period of time after which their
services would be available to any other farm owner.

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Ps contention of working 12 hours a day the whole year
was an exaggeration because planting of rice and sugar
cane does not entail a whole year.
The sworn statement of Fortunato Jr shows that Ps were
hired only as casuals, thus it was within the prerog of
respondent Cruz either to take them in to do further work
or not after any single phase of agricultural work had been
completed by them.
The real cause of this complaint was the criminal complaint
for theft filed against Reynaldo Mercado, a family member
of the Ps
Only the money claims from years 76-77, 77-78 and 7879 may be considered since all other money claims have
prescribed for having accrued beyond the three year period
prescribed by law.
For equitys sake, LA awarded Ps financial assistance of
P10k
NLRC affirmed the decision of LA, with modifications of the
deletion of the award for financial assistance.
Present petition: Ps argue that LA and NLRC erred in ruling
that they are not regular and permanent employees. Policy
Instruction No. 12 of DOLE supports their contention: What
determines regularity or casualness is not the employment
contract, but the nature of the job. If the job is usually necessary
or desirable to the main business regular. If not, casual.
Employment for a definite period which exceeds one year shall
be considered regular for the duration of the definite period.
They have been doing all phases of agricultural work for so
many years, activities were necessary, desirable and
indispensable in the rice and sugar cane production business.
Rs contend that Ps were only hired as casuals. This is based
on solid evidence presented by the parties and by the Chief of
the Special Task Force of the NLRC Regl Office.
Issue: WON Ps are regular employees. NO.
(see LAs decision above)
The findings of LA are ably supported by evidence. Theres no
reason to reverse the decisions of LA and NLRC.
Re: the contention of Ps that 2nd par of Art. 280 LC should be
applied.
An employee is deemed regular where he is engaged in
necessary or desirable activities in the usual business or trade
of the employer, except for project employees. A PE is one
whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee,
or where the work or service to be performed is seasonal in

nature and the employment is for the duration of the season,

as in the present case.
The 2nd paragraph defines casual employees as all other
employees who do not fall under the definition in the 1st par. A
casual employee becomes a regular employee if he/she has
rendered at least one year of service regardless of the fact
that such statement is broken or continuous.
This proviso qualifies or modifies the phrase it immediately
follows, and not the statute itself or to other sections. The
only exception to this rule is where the clear legislative intent
is to restrain or qualify not only the phrase immediately
preceding it, but also earlier provisions of the statute or even
the statute itself.
PI No. 12 of DOLE show that the proviso in the 2nd par of Art.
280 was not designed to stifle small-scale businesses nor to
oppress agricultural land owners to further the interests of
labourers, whether agricultural or industrial. It seeks to
eliminate abuses of employers against their employees and
not to prevent small-scale businesses from engaging in
legitimate methods to realize profit. Hence, this proviso is
applicable only to casual employees, not to project
employees nor regular employees.
Petitioners are seasonal employees, their employment legally
ends upon completion of the project or the season. Their
termination was not illegal dismissal.

D. Fixed-term Employees
148. Brent School v. Zamora (1990)
Summary: Alegre was working for Brent. In their contract, it
said that there is a period of employment. After completion of
period, he was terminated. He now assails the validity of the
termination because he was saying he already had the status
of a regular employee hence cannot be terminated without
reason. Court held that LC recognizes the stipulation of
employment with a period, especially those contracted before
the enactment of the LC which expressly mentioned such
contracts.
Facts: Private respondent Doroteo R. Alegre was the athletic
director of petitioner Brent School, Inc. at a yearly
compensation of P20,000.00.
CONTRACT: fixed a specific term for its existence, five (5)
years, from the date of execution (July 18, 1971 to July 17,
1976). Subsequent subsidiary agreements dated March 15,
1973, August 28, 1973, and September 14, 1974 reiterated the

Labor Law 1 8
November 5, 2014
same terms and conditions, including the expiry date, as
those contained in the original contract of July 18, 1971.
April 20,1976: Alegre was given a copy of the report filed by
Brent School with the Department of Labor advising of the
termination of his services effective on July 16, 1976. The
ground for the termination was "completion of contract,
expiration of the definite period of employment." Alegre
accepted the amount of P3,177.71, and signed a receipt
therefor containing the phrase, "in full payment of services for
the period May 16, to July 17, 1976 as full payment of
contract". In the Labor Conciliator, he protested the
announced termination saying that that his services were
necessary and desirable in the usual business of his employer,
and his employment lasted for 5 years - therefore he had
acquired the status of regular employee.
The Regional Director considered Brent School's report as an
application for clearance to terminate employment (not a
report of termination), and accepting the recommendation of
the Labor Conciliator, refused to give such clearance and
instead required the reinstatement of Alegre, as a
"permanent employee," to his former position without loss of
seniority rights and with full back wages. It said that as a
permanent employee, he could not be dismissed except for
just cause, and expiration of the employment contract was
not one of the just causes provided in the Labor Code for
termination of services.
Issue: Whether or not the provisions of the Labor Code, as
amended, has already set aside the "fixed period
employment" or employment for a term.

It is plain then that when the employment contract was

signed between Brent School and Alegre, it was perfectly
legitimate for them to include in it a stipulation fixing the
duration thereof. Stipulations for a term were explicitly
recognized as valid by this Court.
Even under the Labor Code, the status of legitimacy is
continued to be enjoyed by fixed-period employment
contracts. The Code contained explicit references to fixed
period employment, or employment with a fixed or definite
period. Nevertheless, obscuration of the principle of licitness
of term employment began to take place at about this time.
Article 320 originally stated that the "termination of
employment of probationary employees and those employed
WITH A FIXED PERIOD shall be subject to such regulations as
the Secretary of Labor may prescribe." Article 321 prescribed
the just causes for which an employer could terminate "an
employment without a definite period." And Article 319
undertook to define "employment without a fixed period" in
the following manner: where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific
project or undertaking the completion or termination of which
has been determined at the time of the engagement of the
employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of
the season.

Ratio: Respondent Alegre's contract of employment with

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

Subsequently, the foregoing articles regarding employment

with "a definite period" and "regular" employment were
amended by Presidential Decree No. 850 (this was on
December 16, 1975). Article 320, dealing with "Probationary
and fixed period employment," was altered by eliminating the
reference to persons "employed with a fixed period," and was
renumbered to Article 271.

The employment contract between Brent School and Alegre

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

As it is evident that Article 280 of the Labor Code, under a

narrow and literal interpretation, not only fails to exhaust the
gamut of employment contracts to which the lack of a fixed
period would be an anomaly, but would also appear to
restrict, without reasonable distinctions, the right of an
employee to freely stipulate with his employer the duration of
his engagement, it logically follows that such a literal
interpretation should be eschewed or avoided. The law must
be given a reasonable interpretation, to preclude absurdity in
its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom
of contract to remedy the evil of employer's using it as a
means to prevent their employees from obtaining security of

Labor Law 1 9
November 5, 2014
tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping off the head.
Such interpretation puts the seal on Bibiso upon the effect of
the expiry of an agreed period of employment as still good
rulea rule reaffirmed in the recent case of Escudero vs.
Office of the President where, in the fairly analogous case of a
teacher being served by her school a notice of termination
following the expiration of the last of three successive fixedterm employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses
sight of the fact that her employment was probationary,
contractual in nature, and one with a definitive period. At the
expiration of the period stipulated in the contract, her
appointment was deemed terminated and the letter
informing her of the non-renewal of her contract is not a
condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere
reminder that Reyes' contract of employment was due to
expire and that the contract would no longer be renewed. It is
not a letter of termination.
Paraphrasing Escudero, respondent Alegre's employment
was terminated upon the expiration of his last contract with
Brent School on July 16, 1976 without the necessity of any
notice. The advance written advice given the Department of
Labor with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate
which needed the approval of the Department of Labor to
make the termination of his services effective. In any case,
such clearance should properly have been given, not denied.

the receipt of notice. Their failure to provide an explanation

terminated their employment. Subsequently Lynvil filed a
case against them for violation of the Anti Piracy and AntiHighway Robbery Law.
Respondents version
They were crewmembers of the vessel Analyn VIII. On
July 31, 1998 they arrived at the Navotas Fishport on board
Analyn VIII loaded with 1,241 baeras of different kinds of
fishes. These baeras were delivered to a consignee named
SAS and Royale. When they reported back to Lynvil the next
day they were told to wait for further advice regarding their
new job assignment. On Aug 5, only Jessie and one other
received a memorandum asking them to explain the incident
on July 31, 1998. When all of them arrived at the office they
were informed that their employment was already
terminated.
They filed for a complaint for illegal dismissal with
claims for backwages and damages etc. They assert that the
allegation of theft came about as a result of their oral
demand of salary increase and that they not be required to
sign blank payrolls and vouchers.
LA: In favor of respondents. No evidence of the theft,
disregarded resolution of asst city prosecutor because the
labor office is governed by different rules for the
determination of the valid dismissal of an employee. The per
trip basis of their employment did not make their dismissal
legal.
NLRC: Reversed LA decision.
CA: Reinstated LA decision.
Issues
1.

149. Lynvil Fishing Enterprises Inc. v. Andres G. Ariola (2012)

Facts
Lynvils version
Lynvil is a deep sea fishing business. On Aug 1, 1998, they
received a report from one of their employees Romanito that
on July 31, 1998, that while on board the company vessel
Analyn VIII, he witnessed the respondents Andres (Captain),
Jessie (Chief Mate), Jimmy (Chief Engineer), Leopoldo
(bodegero) and others conspire with one another and stole 8
tubs of pompano and taguigue fish and delivered it to
another vessel, to the prejudice of Lynvil.
The respondent employees were engaged on a per trip
basis which ends after every trip. Andres, Jessie and Jimmy
were managerial field personnel while the others were field
personnel. After the initial investigation the respondents were
required to explain why they should not be dismissed from
service. Everyone except Jessie and another refused to sign

2.

WON the filing of a crim case constitutes sufficient

basis for a valid termination on the grounds of
serious misconduct or loss of trust/confidence? NO
WON they were REGULAR or FIXED-TERM
employees? REGULAR but they were dismissed for
just cause

Ratio
The Court cited the Nasipit case and Nicolas v NLRC. The
former explained that proof beyond reasonable doubt is not
required when loss of confidence is the grounds for dismissal,
it being sufficient that the employer has some basis. The
latter explained that whichever way that the public
prosecutor disposes of a complaint, it is not binding to the
labor tribunal. The Court stated that the finding of probable
cause by the office of the prosecutor does not need to be
automatically followed by the LA as a valid cause for
termination of employment.

Labor Law 1 10
November 5, 2014
But still, the Court held that there was a valid cause for the
respondents dismissal. They found that there was actual
breach of trust present in the case. Despite the finding that
the quantity of the tubs of fish was similar, the Court pointed
out that the kind of fish loaded and unloaded was material to
the issue. The witnesses corroborated stories show that a
small boat approached the ship. Jessie went into the
stockroom while Leopoldo pushed 4 tubs away from it.
Andres served as lookout and negotiator of the transaction
while Jimmy and one other loaded the tubs on the small
boat. It was even stated that Jessie told everyone to be quiet
about the incident.
Lynvil contends that it cannot be guilty of illegal dismissal by
virtue of the fixed-term por viaje contract between them and
the respondents, citing the applicability of the Brent School
case. Respondents on the other hand contend otherwise.
Jurisprudence provides the 2 conditions for the validity of a
fixed-term contract:
First, the fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his
consent; or
Second, it satisfactorily appears that the employer and
the employee dealt with each other on more or less equal
terms with no moral dominance exercised by the former or
the latter.
The text of the contract is for a fixed term, but within the
context of facts that (1) the respondents were doing tasks
necessarily to Lynvils fishing business with positions ranging
from captain of the vessel to bodegero; (2) after the end of a
trip, they will again be hired for another trip with new
contracts; and (3) this arrangement continued for more than
ten years, the clear intention is to go around the security of
tenure of the respondents as regular employees. And by
virtue of the 2nd paragraph of Art 280 of the LC, they were
regular employees. Because of economic reasons, the
respondents were forced to accede to such an arrangement.
Thus it becomes clear that the first requirement of the
conditions for a valid fixed term contract is missing. The
respondents are therefore deemed regular employees. They
are however dismissed for just cause. Procedurally though,
Lynvil was lacking as the facts show that they were remiss in
providing final notices to the respondents.
With regard to the joint and several liability of de Borja
with Lynvil being the general manager, the court held that
because of lack of bad faith on his part, he did not have such.
1. Project Employment
distinguished

and

Fixed-term

Employment,

150. GMA Network, Inc. v. Carlos P. Pabriga et. al (2013)

2. No implied renewal of employment contract
151. Antonio e. Unica v. ANscor Swire Ship Management Corp.
(2014)

E. Seasonal Employees
Art. 286. 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 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 performed is seasonal in nature
and the employment is for the duration of the season.
152. Phil. Tobacco v. NLRC (1998)
Facts:
On August 1, 1994, due to supposed serious financial reverses
and losses suffered by respondent and its desire to prevent
further losses, a notice of permanent closure of its redrying
operations at Balintawak, Quezon City and transfer of the
same to Candon, Ilocos Sur was served to the DOLE.
August 3, 1994: complainants were also notified of the said
decision to close and transfer
On August 16, 1994, their separation benefits were given to
them but allegedly [based on] wrong computation when
management did not consider 3/4 of their length of service as
claimed by complainants (Luris group).While the Lubat group
were not granted xxx separation pay as their previous
seasonal service [was] not continuous, and as of August,
1994, they were not employed there with as declared by
respondent.
In its position paper respondent maintains that the Lubat
group are not entitled to separation pay for the reason that
they were not among those separated or could not have been
separated from employment on August 3, 1994 due to such
closure and transfer as they were not employed or did not
report for work at the plant for the 1994 tobacco season as
shown by the companys records.

Labor Law 1 11
November 5, 2014
- As to the Luris group, although being questioned by this
group, respondent considers the following formula in
determining the length of service in years as basis for
computing the separation pay of this group to be fair and
reasonable and xxx supported by Article 283 of the Labor
Code, as amended, such as the total number of working days
actually worked over total number of working days in a year
(303 days), multiplied by the daily rate and further multiplied
by 15 days.
- Respondent explains that this is so because complainants
nature of work is seasonal as they are employed every year
only during the tobacco season which may fall within the
months of February to November but actually work for a
period of less than six (6) months for each season. The law
qualifies tenure for purposes of separation benefits as based
on service and not employment.
- On the charge of illegal dismissal by the Luris group,
respondent asserts that complainants were separated from
employment for ajust cause that is the closure of its
REDRYING operations at the Balintawak plant and the
transfer of the same to Candon, Ilocos Sur which was
authorized by the law and the parties CBA.
- The decision of management to close and transfer its
tobacco processing and REDRYING operations was based on
the fact that it had consistently incurred a net loss from these
operations, its principal line of business, although its audited
financial statement showed a net profit after tax from 1990 to
1993 based on over-all operations. Moreover, respondent
points out that as the Luris group and the DOLE were served
a written notice at least one (1) month before the intended
date of closure effective on Sept. 15, 1994, the due process
requirement was met.
- Lubat group: is composed of petitioners seasonal
employees who were not rehired for the 1994 tobacco
season. At the start of that season, they were merely
informed that their employment had been terminated at the
end of the 1993 season. They claimed that petitioners refusal
to allow them to report for work without mention of any just
or authorized cause constituted illegal dismissal. In their
Complaint, they prayed for separation pay, back wages,
attorneys fees and moral damages.
- Luris Group: made up of seasonal employees who worked
during the 1994 season. On August 3, 1994, they received a
notice informing them that, due to serious business losses,
petitioner planned to close its Balintawak plant and transfer
its tobacco processing and redrying operations to Ilocos
Sur. Although the closure was to be effective September 15,
1994, they were no longer allowed to work starting August 4,

1994. Instead, petitioner awarded them separation pay

computed according to the following formula:
total no. of days actually worked
------------------------------x daily rate x 15 days
total no. of working days in one year
- In their Complaint, they claimed that the computation
should be based not on the above mathematical equation,
but on the actual number of years served. In addition, they
contended that they were illegally dismissed, and thus they
prayed for back wages.
LA: ordered the petitioner to pay complainants separation
pay differential plus attorneys fees in the total amount of
P3,092,896.76.
NLRC: agreed with the labor arbiter that the closure by
petitioner herein of its operations at Balintawak and its
transfer thereof to Ilocos Sur were due to serious financial
losses. Nonetheless, both labor agencies held that the Luris
and Lubat groups were entitled to separation pay equivalent
to one-half (1/2) month salary for every year of service,
provided that the employee worked at least one month in a
given year.The NLRC further ruled that private respondents
were not entitled to back wages and damages, since the
closure of the factory and the termination of their
employment were due to a legally recognized cause.
Issues
WON there was substantial and undisputed evidence that the
closure of the petitioners business operation was due to
serious business losses and financial reverses?NO; Therefore
not entitled to pay separation pay?NO
WON petitioners closure was not due to serious business
losses and financial reverses, the Lubat group are still not
entitled to separation pay?NO
WON the Luris group is entitled to separation pay?YES
ratio
1. Petitioner asserts that it submitted before the labor arbiter
a Statement of Income and Expenses, as well as a recasted
version thereof, showing that it had suffered serious business
losses in its tobacco processing and redrying
operations. Citing Article 283 of the Labor Code, it concludes
that it is not obligated to award separation pay to its
dismissed workers (whether belonging to the Lubat or the
Luris group), because the closure of its tobacco business was
due to an authorized cause.

Labor Law 1 12
November 5, 2014
The present case involves the closure of merely a unit or
division, not the whole business of an otherwise viable
enterprise. Although Article 283 uses the phrase closure or
cessation of operation of an establishment or undertaking,
this Court previously ruled in Coca-Cola Bottlers (Phils.), Inc.
v. NLRC that said statutory provision applies in cases of both
complete and partial cessation of the business operation:
x x x Ordinarily, the closing of a warehouse facility and the
termination of the services of employees there assigned is a
matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the Labor Code
which permits closure or cessation of operation of an
establishment or undertaking not due to serious business
losses or financial reverses, which, in our reading, includes
both the complete cessation of operations and the cessation
of only part of a companys business.

2. Petitioner argues that it was not obliged to rehire the

members of the Lubat group for the 1994 season, because
their employment had been terminated at the end of the 1993
season. Since they were not employed for the 1994 season
when the Balintawak plant was closed, it follows that
petitioner has no obligation to award them separation pay
due to the said closure. Petitioner illegally dismissed the
members of the Lubat group when it refused to allow them to
work during the 1994 season.

- Petitioner did not actually close its entire business. It

merely transferred or relocated its tobacco processing and
redrying operations. Moreover, it was also engaged in,
among others, corn and rental operations, which were
unaffected by the closure of its Balintawak plant.

- Petitioner is liable for illegal dismissal and should be

responsible for the reinstatement of the Lubat group and the
payment of their back wages. However, since reinstatement
is no longer possible as petitioner has already closed its
Balintawak plant, respondent members of the said group
should instead be awarded normal separation pay (in lieu of
reinstatement) equivalent to at least one month pay, or
one month pay for every year of service, whichever is
higher. It must be stressed that the separation pay being
awarded to the Lubat group is due to illegal dismissal; hence,
it is different from the amount of separation pay provided for
in Article 283 in case of retrenchment to prevent losses or in
case of closure or cessation of the employers business, in
either of which the separation pay is equivalent to at least one
(1) month or one-half (1/2) month pay for every year of service,
whichever is higher.

- Tested against the aforecited standards, we hold that herein

petitioner was not able to prove serious financial losses
arising from its tobacco operations. A close examination of
its Statement of Income and Expenses and its recasted
version thereof, which were presented in support of its
contention, suggests its failure to show business losses.In the
recasted Statement, petitioner tried to prove that there was a
net loss from its tobacco processing and redrying
operations. It did so by subtracting all of its selling,
administrative and interest expenses for a given year from the
earnings in its tobacco sales for the corresponding year. This
formula,
however,
is
at
best
illogical
and
misleading. Petitioner would have us believe that all of its
expenses -- selling, administrative and interest expenses -resulted only from its tobacco processing and redrying
operations, and that it incurred no expense in its other profit
centers.
Defective Notice: Article 283 of the Labor Code also requires
the
employer
to
furnish
both the employee and the Department of Labor and
Employment a written Notice of Closure at least one month
prior to closure. True, in the present case the Notices of
Termination were given to the employees on August 3, 1994,
and the intended date of closure was September 15,
1994. However, the employees were in fact not allowed to
work after August 3, 1994. Therefore, the termination notices
to the employees were given in violation of the requisite onemonth prior notice under Article 283 of the Labor Code.

- From the foregoing, it follows that the employer-employee

relationship between herein petitioner and members of the
Lubat group was not terminated at the end of the 1993
season. From the end of the 1993 season until the beginning
of the 1994 season, they were considered only on leave but
nevertheless still in the employ of petitioner.

- However, despite the fact that the respondent members of

the Lubat group were entitled to separation pay equivalent to
at least one (1) month pay, or one (1) month pay for every year
of service, whichever is higher, they cannot receive more than
the amount awarded to them in the NLRC Decision -- at least
one (1) month or one-half (1/2) month pay for every year of
service, whichever is higher -- because they did not appeal
from the said Decision. Therefore, no affirmative award can
be given to them. In the same manner, although respondents
should have been entitled to back wages because petitioner
illegally deprived them of work during the 1994 season, no
such award can be given to them, since they did not appeal
the NLRC Decision. The elementary norms of due process
prevent the grant of such awards, as the employer was not
given notice that its filing of its own Petition
for Certiorari would put it in jeopardy of such relief.

Labor Law 1 13
November 5, 2014
3. Petitioner posits that the separation pay of a seasonal
worker, who works for only a fraction of a year, should not be
equated with that of a regular worker. Positing that the total
number of working days in one year is 303 days, petitioner
submits the following formula for the computation of a
seasonal workers separation pay:

percent (10%) attorneys fees given by the NLRC and the

labor arbiter shall be based on the award modified herein.
153. Universal Robina Sugar Milling Corp. and Rene Cabati v.
Fernando Acibo, et. al (2014)

F. Probationary Employees

Total No. of Days Actually Worked

X Daily Rate X 15 days

Total No. Of Working Days In One Year

- The amount of separation pay is based on two factors: the
amount of monthly salary and the number of years of
service. Although the Labor Code provides different
definitions as to what constitutes one year of service, Book
Six does not specifically define one year of service for
purposes of computing separation pay. However, Articles
283 and 284 both state in connection with separation pay
that a fraction of at least six months shall be considered one
whole year. Applying this to the case at bar, we hold that the
amount of separation pay which respondent members of the
Lubat and Luris groups should receive is one-half (1/2) their
respective average monthly pay during the last season they
worked multiplied by the number of years they actually
rendered service, provided that they worked for at least six
months during a given year.
- The formula that petitioner proposes, wherein a year of work
is equivalent to actual work rendered for 303 days, is both
unfair and inapplicable, considering that Articles 283 and
284 provide that in connection with separation pay, a fraction
of at least six months shall be considered one whole
year. Under these provisions, an employee who worked for
only six months in a given year -- which is certainly less than
303 days -- is considered to have worked for one whole year.

Art. 287. Probationary employment. PE shall not exceed 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.
Book VI, Rule 1, Sec. 6. Probationary employment. see codal
pp. 399-400
Art. 75. Learnership Agreement. Any employer desiring to
employ learners shall enter into a learnership agreement with
them, which agreement shall include:
(d) A commitment to employ the learners if they so desire, as
regular employees upon completion of the learnership. All
learners who have been allowed or suffered to work during
the first two months shall be deemed regular employees if
training is terminated by the employer before the end of the
stipulated period through no fault of the learners.
1. Definition/Purpose
154. Robinsons Galleria et. al v. Ranchez (2011)

- Finally, Manila Hotel Company v. CIR did not rule that

seasonal workers are considered at work during off-season
with regard to the computation of separation pay. Said case
merely held that, in regard to seasonal workers, the
employer-employee relationship is not severed during offseason but merely suspended.
the decision NLRC is AFFIRMED WITH THE
MODIFICATION that private respondents are hereby awarded
separation pay equivalent to one (1) month, or to one-half
(1/2) month payfor each year that they rendered service,
whichever is higher, provided that they rendered service for at
least six (6) months in a given year. The separation pay to be
awarded to members of the Luris group shall be taken from
the amount which petitioner has already awarded to them,
and any excess need not be refunded by the workers. The ten

Facts: Irene was a probationary employee of Robinsons

Galleria/Robinsons Supermarket Corp. for 5 months (October
15, 1997 March 14, 1998). Two weeks after she was hired,
Irene reported to her supervisor the loss of P20,299 in cash,
which she had placed inside the company locker. Jess Manuel
(Operations Manager) ordered that Irene be strip-searched by
the company guards. The search yielded nothing.
Irene acknowledged her responsibility and requested that she
be allowed to settle the amount but Manuel denied the
request and subsequently filed a complaint for Qualified
Theft. Irene was sent to jail for failure to immediately post
bail.

Labor Law 1 14
November 5, 2014
Procedural: Irene filed a complaint for illegal dismissal and
damages. On March 12, 1998, petitioners sent to Irene a
notice of termination and/or notice of expiration of
probationary employment dated March 9, 1998.
LA dismissed complaint. When Irene filed the complaint for
illegal dismissal, she was not yet dismissed by petitioners.
NLRC reversed LA. Irene was denied due process. The stripsearch and sending her to jail for two weeks amounted to
constructive dismissal since continued employment had been
rendered impossible, unreasonable and unlikely. Although
Irene was only a probationary employee, the subsequent
lapse of her probationary employment contract did not have
the effect of validly terminating her employment because
constructive dismissal had already been effected earlier by
petitioners.
CA affirmed NLRC
issue
WON Irene was illegally terminated from employment. YES.
NLRC and CA affirmed.
[minor] How should backwages be computed? Time between
her constructive dismissal until the date of the termination of
her probationary employment.
Ratio
There is probationary employment when the employee,
upon his engagement, is made to undergo a trial period
during which the employer determines his fitness to qualify
for regular employment based on reasonable standards
made known to him at the time of the engagement. A
probationary employee, like a regular employee, enjoys
security of tenure. A probationary employee may be
terminated for any of the following: (1) a just cause, (2) an
authorized cause), and (3) when he fails to qualify as a
regular employee in accordance with reasonable standards
prescribed by the employer.1
This also means that the employer shall furnish the
worker, whose employment is sought to be terminated, a
written notice containing a statement of the causes of
termination, and shall afford the latter an opportunity to be
heard and to defend himself with the assistance of a
representative if he so desires.
Robinsons failed to accord Irene substantive and
procedural due process. The haphazard manner in the
investigation, which was left to the determination of the
police authorities and the Prosecutors Office, left respondent
but to cry foul. The company already pre-judged her guilt
Omnibus Rules Implementing the Labor Code, Book VI, Rule
I, Sec 6(c)
1

without proper investigation, and instantly reported her to the

police as the suspected thief, which resulted her being in jail
for two weeks.
The due process requirements under the Labor Code are
mandatory and may not be supplanted by police
investigation or court proceedings. The criminal aspect of the
case is considered independent of the administrative aspect.
Thus, employers should not rely solely on the findings of the
Prosecutors Office. They are mandated to conduct their own
separate investigation, and to accord the employee every
opportunity to defend herself. Irene was not represented by
counsel when she was strip-searched inside the company
premises or during the police investigation and in the
preliminary investigation before the Prosecutors Office.
Irene was constructively dismissed. It was unreasonable
for Robinsons to charge her with abandonment for not
reporting for work upon her release in jail. Work has been
rendered unreasonable, unlikely, and definitely impossible,
considering the treatment that was accorded to Irene by
Robinson.
RE: damages the backwages that should be awarded
to Irene shall be reckoned from the time of her constructive
dismissal until the date of the termination of her employment
(Oct. 30, 1997 to Mar. 14, 1998). This is because Irene was a
probationary employee, and the lapse of her probationary
employment without her appointment as a regular employee
of Robinsons effectively severed the employer-employee
relationship between parties.
In all cases involving probationary employment, the
employer shall make known to its employees the standards
under which they will qualify as regular employees at the time
of their engagement. When no standards are made known to
an employee at the time, he shall be deemed a regular
employee, unless the job is self-descriptive. Naturally,
Robinsons cannot be expected to retain Irene as a regular
employee considering that she lost money while acting as a
cashier during the probationary period. The rules on
probationary employment should not be used to exculpate a
probationary employee who acts in a manner contrary to
basic knowledge and common sense, in regard to which,
there is no need to spell out a policy or standard to be met.
155. Espina v. CA (2007)
Facts: Dec 27, 2000: in a conciliation proceeding before
DOLE NCMB-NCR Director de Jesus, the duly authorized
representative of M.Y. San Workers Union-PTGWO and M.Y.
San Sales Force Union-PTGWO was informed of the cessation

Labor Law 1 15
November 5, 2014
of business operations ofM.Y. San as a result of the intended
sale of the business and all the assets of respondent M.Y. San
toMonde M.Y. San Corporation (Monde) and was notified of
their termination, effective 31 January 2001.
In line with this, the union and mgmt. agreed (in the
interest of industrial peace) that in the payment of their
separation packages it will be tax-free, and that there will
be a grant of 9 days per year of service on top of what was
provided in their CBA. Also, the cash equivalent of the
vacation and sick leaves are agreed upon. In addition, MY
San promised to submit the list of all employeesto Monde
for purposes of rehiring(they will be given hiring
preference), however, subject to thenew qualifications that
the latter may impose.
Dec 28, 2000: the written notice of the sale and purchase
of the assets of M.Y San toMonde and of the termination of
all the employees of respondent M.Y. San were filed before
the DOLERegional Office No. IV.
Jan 31, 2001: all the employees of respondent M.Y. San
received their separation pay and the cashequivalent of their
vacation and sick leaves. Thereafter, they signed their
respective Quitclaims.
Feb 1, 2001: Asset Purchase Agreement was executed
between MY San and Monde.
Feb 2, 2001: Monde commenced its operations. All the
former employees of M.Y.San who were terminated upon
its closure and who applied and qualified for probationary
employment, includingpetitioners herein, started working
for Monde on a contractual basis for a period of six months.
Subsequently, petitioners were terminated on various
dates. They then filed a complaint for illegal dismissal plus
damages with the NLRC.
o Pilar et al: The same top mgmt is running the business
(3 days after the stoppage of operations in Jan 31); the
union officers acceded to bust the union in exchange
of being re-hired; and the sale of M.Y. San to Monde
was merelya ploy to circumvent the provisions of LC.
o MY San: ER-EE relationship had ceased to exist; the
complaint for illegal dismissal could no longer prosper
against it.
o Monde: the probationary EEswere subjected to
performance appraisal by their supervisors. Those who
passed and who qualifiedas regular EEs were
accordingly appointed as such. Out 116 probationary
EEs, 74 EEs qualified for regular employment on May
2, 2001.
For those who did not qualify for regular
employment, including Pilar, et al.,Monde gave
them the remainder of their probationary period
(until July 2, 2001), withinwhich to prove their
qualification
for
regular
employment.Notwithstanding the opportunity

given to them to improve their performance,

complainants either:
(a) resigned from their employment withMonde;
(b) refused to report for work on 02 May 2001 and
on the days following- includes Pilar [they
deliberately failed to explain their absences
dismissal due to AWOL & habitual neglect of
duties]; or
(c) failed to qualify for regularemployment at the
expiration of the period of their probationary
employment.
LA: dismissed the case for lack of merit.M.Y. Sans Decision
to shut down its operations by selling itsassets is its sole
prerogative which must be respected, and that it had
faithfully complied with the requirements ofthe law, i.e., the
notice and payment of separation pay. As to Monde, the LA
ruled that itsatisfactorily discharged the burden of
establishing a just and authorized cause for terminating the
servicesof petitioners.
NLRC: affirmed LA.
CA: dismissed the petition lack of the signatures of 3 copetitioners in their SPA. Their MR plus motion to drop the
names of the 3 co-petitioners was likewise denied for
subsequent compliance does not warrant a reconsideration
of the order of dismissal.There was also no prima facie error
in the NLRC ruling. They filed a 2nd MR it was denied for
being a prohibited pleading under ROC. Hence, this appeal
to SC.
Issues
1. WON the CA was correct in dismissing their petition due to
the lack of signatures. NO.
2. (termination of employment topic)WON the closure of
business by MY San is valid. YES.Hence,there was no
illegaldismissal of petitioners by MY San to speak of.
3. (probationary EEs topic) WON the petitioners were illegally
terminated from work. NO.Monde exercised in good faith its
management prerogative as there is no dispute that petitioners
had been habitually absent, neglectful of their work, and
rendered unsatisfactory service, to the damage and prejudice of
the company.
4. WON the quitclaims signed by petitioners are valid. YES.
Ratio
1. The rules on forum shopping, which were designed to
promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective. The
signatures of 25 out of the 28 employees who filed the
Petition for Certiorari in the CA constitute substantial
compliance with the Rules. Petitioners raised one common
cause of actionagainst M.Y. San and Monde, i.e., the illegal

Labor Law 1 16
November 5, 2014
closure of respondent M.Y. San and its subsequent saleto
respondent Monde, which resulted in the termination of their
services. They share a common interest andcommon defense
in the Complaint for illegal dismissal. Thus, when they
appealedtheir case to the CA, they pursued the same as a
collective body, raising only one argument in supportof their
rights against the illegal dismissal allegedly committed by
respondents M.Y. San and Monde.
Ordinarily, SC would have remanded the case to the CA
for disposition on the merits. However, in the interest of
justice and equity, they decided to rule on its merits.
2. The ERs are given mass of privileges called management
prerogatives. Although they may be broad and unlimited in
scope, the State has the right to determine whether an
ERsprivilege is exercised in a manner that complies with the
legal requirements and does not offend the protectedrights
of labor.
One of the rights accorded an employer is the right to
close an establishment or undertaking. Just as no law forces
anyone to go into business, no law can compel anybody to
continue the same.It is explicitly recognized under the LC (Art.
283) as one of the authorized causes in terminating
employment of workers, the only limitation being that the
closuremust not be for the purpose of circumventing the
provisions on terminations of employment embodied in the
LC.
The phrase "closure or cessation of operations of
establishment or undertaking" includes a partial or total
closure or cessation. It also recognizes the right of the
employer to close or cease its business operations or
undertaking even in the absence of serious business losses or
financial reverses, as long as he pays his employees their
termination pay in the amount corresponding to their length
of service.
The determination to cease operations is a prerogative of
management which the State does not usually interfere with,
as no business or undertaking must be required to continue
operating simply because it has to maintain its workers in
employment, and such act would be tantamount to a taking
of property without due process of law. As long as the
companys exercise of the same is in good faith to advance
itsinterest and not for the purpose of circumventing the rights
of employees under the law or a valid agreement, suchexercise
will be upheld.
The 3 requirements necessary for the cessation of
business operations are adequately complied by MY San
based on the records:
(1) service of a written notice to the employees and to the
DOLE at least 1 month before the intended date thereof the
EEs are adequately informed of the intended business closure
and a written notice was sent to DOLE Regional Director.

(2) the cessation must be bona fide in character MY

San in good faith complied with the requirements for closure;
sold and conveyed all its assets torespondent Monde for
valuable consideration; and there were no previous labor
problems.
(3) payment to the employees of termination pay
amounting to at least 1/2 month pay for every year of service,
or 1 month pay, whichever is higher Petitioners received
their termination pay which was even beyond the amount
required by law. Thecomputation of their separation pay was
15 days for every year of service plus an additional nine days
for everyyear of service, and cash equivalent of their vacation
and sick leaves.
The closure, therefore, of the business operation of
respondent MY San was not tainted with bad faith or
othercircumstance that would give rise to suspicions of
malicious intent. Other than their mere allegations,
petitionersfailed to present independent evidence that would
otherwise show that the closure of MY San was without
factualbasis and done in utter bad faith. It is a basic rule in
evidence that each party
must prove his affirmative allegation.
Since MY Sans closure and cessation of business was lawful,
there was no illegaldismissal of petitioners to speak of.
3. The petitioners were probationary employees as stated in
their individual contracts ofemployment with Monde. Art. 281
LC governs probationary employment.
While petitioners were only probationary employees who
do not enjoy permanent status, nonetheless, they werestill
entitled to the constitutional protection of security of tenure;
their employment may only be terminated for a valid and just
cause or for failing to qualify as a regular employeein
accordance with the reasonable standards made known to
him by the employer at the time of engagement andafter
being accorded due process. Procedural due process requires
the twin notices before the EE can be terminated (notice
which apprises the employee of the particular acts/omissions
for which the dismissal issought and the subsequent notice
which informs the employee of the employers decision to
dismiss him).
In the case at bar, petitioners were notified of the
standards they have to meet to qualify as regular employees of
Monde when the latter apprised them, at the start of their
employment, that:
1. You shall be under probation for a
maximum period of six (6) months or until
Jul. 03, 2001. During this period, you are
expected to learn your job, perform your
duties and responsibilities to the best of
your ability, and observe all company rules
and regulations; if during this period, you

Labor Law 1 17
November 5, 2014
fail to meet companystandards, your
appointment may be terminated earlier or at
the expiration of your probationary period
atthe discretion of the company.
x xxx
5. To determine your fitness to assume
your position on a permanent status, when
considered due, yoursupervisor shall rate
your performance during your probationary
period.
Significantly, some of the petitioners indeed voluntarily
resigned from the company. Also, Monde had exercised its
management prerogative in good faith when it dismissed other
petitioners including Pilar, due to absence without leave
(AWOL), gross and habitual neglect of duties, and only after the
personal delivery ofthe notices to their respective addresses or
by registered mail. Moreover, some did not qualify as regular
EEs the twin notices are sent to them individually.
It must be noted that petitioners were terminated prior to
the expiration of their probationary contracts. As probationary
employees, they enjoyed only temporary employment status.
In general terms, this meantthat they were terminable
anytime, permanent employment not having been attained in
the meantime.
During the probationary period,the employer is given the
opportunity to observe the skill, competence and attitude of
the employee to determine ifhe has the qualification to meet
the reasonable standards for permanent employment. The
length of time is immaterial in determining the correlative
rights of both the employer and the employee in dealing with
each other during said period. Thus, as long as the
termination was made before the expiration of the six-month
probationary period, the employer was well within his rights to
sever the employer-employee relationship. A contrary
interpretation would defeat the clear meaning of the term
"probationary.
Terminating employment is one of Mondes prerogatives.
As an employer, respondent Monde has the right to regulate,
according to its discretion and best judgment, including work
assignment, working methods, processes to be followed,
working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of
workers.SC has consistently upheld a companys management
prerogatives so long as they are exercised in good faith for the
advancement of the employers interest and not for the
purpose of defeating or circumventing the rights of the
employees under special laws and valid agreements.
Monde exercised in good faith its management
prerogative as there is no dispute that petitioners had been
habitually absent, neglectful of their work, and rendered
unsatisfactory service, to the damage and prejudice of the
company.

4. Quitclaims andreleases are not per se invalid.In the case at

bar, there is no showing that petitioners were coerced into
signing the quitclaims; they freely declared that they received
to their satisfaction all that are due them by reason of
theiremployment and that they were voluntarily releasing
respondents M.Y. San and Monde, for any liability in
relationto their employment. Nothing on the face of their
quitclaims would show that they were unconscionable.
Further,petitioners did not present evidence that they had been
forced or intimidated in signing the same.
Finally, it is significant to note that both the LA and the NLRC
were unanimous in their findings that theclosure of
respondent M.Y. San is valid and that the employees of
respondents M.Y. San and Monde were notillegally dismissed
(issue of whether there was a valid ground for petitioners
dismissal is factual innature). The factual findings of the
NLRC affirming those of the LA, who aredeemed to have
acquired expertise in matters within their jurisdiction, when
sufficiently supported by evidence onrecord, are accorded
respect if not finality, and are considered binding on this Court.
As long as their Decisions are devoid of any unfairness or
arbitrariness in the process of their deduction from the evidence
proffered by the parties before them, all that is left is the
Courts stamp of finality by affirming the factual findings made
by the NLRC and the LA.