1.

Employer-employee relationship
3. Test to determine the existence of employer-employee relationship
CHARLIE JAO Petitioner - versus -BCC PRODUCTS SALES INC., and TERRANCE TY,Respondents.
Facts:
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent Terrance
Ty (Ty), employed him as comptroller starting from September 1995 with a monthly salary of P20,000.00 to
handle the financial aspect of BCCs business; 1[2] that on October 19,1995, the security guards of BCC,
acting upon the instruction of Ty, barred him from entering the premises of BCC where he then worked;
that his attempts to report to work in November and December 12, 1995 were frustrated because he
continued to be barred from entering the premises of BCC; 2[3] and that he filed a complaint. Although
Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996, 3[6] the NLRC vacated the ruling and
remanded the case for further proceedings. 4[7] Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a new
decision on September 20, 2001, dismissing petitioners complaint for want of an employer-employee
relationship between the parties.5[8] Petitioner appealed the September 20, 2001 decision of Labor Arbiter
Mayor. NLRC reversed. CA reversed finding no employer-employee relationship.
Issue:
Whether petitioner was respondents employee or not (won the employer-employee relationship existed)
Ruling:
SC affirmed the CA ruling.
Petitioner was not an employee of the respondent. (no employer employee relationship exists.)
Etched in an unending stream of cases are the four (4) standards in determining the existence of an
employer-employee relationship, namely, (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d)
the presence or absence of control of the putative employees conduct. Of these powers the power of
control over the employees conduct is generally regarded as determinative of the existence of the
relationship.
Apparently, in the case before us, all these four elements are absent. First, there is no proof that the
services of the private respondent were engaged to perform the duties of a comptroller in the petitioner
company. There is no proof that the private respondent has undergone a selection procedure as a
standard requisite for employment, especially with such a delicate position in the company. Neither is
there any proof of his appointment nor is there any showing that the parties entered into an employment
contract, stipulating thereof that he will receive P20,000.00/month salary as comptroller, before the private
respondent commenced with his work as such. Second, as clearly established on record, the private

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respondent was not included in the petitioner companys payroll during the time of his alleged
employment with the former. True, the name of the private respondent Charlie Jao appears in the payroll
however it does not prove that he has received his remuneration for his services. Notably, his name was
not among the employees who will receive their salaries as represented by the payrolls. Instead, it
appears therein as a comptroller who is authorized to approve the same. Suffice it to state that it is rather
obscure for a certified public accountant doing the functions of a comptroller from September 1995 up to
December 1995 not to receive his salary during the said period. Verily, such scenario does not conform
with the usual and ordinary experience of man. Coming now to the most controlling factor, the records
indubitably reveal the undisputed fact that the petitioner company did not have nor did not exercise the
power of control over the private respondent. It did not prescribe the manner by which the work is to be
carried out, or the time by which the private respondent has to report for and leave from work. As already
stated, the power of control is such an important factor that other requisites may even be disregarded.
Moreover, in determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is accomplished. The last element, the so-called
control test, is the most important element. 6[24]Hereunder are some of the circumstances and incidents
occurring while petitioner was supposedly employed by BCC that debunked his claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to
deliver some 158 checks to SFC. Considering that he contested respondents challenge by pointing to the
existing arrangements between BCC and SFC, it should be clear that respondents did not exercise the
power of control over him, because he thereby acted for the benefit and in the interest of SFC more than of
BCC. In addition, petitioner presented no document setting forth the terms of his employment by BCC. The
failure to present such agreement on terms of employment may be understandable and expected if he was
a common or ordinary laborer who would not jeopardize his employment by demanding such document
from the employer, but may not square well with his actual status as a highly educated
professional.Petitioners admission that he did not receive his salary for the three months of his
employment by BCC, as his complaint for illegal dismissal and non-payment of wages 7[25] and the criminal
case for estafa he later filed against the respondents for non-payment of wages 8[26] indicated, further
raised grave doubts about his assertion of employment by BCC. If the assertion was true, we are puzzled
how he could have remained in BCCs employ in that period of time despite not being paid the first salary
of P20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him having
approved the payroll as comptroller.Lastly, the confusion about the date of his alleged illegal dismissal
provides another indicium of the insincerity of petitioners assertion of employment by BCC. In the petition
for review on certiorari, he averred that he had been barred from entering the premises of BCC on October
19, 1995,9[27] and thus was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had
been illegally dismissed on December 12, 1995 when respondents security guards barred him from
entering the premises of BCC,10[28] causing him to bring his complaint only on December 29, 1995, and
after BCC had already filed the criminal complaint against him. The wide gap between October 19, 1995
and December 12, 1995 cannot be dismissed as a trivial inconsistency considering that the several
incidents affecting the veracity of his assertion of employment by BCC earlier noted herein transpired in
that interval. With all the grave doubts thus raised against petitioners claim, we need not dwell at length
on the other proofs he presented, like the affidavits of some of the employees of BCC, the ID, and the
signed checks, bills and receipts. Suffice it to be stated that such other proofs were easily explainable by
respondents and by the aforestated circumstances showing him to be the employee of SFC, not of BCC.

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Bernarte vs PBA
Facts:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as
referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a
year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of
their employment. On January 15, 2004, Bernarte received a letter from the Office of the Commissioner
advising him that his contract would not be renewed citing his unsatisfactory performance on and off the
court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the
dismissal was caused by his refusal to fix a game upon order of Ernie De Leon. On the other hand,
complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On
March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular
Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing
dissatisfaction over his questioning on the assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.
Issue:
WON employer-employee relationship exists between the referees and PBA
Ruling:
No employer-employee relationship. (referees are independent contractor)
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule,
factual issues are beyond the province of this Court. However, this rule admits of exceptions, one of which
is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC
and Labor Arbiter, on the other, such as in the present case. 18To determine the existence of an employeremployee relationship, case law has consistently applied the four-fold test, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the work is accomplished.
The so-called control test is the most important indicator of the presence or absence of an employeremployee relationship.19
In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA
pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract.
PBA can terminate the retainer contract for petitioners violation of its terms and conditions. However,
respondents argue that the all-important element of control is lacking in this case, making petitioner an
independent contractor and not an employee of respondents.Petitioner contends otherwise. Petitioner
asserts that he is an employee of respondents since the latter exercise control over the performance of his
work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1)
respondents classify or rate a referee; (2) respondents require referees to attend all basketball games
organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3)
respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee
agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees
whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional
condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the
PBA, and not to officiate as referee in any basketball game outside of the PBA, without written prior
consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest
standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and
conditions of the contract.

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The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner
performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not
pertain to, much less dictate, how and when petitioner will blow the whistle and make calls. On the
contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of Appeals, how could a skilled referee
perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the
performance of work of a referee without controlling his acts of blowing the whistle and making calls? 20
We agree with respondents that once in the playing court, the referees exercise their own independent
judgment, based on the rules of the game, as to when and how a call or decision is to be made. The
referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision
is made on the playing court. The referees are the only, absolute, and final authority on the playing court.
Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make
and cannot control the referee when he blows the whistle because such authority exclusively belongs to
the referees. The very nature of petitioners job of officiating a professional basketball game undoubtedly
calls for freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the
referees are required to report for work only when PBA games are scheduled, which is three times a week
spread over an average of only 105 playing days a year, and they officiate games at an average of two
hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a
week, petitioner is required to report for work only when PBA games are scheduled or three times a week
at two hours per game. In addition, there are no deductions for contributions to the Social Security System,
Philhealth or Pag-Ibig, which are the usual deductions from employees salaries. These undisputed
circumstances buttress the fact that petitioner is an independent contractor, and not an employee of
respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose
special skills and independent judgment are required specifically for such position and cannot possibly be
controlled by the hiring party.
In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an
employee of the former. For a hired party to be considered an employee, the hiring party must have
control over the means and methods by which the hired party is to perform his work, which is absent in
this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between
PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such
contract renewal. Conversely, if PBA decides to discontinue petitioners services at the end of the term
fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the
contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as in
the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal
of petitioner by respondents.
MARTICIO SEMBLANTE and DUBRICK Petitioner- versus -COURT OF APPEALS, 19TH DIVISION, now
SPECIAL FORMER 19TH DIVISION, GALLERA DE MANDAUEmSPOUSES VICENTE and MARIA LUISA
LOOT,Respondents.
Facts:
For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP
8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday,
Wednesday, Saturday, and Sunday every week, excluding monthly derbies and cockfights held on special
holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the
morning depending on the needs of the cockpit. Petitioners had both been issued employees identification

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cards11[5] that they wear every time they report for duty. They alleged never having incurred any infraction
and/or violation of the cockpit rules and regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of
respondents, and were informed of the termination of their services effective that date. This prompted
petitioners to file a complaint for illegal dismissal against respondents.
Issue:
WON masiador and sentenciador are employees of the Gellera de mandaue
Ruling:
No employer employee relationship.
Petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold
test of employment We have repeatedly mentioned in countless decisions: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct, which is the most important element. 12[18]
As found by both the NLRC and the CA, respondents had no part in petitioners selection and
management;13[19] petitioners compensation was paid out of the arriba (which is a percentage deducted
from the total bets), not by petitioners; 14[20] and petitioners performed their functions as masiador
and sentenciador free from the direction and control of respondents.15[21] In the conduct of their
work, petitioners relied mainly on their expertise that is characteristic of the cockfight gambling, 16[22]
and were never given by respondents any tool needed for the performance of their work. 17[23]
Respondents, not being petitioners employers, could never have dismissed, legally or illegally, petitioners,
since respondents were without power or prerogative to do so in the first place. The rule on the posting of
an appeal bond cannot defeat the substantive rights of respondents to be free from an unwarranted
burden of answering for an illegal dismissal for which they were never responsible.
CRC AGRICULTURAL TRADING and ROLANDO B. CATINDIG, Petitioners- versus
LABORRELATIONS COMMISSION and ROBERTO OBIRespondents.

-NATIONAL

Facts:

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In his Sinumpaang Salaysay,18[6] the respondent alleged that the petitioners employed him as a driver
sometime in 1985. The respondent worked for the petitioners until he met an accident in 1989, after
which the petitioners no longer allowed him to work. After six years, or in February 1995, the petitioners
again hired the respondent as a driver and offered him to stay inside the companys premises. The
petitioners gave him a P3,000.00 loan to help him build a hut for his family.
Sometime in March 2003, the petitioners ordered respondent to have the alternator of one of its vehicles
repaired. The respondent brought the vehicle to a repair shop and subsequently gave the petitioners two
receipts issued by the repair shop. The latter suspected that the receipts were falsified and stopped
talking to him and giving him work assignments. The petitioners, however, still paid him P700.00 and
P500.00 on April 15 and 30, 2004, respectively, but no longer gave him any salary after that. As a result,
the respondent and his family moved out of the petitioners compound and relocated to a nearby place.
The respondent claimed that the petitioners paid him a daily wage of P175.00, but did not give him service
incentive leave, holiday pay, rest day pay, and overtime pay. He also alleged that the petitioners did not
send him a notice of termination.
Issue:
WON employer-employee relationship existed
Ruling:
Employer-employee relationship existed between the petitioners and respondent.
The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct. The most important element is the employers
control of the employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it. All the four elements are present in this case.19[10]
First, the petitioners engaged the services of the respondent in 1995. Second, the petitioners paid the
respondent a daily wage of P175.00, with allowances ranging from P140.00 to P200.00 per day. The fact
the respondent was paid under a no work no pay scheme, assuming this claim to be true, is not
significant. The no work no pay scheme is merely a method of computing compensation, not a basis for
determining the existence or absence of employer-employee relationship. Third, the petitioners power to
dismiss the respondent was inherent in the fact that they engaged the services of the respondent as a
driver. Finally, a careful review of the record shows that the respondent performed his work as driver
under the petitioners supervision and control. Petitioners determined how, where, and when the
respondent performed his task. They, in fact, requested the respondent to live inside their compound so
he (respondent) could be readily available when the petitioners needed his services. Undoubtedly, the
petitioners exercised control over the means and methods by which the respondent accomplished his work
as a driver.
We conclude from all these that an employer-employee relationship existed between the petitioners and
respondent.
DEALCO FARMS, INC., Petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION (5th DIVISION),
CHIQUITO BASTIDA, and ALBERT CABAN, Respondents.
Facts:

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Petitioner is a corporation engaged in the business of importation, production, fattening and distribution of
live cattle for sale to meat dealers, meat traders, meat processors, canned good manufacturers and other
dealers in Mindanao and in Metro Manila. Petitioner imports cattle by the boatload from Australia into the
ports of General Santos City, Subic, Batangas, or Manila. In turn, these imported cattle are transported to,
and housed in, petitioners farms in Polomolok, South Cotabato, or in Magalang, Pampanga, for fattening
until the cattle individually reach the market weight of 430 to 450 kilograms.Respondents Albert Caban
and Chiquito Bastida were hired by petitioner on June 25, 1993 and October 29, 1994, respectively, as
escorts or "comboys" for the transit of live cattle from General Santos City to Manila. Respondents work
entailed tending to the cattle during transportation. It included feeding and frequently showering the cattle
to prevent dehydration and to develop heat resistance. On the whole, respondents ensured that the cattle
would be safe from harm or death caused by a cattle fight or any such similar incident. Upon arrival in
Manila, the cattle are turned over to and received by the duly acknowledged buyers or customers of
petitioner, at which point, respondents work ceases. For every round trip travel which lasted an average of
12 days, respondents were each paid P1,500.00. The 12-day period is occasionally extended when
petitioners customers are delayed in receiving the cattle. In a month, respondents usually made two trips.
On October 15, 1999, respondents Bastida and Caban, together with Ramon Maquinsay and Roland
Parrocha, filed a Complaint for illegal dismissal with claims for separation pay with full backwages, salary
differentials, service incentive leave pay, 13th month pay, damages, and attorneys fees against petitioner.
Issue:
WON employer-employee existed
Ruling:
There is employer-employee relationship existed.
After a judicious review of the records of this case, we found no cogent reason to disturb the findings of the
branch.
The presence of the four (4) elements in the determination of an employer-employee relationship has been
clearly established by the facts and evidence on record, starting with the admissions of [petitioner] who
acknowledged the engagement of [respondents] as escorts of their cattles shipped from General Santos to
Manila, and the compensation of the latter at a fee of P1,500.00 per trip. The dates claimed by
[respondents] that they were engaged remain not disputed by [petitioner] as observed by the branch.
The element of control, jurisprudentially considered the most essential element of the four, has not been
demolished by any evidence to the contrary. The branch has noticed that the preparation of the shipment
of cattle, manning and feeding them while in transit, and making a report upon their return to General
Santos that the cattle shipped and which reached Manila actually tallied were all indicators of instructions,
supervision and control by [petitioner] on [respondents] performance of work as escorts for which they
were hired. This we agree on all four[s]. The livestock shipment would cost thousands of pesos and the
certainty of it reaching its destination would be the only thing any operator would consider at all [time] and
under all circumstances. Nothing more, nothing less. It is illogical for [petitioner] to argue that the
shipment was not necessary [or] desirable to their business, as their business was mainly livestock
production, because they were undeniably the owners of the cattle escorted by [respondents]. Should
losses of a shipment occur due to [respondents] neglect these would still be [petitioners] loss, and
nobody elses.
At this point, we emphasize the fact that even on appeal [petitioner] declines to refute, by way of
evidence, the finding of the branch that they failed to prove the payment of [respondents] services by any
of the supposed traders, or that said traders actually shipped livestock. This is the point where the case of
NFL v. Bibiana Farms cited by [petitioner] differs from the instant case in that bills of lading issued to, thus,
in the name of the hog shippers were submitted as proof that said shippers engaged, compensated and
supervised the escorts or convoys in their work, and not the hog raisers. 8

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Undoubtedly, respondents were regular employees of petitioner with respect to the escort or "comboy"
activity for which they had been engaged since 1993 and 1994, respectively, without regard to continuity
or brokenness of the service.
Lastly, considering that we have sustained the Labor Arbiters and the NLRCs finding of an employeremployee relationship between the parties, we likewise sustain the administrative bodies finding of
respondents illegal dismissal.
WPP MARKETING COMMUNICATIONS, INC.,JOHN STEEDMAN, MARK WEBSTER, and NOMINADA
LANSANG, Petitioners, - versus -JOCELYN M. GALERA,Respondent
Facts:
Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of
America by private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of
Mindshare, Co., a corporation based in Hong Kong, China, to work in the Philippines for private respondent
WPP Marketing Communications, Inc. (WPP), a corporation registered and operating under the laws of
Philippines. GALERA accepted the offer and she signed an Employment Contract entitled Confirmation of
Appointment and Statement of Terms and Conditions.
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on
the instruction of the CEO and upon signing of the contract, without any further action from the Board of
Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an
application for petitioner GALERA to receive a working visa, wherein she was designated as Vice President
of WPP. Petitioner alleged that she was constrained to sign the application in order that she could remain
in the Philippines and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent
STEEDMAN that her services had been terminated from private respondent WPP. A termination letter
followed the next day.20[4] On 3 January 2001, Galera filed a complaint for illegal dismissal.
Issue:
WON employer-employee relationship existed (Whether Galera is an Employee or a Corporate Officer)
Ruling:
Galera is an employee of WPP.
Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other
hand, WPP, Steedman, Webster and Lansang contend that Galera is a corporate officer; hence, any
controversy regarding her dismissal is under the jurisdiction of the Regional Trial Court.
We agree with
Galera.
Corporate officers are given such character either by the Corporation Code or by the corporations by-laws.
Under Section 25 of the Corporation Code, the corporate officers are the president, secretary, treasurer
and such other officers as may be provided in the by-laws. 21[19] Other officers are sometimes created by

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the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a
corporation to create additional offices as may be necessary.
An examination of WPPs by-laws resulted in a finding that Galeras appointment as a corporate officer
(Vice-President with the operational title of Managing Director of Mindshare) during a special meeting of
WPPs Board of Directors is an appointment to a non-existent corporate office. WPPs by-laws provided for
only one Vice-President. At the time of Galeras appointment on 31 December 1999, WPP already had one
Vice-President in the person of Webster. Galera cannot be said to be a director of WPP also because all five
directorship positions provided in the by-laws are already occupied.
Finally, WPP cannot rely on its
Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws
provided for more than one Vice-President and for two additional directors.
Even though WPPs
stockholders voted for the amendment on 31 May 2000, the SEC approved the amendments only on 16
February 2001. Galera was dismissed on 14 December 2000. WPP, Steedman, Webster, and Lansang did
not present any evidence that Galeras dismissal took effect with the action of WPPs Board of Directors.
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting
WPP and Galeras relationship to the four-fold test: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee
with respect to the means and methods by which the work is to be accomplished. The appellate court
found:
x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her
work; sections 3, 5, 6 and 7 show that wages she receives are completely controlled by x x x WPP; and
sections 10 and 11 clearly state that she is subject to the regular disciplinary procedures of x x x WPP.
Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract,
which clearly states that she is a permanent employee not a Vice-President or a member of the Board of
Directors.x x x x
Another indication that the Employment Contract was one of regular employment is Section 12, which
states that the rights to any invention, discovery, improvement in procedure, trademark, or copyright
created or discovered by petitioner GALERA during her employment shall automatically belong to private
respondent WPP. Under Republic Act 8293, also known as the Intellectual Property Code, this condition
prevails if the creator of the work subject to the laws of patent or copyright is an employee of the one
entitled to the patent or copyright.
Another convincing indication that she was only a regular employee and not a corporate officer is the
disciplinary procedure under Sections 10 and 11 of the Employment Contract, which states that her right of
redress is through Mindshares Chief Executive Officer for the Asia-Pacific. This implies that she was not
under the disciplinary control of private respondent WPPs Board of Directors (BOD), which should have
been the case if in fact she was a corporate officer because only the Board of Directors could appoint and
terminate such a corporate officer.
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and
Employment and the application for a 9(g) visa with the Bureau of Immigration both of which stated that
she was private respondents WPP Vice President these should not be considered against her. Assurming
arguendo that her appointment as Vice-President was a valid act, it must be noted that these
appointments occurred afater she was hired as a regular employee. After her appointments, there was no
appreciable change in her duties.22[20]
Gomez vs PMDC development corporation
Facts:

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Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of Petron Corporation, then a
government-owned corporation. With Petrons privatization, she availed of the companys early retirement
program and left that organization on April 30, 1994. On the following day, May 1, 1994, however, Filoil
Refinery Corporation (Filoil), also a government-owned corporation, appointed her its corporate secretary
and legal counsel,23[1] with the same managerial rank, compensation, and benefits that she used to enjoy
at Petron.But Filoil was later on also identified for privatization. To facilitate its conversion, the Filoil board
of directors created a five-member task force headed by petitioner Gomez who had been designated
administrator.24[2] While documenting Filoils assets, she found several properties which were not in the
books of the corporation. Consequently, she advised the board to suspend the privatization until all assets
have been accounted for.With the privatization temporarily shelved, Filoil underwent reorganization and
was renamed Filoil Development Management Corporation (FDMC), which later became the respondent
PNOC Development Management Corporation (PDMC). When this happened, Gomezs task force was
abolished and its members, including Gomez, were given termination notices on March 5, 1996. 25[3] The
matter was then reported to the Department of Labor and Employment on March 7, 1996. 26[4]Meantime,
petitioner Gomez continued to serve as corporate secretary of respondent PDMC. On September 23, 1996
its president re-hired her as administrator and legal counsel of the company. 27[5] In accordance with
company guidelines, it credited her the years she served with the Filoil task force. On May 24, 1998, the
next president of PDMC extended her term as administrator beyond her retirement age, 28[6] pursuant to
his authority under the PDMC Approvals Manual. 29[7] She was supposed to serve beyond retirement from
August 11, 1998 to August 11, 2004. Meantime, a new board of directors for PDMC took over the
company.On March 29, 1999 the new board of directors of respondent PDMC removed petitioner Gomez as
corporate secretary. Further, at the boards meeting on October 21, 1999 the board questioned her
continued employment as administrator. In answer, she presented the former presidents May 24, 1998
letter that extended her term. Dissatisfied with this, the board sought the advice of its legal department,
which expressed the view that Gomezs term extension was an ultra vires act of the former president. It
reasoned that, since her position was functionally that of a vice-president or general manager, her term
could be extended under the companys by-laws only with the approval of the board. The legal
department held that her de facto tenure could be legally put to an end.30[8]
Sought for comment, the Office of the Government Corporate Counsel (OGCC) held the view that while
respondent PDMCs board did not approve the creation of the position of administrator that Gomez held,
such action should be deemed ratified since the board had been aware of it since 1994. But the OGCC
ventured that the extension of her term beyond retirement age should have been made with the boards
approval.31[9]
Petitioner Gomez for her part conceded that as corporate secretary, she served only as a corporate officer.
But, when they named her administrator, she became a regular managerial employee. Consequently, the

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respondent PDMCs board did not have to approve either her appointment as such or the extension of her
term in 1998.
Pending resolution of the issue, the respondent PDMCs board withheld petitioner Gomezs wages from
November 16 to 30, 1999, prompting her to file a complaint for non-payment of wages, damages, and
attorneys fees with the Labor Arbiter on December 8, 1999. 32[10] She later amended her complaint to
include other money claims.33[11]
Issue:
WON employer-employee relationship existed
Ruling:
Gomez is an employee of PDMC.
But the relationship of a person to a corporation, whether as officer or agent or employee, is not
determined by the nature of the services he performs but by the incidents of his relationship with the
corporation as they actually exist.34[27] Here, respondent PDMC hired petitioner Gomez as an ordinary
employee without board approval as was proper for a corporate officer. When the company got her the
first time, it agreed to have her retain the managerial rank that she held with Petron. Her appointment
paper said that she would be entitled to all the rights, privileges, and benefits that regular PDMC
employees enjoyed.35[28] This is in sharp contrast to what the former PDMC presidents appointment
paper stated: he was elected to the position and his compensation depended on the will of the board of
directors.36[29]
What is more, respondent PDMC enrolled petitioner Gomez with the Social Security System, the Medicare,
and the Pag-Ibig Fund. It even issued certifications dated October 10, 2008, 37[30] stating that Gomez was
a permanent employee and that the company had remitted combined contributions during her tenure.
The company also made her a member of the PDMCs savings and provident plan 38[31] and its retirement
plan.39[32] It grouped her with the managers covered by the companys group hospitalization insurance. 40
[33] Likewise, she underwent regular employee performance appraisals, 41[34] purchased stocks through
the employee stock option plan, 42[35] and was entitled to vacation and emergency leaves. 43[36] PDMC
even withheld taxes on her salary and declared her as an employee in the official Bureau of Internal

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Revenue forms.44[37] These are all indicia of an employer-employee relationship which respondent PDMC
failed to refute.
Estoppel, an equitable principle rooted on natural justice, prevents a person from rejecting his previous
acts and representations to the prejudice of others who have relied on them. 45[38] This principle of law
applies to corporations as well. The PDMC in this case is estopped from claiming that despite all the
appearances of regular employment that it weaved around petitioner Gomezs position it must have
technically hired her only as a corporate officer. The board and its officers made her stay on and work with
the company for years under the belief that she held a regular managerial position.
That petitioner Gomez served concurrently as corporate secretary for a time is immaterial. A corporation
is not prohibited from hiring a corporate officer to perform services under circumstances which will make
him an employee.46[39] Indeed, it is possible for one to have a dual role of officer and employee. In
Elleccion Vda. De Lecciones v. National Labor Relations Commission,47[40] the Court upheld NLRC
jurisdiction over a complaint filed by one who served both as corporate secretary and administrator,
finding that the money claims were made as an employee and not as a corporate officer.
Locsin vs PLT
Facts:
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security
and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement 48[3]
(Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various
offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards,
were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement
effective October 1, 2001.49[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their
assigned office. They were allegedly directed to remain at their post by representatives of respondent. In
support of their contention, petitioners provided the Labor Arbiter with copies of petitioner Locsins pay
slips for the period of January to September 2002.50[5]

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Then, on September 30, 2002, petitioners services were terminated.

Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money
claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave
pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.
Issue:
Won employer-employee relationship existed. The only issue in this case is whether petitioners became
employees of respondent after the Agreement between SSCP and respondent was terminated.
Ruling:
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even
after the Agreement was terminated. And it is this fact that must be explained.To recapitulate, the CA, in
rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP was a
labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.In arriving at such
conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT
with the required security guards, while furnishing PLDT with a performance bond in the amount of PhP
707,000. Moreover, the CA gave weight to the provision in the Agreement that SSCP warranted that it
carry on an independent business and has substantial capital or investment in the form of equipment,
work premises, and other materials which are necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the parties, the CA
quoted the express provision of the Agreement, stating that no employer-employee relationship existed
between the parties herein. The CA disregarded the pay slips of Locsin considering that they were in fact
issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the
termination of the Agreement. Notably, in its Comment dated March 10, 2009, 51[8] respondent never
denied that petitioners remained at their post until September 30, 2002. While respondent denies the
alleged circumstances stated by petitioners, that they were told to remain at their post by respondents
Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their
salaries would be coursed through SSCP as per arrangement with PLDT, it does not state why they were
not made to vacate their posts. Respondent said that it did not know why petitioners remained at their
posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:x x x x
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards
of an agency with whom the owners or managers have severed ties with to continue to stay within the
business premises. This is because upon the termination of the owners or managers agreement with the
security agency, the agencys undertaking of liability for any damage that the security guard would cause
has already been terminated. Thus, in the event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or managers who would be liable and not the agency.

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The business owners or managers would, therefore, be opening themselves up to liability for acts of
security guards over whom the owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security
guards were remaining at their posts, and would have a clear understanding of the circumstances of the
guards stay. It is but logical that responsible business owners or managers would be aware of the situation
in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries
while securing respondents premises despite the termination of their Agreement. Obviously, it would only
be respondent that would benefit from such a situation. And it is seriously doubtful that a security agency
that was established for profit would allow its security guards to secure respondents premises when the
Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post
under the instructions of respondent. We can further conclude that respondent dictated upon petitioners
that the latter perform their regular duties to secure the premises during operating hours. This, to our mind
and under the circumstances, is sufficient to establish the existence of an employer-employee relationship.
Certainly, the facts as narrated by petitioners are more believable than the irrational denials made by
respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:52[9]
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be
credible in itself such as the common experience and observation of mankind can approve as probable
under the circumstances. We have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is
outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the premises of respondent while receiving their
salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by
respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest
and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are
indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the right to control not only the end to be achieved but also
the means to be used in reaching such end. 53[10] With the conclusion that respondent directed petitioners
to remain at their posts and continue with their duties, it is clear that respondent exercised the power of
control over them; thus, the existence of an employer-employee relationship.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person
for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.

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The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit
the contracting-out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting
and determine who among the parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106
as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:
(i)

(ii)

The contractor or subcontractor does not have substantial capital or investment which relates
to the job, work or service to be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or
the contractor does not exercise the right to control over the performance of the
work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code,
as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-only
contracting:
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:
(a) where there is labor-only contracting; or

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(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as petitioners
employerfrom the termination of the Agreement onwardsas this was the only time that any evidence
of control was exhibited by respondent over petitioners and in light of our ruling in Abella.54[12] Thus, as
aptly declared by the NLRC, petitioners were entitled to the rights and benefits of employees of
respondent, including due process requirements in the termination of their services.
MASONIC CONTRACTOR, INC. and MELVIN BALAIS/AVELINO REYESPetitioners,MAGDALENA MADJOS, ZENAIDA TIAMZON, and CARMELITA RAPADAS,Respondents.

versus

Facts:
Respondents Magdalena Madjos, Zenaida Tiamzon and Carmelita Rapadas were employed sometime in
1991 as all-around laborers (driver/sweeper/ taga-libing/grass-cutter) by Masonic Contractor, Inc. (MCI).
Each of them received an initial daily wage of P165.00 and were required to report for work from 7:00 a.m.
to 4:00 p.m. Three years thereafter, MCI increased their wages by P15.00 per day55[5] but not without
earning the ire of Melvin Balais, president of MCI.56[6.
Sometime in 2004, Balais told Madjos, Tiamzon and Rapadas, along with nine (9) other employees, to take
a two-day leave. When they reported for work two days thereafter, they were barred from entering the
work premises and were informed that they had already been replaced by other workers. 57[7] This
prompted Madjos and her co-workers to file a complaint against herein petitioners for illegal dismissal and
for non-payment of overtime pay, holiday pay, 13th month pay, and damages.
Issue:
WON employer-employee relationship existed (whether respondents are employees of MCI)
Ruling:
We answer in the affirmative.
In Brotherhood Labor Unity Movement of the Philippines v. Hon. Zamora, the Court explained:
In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employers power to control the employee with respect to
the means and methods by which the work is to be accomplished. It is the so-called control test that is
the most important element.58[16]

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The existence of an employer-employee relationship is a question of fact which should be supported by

substantial evidence.59[17]
Petitioners defense that they merely contracted the services of respondents through Malibiran fails to
persuade us. The facts of this case show that respondents have been under the employ of MCI as early as
1991. They were hired not to perform a specific job or undertaking. Instead, they were employed as allaround laborers doing varied and intermittent jobs, such as those of drivers, sweepers, gardeners, and
even undertakers or tagalibing, until they were arbitrarily terminated by MCI in 2004. Their wages were
paid directly by MCI, as evidenced by the latters payroll summary, 60[18] belying its self-serving and
unsupported contention that it paid directly to Malibiran for respondents services. Respondents had
identification cards or gate passes issued not by Malibiran, but by MCI, 61[19] and were required to wear
uniforms bearing MCIs emblem or logo when they reported for work. 62[20]
It is common practice for companies to provide identification cards to individuals not only as a security
measure, but more importantly to identify the bearers thereof as bona fide employees of the firm or
institution that issued them.63[21] The provision of company-issued identification cards and uniforms to
respondents, aside from their inclusion in MCIs summary payroll, indubitably constitutes substantial
evidence sufficient to support only one conclusion: that respondents were indeed employees of MCI.
Moreover, as correctly observed by the CA, petitioners failed to show that it was Malibiran who exercised
control over the means and methods of the work assigned to respondents. Interestingly, Malibirans
affidavit is silent on the aspect of control over respondents means and methods of work. Rather than
categorically stating that she was the one who directly employed respondents to render work for MCI,
Malibiran merely implies that, like respondents, she was just a co-worker. Malibirans statement that the
work for MCI was merely in the nature of accommodation to help respondents earn a living, in effect,
impliedly admits the fact that she did not have the capacity to engage in the independent job-contracting
business, and that, therefore, she was not respondents employer.
With the issue of respondents employment resolved, we then declare that respondents were illegally
terminated when petitioners summarily dismissed them from work without any valid reason for doing so
and without observing procedural due process. We thus affirm the CAs finding that petitioners are liable
for their unwarranted action against respondents.
LESLIE OKOL,Petitioner, - versus -SLIMMERS WORLD INTERNATIONAL, BEHAVIOR MODIFICATIONS,
INC., and RONALD JOSEPH MOY,Respondents.
Facts:
Respondent Slimmers World International operating under the name Behavior Modifications, Inc.
(Slimmers World) employed petitioner Leslie Okol (Okol) as a management trainee on 15 June 1992. She
rose up the ranks to become Head Office Manager and then Director and Vice President from 1996 until
her dismissal on 22 September 1999.
On 28 July 1999, prior to Okols dismissal, Slimmers World preventively suspended Okol. The suspension
arose from the seizure by the Bureau of Customs of seven Precor elliptical machines and seven Precor

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treadmills belonging to or consigned to Slimmers World. The shipment of the equipment was placed
under the names of Okol and two customs brokers for a value less than US$500. For being undervalued,
the equipment were seized.On 2 September 1999, Okol received a memorandum that her suspension had
been extended from 2 September until 1 October 1999 pending the outcome of the investigation on the
Precor equipment importation.On 17 September 1999, Okol received another memorandum from
Slimmers World requiring her to explain why no disciplinary action should be taken against her in
connection with the equipment seized by the Bureau of Customs.
On 19 September 1999, Okol filed her written explanation. However, Slimmers World found Okols
explanation to be unsatisfactory. Through a letter dated 22 September 1999 signed by its president
Ronald Joseph Moy (Moy), Slimmers World terminated Okols employment.
Okol filed a complaint64[3] with the Arbitration branch of the NLRC against Slimmers World, Behavior
Modifications, Inc. and Moy (collectively called respondents) for illegal suspension, illegal dismissal, unpaid
commissions, damages and attorneys fees, with prayer for reinstatement and payment of backwages.
Issue:
WON employer-employee relationship existed
Ruling:
No employer-employee relationship existed. Okol is a corporate officer. NLRC has no jurisdiction.
Petitioner insists that the Court of Appeals erred in ruling that she was a corporate officer and that the
case is an intra-corporate dispute falling within the jurisdiction of the regular courts. Petitioner asserts
that even as vice-president, the work that she performed conforms to that of an employee rather than a
corporate officer. Mere title or designation in a corporation will not, by itself, determine the existence of
an employer-employee relationship. It is the four-fold test, namely (1) the power to hire, (2) the
payment of wages, (3) the power to dismiss, and (4) the power to control, which must be applied.
Petitioner enumerated the instances that she was under the power and control of Moy, Slimmers Worlds
president: (1) petitioner received salary evidenced by pay slips, (2) Moy deducted Medicare and SSS
benefits from petitioners salary, and (3) petitioner was dismissed from employment not through a board
resolution but by virtue of a letter from Moy. Thus, having shown that an employer-employee relationship
exists, the jurisdiction to hear and decide the case is vested with the labor arbiter and the NLRC.
Respondents, on the other hand, maintain that petitioner was a corporate officer at the time of her
dismissal from Slimmers World as supported by the General Information Sheet and Directors Affidavit
attesting that petitioner was an officer. Also, the factors cited by petitioner that she was a mere employee
do not prove that she was not an officer of Slimmers World. Even the alleged absence of any resolution of
the Board of Directors approving petitioners termination does not constitute proof that petitioner was not
an officer. Respondents assert that petitioner was not only an officer but also a stockholder and director;
which facts provide further basis that petitioners separation from Slimmers World does not come under
the NLRCs jurisdiction.
The issue revolves mainly on whether petitioner was an employee or a corporate officer of Slimmers
World. Section 25 of the Corporation Code enumerates corporate officers as the president, secretary,
treasurer and such other officers as may be provided for in the by-laws. In Tabang v. NLRC,65[12] we held
that an office is created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an employee usually occupies no office and generally is employed not

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by action of the directors or stockholders but by the managing officer of the corporation who also
determines the compensation to be paid to such employee.
In the present case, the respondents, in their motion to dismiss filed before the labor arbiter, questioned
the jurisdiction of the NLRC in taking cognizance of petitioners complaint. In the motion, respondents
attached the General Information Sheet66[13] (GIS) dated 14 April 1998, Minutes 67[14] of the meeting of
the Board of Directors dated 14 April 1997 and Secretarys Certificate, 68[15] and the Amended ByLaws69[16] dated 1 August 1994 of Slimmers World as submitted to the SEC to show that petitioner was a
corporate officer whose rights do not fall within the NLRCs jurisdiction. The GIS and minutes of the
meeting of the board of directors indicated that petitioner was a member of the board of directors, holding
one subscribed share of the capital stock, and an elected corporate officer.
The relevant portions of the Amended By-Laws of Slimmers World which enumerate the power of the
board of directors as well as the officers of the corporation state:
Article II
The Board of Directors
1. Qualifications and Election The general management of the corporation shall be vested in a board of
five directors who shall be stockholders and who shall be elected annually by the stockholders and
who shall serve until the election and qualification of their successors.x x x
Article III
Officersx x x
4. Vice-President Like the Chairman of the Board and the President, the Vice-President shall be elected
by the Board of Directors from [its] own members.
The Vice-President shall be vested with all the powers and authority and is required to perform all the
duties of the President during the absence of the latter for any cause.
The Vice-President will perform such duties as the Board of Directors may impose upon him from time to
time.x x x
Clearly, from the documents submitted by respondents, petitioner was a director and officer of Slimmers
World. The charges of illegal suspension, illegal dismissal, unpaid commissions, reinstatement and back
wages imputed by petitioner against respondents fall squarely within the ambit of intra-corporate
disputes. In a number of cases,70[17] we have held that a corporate officers dismissal is always a
corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.
The question of remuneration involving a stockholder and officer, not a mere employee, is not a simple

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labor problem but a matter that comes within the area of corporate affairs and management and is a
corporate controversy in contemplation of the Corporation Code.71[18]
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A 72[19] (PD 902-A) provided that intracorporate disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC)
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission
over corporations, partnerships and other forms of associations registered with it as expressly granted
under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases
involving:
xxx
c) Controversies in the election or appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations.
Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to
regional trial courts the SECs jurisdiction over all cases listed in Section 5 of PD 902-A:
5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court.x x
x
It is a settled rule that jurisdiction over the subject matter is conferred by law. 73[20] The determination of
the rights of a director and corporate officer dismissed from his employment as well as the corresponding
liability of a corporation, if any, is an intra-corporate dispute subject to the jurisdiction of the regular
courts. Thus, the appellate court correctly ruled that it is not the NLRC but the regular courts which have
jurisdiction over the present case.

Topic 2.
Classification of employees
a. Regular vs casual employees
LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION - ALU - TUCP, Petitioner,vs.
PHILIPPINE NATIONAL OIL COMPANY - ENERGY DEVELOPMENT CORPORATION, Respondent.
Facts:
[Respondent Philippine National Oil Corporation]-Energy Development Corporation [PNOC-EDC] is a
government-owned and controlled corporation engaged in exploration, development, utilization,
generation and distribution of energy resources like geothermal energy.
Petitioner is a legitimate labor organization, duly registered with the Department of Labor and Employment
(DOLE) Regional Office No. VIII, Tacloban City.

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Among [respondents] geothermal projects is the Leyte Geothermal Power Project located at the Greater
Tongonan Geothermal Reservation in Leyte. The said Project is composed of the Tongonan 1 Geothermal
Project (T1GP) and the Leyte Geothermal Production Field Project (LGPF) which provide the power and
electricity needed not only in the provinces and cities of Central and Eastern Visayas (Region VII and VIII),
but also in the island of Luzon as well. Thus, the [respondent] hired and employed hundreds of employees
on a contractual basis, whereby, their employment was only good up to the completion or termination of
the project and would automatically expire upon the completion of such project.
On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the [respondent] on the
ground of purported commission by the latter of unfair labor practice for "refusal to bargain collectively,
union busting and mass termination." On the same day, the petitioner declared a strike and staged such
strike.
To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and issued the
Order, dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration.
Accordingly, all the striking workers were directed to return to work within twelve (12) hours from receipt of
the Order and for the [respondent] to accept them back under the same terms and conditions of
employment prior to the strike. Further, the parties were directed to cease and desist from committing any
act that would exacerbate the situation.
However, despite earnest efforts on the part of the Secretary of Labor and Employment to settle the
dispute amicably, the petitioner remained adamant and unreasonable in its position, causing the failure of
the negotiation towards a peaceful compromise. In effect, the petitioner did not abide by [the] assumption
order issued by the Secretary of Labor.
Consequently, on January 15, 1999, the [respondent] filed a Complaint for Strike Illegality, Declaration of
Loss of Employment and Damages at the NLRC-RAB VIII in Tacloban City and at the same time, filed a
Petition for Cancellation of Petitioners Certificate of Registration with DOLE, Regional Office No. VIII. The
two cases were later on consolidated pursuant to the New NLRC Rules of Procedure. The consolidated case
was docketed as NLRC Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-10019-99). The said certified case was indorsed to the NLRC 4th Division in Cebu City on June 21, 1999 for
the proper disposition thereof.3
Issue:
Whether the officers and members of petitioner Union are project employees of respondent
Ruling:
They are project employees SC held.
We cannot subscribe to the view taken by petitioner Union.
The distinction between a regular and a project employment is provided in Article 280, paragraph 1, of the
Labor Code:
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 service to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists.7
The foregoing contemplates four (4) kinds of employees: (a) regular employees or those who have been
"engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer"; (b) project employees or those "whose employment has been fixed for a specific project or
undertaking[,] the completion or termination of which has been determined at the time of the engagement
of the employee"; (c) seasonal employees or those who work or perform services which are seasonal in
nature, and the employment is for the duration of the season; 8 and (d) casual employees or those who are
not regular, project, or seasonal employees. Jurisprudence has added a fifth kind a fixed-term employee. 9

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Article 280 of the Labor Code, as worded, establishes that the nature of the employment is determined by
law, regardless of any contract expressing otherwise. The supremacy of the law over the nomenclature of
the contract and the stipulations contained therein is to bring to life the policy enshrined in the
Constitution to "afford full protection to labor." 10 Thus, labor contracts are placed on a higher plane than
ordinary contracts; these are imbued with public interest and therefore subject to the police power of the
State.11
However, notwithstanding the foregoing iterations, project employment contracts which fix the
employment for a specific project or undertaking remain valid under the law:
x x x By entering into such a contract, an employee is deemed to understand that his employment is
coterminous with the project. He may not expect to be employed continuously beyond the completion of
the project. It is of judicial notice that project employees engaged for manual services or those for special
skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone is not a valid
reason for bestowing special treatment on them or for invalidating a contract of employment. Project
employment contracts are not lopsided agreements in favor of only one party thereto. The employers
interest is equally important as that of the employee[s] for theirs is the interest that propels economic
activity. While it may be true that it is the employer who drafts project employment contracts with its
business interest as overriding consideration, such contracts do not, of necessity, prejudice the employee.
Neither is the employee left helpless by a prejudicial employment contract. After all, under the law, the
interest of the worker is paramount.12
In the case at bar, the records reveal that the officers and the members of petitioner Union signed
employment contracts indicating the specific project or phase of work for which they were hired, with a
fixed period of employment. The NLRC correctly disposed of this issue:
A deeper examination also shows that [the individual members of petitioner Union] indeed signed and
accepted the [employment contracts] freely and voluntarily. No evidence was presented by [petitioner]
Union to prove improper pressure or undue influence when they entered, perfected and consummated [the
employment] contracts. In fact, it was clearly established in the course of the trial of this case, as
explained by no less than the President of [petitioner] Union, that the contracts of employment were read,
comprehended, and voluntarily accepted by them. x x x.
xxxx
As clearly shown by [petitioner] Unions own admission, both parties had executed the contracts freely and
voluntarily without force, duress or acts tending to vitiate the worker[s] consent. Thus, we see no reason
not to honor and give effect to the terms and conditions stipulated therein. x x x. 13
Thus, we are hard pressed to find cause to disturb the findings of the NLRC which are supported by
substantial evidence.
It is well-settled in jurisprudence that factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded
not only respect but even finality, and bind the Court when supported by substantial evidence. 14 Rule 133,
Section 5 defines substantial evidence as "that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion."
Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in
labor cases.15 We may take cognizance of and resolve factual issues, only when the findings of fact and
conclusions of law of the Labor Arbiter or the NLRC are inconsistent with those of the CA. 16
In the case at bar, both the NLRC and the CA were one in the conclusion that the officers and the members
of petitioner Union were project employees. Nonetheless, petitioner Union insists that they were regular
employees since they performed work which was usually necessary or desirable to the usual business or
trade of the Construction Department of respondent.
The landmark case of ALU-TUCP v. NLRC17 instructs on the two (2) categories of project employees:

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It is evidently important to become clear about the meaning and scope of the term "project" in the present
context. The "project" for the carrying out of which "project employees" are hired would ordinarily have
some relationship to the usual business of the employer. Exceptionally, the "project" undertaking might not
have an ordinary or normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameters of the "project" becomes fairly easy. x x x. From the viewpoint,
however, of the legal characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish culture or the
production of vegetables as "project employees," as distinguished from ordinary or "regular employees,"
so long as the duration and scope of the project were determined or specified at the time of engagement
of the "project employees." For, as is evident from the provisions of Article 280 of the Labor Code, quoted
earlier, the principal test for determining whether particular employees are properly characterized as
"project employees" as distinguished from "regular employees," is whether or not the "project employees"
were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were
specified at the time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least two
(2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is
within the regular or usual business of the employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends
at determined or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily carries out two or
more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential
condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for
the carrying out of one of these separate projects, the scope and duration of which has been determined
and made known to the employees at the time of employment, are properly treated as "project
employees," and their services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.18
Plainly, the litmus test to determine whether an individual is a project employee lies in setting a fixed
period of employment involving a specific undertaking which completion or termination has been
determined at the time of the particular employees engagement.
In this case, as previously adverted to, the officers and the members of petitioner Union were specifically
hired as project employees for respondents Leyte Geothermal Power Project located at the Greater
Tongonan Geothermal Reservation in Leyte. Consequently, upon the completion of the project or
substantial phase thereof, the officers and the members of petitioner Union could be validly terminated.
Petitioner Union is adamant, however, that the lack of interval in the employment contracts of its officer
and members negates the latters status as mere project employees. For petitioner Union, the lack of
interval further drives home its point that its officers and members are regular employees who performed
work which was usually necessary or desirable to the usual business or trade of respondent.
We are not persuaded.
Petitioner Unions members employment for more than a year does equate to their regular employment
with respondent. In this regard, Mercado, Sr. v. NLRC 19 illuminates:
The first paragraph [of Article 280 of the Labor Code] answers the question of who are regular employees.
It states that, regardless of any written or oral agreement to the contrary, an employee is deemed regular
where he is engaged in necessary or desirable activities in the usual business or trade of the employer,
except for project employees.

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A project employee has been defined to be one whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the engagement
of the employee, or where the work or service to be performed is seasonal in nature and the employment
is for the duration of the season, as in the present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall
under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year of service regardless of the fact
that such service may be continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280 is applicable to their
case and that the Labor Arbiter should have considered them regular by virtue of said proviso. The
contention is without merit.
The general rule is that the office of a proviso is to qualify or modify only the phrase immediately
preceding it or restrain or limit the generality of the clause that it immediately follows. Thus, it has been
held that a proviso is to be construed with reference to the immediately preceding part of the provision to
which it is attached, and not to the statute itself or to other sections thereof. The only exception to this rule
is where the clear legislative intent is to restrain or qualify not only the phrase immediately preceding it
(the proviso) but also earlier provisions of the statute or even the statute itself as a whole.
Policy Instruction No. 12 of the Department of Labor and Employment discloses that the concept of regular
and casual employees was designed to put an end to casual employment in regular jobs, which has been
abused by many employers to prevent so called casuals from enjoying the benefits of regular employees
or to prevent casuals from joining unions. The same instructions show that the proviso in the second
paragraph of Art. 280 was not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or industrial. What it seeks to eliminate are
abuses of employers against their employees and not, as petitioners would have us believe, to prevent
small-scale businesses from engaging in legitimate methods to realize profit. Hence, the proviso is
applicable only to the employees who are deemed "casuals" but not to the "project" employees nor the
regular employees treated in paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees,
their employment legally ends upon completion of the project or the [end of the] season. The termination
of their employment cannot and should not constitute an illegal dismissal.
Considering our holding that the officers and the members of petitioner Union were project employees, its
claim of union busting is likewise dismissed.
SAN MIGUEL CORPORATIONPetitioner,- versus -EDUARDO L. TEODOSIO,Respondent.
Facts:
On September 5, 1991, respondent Eduardo Teodosio was hired by San Miguel Corporation (SMC) as a
casual forklift operator in its Bacolod City Brewery. 74[3] As a forklift operator, respondent was tasked with
loading and unloading pallet75[4] of beer cases within the brewery premises. Respondent continuously
worked from September 5, 1991 until March 1992, after which he was asked to rest for a while. A month
after, or sometime in April 1992, respondent was rehired for the same position, and after serving for about
five to six months, he was again asked to rest. After three weeks, he was again rehired as a forklift
operator. He continued to work as such until August 1993.76[5]

74
75

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Sometime in August 1993, respondent was made to sign an Employment with a Fixed Period 77[6]
contract by SMC, wherein it was stipulated, among other things, that respondents employment would be
from August 7, 1993 to August 30, 1995, or upon cessation of the instability/fluctuation of the market
demand, whichever comes first. Thereafter, respondent worked at the plant without interruption as a
forklift operator.
On March 20, 1995, respondent was transferred to the plants bottling section as a case piler. In a
letter78[7] dated April 10, 1995, respondent formally informed SMC of his opposition to his transfer to the
bottling section. He asserted that he would be more effective as a forklift operator because he had been
employed as such for more than three years already. Respondent also requested that he be transferred to
his former position as a forklift operator. However, SMC did not answer his letter.
In an undated letter,79[8] respondent informed SMC that he was applying for the vacant position of bottling
crew as he was interested in becoming a regular employee of SMC.
On June 1, 1995, SMC notified the respondent that his employment shall be terminated on July 1, 1995 in
compliance with the Employment with a Fixed Period contract. 80[9] SMC explained that this was due to the
reorganization and streamlining of its operations.
Issue:
WON the respondent is a casual or regular employee
Ruling:
Respondent is a REGULAR employee.
This Court finds the respondent to be a regular employee. Article 280 of the Labor Code, as amended,
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 preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.

76
77
78
79
80

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Thus, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who
have rendered at least one year of service, whether continuous or broken, with respect to the activity in
which they are employed.81[23] Simply stated, regular employees are classified into (1) regular employees
- by nature of work and (2) regular employees - by years of service. The former refers to those employees
who perform a particular activity which is necessary or desirable in the usual business or trade of the
employer, regardless of their length of service; while the latter refers to those employees who have been
performing the job, regardless of the nature thereof, for at least a year. 82[24] 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. 83[25]
Based on the circumstances surrounding respondents employment by SMC, this Court is convinced that he
has attained the status of a regular employee long before he executed the employment contract with a
fixed period. Although respondent was initially hired by SMC as a casual employee, respondent has
attained the status of a regular employee. Respondent was initially hired by SMC on September 5, 1991
until March 1992. He was rehired for the same position in April 1992 which lasted for five to six months.
After three weeks, he was again rehired as a forklift operator and he continued to work as such until
August 1993. Thus, at the time he signed the Employment with a Fixed Period contract, respondent had
already been in the employ of SMC for at least twenty-three (23) months.
The Labor Code provides that a casual employee can be considered as a regular employee if said casual
employee has rendered at least one year of service regardless of the fact that such service may be
continuous or broken. Section 3, Rule V, Book II of the Implementing Rules and Regulations of the Labor
Code clearly defines the term at least one year of service to mean service within 12 months, whether
continuous or broken, reckoned from the date the employee started working, including authorized
absences and paid regular holidays, unless the working days in the establishment, as a matter of practice
or policy, or as provided in the employment contract, is less than 12 months, in which case said period
shall be considered one year. 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 of the employer.84[26]
Moreover, the nature of respondents work is necessary in the business in which SMC is engaged. SMC is
primarily engaged in the manufacture and marketing of beer products, for which purpose, it specifically
maintains a brewery in Bacolod City. 85[27] Respondent, on the other hand, was engaged as a forklift
operator tasked to lift and transfer pallets and pile them from the bottling section to the piling area. SMC
admitted that it hired respondent as a forklift operator since the third quarter of 1991 when, in the
absence of fully automated palletizers, manual transfers of beer cases and empties would be extensive
within the brewery and its premises.
SMC would have wanted this Court to believe that circumstances have transpired to force it to implement
full automation of its brewery and new marketing and distribution systems in its sales offices resulting in
the reduction of personnel and termination of employees with a fixed period contract. However, even after
the installation of the automated palletizers, SMC did not leave the position of forklift operator vacant.
SMC even transferred one of its regular employees to the Bacolod City Brewery to replace respondent who

81
82
83
84
85

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was in turn transferred to the bottling section of the plant. This demonstrates the continuing necessity and
indispensability of hiring a forklift operator to the business of SMC.
Undoubtedly, respondent is a regular employee of SMC. Consequently, the employment contract with a
fixed period which SMC had respondent execute was meant only to circumvent respondents right to
security of tenure and is, therefore, invalid.
PLT vs Arceo
Facts:
In May 1990, respondent Rosalina Arceo (Arceo) applied for the position of telephone operator with
petitioner Philippine Long Distance Telephone Company, Inc. Tarlac Exchange (PLDT). She, however,
failed the pre-employment qualifying examination. Having failed the test, Arceo requested PLDT to allow
her to work at the latters office even without pay. PLDT agreed and assigned her to its commercial section
where she was made to perform various tasks like photocopying documents, sorting out telephone bills
and notices of disconnection, and other minor assignments and activities. After two weeks, PLDT decided
to pay her the minimum wage.
On February 15, 1991, PLDT saw no further need for Arceos services and decided to fire her but, through
the intervention of PLDTs commercial section supervisor, Mrs. Beatriz Mataguihan, she was recommended
for an on-the-job training on minor traffic work. When she failed to assimilate traffic procedures, the
company transferred her to auxiliary services, a minor facility.
Subsequently, Arceo took the pre-qualifying exams for the position of telephone operator two more times
but again failed in both attempts.
Finally, on October 13, 1991, PLDT discharged Arceo from employment. She then filed a case for illegal
dismissal before the labor arbiter. 86[2] On May 11, 1993, the arbiter ruled in her favor. PLDT was ordered to
reinstate Arceo to her former position or to an equivalent position. This decision became final and
executory.
On June 9, 1993, Arceo was reinstated as casual employee with a minimum wage of P106 per day. She was
assigned to photocopy documents and sort out telephone bills.
On September 3, 1996 or more than three years after her reinstatement, Arceo filed a complaint for unfair
labor practice, underpayment of salary, underpayment of overtime pay, holiday pay, rest day pay and
other monetary claims. She alleged in her complaint that, since her reinstatement, she had yet to be
regularized and had yet to receive the benefits due to a regular employee.
Issue:
WON arceo is a regular employee of PLT (is Arceo eligible to become a regular employee of PLDT?)
Ruling:
Yes.
Article 280 of the Labor Code, as amended, 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

86

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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 engagement of the employee or where the work or services to be
performed is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided,
that, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such activity exists. (emphasis
ours)
Under the foregoing provision, a regular employee is (1) one who is either engaged to perform activities
that are necessary or desirable in the usual trade or business of the employer or (2) a casual employee
who has rendered at least one year of service, whether continuous or broken, with respect to the activity in
which he is employed.
Under the first criterion, respondent is qualified to be a regular employee. Her work, consisting mainly of
photocopying documents, sorting out telephone bills and disconnection notices, was certainly necessary
or desirable to the business of PLDT. But even if the contrary were true, the uncontested fact is that she
rendered service for more than one year as a casual employee. Hence, under the second criterion, she is
still eligible to become a regular employee.
Petitioners argument that respondents position has been abolished, if indeed true, does not
preclude Arceos becoming a regular employee. The order to reinstate her also included the alternative to
reinstate her to a position equivalent thereto. Thus, PLDT can still regularize her in an equivalent
position.
Moreover, PLDTs argument does not hold water in the absence of proof that the activity in which
Arceo was engaged (like photocopying of documents and sorting of telephone bills) no longer subsists.
Under Article 280, any employee who has rendered at least one year of service 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. For PLDTs failure to show that the activity undertaken by Arceo has been
discontinued, we are constrained to confirm her regularization in that position.
From what date will she be entitled to the benefits of a regular employee? Considering that she has
already worked in PLDT for more than one year at the time she was reinstated, she should be entitled to all
the benefits of a regular employee from June 9, 1993 the day of her actual reinstatement.
PLDTs other contention that the regularization of respondent as telephone operator was not
possible since she failed in three qualifying exams for that position is also untenable. It is understood that
she will be regularized in the position she held prior to the filing of her complaint with the labor arbiter, or,
if that position was already abolished, to an equivalent position. The position of telephone operator was
never even considered in any of the assailed decisions of the labor arbiter, the NLRC or the CA.
ABS-CBN BROADCASTING CORPORATION, petitioner,vs.MARLYN NAZARENO, MERLOU GERZON,
JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.
Facts:
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns
a network of television and radio stations, whose operations revolve around the broadcast, transmission,
and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates
from its radio and television operations. It has a franchise as a broadcasting company, and was likewise
issued a license and authority to operate by the National Telecommunications Commission.

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Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs)
on different dates. They were assigned at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN
employees identification cards and were required to work for a minimum of eight hours a day, including
Sundays and holidays. They were made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of
respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Issue:
WON the respondents are regular employees of ABS CBN
Ruling:
The respondents are regular employees of ABS CBN.
The question of whether respondents are regular or project employees or independent contractors is
essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous
effects to the legions of production assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least one year of service,
regardless of the nature of the activity performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having attained regular status.
Article 280 of the Labor Code 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.
In Universal Robina Corporation v. Catapang, 31 the Court reiterated the test in determining whether one is
a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or business of the
employer. The test is whether the former is usually necessary or desirable in the usual business or trade of
the employer. The connection can be determined by considering the nature of work performed and its
relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been
performing the job for at least a year, even if the performance is not continuous and merely intermittent,

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the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists. 32
As elaborated by this Court in Magsalin v. National Organization of Working Men: 33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to
ensure a "regular" workers security of tenure, however, can hardly be doubted. In determining whether an
employment should be considered regular or non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade of the
employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or
desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the
nature of the services rendered and its relation to the general scheme under which the business or trade is
pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal
activities required in carrying on the particular business or trade. But, although the work to be performed is
only for a specific project or seasonal, where a person thus engaged has been performing the job for at
least one year, even if the performance is not continuous or is merely intermittent, the law deems the
repeated and continuing need for its performance as being sufficient to indicate the necessity or
desirability of that activity to the business or trade of the employer. The employment of such person is also
then deemed to be regular with respect to such activity and while such activity exists. 34
Not considered regular employees are "project employees," the completion or termination of which is more
or less determinable at the time of employment, such as those employed in connection with a particular
construction project, and "seasonal employees" whose employment by its nature is only desirable for a
limited period of time. Even then, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity performed and while such activity
actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received preagreed "talent fees" instead of salaries, that they did not observe the required office hours, and that they
were permitted to join other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not actors or actresses or
radio specialists or mere clerks or utility employees. They are regular employees who perform several
different duties under the control and direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to
the activities in which they are employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determines whether a certain employment
is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces,
much less the procedure of hiring the employee or the manner of paying the salary or the actual time
spent at work. It is the character of the activities performed in relation to the particular trade or business
taking into account all the circumstances, and in some cases the length of time of its performance and its
continued existence.36 It is obvious that one year after they were employed by petitioner, respondents
became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was
presented to show that the duration and scope of the project were determined or specified at the time of
their engagement. Under existing jurisprudence, project could refer to two distinguishable types of
activities. First, a project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or determinable

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times. Second, the term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct
from the ordinary or regular business operations of the employer. The job or undertaking also begins and
ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or
undertaking, the duration and scope of which were specified at the time the employees were engaged for
that project.39
In this case, it is undisputed that respondents had continuously performed the same activities for an
average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of the
petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability
of such services to petitioners business or trade. 40 While length of time may not be a sole controlling test
for project employment, it can be a strong factor to determine whether the employee was hired for a
specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to
the usual trade or business of the employer. 41 We note further that petitioner did not report the termination
of respondents employment in the particular "project" to the Department of Labor and Employment
Regional Office having jurisdiction over the workplace within 30 days following the date of their separation
from work, using the prescribed form on employees termination/ dismissals/suspensions. 42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In
its earlier pleadings, petitioner classified respondents as program employees, and in later pleadings,
independent contractors. Program employees, or project employees, are different from independent
contractors because in the case of the latter, no employer-employee relationship exists.
POSEIDON FISHING/TERRY DE JESUS, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION
and JIMMY S. ESTOQUIA, Respondents.
Facts:
Petitioner Poseidon Fishing is a fishing company engaged in the deep-sea fishing industry. Its various
vessels catch fish in the outlying islands of the Philippines, which are traded and sold at the Navotas Fish
Port. One of its boat crew was private respondent Jimmy S. Estoquia. 3 Petitioner Terry de Jesus is the
manager of petitioner company.
Private respondent was employed by Poseidon Fishing in January 1988 as Chief Mate. After five years, he
was promoted to Boat Captain. In 1999, petitioners, without reason, demoted respondent from Boat
Captain to Radio Operator of petitioner Poseidon. 4 As a Radio Operator, he monitored the daily activities in
their office and recorded in the duty logbook the names of the callers and time of their calls. 5
On 3 July 2000, private respondent failed to record a 7:25 a.m. call in one of the logbooks. However, he
was able to record the same in the other logbook. Consequently, when he reviewed the two logbooks, he
noticed that he was not able to record the said call in one of the logbooks so he immediately recorded the
7:25 a.m. call after the 7:30 a.m. entry. 6
Around 9:00 oclock in the morning of 4 July 2000, petitioner Terry de Jesus detected the error in the entry
in the logbook. Subsequently, she asked private respondent to prepare an incident report to explain the
reason for the said oversight.7
At around 2:00 oclock in the afternoon of that same day, petitioner Poseidons secretary, namely Nenita
Laderas, summoned private respondent to get his separation pay amounting to Fifty-Five Thousand Pesos
(P55,000.00). However, he refused to accept the amount as he believed that he did nothing illegal to
warrant his immediate discharge from work.8

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Rising to the occasion, private respondent filed a complaint for illegal dismissal on 11 July 2000 with the
Labor Arbiter.
Asserting their right to terminate the contract with private respondent per the "Kasunduan" with him,
petitioners pointed to the provision thereof stating that he was being employed only on a por viaje basis
and that his employment would be terminated at the end of the trip for which he was being hired, to wit:
NA, kami ay sumasang-ayon na MAGLINGKOD at GUMAWA ng mga gawaing magmula sa pag-alis ng lantsa
sa pondohan sa Navotas patungo sa palakayahan; pabalik sa pondohan ng lantsa sa Navotas hanggang sa
paghango ng mga kargang isda.13
Petitioners lament that fixed-term employment contracts are recognized as valid under the law
notwithstanding the provision of Article 280 of the Labor Code. Petitioners theorize that the Civil Code has
always recognized the validity of contracts with a fixed and definite period, and imposes no restraints on
the freedom of the parties to fix the duration of the contract, whatever its object, be it species, goods or
services, except the general admonition against stipulations contrary to law, morals, good customs, public
order and public policy. Quoting Brent School Inc. v. Zamora, 14 petitioners are hamstrung on their reasoning
that under the Civil Code, fixed-term employment contracts are not limited, as they are under the present
Labor Code, to those that by their nature are seasonal or for specific projects with pre-determined dates of
completion as they also include those to which the parties by free choice have assigned a specific date of
termination. Hence, persons may enter into such contracts as long as they are capacitated to act,
petitioners bemoan.
Issue:
Was private respondent a regular employee at the time his employment was terminated on 04 July 2000?
Ruling:
Petitioners reliance in Brent vs Zamora is misplaced.
Respondent is indeed a regular employee of the petitioner when he was terminated on July 4, 2000.
Petitioners construal of Brent School, Inc. v. Zamora, has certainly gone astray. The subject of scrutiny in
the Brent case was the employment contract inked between the school and one engaged as its Athletic
Director. The contract fixed a specific term of five years from the date of execution of the agreement. This
Court upheld the validity of the contract between therein petitioner and private respondent, fixing the
latters period of employment. This Court laid down the following criteria for judging the validity of such
fixed-term contracts, to wit:
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. 15 (Emphasis supplied.)

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Brent cited some familiar examples of employment contracts which may neither be for seasonal work nor
for specific projects, but to which a fixed term is an essential and natural appurtenance, i.e., overseas
employment contracts, 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.16 Thus, in Brent, the acid test in considering fixed-term contracts as valid is: if from the
circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by
the employee, they should be disregarded for being contrary to public policy.
On the same tack as Brent, the Court in Pakistan International Airlines Corporation v. Ople,17 ruled in this
wise:
It is apparent from Brent School that the critical consideration is the presence or absence of a substantial
indication that the period specified in an employment agreement was designed to circumvent the security
of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This
indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a
fixed term of the employment agreement, or upon evidence aliunde of the intent to evade.
Consistent with the pronouncements in these two earlier cases, the Court, in Cielo v. National Labor
Relations Commission,18 did not hesitate to nullify employment contracts stipulating a fixed term after
finding that "the purpose behind these individual contracts was to evade the application of the labor laws."
In the case under consideration, the agreement has such an objective - to frustrate the security of tenure
of private respondent- and fittingly, must be nullified. In this case, petitioners intent to evade the
application of Article 280 of the Labor Code is unmistakable. In a span of 12 years, private respondent
worked for petitioner company first as a Chief Mate, then Boat Captain, and later as Radio Operator. His job
was directly related to the deep-sea fishing business of petitioner Poseidon. His work was, therefore,
necessary and important to the business of his employer. Such being the scenario involved, private
respondent is considered a regular employee of petitioner under Article 280 of the Labor Code, the law in
point, which 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 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. (Emphasis supplied.)
Moreover, unlike in the Brent case where the period of the contract was fixed and clearly stated, note that
in the case at bar, the terms of employment of private respondent as provided in the Kasunduan was not
only vague, it also failed to provide an actual or specific date or period for the contract. As adroitly
observed by the Labor Arbiter:
There is nothing in the contract that says complainant, who happened to be the captain of said vessel, is a
casual, seasonal or a project worker. The date July 1 to 31, 1998 under the heading "Pagdating" had been
placed there merely to indicate the possible date of arrival of the vessel and is not an indication of the
status of employment of the crew of the vessel.

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Actually, the exception under Article 280 of the Labor Code in which the respondents have taken refuge to
justify its position does not apply in the instant case. The proviso, "Except where the employment has been
fixed for a specific project or undertaking the completion or determination 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." (Article 280 Labor Code), is inapplicable
because the very contract adduced by respondents is unclear and uncertain. The kasunduan does not
specify the duration that complainant had been hired x x x.19 (Emphasis supplied.)
Furthermore, as petitioners themselves admitted in their petition before this Court, private respondent was
repeatedly hired as part of the boats crew and he acted in various capacities onboard the vessel. In
Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, 20 we held that 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.
And, 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. 21
In Bustamante v. National Labor Relations Commission, 22 the Court expounded on what are regular
employees under Article 280 of the Labor Code, viz:
It is undisputed that petitioners were illegally dismissed from employment. Article 280 of the Labor Code,
states:
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
that, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
This provision draws a line between regular and casual employment, a distinction however often abused by
employers. The provision enumerates two (2) kinds of employees, the regular employees and the casual
employees. The regular employees consist of the following:
1) those engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and
2) those who have rendered at least one year of service whether such service is continuous or
broken.23
Ostensibly, in the case at bar, at different times, private respondent occupied the position of Chief Mate,
Boat Captain, and Radio Operator. In petitioners interpretation, however, this act of hiring and re-hiring
actually highlight private respondents contractual status saying that for every engagement, a fresh
contract was entered into by the parties at the outset as the conditions of employment changed when the
private respondent filled in a different position. But to this Court, the act of hiring and re-hiring in various
capacities is a mere gambit employed by petitioner to thwart the tenurial protection of private respondent.
Such pattern of re-hiring and the recurring need for his services are testament to the necessity and
indispensability of such services to petitioners business or trade. 24

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Petitioners would brush off private respondents length of service by stating that he had worked for the
company merely for several years 25 and that in those times, his services were not exclusive to petitioners.
On the other hand, to prove his claim that he had continuously worked for petitioners from 1988 to 2000,
private respondent submitted a copy of his payroll 26 from 30 May 1988 to October 1988 and a copy of his
SSS Employees Contributions27 as of the year 2000. These documents were submitted by private
respondent in order to benchmark his claim of 12 years of service. Petitioners, however, failed to submit
the pertinent employee files, payrolls, records, remittances and other similar documents which would show
that private respondents work was not continuous and for less than 12 years. Inasmuch as these
documents are not in private respondents possession but in the custody and absolute control of
petitioners, their failure to refute private respondents evidence or even categorically deny private
respondents allegations lead us to no other conclusion than that private respondent was hired in 1988 and
had been continuously in its employ since then. Indeed, petitioners failure to submit the necessary
documents, which as employers are in their possession, gives rise to the presumption that their
presentation is prejudicial to its cause.28
To recapitulate, it was after 12 long years of having private respondent under its wings when petitioners,
possibly sensing a brewing brush with the law as far as private respondents employment is concerned,
finally found a loophole to kick private respondent out when the latter failed to properly record a 7:25 a.m.
call. Capitalizing on this faux pas, petitioner summarily dismissed private respondent. On this note, we
disagree with the finding of the NLRC that private respondent was negligent on account of his failure to
properly record a call in the log book. A review of the records would ineluctably show that there is no basis
to deduct six months worth of salary from the total separation pay that private respondent is entitled to.
We note further that the NLRCs finding clashes with that of the Labor Arbiter which found no such
negligence and that such inadvertence on the part of private respondent, at best, constitutes simple
negligence punishable only with admonition or suspension for a day or two.
We are not won over.
As correctly pointed out by the Court of Appeals, the "activity of catching fish is a continuous process and
could hardly be considered as seasonal in nature." 33 In Philex Mining Corp. v. National Labor Relations
Commission,34 we defined project employees as those workers hired (1) for a specific project or
undertaking, and (2) the completion or termination of such project has been determined at the time of the
engagement of the employee. The principal test for determining whether particular employees are "project
employees" as distinguished from "regular employees," is whether or not the "project employees" were
assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at
the time the employees were engaged for that project. In this case, petitioners have not shown that
private respondent was informed that he will be assigned to a "specific project or undertaking." As earlier
noted, neither has it been established that he was informed of the duration and scope of such project or
undertaking at the time of their engagement.
More to the point, in Maraguinot, Jr. v. National Labor Relations Commission,35 we ruled 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.
In fine, inasmuch as private respondents functions as described above are no doubt "usually necessary or
desirable in the usual business or trade" of petitioner fishing company and he was hired continuously for
12 years for the same nature of tasks, we are constrained to say that he belongs to the ilk of regular
employee. Being one, private respondents dismissal without valid cause was illegal. And, where illegal
dismissal is proven, the worker is entitled to back wages and other similar benefits without deductions or
conditions.36
Indeed, it behooves this Court to be ever vigilant in checking the unscrupulous efforts of some of our
entrepreneurs, primarily aimed at maximizing their return on investments at the expense of the lowly
workingman.37

Page 35 of 98

BIG AA MANUFACTURER, Petitioner, vs.EUTIQUIO ANTONIO,

ANTONIO, and LEONARDO ANTONIO, SR.,* Respondents.

JAY

ANTONIO,

FELICISIMO

Facts:
Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo, 5with office
address at 311 Barrio Santol, Balagtas, Bulacan.
On January 13, 2000, herein respondents Eutiquio Antonio, 6Jay Antonio, Felicisimo Antonio, Leonardo
Antonio, Sr. and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the NLRCs
Regional Arbitration Branch No. III. They claimed that they were dismissed on January 11, 2000 and sought
separation pay from petitioner.
When amicable settlement during the mandatory conference failed, the parties were required to file their
position papers. The Labor Arbiter did not dismiss the complaint with respect to Roberto Fabian, despite his
failure to file a position paper. Neither did the Labor Arbiters decision concern Roberto Fabian. Hence, this
petition shall apply only to Eutiquio, Jay, Felicisimo, and Leonardo, Sr., all surnamed Antonio, the
respondents herein.
In respondents position paper,7they alleged that as regular employees, they worked from 8:00 a.m. to
5:00 p.m. at petitioners premises using petitioners tools and equipment and they received P250 per day.
Eutiquio was employed as carpenter-foreman from 1991-1999; Jay as carpenter from 1993-1999; Felicisimo
as carpenter from 1994-1999; and Leonardo, Sr. also as carpenter from 1997-1999. According to
respondents, they were dismissed without just cause and due process; hence, their prayer for
reinstatement and full backwages. They also impleaded one Hermie Alejo, a relative of the petitioners
owner, as co-respondent in their complaint.
Issue:
WON the respondents are regular employees of the petitioner
Ruling:
The respondents are regular employees of the petitioner.
Considering the submission of the parties, we are constrained to agree with the unanimous ruling of the
Court of Appeals, NLRC and Labor Arbiter that respondents are petitioners regular employees.
Respondents were employed for more than one year and their work as carpenters was necessary or
desirable in petitioners usual trade or business of manufacturing office furniture. Under Article 280 of the
Labor Code, the applicable test to determine whether an employment should be considered regular or nonregular is the reasonable connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer.20
True, certain forms of employment require the performance of usual or desirable functions and exceed one
year but do not necessarily result to regular employment under Article 280 of the Labor Code. 21Some
specific exceptions include project or seasonal employment. Yet, in this case, respondents cannot be
considered project employees. Petitioner had neither shown that respondents were hired for a specific
project the duration of which was determined at the time of their hiring nor identified the specific project or
phase thereof for which respondents were hired.
We also agree that Eutiquio was not an independent contractor for he does not carry a distinct and
independent business, and he does not possess substantial capital or investment in tools, equipment,
machinery or work premises.22He works within petitioners premises using the latters tools and materials,
as admitted by petitioner. Eutiquio is also under petitioners control and supervision. Attesting to this is

Page 36 of 98

petitioners admission that it allowed respondents to use its facilities for the "proper implementation" of
job orders. Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines, penalties;
providing petitioners right to fire employees or "contractors"; requiring the carpentry division to join
petitioners exercise program; and providing rules on machine maintenance, all reflect control and
supervision over respondents.
Petitioner likewise alleges that it did not dismiss respondents as they were not its regular employees; that
respondents failed to sufficiently establish the fact of illegal dismissal; and that respondents abandoned
the work after it issued the Implementing Guidelines.23
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.
Facts:
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 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. Basica
lly, 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
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
Issue:
WON Paguio is a regular employee of the respondent (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?)
Ruling:

Page 37 of 98

The petitioner is a regular employee.

A "regular employment," whether it is one or not, is aptly gauged from the concurrence, or the nonconcurrence, 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
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.
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
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 petitioner's invaluable contribution to the business when it
renewed, not just once but five times, its contract with petitioner.
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

Page 38 of 98

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.
B. seasonal
HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS and CRISTINE SEGURA,
petitioners, vs.NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND GENERAL TRADE,
respondents.
Facts:
'Now therefore, in the interest of both labor and management, parties herein agree as follows:
'1. That the list of the names of affected union members hereto attached and made part of this agreement
shall be referred to the Hacienda payroll of 1990 and determine whether or not this concerned Union
members are hacienda workers;
'2. That in addition to the payroll of 1990 as reference, herein parties will use as guide the subjects of a
Memorandum of Agreement entered into by and between the parties last January 4, 1990;
'3. That herein parties can use other employment references in support of their respective claims whether
or not any or all of the listed 36 union members are employees or hacienda workers or not as the case may
be;
'4. That in case conflict or disagreement arises in the determination of the status of the particular hacienda
workers subject of this agreement herein parties further agree to submit the same to voluntary arbitration;
'5. To effect the above, a Committee to be chaired by Rose Mengaling is hereby created to be composed of
three representatives each and is given five working days starting Jan. 23, 1992 to resolve the status of the
subject 36 hacienda workers. (Union representatives: Bernardo Torres, Martin Alas-as, Ariston Arulea Jr.)"
"Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation Meeting showed as
follows:

'The meeting started at 10:00 A.M. A list of employees

was submitted by Atty. Tayko based on who received
their 13th month pay. The following are deemed not
considered employees:

1. Luisa Rombo
2. Ramona Rombo
3. Bobong Abrega
4. Boboy Silva

'The name Orencio Rombo shall be verified in the 1990

payroll.
'The following employees shall be reinstated immediately upon availability of work:
1. Jose Dagle

7. Alejandro Tejares

2. Rico Dagle

8. Gaudioso Rombo

3. Ricardo Dagle

9. Martin Alas-as Jr.

4. Jesus Silva

10. Cresensio Abrega

Page 39 of 98

5. Fernando Silva

11. Ariston Eruela Sr.

6. Ernesto Tejares

12. Ariston Eruela Jr.'

It is being disputed the nature of the employment done by the laborers in hacienda Fatima.
Issue:
Won the work of respondents was seasonal in nature
Ruling:
The respondents are regular employees an their work was not seasonal in nature.
The CA did not err when it held that respondents were regular employees.
Article 280 of the Labor Code, as amended, states:
"Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exist." (Italics supplied)
For respondents to be excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have also been employed only for the
duration of one season. The evidence proves the existence of the first, but not of the second, condition.
The fact that respondents with the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga and
Boboy Silva repeatedly worked as sugarcane workers for petitioners for several years is not denied by
the latter. Evidently, petitioners employed respondents for more than one season. Therefore, the general
rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission,

13

the Court issued this clarification:

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

Page 40 of 98

". . . [T]he fact that [respondents] do not work continuously for one whole year but only for the duration of
the . . . season does not detract from considering them in regular employment since in a litany of cases
this Court has already settled that seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are not separated from service in said period, but merely considered
on leave until re-employed." 14
The CA did not err when it ruled that Mercado v. NLRC 15 was not applicable to the case at bar. In the
earlier case, the workers were required to perform phases of agricultural work for a definite period of time,
after which their services would be available to any other farm owner. They were not hired regularly and
repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof. On the
other hand, herein respondents, having performed the same tasks for petitioners every season for several
years, are considered the latter's regular employees for their respective tasks. Petitioners' eventual refusal
to use their services even if they were ready, able and willing to perform their usual duties whenever
these were available and hiring of other workers to perform the tasks originally assigned to respondents
amounted to illegal dismissal of the latter.
The Court finds no reason to disturb the CA's dismissal of what petitioners claim was their valid exercise of
a management prerogative. The sudden changes in work assignments reeked of bad faith. These changes
were implemented immediately after respondents had organized themselves into a union and started
demanding collective bargaining. Those who were union members were effectively deprived of their jobs.
Petitioners' move actually amounted to unjustified dismissal of respondents, in violation of the Labor Code.
"Where there is no showing of clear, valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a valid and authorized cause." 16 In the case at bar, petitioners failed to prove any such
cause for the dismissal of respondents who, as discussed above, are regular employees.
PHILIPPINE TOBACCO FLUE-CURING & REDRYING CORPORATION, petitioner, vs.NATIONAL LABOR
RELATIONS COMMISSION Ligaya Lubat et al.
Facts:
This case involves two groups of seasonal workers who claimed separation benefits after the closure of
petitioner's tobacco processing plant in Balintawak, Metro Manila and the transfer of its tobacco operations
to Candon, Ilocos Sur. Petitioner refuses to grant separation pay to the workers belonging to the first batch
(referred to as the Lubat group), because they had not been given work during the preceding year and,
hence, were no longer in its employ at the time it closed its Balintawak plant. Likewise, it claims exemption
from awarding separation pay to the second batch (the Luris group), because the closure of its plant was
due to "serious business losses," as defined in Article 283 of the Labor Code.
These refer to the consolidated cases for payment of separation pay lodged by [the] Lubat Group, and for
illegal dismissal and underpayment of separation pay by [the] Luris group, with prayers for damages and
attorney's fees against the above respondents.
The record reveals that all complainants in both cases were former workers of respondent with their
respective periods of employment and latest wages stated in the parties' pleadings/[a]nnexes.
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 red[r]ying operations at Balintawak,
Quezon City and transfer [of] the same to Candon, Ilocos Sur was served to the DOLE.
On August 3, 1994, complainants were also notified of the said decision to close and transfer.

Page 41 of 98

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).
Issue:
WON the respondents are seasonal employees
Ruling:
Respondents are seasonal workers who are called to work from time to time ripened into regular
employment.
Petitioner relies upon our ruling in Mercado v. NLRC 11 that the "employment [of seasonal employees]
legally ends upon completion of the . . . season," a statement which was subsequently reiterated in
Magcalas
v.
NLRC. 12 Thus, 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.
We are not persuaded. From the facts, we are convinced that petitioner illegally dismissed the members of
the Lubat group when it refused to allow them to work during the 1994 season.
This Court has previously ruled in Manila Hotel Company v. CIR 13 that seasonal workers who are called to
work from time to time and are temporarily laid of during off-season are not separated from service in said
period, but are merely considered on leave until reemployed, viz.:
The nature of their relationship . . . is such that during off season they are temporarily laid off but during
summer season they are re-employed, or when their services may be needed. They are not strictly
speaking separated from the service but are merely considered as on leave of absence without pay until
they are re-employed.
The above doctrine was echoed by this Court in Industrial-Commercial-Agricultural Workers' Organization
(ICAWO) v. CIR 14 and Visayan Stevedore Transportation Company v. CIR. 15
Petitioner claims that the aforecited ruling has been superseded by Article 280 of the Labor Code, which
took effect on November 1, 1974. We disagree. There is no clear conflict between the above doctrine and
Article 280 of the Labor Code. In fact, the same doctrine was reiterated by this Court in Tacloban Sagkahan
Rice and Corn Mills Co. v. NLRC 16 in 1990, which was promulgated after the labor Code took effect.
Furthermore, in Bacolod-Murcia Milling Co, Inc. v. NLRC, 17 this Court considered a seasonal workers "in
regular employment" in cases involving the determination of an employer-employee relationship and
security of tenure. The Court ruled:
While under prevailing jurisprudence, Canete may be considered as in regular employment even during
those years when she was merely a seasonal worker, that legal conclusion will hold true only in cases
involving the determination of an employer-employee relationship or security of tenure.
Again in Gaco v. NLRC, petitioner therein was a seasonal worker employed and repeatedly rehired in a
business enterprise similar to that of petitioner herein. Finding that he was in regular employment and thus
entitled to separation pay for having been constructively dismissed, the Court stated:
I may appear that the work in private respondent Orient Leaf Tobacco Corporation is seasonal, however,
the records reveal that petitioner Zenaida Gaco was repeatedly re-hired, sufficiently evidencing the

Page 42 of 98

necessity and indispensability of her services to the former's business or trade. Furthermore, she has been
employed since 1974 up to the end of the season in 1989. Owing to her length of service, she became a
regular employee, by operation of law, one year after she was employed. 18
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.
The facts in the above-mentioned cases are different from those in Mercado v. NLRC 19 and in Magcalas v.
NLRC. 20 In Mercado, although respondent constantly availed herself of petitioners' services from year to
year, it was clear from the facts therein that they were not in her regular employ. Petitioners therein
performed different phases of agricultural work in a given year. However, during that period that period,
they were free to work for other farm owners, and in fact they did. In other words, they worked for
respondent, but were nevertheless free to contract their services with other farm owners. The Court was
thus emphatic when it ruled that petitioners were mere project employees, who could be hired by other
farm owners. As such, their employment would naturally end upon the completion of each project or each
phase of farm work which has been contracted. In Magcalas v. NLRC, the Court merely cited the
aforequoted ruling to explain the difference among regular, project and seasonal employees. In fact, it
concluded that the employees therein were regular and not project employees.
From the peculiar facts of Mercado and Magcalas, it is clear that the ruling therein is not inconsistent with
Manila Hotel, Gaco and other cases. It is noteworthy that the ponente in Mercado concurred in the Court's
ruling in Gaco awarding to the seasonal employee separation pay for every year of service.
Prescinding from the above, we hold that 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 employer's 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.
PHILIPPINE FRUIT & VEGETABLE INDUSTRIES, INC. and its President and General Manager, MR.
PEDRO CASTILLO, petitioners,vs.NATIONAL LABOR RELATIONS COMMISSION, and Philippine
Fruit and Vegetable Workers Union-Tupas Local Chapter, respondents.
Facts:
Petitioner Philippine Fruit and Vegetable Industries, Inc. (PFVII, for brevity) is a government-owned and
controlled corporation engaged in the manufacture and processing of fruit and vegetable purees for
export. Petitioner Pedro Castillo is the former President and General Manager of petitioner PFVII.
On September 5, 1988 herein private respondent Philippine Fruit and Vegetable Workers Union-Tupas Local
Chapter, for and in behalf of 127 of its members, filed a complaint for unfair labor practice and/or illegal
dismissal with damages against petitioner corporation. Private respondent alleged that many of its
complaining members started working for San Carlos Fruits Corporation which later incorporated into PFVII
in January or February 1983 until their dismissal on different dates in 1985, 1986, 1987 and 1988. They
further alleged that the dismissals were due to complainants' involvement in union activities and were
without just cause.
Issue:

Page 43 of 98

WON the respondents are seasonal employees

Ruling:
They are NOT seasonal employees but regular employees.
Art. 280 of the Labor Code provides:
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 employers, except where the employment has been fixed for a specific project. . . .
An employment shall be deemed to be casual if it is not covered by the preceeding 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.
Under the above provision, an employment shall be deemed regular where the employee: a) has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer; or b) has rendered at least one year of service, whether such service is continuous or broken,
with respect to the activity in which he is employed. 12
In the case at bar, the work of complainants as seeders, operators, sorters, slicers, janitors, drivers, truck
helpers, mechanics and office personnel is without doubt necessary in the usual business of a food
processing company like petitioner PFVII.
It should be noted that complainants' employment has not been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of their appointment or hiring. 13
Neither is their employment seasonal in nature. While it may be true that some phases of petitioner
company's processing operations is dependent on the supply of fruits for a particular season, the other
equally important aspects of its business, such as manufacturing and marketing are not seasonal. The fact
is that large-scale food processing companies such as petitioner company continue to operate and do
business throughout the year even if the availability of fruits and vegetables is seasonal.
Having determined that private respondents are regular employees under the first paragraph, we need not
dwell on the question of whether or not they had rendered one year of service. This Court has clearly
stated in Mercado, Sr. vs. NLRC, 14 that:
The second paragraph of Article 280 demarcates as "casual" employees, all other employees who do not
fall under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as
regular employees those "casual" employees who have rendered at least one year of service regardless of
the fact that such service may be continuous or broken.1wphi1.nt
. . . Hence, the proviso is applicable only to the employees who are deemed "casuals" but not to the
"project" employees nor the regular employees treated in paragraph one of Art. 280.
As correctly noted by the Office of the Solicitor General; private respondents in this case are deemed
regular employees by virtue of the fact that they performed functions which are necessary and desirable in
the usual business of PFVII as provided under the first paragraph of Art. 280 of the Labor Code.
C. Project Employees

Page 44 of 98

WILFREDO ARO, RONILO TIROL, JOSE PACALDO, PRIMITIVO CASQUEJO and MARCIAL ABGO,
Petitioners,versus NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION and
BENTHEL DEVELOPMENT CORPORATION,Respondents.
Facts:
Several employees of private respondent Benthel Development Corporation, including the petitioners, filed
a Complaint for illegal dismissal with various money claims and prayer for damages against the latter, in
the NLRC Arbitration Branch No. VII in Cebu City and docketed as RAB Case No. 07-09-1222-97/12-1609-97.
Thereafter, Labor Arbiter Ernesto F. Carreon rendered a decision finding private respondent guilty of illegal
dismissal and ordering it to pay its thirty-six (36) employees P446,940.00 as separation pay.
Issue:
Won the petitioners are project employees
Ruling:
The petitioners are project employees.
Court agrees with the findings of the CA that petitioners were project employees.
According to the CA, petitioners are project employees as found by Labor Arbiter Ernesto Carreon in his
Decision dated May 28, 1998, because they were hired for the construction of the Cordova Reef Village
Resort in Cordova, Cebu, which was later on affirmed by the NLRC in its January 12, 1999 decision. The
only discrepancy is the Order of the NLRC that petitioners are entitled to backwages up to the finality of its
decision, when as project employees, private respondents are only entitled to payment of backwages until
the date of the completion of the project. In a later resolution on private respondent's motion for
reconsideration of its January 12, 1999 decision, the NLRC changed its findings by ruling that petitioners
herein were regular employees and, therefore, entitled to full backwages, until finality of the decision,
citing that petitioners repeated rehiring over a long span of time made them regular employees.
Article 280 of the Labor Code distinguishes a "project employee" from a "regular employee," thus:
Article 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 service to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year 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.
In Hanjin Heavy Industries and Construction Co. Ltd. v. Ibaez, 87[10] this Court extensively discussed the
above distinction, thus:
x x x [T]he principal test for determining whether particular employees are properly characterized as
"project employees" as distinguished from "regular employees" is whether or not the project employees

87

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were assigned to carry out a "specific project or undertaking," the duration and scope of which were
specified at the time the employees were engaged for that project. 88[11]
In a number of cases,89[12] the Court has held that the length of service or the re-hiring of
construction workers on a project-to-project basis does not confer upon them regular employment status,
since their re-hiring is only a natural consequence of the fact that experienced construction workers are
preferred. Employees who are hired for carrying out a separate job, distinct from the other undertakings of
the company, the scope and duration of which has been determined and made known to the employees at
the time of the employment , are properly treated as project employees and their services may be lawfully
terminated upon the completion of a project. 90[13] Should the terms of their employment fail to comply
with this standard, they cannot be considered project employees.
In Abesco Construction and Development Corporation v. Ramirez,91[14] which also involved a construction
company and its workers, this Court considered it crucial that the employees were informed of their status
as project employees:
The principal test for determining whether employees are "project employees" or "regular employees" is
whether they are assigned to carry out a specific project or undertaking, the duration and scope of which
are specified at the time they are engaged for that project. Such duration, as well as the particular
work/service to be performed, is defined in an employment agreement and is made clear to the employees
at the time of hiring.
In this case, petitioners did not have that kind of agreement with respondents. Neither did they inform
respondents of the nature of the latters work at the time of hiring. Hence, for failure of petitioners to
substantiate their claim that respondents were project employees, we are constrained to declare them as
regular employees.
In Caramol v. National Labor Relations Commission,92[15] and later reiterated in Salinas, Jr. v. National
Labor Relations Commission,93[16] the Court markedly stressed the importance of the employees' knowing
consent to being engaged as project employees when it clarified that "there is no question that stipulation
on employment contract providing for a fixed period of employment such as project-to-project contract is
valid provided the period 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 x x x."
It is not disputed that petitioners were hired for the construction of the Cordova Reef Village Resort in
Cordova, Cebu. By the nature of the contract alone, it is clear that petitioners' employment was to carry
out a specific project. Hence, the CA did not commit grave abuse of discretion when it affirmed the
findings of the Labor Arbiter. The CA correctly ruled:
A review of the facts and the evidence in this case readily shows that a finding had been made by Labor
Arbiter Ernesto Carreon, in his decision dated May 28, 1998, that complainants, including private
respondents, are project employees. They were hired for the construction of the Cordova Reef Village

88
89
90
91
92
93

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Resort in Cordova, Cebu. We note that no appeal had been made by the complainants, including herein
private respondents, from the said finding. Thus, that private respondents are project employees has
already been effectively established.
Likewise, a review of the public respondent's January 12, 1999 decision shows that it affirmed the labor
arbiter's finding of the private respondents' being project employees.
We therefore cannot fathom how the public respondent could have ordered backwages up to the finality of
its decision when, as project employees, private respondents are only entitled to payment of the same
until the date of the completion of the project. It is settled that, without a valid cause, the employment of
project employees cannot be terminated prior to expiration. Otherwise, they shall be entitled to
reinstatement with full backwages. However, if the project or work is completed during the pendency of
the ensuing suit for illegal dismissal, the employees shall be entitled only to full backwages from the date
of the termination of their employment until the actual completion of the work.
While it may be true that in the proceedings below the date of completion of the project for which the
private respondents were hired had not been clearly established, it constitutes grave abuse of discretion
on the part of the public respondent for not determining for itself the date of said completion instead of
merely ordering payment of backwages until finality of its decision.x x x x
The decision of the labor arbiter, as affirmed by the public respondent in its January 12, 1999 decision,
clearly established that private respondents were project employees. Because there was no showing then
that the project for which their services were engaged had already been completed, the public respondent
likewise found that private respondents were illegally dismissed and thus entitled to backwages.
However, in utter disregard of the law and prevailing jurisprudence, the public respondents capriciously
and arbitrarily ordered that the said backwages be computed until the finality of its decision instead of
only until the date of the project completion. In grave abuse of its discretion, the public respondent
refused to consider the evidence presented before it as to the date of completion of the Cordova Reef
Village Resort project. The records show that affidavits have been executed by the petitioner's manager,
corporate architect and project engineer as to the fact of the completion of the project in October 1996.
As these evidences [sic] were already a matter of record, the public respondent should not have closed its
eyes and should have endeavored to render a correct and just judgment.x x x x
Furthermore, as earlier noted, private respondents did not appeal from the Labor Arbiter's findings that
they were indubitably project employees. However, they were entitled to the payment of separation pay
only for the reason that the date of the completion of the project for which they were hired had not been
clearly established. Thus, in affirming the labor arbiter's decision, the public respondent in effect
sustained the finding that private respondents are project employees.
The statement, therefore,
contained in the resolution of the petitioner's motion for reconsideration of its January 12, 1999 decision
that repeated rehiring makes the worker a regular employee, is at best an obiter, especially considering
that such conclusion had not been shown to apply to the circumstances then obtaining with the private
respondents' employment with the petitioner. 94[17]
Therefore, being project employees, petitioners are only entitled to full backwages, computed from the
date of the termination of their employment until the actual completion of the work. Illegally dismissed
workers are entitled to the payment of their salaries corresponding to the unexpired portion of their
employment where the employment is for a definite period. 95[18] In this case, as found by the CA, the
Cordova Reef Village Resort project had been completed in October 1996 and private respondent herein
had signified its willingness, by way of concession to petitioners, to set the date of completion of the

94
95

Page 47 of 98

project as March 18, 1997; hence, the latter date should be considered as the date of completion of the
project for purposes of computing the full backwages of petitioners.
D.M. CONSUNJI,
JAMINRespondent.

INC.

and/or

DAVID

M.

CONSUNJI,

Petitioners,-

versus

-ESTELITO

L.

Facts:
On December 17, 1968, petitioner D.M. Consunji, Inc. (DMCI), a construction company, hired respondent
Estelito L. Jamin as a laborer. Sometime in 1975, Jamin became a helper carpenter. Since his initial hiring,
Jamins employment contract had been renewed a number of times. 96[4] On March 20, 1999, his work at
DMCI was terminated due to the completion of the SM Manila project. This termination marked the end of
his employment with DMCI as he was not rehired again.
On April 5, 1999, Jamin filed a complaint 97[5] for illegal dismissal, with several money claims (including
attorneys fees), against DMCI and its President/General Manager, David M. Consunji. Jamin alleged that
DMCI terminated his employment without a just and authorized cause at a time when he was already 55
years old and had no independent source of livelihood. He claimed that he rendered service to DMCI
continuously for almost 31 years. In addition to the schedule of projects (where he was assigned)
submitted by DMCI to the labor arbiter, 98[6] he alleged that he worked for three other DMCI projects: Twin
Towers, Ritz Towers, from July 29, 1980 to June 12, 1982; New Istana Project, B.S.B. Brunei, from June 23,
1982 to February 16, 1984; and New Istana Project, B.S.B. Brunei, from January 24, 1986 to May 25, 1986.
DMCI denied liability. It argued that it hired Jamin on a project-to-project basis, from the start of his
engagement in 1968 until the completion of its SM Manila project on March 20, 1999 where Jamin last
worked. With the completion of the project, it terminated Jamins employment. It alleged that it submitted
a report to the Department of Labor and Employment (DOLE) everytime it terminated Jamins services.
Issue:
WON Jamin is a project employee
Ruling:
Due to repeated rehiring, Jamin as project employee from the very start deeme to be regular employee.
We agree with the CA. In Liganza v. RBL Shipyard Corporation,99[37] the Court held that [a]ssuming,
without granting[,] that [the] petitioner was initially hired for specific projects or
undertakings, the repeated re-hiring and continuing need for his services for over eight (8)
years have undeniably made him a regular employee. We find the Liganza ruling squarely
applicable to this case, considering that for almost 31 years, DMCI had repeatedly, continuously and
successively engaged Jamins services since he was hired on December 17, 1968 or for a total of 38 times
35 as shown by the schedule of projects submitted by DMCI to the labor arbiter 100[38] and three more
projects or engagements added by Jamin, which he claimed DMCI intentionally did not include in its
schedule so as to make it appear that there were wide gaps in his engagements. One of the three projects

96
97
98
99
100

Page 48 of 98

was local, the Ritz Towers,101[39] from July 29, 1980 to June 12, 1982, while the other two were overseas
the New Istana Project in Brunei, Darussalam, from June 23, 1982 to February 16, 1984; 102[40] and again,
the New Istana Project, from January 24, 1986 to May 25, 1986.103[41]
We reviewed Jamins employment contracts as the CA did and we noted that while the contracts indeed
show that Jamin had been engaged as a project employee, there was an almost unbroken string of Jamins
rehiring from December 17, 1968 up to the termination of his employment on March 20, 1999. While the
history of Jamins employment (schedule of projects) 104[42] relied upon by DMCI shows a gap of almost four
years in his employment for the period between July 28, 1980 (the supposed completion date of the
Midtown Plaza project) and June 13, 1984 (the start of the IRRI Dorm IV project), the gap was caused by
the companys omission of the three projects above mentioned.
For not disclosing that there had been other projects where DMCI engaged his services, Jamin accuses the
company of suppressing vital evidence that supports his contention that he rendered service in the
companys construction projects continuously and repeatedly for more than three decades. The nondisclosure might not have constituted suppression of evidence it could just have been overlooked by the
company but the oversight is unfair to Jamin as the non-inclusion of the three projects gives the
impression that there were substantial gaps not only of several months but years in his employment with
DMCI.
Thus, as Jamin explains, the Ritz Tower Project (July 29, 1980 to June 12, 1982) and the New Istana Project
(June 23, 1982 to February 16, 1984) would explain the gap between the Midtown Plaza project
(September 3, 1979 to July 28, 1980) and the IRRI Dorm IV project (June 13, 1984 to March 12, 1985) and
the other New Istana Project (January 24, 1986 to May 25, 1986) would explain the gap between P. 516
Hanger (September 13, 1985 to January 23, 1986) and P. 516 Maint (May 26, 1986 to November 18, 1987).
To reiterate, Jamins employment history with DMCI stands out for his continuous, repeated and successive
rehiring in the companys construction projects. In all the 38 projects where DMCI engaged Jamins
services, the tasks he performed as a carpenter were indisputably necessary and desirable in DMCIs
construction business. He might not have been a member of a work pool as DMCI insisted that it does not
maintain a work pool, but his continuous rehiring and the nature of his work unmistakably made him a
regular employee. In Maraguinot, Jr. v. NLRC,105[43] the Court held that once a project or work pool
employee has been: (1) continuously, as opposed to intermittently, rehired 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.
Further, as we stressed in Liganza,106[44] [r]espondent capitalizes on our ruling in D.M. Consunji, Inc. v.
NLRC which reiterates the rule that the length of service of a project employee is not the controlling test of
employment tenure but whether or not 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.
Surely, length of time is not the controlling test for project employment. Nevertheless, it is vital in
determining if the employee was hired for a specific undertaking or tasked to perform functions vital,
necessary and indispensable to the usual business or trade of the employer. Here, [private] respondent
had been a project employee several times over. His employment ceased to be coterminous with specific

101
102
103
104
105
106

Page 49 of 98

projects when he was repeatedly re-hired due to the demands of petitioners business. 107[45] Without
doubt, Jamins case fits squarely into the employment situation just quoted.
With our ruling that Jamin had been a regular employee, the issue of whether DMCI submitted termination
of employment reports, pursuant to Policy Instructions No. 20 (Undated 108[46]), as superseded by DOLE
Department Order No. 19 (series of 1993), has become academic. DOLE Policy Instructions No. 20 provides
in part:
Project employees are not entitled to termination pay if they are terminated as a result of the completion
of the project or any phase thereof in which they are employed, regardless of the number of projects in
which they have been employed by a particular construction company. Moreover, the company is not
required to obtain a clearance from the Secretary of Labor in connection with such termination. What is
required of the company is a report to the nearest Public Employment Office for statistical purposes. 109[47]
To set the records straight, DMCI indeed submitted reports to the DOLE but as pointed out by Jamin, the
submissions started only in 1992.110[48] DMCI explained that it submitted the earlier reports (1982), but it
lost and never recovered the reports. It reconstituted the lost reports and submitted them to the DOLE in
October 1992; thus, the dates appearing in the reports. 111[49]
LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION - ALU - TUCP, Petitioner,
vs.PHILIPPINE NATIONAL OIL COMPANY - ENERGY DEVELOPMENT CORPORATION, Respondent.
Facts:
[Respondent Philippine National Oil Corporation]-Energy Development Corporation [PNOC-EDC] is a
government-owned and controlled corporation engaged in exploration, development, utilization,
generation and distribution of energy resources like geothermal energy.
Petitioner is a legitimate labor organization, duly registered with the Department of Labor and Employment
(DOLE) Regional Office No. VIII, Tacloban City.
Among [respondents] geothermal projects is the Leyte Geothermal Power Project located at the Greater
Tongonan Geothermal Reservation in Leyte. The said Project is composed of the Tongonan 1 Geothermal
Project (T1GP) and the Leyte Geothermal Production Field Project (LGPF) which provide the power and
electricity needed not only in the provinces and cities of Central and Eastern Visayas (Region VII and VIII),
but also in the island of Luzon as well. Thus, the [respondent] hired and employed hundreds of employees
on a contractual basis, whereby, their employment was only good up to the completion or termination of
the project and would automatically expire upon the completion of such project.
On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the [respondent] on the
ground of purported commission by the latter of unfair labor practice for "refusal to bargain collectively,
union busting and mass termination." On the same day, the petitioner declared a strike and staged such
strike.
To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and issued the
Order, dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration.
Accordingly, all the striking workers were directed to return to work within twelve (12) hours from receipt of
the Order and for the [respondent] to accept them back under the same terms and conditions of
employment prior to the strike. Further, the parties were directed to cease and desist from committing any
act that would exacerbate the situation.

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However, despite earnest efforts on the part of the Secretary of Labor and Employment to settle the
dispute amicably, the petitioner remained adamant and unreasonable in its position, causing the failure of
the negotiation towards a peaceful compromise. In effect, the petitioner did not abide by [the] assumption
order issued by the Secretary of Labor.
Consequently, on January 15, 1999, the [respondent] filed a Complaint for Strike Illegality, Declaration of
Loss of Employment and Damages at the NLRC-RAB VIII in Tacloban City and at the same time, filed a
Petition for Cancellation of Petitioners Certificate of Registration with DOLE, Regional Office No. VIII. The
two cases were later on consolidated pursuant to the New NLRC Rules of Procedure. The consolidated case
was docketed as NLRC Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-10019-99). The said certified case was indorsed to the NLRC 4th Division in Cebu City on June 21, 1999 for
the proper disposition thereof.3
Issue:
Won the petitioners are project employees
Ruling:
They are project employees SC held.
However, notwithstanding the foregoing iterations, project employment contracts which fix the
employment for a specific project or undertaking remain valid under the law:
x x x By entering into such a contract, an employee is deemed to understand that his employment is
coterminous with the project. He may not expect to be employed continuously beyond the completion of
the project. It is of judicial notice that project employees engaged for manual services or those for special
skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone is not a valid
reason for bestowing special treatment on them or for invalidating a contract of employment. Project
employment contracts are not lopsided agreements in favor of only one party thereto. The employers
interest is equally important as that of the employee[s] for theirs is the interest that propels economic
activity. While it may be true that it is the employer who drafts project employment contracts with its
business interest as overriding consideration, such contracts do not, of necessity, prejudice the employee.
Neither is the employee left helpless by a prejudicial employment contract. After all, under the law, the
interest of the worker is paramount.12
In the case at bar, the records reveal that the officers and the members of petitioner Union signed
employment contracts indicating the specific project or phase of work for which they were hired, with a
fixed period of employment. The NLRC correctly disposed of this issue:
A deeper examination also shows that [the individual members of petitioner Union] indeed signed and
accepted the [employment contracts] freely and voluntarily. No evidence was presented by [petitioner]
Union to prove improper pressure or undue influence when they entered, perfected and consummated [the
employment] contracts. In fact, it was clearly established in the course of the trial of this case, as
explained by no less than the President of [petitioner] Union, that the contracts of employment were read,
comprehended, and voluntarily accepted by them. x x x.
xxxx
As clearly shown by [petitioner] Unions own admission, both parties had executed the contracts freely and
voluntarily without force, duress or acts tending to vitiate the worker[s] consent. Thus, we see no reason
not to honor and give effect to the terms and conditions stipulated therein. x x x. 13
Thus, we are hard pressed to find cause to disturb the findings of the NLRC which are supported by
substantial evidence.
It is well-settled in jurisprudence that factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded
not only respect but even finality, and bind the Court when supported by substantial evidence. 14 Rule 133,
Section 5 defines substantial evidence as "that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion."

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Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in
labor cases.15 We may take cognizance of and resolve factual issues, only when the findings of fact and
conclusions of law of the Labor Arbiter or the NLRC are inconsistent with those of the CA. 16
In the case at bar, both the NLRC and the CA were one in the conclusion that the officers and the members
of petitioner Union were project employees. Nonetheless, petitioner Union insists that they were regular
employees since they performed work which was usually necessary or desirable to the usual business or
trade of the Construction Department of respondent.
The landmark case of ALU-TUCP v. NLRC17 instructs on the two (2) categories of project employees:
It is evidently important to become clear about the meaning and scope of the term "project" in the present
context. The "project" for the carrying out of which "project employees" are hired would ordinarily have
some relationship to the usual business of the employer. Exceptionally, the "project" undertaking might not
have an ordinary or normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameters of the "project" becomes fairly easy. x x x. From the viewpoint,
however, of the legal characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish culture or the
production of vegetables as "project employees," as distinguished from ordinary or "regular employees,"
so long as the duration and scope of the project were determined or specified at the time of engagement
of the "project employees." For, as is evident from the provisions of Article 280 of the Labor Code, quoted
earlier, the principal test for determining whether particular employees are properly characterized as
"project employees" as distinguished from "regular employees," is whether or not the "project employees"
were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were
specified at the time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least two
(2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is
within the regular or usual business of the employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends
at determined or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily carries out two or
more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential
condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for
the carrying out of one of these separate projects, the scope and duration of which has been determined
and made known to the employees at the time of employment, are properly treated as "project
employees," and their services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.18
Plainly, the litmus test to determine whether an individual is a project employee lies in setting a fixed
period of employment involving a specific undertaking which completion or termination has been
determined at the time of the particular employees engagement.
In this case, as previously adverted to, the officers and the members of petitioner Union were specifically
hired as project employees for respondents Leyte Geothermal Power Project located at the Greater
Tongonan Geothermal Reservation in Leyte. Consequently, upon the completion of the project or
substantial phase thereof, the officers and the members of petitioner Union could be validly terminated.
MILLENNIUM ERECTORS CORPORATION,Petitioner,- versus -VIRGILIO MAGALLANES,Respondent.
Facts:

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In its Position Paper, 112[2] petitioner claimed that respondent was a project employee whom it hired for a
building project in Libis on January 30, 2003, to prove which it submitted the employment contract 113[3]
signed by him; that on August 3, 2004, respondents services were terminated as the project was nearing
completion; and he was given financial assistance 114[4] in the amount of P2,000, for which he signed a
quitclaim and waiver. 115[5] Petitioner likewise submitted a termination report to the Department of Labor
and Employment (DOLE) dated August 17, 2004.
Rebutting respondents claim that he was employed since 1988, petitioner contended that it was
incorporated only in February 2000, and Kenneth Construction Corporation which was established in 1989
and dissolved in 2000, was a separate and distinct entity.
Issue:
Won the respondents are project employees
Ruling:
On the merits of the case, the Court finds that, indeed, respondent was a regular, not a project employee.
Saberola v. Suarez116[14] reiterates the well-settled definition of project employee, viz:
A project employee 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." (emphasis and underscoring supplied)
And Equipment Technical Services v. Court of Appeals 117[15] emphasizes the difference between a regular
employee and a project employee:
As the Court has consistently held, the service of project employees are coterminus [sic] with the
project and may be terminated upon the end or completion of that project or project phase for which they
were hired. Regular employees, in contrast, enjoy security of tenure and are entitled to hold on to
their work or position until their services are terminated by any of the modes recognized under the Labor
Code. (emphasis and underscoring supplied)
Petitioners various payrolls dating as early as 2001 show that respondent had been employed by it. As
aptly observed by the appellate court, these documents, rather than sustaining petitioners argument, only
serve to support respondents contention that he had been employed in various projects, if not for 16
years, at the very least two years prior to his dismissal.
Assuming arguendo that petitioner hired respondent initially on a per project basis, his continued rehiring,
as shown by the sample payrolls converted his status to that of a regular employee. Following

112
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114
115
116
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Cocomangas Beach Hotel Resort v. Visca,118[16] the repeated and continuing need for respondents
services is sufficient evidence of the necessity, if not indispensability, of his services to petitioner's
business and, as a regular employee, he could only be dismissed from employment for a just or authorized
cause.
Petitioner having failed to discharge its burden of proving that it terminated the services of respondent for
cause and with due process, the challenged decision must remain.
Sorreda vs Cambridge electronic corp
Facts:
On May 8, 1999, petitioner was hired by respondent as a technician for a period of 5 months at minimum
wage.119[6] Five weeks into the job (on June 15, 1999), petitioner met an accident in which his left arm was
crushed by a machine and had to be amputated. 120[7]
Petitioner claimed that, shortly after his release from the hospital, officers of respondent company called
him to a meeting with his common-law wife, father and cousin. There he was assured a place in the
company as a regular employee for as long as the company existed and as soon as he fully recovered from
his injury.
In September 1999, after he recovered from his injury, petitioner reported for work. Instead of giving him
employment, they made him sign a memorandum of resignation to formalize his separation from the
company in the light of the expiration of his five-month contract.
Issue:
Won Sorreda is a project employee
Ruling:
He is a project employee.
SC affirmed the NLRC an CA findings.
The NLRC agreed with respondent. 121[14] It found that petitioner was not a regular employee; thus, he was
neither illegally dismissed nor entitled to reinstatement and backwages. Petitioner sued for compensatory
damages because of the accident that befell him. As the contract for per-project employment had already
expired, the issue no longer fell under the jurisdiction of the labor arbiter and NLRC. Moreover, the
testimonies of petitioners witnesses were declared self-serving and thus insufficient to prove the contract
of perpetual employment.
William construction an corp vs Trinidad
Facts:

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119
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On August 1, 2006 respondent Jorge R. Trinidad filed a complaint for illegal dismissal and unpaid benefits
against petitioner William Uy Construction Corporation. Trinidad claimed that he had been working with
the latter company for 16 years since 1988 as driver of its service vehicle, dump truck, and transit mixer.
He had signed several employment contracts with the company that identified him as a project employee
although he had always been assigned to work on one project after another with some intervals.
Respondent Trinidad further alleged that in December 2004 petitioner company terminated him from work
after it shut down operations because of lack of projects. He learned later, however, that although it
opened up a project in Batangas, it did not hire him back for that project.
Petitioner company countered122[1] that it was in the construction business. By the nature of such
business, it had to hire and engage the services of project construction workers, including respondent
Trinidad, whose employments had to be co-terminous with the completion of specific company projects.
For this reason, every time the company employed Trinidad, he had to execute an employment contract
with it, called Appointment as Project Worker.
Issue:
WON the respondent is a project employee
Ruling:
Trinidad is a project employee.
The test for distinguishing a project employee from a regular employee is whether or not he has been
assigned to carry out a specific project or undertaking, with the duration and scope of his engagement
specified at the time his service is contracted. 123[5] Here, it is not disputed that petitioner company
contracted respondent Trinidads service by specific projects with the duration of his work clearly set out in
his employment contracts.124[6] He remained a project employee regardless of the number of years and
the various projects he worked for the company. 125[7]
Generally, length of service provides a fair yardstick for determining when an employee initially hired on a
temporary basis becomes a permanent one, entitled to the security and benefits of regularization. But this
standard will not be fair, if applied to the construction industry, simply because construction firms cannot
guarantee work and funding for its payrolls beyond the life of each project. And getting projects is not a
matter of course. Construction companies have no control over the decisions and resources of project
proponents or owners. There is no construction company that does not wish it has such control but the
reality, understood by construction workers, is that work depended on decisions and developments over
which construction companies have no say.
For this reason, the Court held in Caseres v. Universal Robina Sugar Milling Corporation 126[8] that the
repeated and successive rehiring of project employees do not qualify them as regular employees, 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 a specific project or undertaking, its completion has been determined
at the time of the engagement of the employee.

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124
125
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In this case, respondent Trinidads series of employments with petitioner company were co-terminous with
its projects. When its Boni Serrano-Katipunan Interchange Project was finished in December 2004,
Trinidads employment ended with it. He was not dismissed. His employment contract simply ended with
the project for which he had signed up. His employment history belies the claim that he continuously
worked for the company. Intervals or gaps separated one contract from another. 127[9] LA ruled that
Trinidad is a project employee.

The CA noted that DOLE Order 19 required employers to submit a report of termination of
employees every completion of construction project. And, since petitioner company submitted at the
hearing before the Labor Arbiter only the termination report covering respondent Trinidads last project, it
failed to satisfy such requirement.

But respondent Trinidad did not say in his complaint that he had been illegally dismissed after each
of the projects for which he had been signed up. His complaint was essentially that he should have been
rehired from the last project since he had already acquired the status of a regular employee.
Consequently, petitioner company needed only to show the last status of Trinidads employment, namely,
that of a project employee under a contract that had ended and the companys compliance with the
reporting requirement for the termination of that employment. Indeed, both the Labor Arbiter and the
NLRC were satisfied that the fact of petitioner companys compliance with DOLE Order 19 had been proved
in this case.
D.M. CONSUNJI, INC., Petitioner, - versus -ANTONIO GOBRES, MAGELLAN DALISAY, GODOFREDO
PARAGSA, EMILIO ALETA and GENEROSO MELO,Respondents.
Facts:
Respondents Antonio Gobres, Magellan Dalisay, Godofredo Paragsa, Emilio Aleta and Generoso Melo
worked as carpenters in the construction projects of petitioner D.M. Consunji, Inc., a construction
company, on several occasions and/or at various times. Their termination from employment for each
project was reported to the Department of Labor and Employment (DOLE), in accordance with Policy
Instruction No. 20, which was later superseded by Department Order No. 19, series of 1993. Respondents
last assignment was at Quad 4-Project in Glorietta, Ayala, Makati, where they started working on
September 1, 1998. On October 14, 1998, respondents saw their names included in the Notice of
Termination posted on the bulletin board at the project premises.
Respondents filed a Complaint with the Arbitration Branch of the National Labor Relations Commission
(NLRC) against petitioner D.M. Consunji, Inc. and David M. Consunji for illegal dismissal, and non-payment
of 13th month pay, five (5) days service incentive leave pay, damages and attorneys fees.
Petitioner D.M. Consunji, Inc. and David M. Consunji countered that respondents, being project employees,
are covered by Policy Instruction No. 20, as superseded by Department Order No. 19, series of 1993 with
respect to their separation or dismissal. Respondents were employed per project undertaken by petitioner
company and within varying estimated periods indicated in their respective project employment contracts.
Citing the employment record of each respondent, petitioner and David M. Consuji averred that
respondents services were terminated when their phases of work for which their services were engaged
were completed or when the projects themselves were completed. Respondents notices of termination

127

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were filed with the DOLE, in compliance with Policy Instruction No. 20, 128[2] superseded by Department
Order No.19, series of 1993.129[3] With respect to respondent Generoso G. Melo, petitioner and David M.
Consuji maintained the same positions they had against the case of Melos co-complainants. 130[4]
Petitioner contended that since respondents were terminated by reason of the completion of their
respective phases of work in the construction project, their termination was warranted and legal.
Issue:
Won the respondents are project employees (are they entitled to nominal damages?)
Ruling:
Respondents were found to be project employees by the Labor Arbiter, the NLRC and the Court of Appeals.
Their unanimous finding that respondents are project employees is binding on the Court. It must also be
pointed out that respondents have not appealed from such finding by the Court of Appeals. It is only the
petitioner that appealed from the decision of the Court of Appeals.
The main issue is whether or not respondents, as project employees, are entitled to nominal damages for
lack of advance notice of their dismissal.
A project employee is defined under Article 280 of the Labor Code as 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 services to be performed is seasonal in
nature and the employment is for the duration of the season. 131[19]
In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents, as project
employees, were validly terminated due to the completion of the phases of work for which their services
were engaged. However, the Court of Appeals held that respondents were entitled to nominal damages,
because petitioner failed to give them advance notice of their termination. The appellate court cited the
case of Agabon v. NLRC as basis for the award of nominal damages.
The Court holds that Agabon v. NLRC is not applicable to this case, because it involved the dismissal of
regular employees for abandonment of work, which is a just cause for dismissal under Article 282 of the
Labor Code.132[20] Although the dismissal was for a cause, the employer therein was required to observe
the standard of due process for termination of employment based on just causes under Article 282 of the
Labor Code, which procedural due process requirements are enumerated in Section 2, Rule 1, Book
VI133[21] of the Omnibus Rules Implementing the Labor Code. 134[22] Since the employer therein failed to
comply with the twin requirements of notice and hearing, the Court ordered the employer to pay the
employees involved nominal damages in the amount of P30,000.00 for failure to observe procedural due
process.

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131
132
133
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Unlike in Agabon, respondents, in this case, were not terminated for just cause under Article 282 of the
Labor Code.
Dismissal based on just causes contemplate acts or omissions attributable to the
employee.135[23] Instead, respondents were terminated due to the completion of the phases of work for
which their services were engaged.
As project employees, respondents termination is governed by Section 1 (c) and Section 2 (III), Rule XXIII
(Termination of Employment), Book V of the Omnibus Rules Implementing the Labor Code.
Section 1 (c), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code states:
Section 1. Security of tenure. (a) In cases of regular employment, the employer shall not terminate the
services of an employee except for just or authorized causes as provided by law, and subject to the
requirements of due process.
xxxx
(c) In cases of project employment or employment covered by legitimate contracting or sub-contracting
arrangements, no employee shall be dismissed prior to the completion of the project or phase thereof for
which the employee was engaged, or prior to the expiration of the contract between the principal and
contractor, unless the dismissal is for just or authorized cause subject to the requirements of due process
or prior notice, or is brought about by the completion of the phase of the project or contract for which the
employee was engaged.136[24]
Records show that respondents were dismissed after the expiration of their respective project employment
contracts, and due to the completion of the phases of work respondents were engaged for. Hence, the
cited provisions requirements of due process or prior notice when an employee is dismissed for just or
authorized cause (under Articles 282 and 283 of the Labor Code) prior to the completion of the project or
phase thereof for which the employee was engaged do not apply to this case.
JUDY O. DACUITAL,137[1] EUGENIO L. MONDANO, JR., JOSEPH GALER, 138[2] MARIANO MORALES,
ROBERTO RUANCE, JOSEPH PORCADILLA, RAULITO PALAD, RICARDO DIGAMON, NONITO
PRISCO , EULOGIO M. TUTOR, MELVIN PEPITO, HELYTO N. REYES, 139[3] RANDOLF C. BALUDO,
ALBERTO EPONDOL, RODELO A. SUSPER, 140[4] EVARISTO VIGORI, 141[5] JONATHAN P. AYAAY,
FELIPE ERILLA, ARIS A. GARCIA, ROY A. GARCIA, and RESTITUTO TAPANAN,Petitioners, - versus
-L.M. CAMUS ENGINEERING CORPORATION and/or LUIS M. CAMUS,Respondents.
Facts:

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136
137
138
139
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Respondent L.M. Camus Engineering Corporation (LMCEC) is a domestic corporation duly organized and
existing under and by virtue of Philippine laws, engaged in construction, engineering, and air-conditioning
business; while respondent Luis M. Camus (Camus) is the company president.
Petitioners Judy O. Dacuital (Dacuital), Eugenio L. Mondano, Jr., Joseph Galer (Galer), Mariano Morales,
Roberto Ruance (Ruance), Joseph Porcadilla, Raulito Palad (Palad), Ricardo Digamon (Digamon), Nonito
Prisco, Eulogio M. Tutor, Melvin Pepito, Helyto N. Reyes (Reyes), Randolf C. Baludo (Baludo), Alberto
Epondol, Rodelo A. Susper, Evaristo Vigori, Jonathan P. Ayaay, Felipe Erilla, Aris A. Garcia (Aris), Roy A.
Garcia (Roy), and Restituto Tapanan (Tapanan) were hired by LMCEC as welder, tinsmith, pipefitter, and
mechanical employees.142[8.
During the months of January, February and March 2001, petitioners were required by LMCEC to surrender
their identification cards and ATM cards and were ordered to execute contracts of employment. Most of the
petitioners did not comply with the directive as they believed that it was only respondents strategy to get
rid of petitioners regular status since they would become new employees disregarding their length of
service. Petitioners were later dismissed from employment. 143[9]
Hence, the complaint for illegal dismissal and non-payment of monetary benefits filed by petitioners.
Issue:
Won petitioners are project employees (The issues boil down to whether the CA was correct in concluding
that petitioners were project employees and that their dismissal from employment was legal.)

Ruling:
We answer in the negative.
Even if the questions that need to be settled are factual in nature, this Court nevertheless feels obliged to
resolve them due to the incongruent findings of the NLRC and the LA and those of the CA. 144[34
Article 280 of the Labor Code distinguishes a project employee from a regular employee in this wise:
Article 280. Regular and casual employment.The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.145[35]

142
143
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A project employee is assigned to a project which begins and ends at determined or determinable times. 146
[36] Employees who work under different project employment contracts for several years do not
automatically become regular employees; they can remain as project employees regardless of the number
of years they work. Length of service is not a controlling factor in determining the nature of ones
employment.147[37] Their rehiring is only a natural consequence of the fact that experienced construction
workers are preferred. 148[38] In fact, employees who are members of a work pool from which a company
draws workers for deployment to its different projects do not become regular employees by reason of that
fact alone. The Court has consistently held that members of a work pool can either be project employees
or regular employees.149[39]
The principal test used to determine whether employees are project employees is whether or not the
employees were assigned to carry out a specific project or undertaking, the duration or scope of which was
specified at the time the employees were engaged for that project. 150[40]
Admittedly, respondents did not present the employment contracts of petitioners except that of Dacuital.
They explained that it was no longer necessary to present the other contracts since petitioners were
similarly situated. Having presented one contract, respondents believed that they sufficiently established
petitioners status as project employees.
Even though the absence of a written contract does not by itself grant regular status to petitioners, such a
contract is evidence that petitioners were informed of the duration and scope of their work and their status
as project employees.151[41] In this case, where no other evidence was offered, the absence of the
employment contracts raises a serious question of whether the employees were properly informed at the
onset of their employment of their status as project employees.152[42]
While it is true that respondents presented the employment contract of Dacuital, the contract does not
show that he was informed of the nature, as well as the duration of his employment. In fact, the duration of
the project for which he was allegedly hired was not specified in the contract. The pertinent provision
thereof is quoted hereunder for easy reference:
3. In accordance with Policy No. 20 of the Labor Code of the Philippines, parties agree that the effective
date of this employment is 4-5-00 up to the duration of the DUCTWORK/ELECTRICAL/MECHANICAL phase of
the project estimated to be finished in the month of _______, 19______ or earlier. 153[43]
Even if we assume that under the above provision of the contract, Dacuital was informed of the nature of
his employment and the duration of the project, that same contract is not sufficient evidence to show that
the other employees were so informed. It is undisputed that petitioners had individual employment

145
146
147
148
149
150
151
152
153

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contracts, yet respondents opted not to present them on the lame excuse that they were similarly situated
as Dacuital. The non-presentation of these contracts gives rise to the presumption that the employees
were not informed of the nature and duration of their employment. It is doctrinally entrenched that in
illegal dismissal cases, the employer has the burden of proving with clear, accurate, consistent, and
convincing evidence that the dismissal was valid. Absent any other proof that the project employees were
informed of their status as such, it will be presumed that they are regular employees. 154[44]
Moreover, Department Order No. 19 (as well as the old Policy Instructions No. 20) requires employers to
submit a report of an employees termination to the nearest public employment office everytime the
employment is terminated due to the completion of a project. 155[45] In this case, there was no evidence
that there was indeed such a report. LMCECs failure to file termination reports upon the cessation of
petitioners employment was an indication that petitioners were not project but regular employees.
Well-established is the rule that regular employees enjoy security of tenure and they can only be dismissed
for just or valid cause and upon compliance with due process, i.e., after notice and hearing. In cases
involving an employees dismissal, the burden is on the employer to prove that the dismissal was legal. 156
[46] This burden was not amply discharged by LMCEC in this case. Being regular employees, petitioners
were entitled to security of tenure, and their services may not be terminated except for causes provided by
law.157[47]
Pangilinan et al. vs General Milling corp
Facts:
The respondent General Milling Corporation is a domestic corporation engaged in the production and sale
of livestock and poultry.2 It is, likewise, the distributor of dressed chicken to various restaurants and
establishments nationwide.3 As such, it employs hundreds of employees, some on a regular basis and
others on a casual basis, as "emergency workers."
The petitioners4 were employed by the respondent on different dates as emergency workers at its poultry
plant in Cainta, Rizal, under separate "temporary/casual contracts of employment" for a period of five
months.5 Most of them worked as chicken dressers, while the others served as packers or helpers. 6 Upon
the expiration of their respective contracts, their services were terminated. They later filed separate
complaints for illegal dismissal and non-payment of holiday pay, 13 th month pay, night-shift differential and
service incentive leave pay against the respondent before the Arbitration Branch of the National Labor
Relations Commission, docketed as NLRC Case No. RAB-IV-9-4519-92-RI; NLRC Case No. RAB-IV-9-4520-92RI; NLRC Case No. RAB-IV-9-4521-92-RI; NLRC Case No. RAB-IV-9-4541-92-RI; NLRC Case No. RAB-IV-104552-92-RI; NLRC Case No. RAB-IV-10-4595-92-RI and NLRC Case No. RAB-IV-11-4599-92-RI. 7
The petitioners alleged that their work as chicken dressers was necessary and desirable in the usual
business of the respondent, and added that although they worked from 10:00 p.m. to 6:00 a.m., they were
not paid night-shift differential.8 They stressed that based on the nature of their work, they were regular
employees of the respondent; hence, could not be dismissed from their employment unless for just cause
and after due notice. In support thereof, the petitioners cited the decision of the Honorable Labor Arbiter
Perlita B. Velasco in NLRC Case No. NCR-6-2168-86, entitled Estelita Jayme, et al. vs. General Milling
Corporation; and NLRC Case No. NCR-9-3726-86, entitled Marilou Carino, et al. vs. General Milling
Corporation.9 They asserted that the respondent GMC terminated their contract of employment without

154
155
156
157

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just cause and due notice. They further argued that the respondent could not rely on the nomenclature of
their employment as "temporary or casual."
Issue:
Won the petitioners are regular employees or project employees or employees on the fixed period
Ruling:
The petitioners are employees in a fixed period.
We agree that the petitioners were employees with a fixed period, and, as such, were not regular
employees.
Article 280 of the Labor Code comprehends three kinds of employees: (a) regular employees or those
whose work is necessary or desirable to the usual business of the employer; (b) project employees or those
whose employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the season; and, (c) casual
employees or those who are neither regular nor project employees. 40
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.41 There are two separate instances whereby it can be determined that an employment is regular:
(1) if the particular activity performed by the employee is necessary or desirable in the usual business or
trade of the employer; and, (2) if the employee has been performing the job for at least a year. 42
In the case of St. Theresa's School of Novaliches Foundation vs. NLRC,43 we held that Article 280 of the
Labor Code does not proscribe or prohibit an employment contract with a fixed period. We furthered that it
does not necessarily follow that where the duties of the employee consist of activities usually necessary or
desirable in the usual business of the employer, the parties are forbidden from agreeing on a period of
time for the performance of such activities. There is thus nothing essentially contradictory between a
definite period of employment and the nature of the employee's duties.
Indeed, in the leading case of Brent School Inc. v. Zamora,44 we laid down the guideline before a contract
of employment may be held as valid, to wit:
[S]tipulations in employment contracts providing for term employment or fixed period
employment are valid when the period were agreed upon knowingly and voluntarily by the
parties without 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.45
An examination of the contracts entered into by the petitioners showed that their employment was limited
to a fixed period, usually five or six months, and did not go beyond such period.
G.R. No. 156748. September 8, 2004], [G.R. No. 156896. September 8, 2004]ISAAC CIOCO, JR.,
REBIE A. MERCADO, BENITO V. GALVADORES, CECILIO SOLVER, CARMELO JUANZO,[1] BENJAMIN
BAYSA, and RODRIGO NAPOLES, petitioners, vs. C. E. CONSTRUCTION CORPORATION and/or
JOHNNY TAN, respondents.C. E. CONSTRUCTION CORPORATION, petitioner, vs. ISAAC CIOCO,
JR., REBIE A. MERCADO, BENITO V. GALVADORES, CECILIO SOLVER, CARMELO JUANZO,
BENJAMIN BAYSA, and RODRIGO NAPOLES, respondents.

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Facts:
Isaac Cioco, Jr., Rebie A. Mercado, Benito V. Galvadores, Cecilio Solver, Carmelo Juanzo, Benjamin Baysa,
and Rodrigo Napoles (WORKERS) were hired by C.E. Construction Corporation (COMPANY), a domestic
corporation engaged in the construction business and managed by its owner-president, Mr. Johnny Tan.
They were hired as carpenters and laborers in various construction projects from 1990 to 1999, the latest
of which was the GTI Tower in Makati. Prior to the start of every project, the WORKERS signed individual
employment contracts which uniformly read[5]
I hereby apply as carpenter/laborer on [the] GTI Tower project. It is understood that if accepted, the period
of employment shall be co-terminus with the completion of the project, unless sooner terminated by you
prior to the completion of the project.
I agree to comply with such rules and regulations and instructions which you may issue from time to time
and to accomplish such forms and papers pertinent to my employment.
In the event my service is terminated prior to completion of the project or upon its completion as above
fixed, I hereby release and hold you harmless and free from any claim, demand or cause of actions.
Sometime in May and June 1999, the WORKERS, along with sixty-six (66) others, were terminated by the
COMPANY on the ground of completion of the phases of the GTI Tower project for which they had been
hired. Alleging that they were regular employees, the WORKERS filed complaints for illegal dismissal with
the Arbitration Branch of the NLRC. Claims for underpaid wages and unpaid overtime pay, premium for
holiday and rest days, service incentive leave pay, night shift differential, and 13 th month pay were likewise
demanded.
Issue:
Won the workers are project employees or regular employees
Ruling:
The issue of whether the WORKERS were regular or project employees of the COMPANY is a question of
fact which shall no longer be dealt with in this petition for review, the Courts jurisdiction being limited to
questions of law. The Labor Arbiter, the NLRC, and the CA, unanimously found that the WORKERS were
project employees of the COMPANY. This finding is binding on this Court.
We again hold that the fact that the WORKERS have been employed with the COMPANY for several years
on various projects, the longest being nine (9) years, did not automatically make them regular
employees considering that the definition of regular employment in Article 280[11] of the Labor Code,
makes specific exception with respect to project employment. The re-hiring of petitioners on a project-toproject basis did not confer upon them regular employment status. The practice was dictated by the
practical consideration that experienced construction workers are more preferred.[12] It did not change
their status as project employees.
ABESCO CONSTRUCTION AND DEVELOPMENT CORPORATION and MR. OSCAR BANZON, General
Manager,Petitioners,vs.ALBERTO RAMIREZ, BERNARDO DIWA, MANUEL LOYOLA, REYNALDO P.
ACODESIN, ALEXANDER BAUTISTA, EDGAR TAJONERA and GARY DISON,* Respondents.
Facts:
Petitioner company was engaged in a construction business where respondents were hired on different
dates from 1976 to 1992 either as laborers, road roller operators, painters or drivers.

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In 1997, respondents filed two separate complaints 1 for illegal dismissal against the company and its
General Manager, Oscar Banzon, before the Labor Arbiter (LA). Petitioners allegedly dismissed them
without a valid reason and without due process of law. The complaints also included claims for nonpayment of the 13th month pay, five days' service incentive leave pay, premium pay for holidays and rest
days, and moral and exemplary damages. The LA later on ordered the consolidation of the two
complaints.2
Petitioners denied liability to respondents and countered that respondents were "project employees" since
their services were necessary only when the company had projects to be completed. Petitioners argued
that, being project employees, respondents' employment was coterminous with the project to which they
were assigned. They were not regular employees who enjoyed security of tenure and entitlement to
separation pay upon termination from work.
After trial, the LA declared respondents as regular employees because they belonged to a "work pool" from
which the company drew workers for assignment to different projects, at its discretion. He ruled that
respondents were hired and re-hired over a period of 18 years, hence, they were deemed to be regular
employees. He likewise found that their employment was terminated without just cause.
Issue:
WON the respondents are work pool project employees
Ruling:
We rule that respondents were regular employees. However, we take exception to the reasons cited by the
LA (which both the NLRC and the CA affirmed) in considering respondents as regular employees and not as
project employees.
Contrary to the disquisitions of the LA, employees (like respondents) who work under different project
employment contracts for several years do not automatically become regular employees; they can remain
as project employees regardless of the number of years they work. 7 Length of service is not a controlling
factor in determining the nature of one's employment. 8
Moreover, employees who are members of a "work pool" from which a company (like petitioner
corporation) draws workers for deployment to its different projects do not become regular employees by
reason of that fact alone. The Court has enunciated in some cases 9 that members of a "work pool" can
either be project employees or regular employees.
The principal test for determining whether employees are "project employees" or "regular employees" is
whether they are assigned to carry out a specific project or undertaking, the duration and scope of which
are specified at the time they are engaged for that project. 10 Such duration, as well as the particular
work/service to be performed, is defined in an employment agreement and is made clear to the employees
at the time of hiring.11
In this case, petitioners did not have that kind of agreement with respondents. Neither did they inform
respondents of the nature of the latter's work at the time of hiring. Hence, for failure of petitioners to
substantiate their claim that respondents were project employees, we are constrained to declare them as
regular employees.
Furthermore, petitioners cannot belatedly argue that respondents continue to be their employees (so as to
escape liability for illegal dismissal). Before the LA, petitioners staunchly postured that respondents were
only "project employees" whose employment tenure was coterminous with the projects they were assigned
to. However, before the CA, they took a different stance by insisting that respondents continued to be their

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employees. Petitioners' inconsistent and conflicting positions on their true relation with respondents make
it all the more evident that the latter were indeed their regular employees.
ISMAEL SAMSON, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF
AND PACIFIC CO., MANILA, INC., respondents.
Facts:
Petitioner has been employed with private respondent Atlantic Gulf and Pacific Co., Manila, Inc. (AG & P) in
the latter's various construction projects since April, 1965, in the course of which employment he worked
essentially as a rigger, from laborer to rigger foreman. From 1977 up to 1985, he was assigned to overseas
projects of AG & P, particularly in Kuwait and Saudi Arabia.
On November 5, 1989, petitioner filed a complaint for the conversion of his employment status from
project employee to regular employee, which complaint was later amended to include claims for
underpayment, non-payment of premium pay for holiday and rest day, refund of reserve fund, and 10%
thereof as attorney's fees. Petitioner alleged therein that on the basis of his considerable and continuous
length of service with AG & P, he should already be considered a regular employee and, therefore, entitled
to the benefits and privileges appurtenant thereto.
The labor arbiter, in a decision dated June 30, 1993, 2 declared that petitioner should be considered a
regular employee on the ground that it has not been shown that AG & P had made the corresponding
report to the nearest Public Employment Office every time a project wherein petitioner was assigned had
been completed and his employment contract terminated, as required under DOLE Policy Instruction No.
20. Furthermore, pursuant to the same policy instruction, the labor arbiter found that since petitioner was
not free to leave anytime and to offer his services to other employers, he should be considered an
employee for an indefinite period because he is a member of a work pool from which AG & P draws its
project employees and is considered an employee thereof during his membership therein, hence the
completion of the project does not mean termination of the employer-employee relationship.
Issue:
Won the petitioner is a project employee
Ruling:
Petitioner is a regular employee. Reasons
First, the factual findings of respondent commission, which is supported by substantial evidence, is already
conclusive and binding and, therefore, entitled to respect by this Court. Second, Department Order No. 19
amended Policy Instruction No. 20 by doing away with the required notice of termination upon completion
of the project. Hence, non-compliance with the required report, which is only one of the "indicators" for
project employment, no longer affixes a prescription of regular employment, by reason of which the
doctrine laid down in the Caramol case no longer applies to the case at bar. In addition, Department Order
No. 19 allows the re-hiring of employees without making them regular employees, aside from the fact that
the word "rehiring" connotes new employment. Third, on the basis of petitioner's project employment
contracts, his services were engaged for a fixed and determinable period which thus makes each
employment for every project separate and distinct from one another. Consequently, the labor arbiter
supposedly erred in taking into account petitioner's various employments in the past in determining his
length of service, considering that upon completion of a project, the services of the project employee are
deemed terminated, his employment being coterminous with each project or phase of the project to which
he is assigned.

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Finally, so it is claimed, petitioner should be considered a project employee since he falls under the
exception provided for in Article 280 of the Labor Code to the effect that "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 . . . ."
The bulk of the problem appears to hinge on the determination of whether or not Department Order No. 19
should be given retroactive effect in order that the notice of termination requirement may be dispensed
with in this case for a correlative ruling on the presumption of regularity of employment which normally
arises in case of non-compliance therewith. Both the petitioner and the Solicitor General submit that said
order can only have prospective application. Private respondent believes otherwise. We find for petitioner.
When the present action for regularization was filed on November 5, 1989 6 and during the entire period of
petitioner's employment with private respondent prior to said date, the rule in force then was Policy
Instruction No. 20 which, in the fourth paragraph thereof, required the employer company to report to the
nearest Public Employment Office the fact of termination of a project employee as a result of the
completion of the project or any phase thereof in which he is employed. Furthermore, contrary to private
respondent's asseveration, Department Order No. 19, which was issued on April 1, 1993, did not totally
dispense with the notice requirement but, instead, made provisions therefor and considered it as one of
the "indicators" that a worker is a project employee.
This is evident in Section 2.2 thereof which provides that:
2.2 Indicators of project employment. Either one or more of the following circumstances, among
others, may be considered as indicators that an employee is a project employee.
(a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably
determinable.
(b) Such duration, as well as the specific work/service to be performed, is defined in an employment
agreement and is made clear to the employee at the time of hiring.
(c) The work/service performed by the
project/undertaking for which he is engaged.

employee

is in

connection

with

the

particular

(d) The employee, while not employed and awaiting engagement, is free to offer his services to any
other employer.
(e) The termination of his employment in the particular project/undertaking is reported to the
Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the
workplace within 30 days following the date of his separation from work, using the prescribed form
on employees' terminations dismissals suspensions.
(f) An undertaking in the employment contract by the employer to pay completion bonus to the
project employee as practiced by most construction companies. (Emphasis supplied)
More importantly, it must be emphasized that the notice of termination requirement has been retained by
express provision of Department Order No. 19 under Section 6.1 thereof, to wit:
6.1. Requirements of labor and social legislations. (a) The construction company and the general
contractor and/or subcontractor referred to in Sec. 2.5 shall be responsible for the workers in its
employ on matters of compliance with the requirements of existing laws and regulations on hours

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of work, wages, wage related benefits, health, safety and social welfare benefits, including
submission to the DOLE-Regional Office of Work Accident/Illness Report, Monthly Report on
Employees' Terminations/Dismissals/Suspensions and other reports. . . . (Emphasis ours.)
Perforce, we agree with the labor arbiter that private respondent's failure to report the termination of
petitioner's services to the nearest Public Employment Office, after completion of every project or a phase
thereof to which he is assigned, is a clear indication that petitioner was not and is not a project employee.
On the bases of the foregoing, the retroactivity or prospectivity of Department Order No. 19 would
normally be of no moment. At any rate, even if the new issuance has expressly superseded Policy
Instruction No. 20, the same cannot be given retroactive effect as such an application would be prejudicial
to the employees and would run counter to the constitutional mandate on social justice and protection to
labor. Furthermore, this view that we take is more in accord with the avowed purpose of Department Order
No. 19 "to ensure the protection and welfare of workers employed" in the construction industry, and which
interpretation may likewise be inferred from a reading of Section 7 thereof, applied corollarily to this case,
which provides that "nothing herein shall be construed to authorize the diminution or reduction of benefits
being enjoyed by employees at the time of issuance hereof."
It is a basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and
its implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. The interpretation herein handed down gives meaning and substance to the liberal and
compassionate spirit of the law enunciated in Article 4 of the Labor Code that "all doubts in the
implementation and interpretation of the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor." 7
The mandate in Article 281 of the Labor Code, which pertinently prescribes that "the provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer" and 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," should apply in the case of herein petitioner.
It is not disputed that petitioner had been working for private respondent for approximately twenty-eight
(28) years as of the adjudication of his plaint by respondent NLRC, and that his "project-to-project"
employment was renewed several times. With the successive contracts of employment wherein petitioner
continued to perform virtually the same kind of work, i.e., as rigger, throughout his period of employment,
it is manifest that petitioner's assigned tasks were usually necessary or desirable in the usual business or
trade of private respondent. 8 The repeated re-hiring and continuing need for his services are sufficient
evidence of the necessity and indispensability of such services to private respondent's business or trade. 9
Where from the circumstances it is apparent that periods have been imposed to preclude the acquisition of
tenurial security by the employee, they should be struck down as contrary to public policy, morals, good
customs or public order. 10 As observed by the Solicitor General, the record of this case discloses, as part of
petitioner's position paper, a certification 11 duly issued by private respondent clearly showing that the
former's services were engaged by private respondent on a continuing basis since 1965. The certification
indubitably indicates that after a particular project has been accomplished, petitioner would be re-hired
immediately the following day save for a gap of one (1) day to one (1) week from the last project to the
succeeding one. 12 There can, therefore, be no escape from the conclusion that petitioner is a regular
employee of private respondent.
ABS CBN vs Nareno
Facts:

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Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business

and owns a network of television and radio stations, whose operations revolve around the broadcast,
transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime
it generates from its radio and television operations. It has a franchise as a broadcasting company, and
was likewise issued a license and authority to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs)
on different dates. They were assigned at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN
employees identification cards and were required to work for a minimum of eight hours a day, including
Sundays and holidays. They were made to perform the following tasks and duties:
a)
Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of
respondent ABS-CBN;
b)

Coordinate, arrange personalities for air interviews;

c)
Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming
reports;
d)

Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;

e)

Assist, anchor program interview, etc; and

f)

Record, log clerical reports, man based control radio. 158[4]

nazareno was terminated.

Issue:
Won nazareno is a project or regular employee of ABS CBN
Ruling:
Nazareno is a regular employee.
Not considered regular employees are project employees, the completion or termination of which is more
or less determinable at the time of employment, such as those employed in connection with a particular
construction project, and seasonal employees whose employment by its nature is only desirable for a
limited period of time. Even then, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity performed and while such
activity actually exists.
It is of no moment that petitioner hired respondents as talents. The fact that respondents received preagreed talent fees instead of salaries, that they did not observe the required office hours, and that they
were permitted to join other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered talents because they are not actors or actresses or
radio specialists or mere clerks or utility employees. They are regular employees who perform several
different duties under the control and direction of ABS-CBN executives and supervisors.

158

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Thus, there are two kinds of regular employees under the law:
(1) those engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2) those
casual employees who have rendered at least one year of service, whether continuous
or broken,
with respect to the activities in which they are employed. 159[35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determines whether a certain employment
is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces,
much less the procedure of hiring the employee or the manner of paying the salary or the actual time
spent at work. It is the character of the activities performed in relation to the particular trade
or
business taking into account all the circumstances, and in some cases the length of time of its
performance and its continued existence.160[36] It is obvious that one year after they were employed by
petitioner, respondents became regular employees by operation of law.161[37]
POSEIDON FISHING/TERRY DE JESUS, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION
and JIMMY S. ESTOQUIA, Respondents.
Facts:
Petitioner Poseidon Fishing is a fishing company engaged in the deep-sea fishing industry. Its various
vessels catch fish in the outlying islands of the Philippines, which are traded and sold at the Navotas Fish
Port. One of its boat crew was private respondent Jimmy S. Estoquia. 3 Petitioner Terry de Jesus is the
manager of petitioner company.
Private respondent was employed by Poseidon Fishing in January 1988 as Chief Mate. After five years, he
was promoted to Boat Captain. In 1999, petitioners, without reason, demoted respondent from Boat
Captain to Radio Operator of petitioner Poseidon. 4 As a Radio Operator, he monitored the daily activities in
their office and recorded in the duty logbook the names of the callers and time of their calls. 5
On 3 July 2000, private respondent failed to record a 7:25 a.m. call in one of the logbooks. However, he
was able to record the same in the other logbook. Consequently, when he reviewed the two logbooks, he
noticed that he was not able to record the said call in one of the logbooks so he immediately recorded the
7:25 a.m. call after the 7:30 a.m. entry. 6
Around 9:00 oclock in the morning of 4 July 2000, petitioner Terry de Jesus detected the error in the entry
in the logbook. Subsequently, she asked private respondent to prepare an incident report to explain the
reason for the said oversight.7
At around 2:00 oclock in the afternoon of that same day, petitioner Poseidons secretary, namely Nenita
Laderas, summoned private respondent to get his separation pay amounting to Fifty-Five Thousand Pesos
(P55,000.00). However, he refused to accept the amount as he believed that he did nothing illegal to
warrant his immediate discharge from work.8
Rising to the occasion, private respondent filed a complaint for illegal dismissal on 11 July 2000 with the
Labor Arbiter, alleging nonpayment of wages with prayer for back wages, damages, attorneys fees, and
other monetary benefits.
Issue:

159
160
161

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Won the respondents are project employees

Ruling:
Respondents are regular employees.
Petitioners next assert that deep-sea fishing is a seasonal industry because catching of fish could only be
undertaken for a limited duration or seasonal within a given year. Thus, according to petitioners, private
respondent was a seasonal or project employee.
We are not won over.
As correctly pointed out by the Court of Appeals, the "activity of catching fish is a continuous process and
could hardly be considered as seasonal in nature." 33 In Philex Mining Corp. v. National Labor Relations
Commission,34 we defined project employees as those workers hired (1) for a specific project or
undertaking, and (2) the completion or termination of such project has been determined at the time of the
engagement of the employee. The principal test for determining whether particular employees are "project
employees" as distinguished from "regular employees," is whether or not the "project employees" were
assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at
the time the employees were engaged for that project. In this case, petitioners have not shown that
private respondent was informed that he will be assigned to a "specific project or undertaking." As earlier
noted, neither has it been established that he was informed of the duration and scope of such project or
undertaking at the time of their engagement.
More to the point, in Maraguinot, Jr. v. National Labor Relations Commission,35 we ruled 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.
In fine, inasmuch as private respondents functions as described above are no doubt "usually necessary or
desirable in the usual business or trade" of petitioner fishing company and he was hired continuously for
12 years for the same nature of tasks, we are constrained to say that he belongs to the ilk of regular
employee. Being one, private respondents dismissal without valid cause was illegal. And, where illegal
dismissal is proven, the worker is entitled to back wages and other similar benefits without deductions or
conditions.36
Indeed, it behooves this Court to be ever vigilant in checking the unscrupulous efforts of some of our
entrepreneurs, primarily aimed at maximizing their return on investments at the expense of the lowly
workingman.37
PLDT vs Ylagan
Facts:
In November 1992, respondent Mayflor T. Ylagan was hired as an accounting clerk in the Cost Accounting
Department (CAD) of petitioner Philippine Long Distance Telephone Company, Inc. (PLDT). In January 1994,
she was transferred to the Revenue Auditing Department. Later, on July 3, 1995, she was brought back to
the CAD to perform the same accounting duties.
Respondent claims that in May 1996, PLDT refused to renew her employment unless she signed up with an
employment agency known as Corporate Executive Search, Inc. (CESI). She was allegedly constrained to
sign an employment contract with the agency in order to keep her job with PLDT. But on February 5, 1997,
PLDT allegedly refused to allow her to report for work since her employment contract with CESI had
already expired.

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PLDT, however, maintains that respondent was hired as a project employee assigned to the Employment
Payroll System Project from the onset of her employment. The project allegedly started on September 21,
1992. It was discontinued in March 1997 when a new system was developed to replace it. PLDT asserts
that respondents project employment was covered by contracts for the period of July 3, 1995 to October
2, 1995 and October 3, 1995 to January 2, 1996. Hence, respondent was not dismissed from her work; her
employment contract merely expired as of January 2, 1996. PLDT, however, did not explain why
respondent had to sign up with CESI in May 1996.
Issue:
Won the respondents are project employees
Ruling:
Various indicators convince us that respondent was not a project employee but a regular employee who
was illegally dismissed.
A project employee is assigned to carry out a specific project or undertaking the duration and scope of
which are specified at the time the employee is engaged in the project. 162[9] A project is a job or
undertaking which is distinct, separate and identifiable from the undertakings of the company. 163[10] A
project employee is assigned to a project which begins and ends at determined or determinable times. 164
[11]
Various indicators convince us that respondent was not a project employee but a regular employee who
was illegally dismissed.
First, respondent worked continuously for PLDT from November 1992 to July 1995 without any mention of a
project to which she was specifically assigned. She was hired to perform accounting duties which were
not shown as distinct, separate and identifiable from the usual undertakings of the company. Although
essentially a telephone company, PLDT maintains its own accounting department to which respondent was
assigned.
Second, aside from its statement that respondent was hired as a project employee for the Employment
Payroll System Project which began in 1992, PLDT did not provide evidence of the project employment
contracts covering the period from November 1992 (when respondent was hired) to July 1995. PLDT
mentioned only two contracts but these pertained to her employment period from July 1995 to January
1996.
Third, despite the supposed expiration of respondents project employment contract on January 2, 1996,
respondent continued to work for PLDT until May 2, 1996 when respondent was required to sign up with
CESI.165[12] Respondent worked for PLDT, under contract with CESI, until February 3, 1997. PLDT explained
that it no longer allowed respondent to report for work by then since the project was already done. But
the project was only completed in March 1997.
Most important of all, based on the records, PLDT did not report the termination of respondents supposed
project employment to the Department of Labor and Employment as project employee. Department Order
No. 19 (as well as the old Policy Instructions No. 20) required employers to submit a report of an

162
163
164
165

Page 71 of 98

employees termination to the nearest public employment office every time his employment was
terminated due to a completion of a project. 166[13] PLDTs failure to file termination reports was an
indication that the respondent was not a project employee but a regular employee. 167[14]
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. Also, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity, if not
indispensability of that activity to the business. Thus, we held that where the employment of
project employees is extended long after the supposed project has been finished, the employees are
removed from the scope of project employees and are considered regular employees. 168[15] (emphasis
ours)
While length of time may not be the controlling test for project employment, it is crucial in determining if
the employee is hired for a specific undertaking to perform functions vital, necessary and indispensable to
the usual business of the company. 169[16]
Here, respondent worked in PLDTs accounting department from November 1992 to July 1995 without any
project employment contract. Her employment was continuous until she was constrained to sign up with
CESI in May 1996. It was almost a year later when she was no longer allowed to report for work in PLDT
due to the alleged expiration of her contract with CESI.
PLDT asserts that even if respondent rendered continuous service for a year or so, she could not be
deemed a regular employee because the services performed were not necessary or desirable to the usual
trade or business of the company. On this, we agree with the CA:
It is absurd to argue that services rendered by the [respondent] as an accounting clerk to the accounting
and auditing department of PLDT in relation to its PEPS project (computerization of employees[] payroll
system) is not necessary or desirable to the companys business. There wont be any business without any
workforce xxx. Employees render their services for a certain payment or compensation. Thus,
[respondents] job pertaining to effective payroll system is part and parcel [of] the usual business of PLDT.
Further, [the CA] is reminded of the jurisprudence that the character of employment is determined not by
stipulations in the contract, but by the nature of the work performed and that an employee is regular
because of the nature of the work and the length of service, not because of the mode or even the reason
for hiring them.170[17] Thus, the scheme of PLDT in adopting the Project Employment Agreement where
the [respondent] was made to sign and the design of referring [respondent] to an employment agency
undoubtedly bolster its intention of stripping from [respondent] the privileges earned by the status of her
[regular] employment.171[18] (citations omitted)
Even assuming that respondent was hired as a project employee from the onset, we have ruled that once
such an employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer

166
167
168
169
170
171

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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.172[19]
From the foregoing, the duration (of at least one year) and necessity of respondents employment have
been established. She was therefore a regular employee of PLDT. As such, respondent was entitled to all
the privileges and benefits attached to that status.
BAHIA SHIPPING SERVICES, INC., petitioner, vs.REYNALDO CHUA, respondent.
Facts:
Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping Services,
Inc., as a restaurant waiter on board a luxury cruise ship liner M/S Black Watch pursuant to a Philippine
Overseas Employment Administration (POEA) approved employment contract dated October 9, 1996 for a
period of nine (9) months from October 18, 1996 to July 17, 1997. On October 18, 1996, the private
respondent left Manila for Heathrow, England to board the said sea vessel where he will be assigned to
work.
On February 15, 1997, the private respondent reported for his working station one and one-half (1) hours
late. On February 17, 1997, the master of the vessel served to the private respondent an official warningtermination form pertaining to the said incident. On March 8, 1997, the vessel's master, ship captain Thor
Fleten conducted an inquisitorial hearing to investigate the said incident. Thereafter, on March 9, 1997,
private respondent was dismissed from the service on the strength of an unsigned and undated notice of
dismissal. An alleged record or minutes of the said investigation was attached to the said dismissal notice.
On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other monetary
claims, which case was assigned to Labor Arbiter Manuel M. Manansala.
The LA declared the dismissal of respondent illegal for the reason that the infraction he committed of being
tardy by 1 hour should not have been penalized by petitioner with the ultimate punishment of
termination; rather, the commensurate penalty for such single tardiness would have been suspension for
one or two weeks. The LA further noted that petitioner meted out on respondent the penalty of dismissal
hastily and summarily in that it merely went through the motions of notifying respondent and hearing his
side when, all along, it had already decided to dismiss him. 9
The NLRC sustained the foregoing findings of the LA, noting that the claim of petitioner that respondent's
tardiness was not infrequent but habitual is not supported by evidence. 10 However, the NLRC held that,
although the penalty of dismissal on respondent was properly lifted, a penalty of deduction of one day's
salary, the same to be subtracted from his monetary award, should be imposed on the latter for the
tardiness he incurred.11The CA held that the NLRC and LA did not commit any grave abuse of discretion in
arriving at the factual assessments which are all supported by substantial evidence. 12
Issue:
Won the respondent is a project employee
Ruling:
No discussion about project employees but this talks about the contract/fixed term contract entered into
by the seafarers.

172

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The Court had occasion to rule on a similar issue in Stolt-Nielsen Marine Services (Phils.), Inc. v. National
Labor Relations Commission,27 where the NLRC was questioned for awarding to an illegally dismissed
overseas worker fixed overtime pay equivalent to the unexpired portion of the latter's contract. In
resolving the question, the Court, citing Cagampan v. National Labor Relations Commission,28 held that
although an overseas employment contract may guarantee the right to overtime pay, entitlement to such
benefit must first be established, otherwise the same cannot be allowed.
Hence, it being improbable that respondent rendered overtime work during the unexpired term of his
contract, the inclusion of his "guaranteed overtime" pay into his monthly salary as basis in the
computation of his salaries for the entire unexpired period of his contract has no factual or legal basis and
the same should have been disallowed.
VIRGILIO SAPIO, PETITIONER, VS. UNDALOC CONSTRUCTION AND/OR ENGR. CIRILO UNDALOC,
RESPONDENTS.
Facts:
The controversy started with a complaint filed by petitioner against Undaloc Construction and/or Engineer
Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of statutory benefits.
Respondent Undaloc Construction, a single proprietorship owned by Cirilo Undaloc, is engaged in road
construction
business
in
Cebu
City.
Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he was terminated on
the ground that the project he was assigned to was already finished, he being allegedly a project
employee. Petitioner asserted he was a regular employee having been engaged to perform works which
are "usually necessary or desirable" in respondents' business. He claimed that from 1 May to 31 August
1995 and from 1 September to 31 December 1995, his daily wage rate was only P80.00 and P90.00,
respectively, instead of P121.87 as mandated by Wage Order No. ROVII-03. From 1 March 1996 to 30 May
1998, his daily rate was P105.00. He further alleged that he was made to sign two payroll sheets, the first
bearing the actual amount he received wherein his signature was affixed to the last column opposite his
name, and the second containing only his name and signature. To buttress this allegation, petitioner
presented the payroll sheet covering the period from 4 to 10 December 1995 in which the entries were
written in pencil. He also averred that his salary from 18 to 30 May 1998 was withheld by respondents. [5]
For its part, respondent Cirilo Undaloc maintained that petitioner was hired as a project employee on 1 May
1995 and was assigned as watchman from one project to another until the termination of the project on 30
May 1998.[6] Refuting the claim of underpayment, respondent presented the payroll sheets from 2
September to 8 December 1996, 26 May to 15 June 1997, and 12 January to 31 May 1998. [7] That petitioner
was a project employee became a non-issue beginning with the decision of the Labor Arbiter. Contested
still is his entitlement to salary differential, apart from attorney's fees.
Issue:
Won the petitioner is a project employee.
Ruling:
No discussion about project employee.
Absent any indication sufficient enough to support a conclusion, we cannot uphold the findings of the
Labor Arbiter and the NLRC.[19]
The conclusion of the Labor Arbiter that entries in the December 1995 payroll sheet could have been
altered is utterly baseless. The claim that the December 1995 payroll sheet was written in pencil and was
thus rendered it prone to alterations or erasures is clearly non sequitur. The same is true with respect to

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the typewritten payroll sheets. In fact, neither the Labor Arbiter nor the NLRC found any alteration or
erasure or traces thereat, whether on the pencil-written or typewritten payroll sheets. Indeed, the most
minute examination will not reveal any tampering. Furthermore, if there is any adverse conclusion as
regards the December 1995 payroll sheet, it must be confined only to it and cannot be applied to the
typewritten
payroll
sheets.
Moreover, absent any evidence to the contrary, good faith must be presumed in this case. Entries in the
payroll, being entries in the course of business, enjoy the presumption of regularity under Rule 130,
Section 43 of the Rules of Court. Hence, while as a general rule, the burden of proving payment of
monetary claims rests on the employer,[20] when fraud is alleged in the preparation of the payroll, the
burden of evidence shifts to the employee and it is incumbent upon him to adduce clear and convincing
evidence in support of his claim. [21] Unfortunately, petitioner's bare assertions of fraud do not suffice to
overcome
the
disputable
presumption
of
regularity.
While we adhere to the position of the appellate court that the "tendency" to alter the entries in the
payrolls was not substantiated, we cannot however subscribe to the total deletion of the award of salary
differential
and
attorney's
fees,
as
it
so
ruled.
The

Labor

Arbiter

granted

salary

differential

of

P24,902.88. [22]

The Labor Arbiter erred in his computation. He fixed the daily wage rate actually received by petitioner at
P105.00[23] without taking into consideration the P141.00 rate indicated in the typewritten payroll sheets
submitted by respondents. Moreover, the Labor Arbiter misapplied the wage orders [24] when he wrongly
categorized respondent as falling within the first category. Based on the stipulated number of employees
and audited financial statements,[25] respondents should have been covered by the second category.
To avoid further delay in the disposition of this case which is not in consonance with the objective of
speedy justice, we have to adjudge the rightful computation of the salary differential based on the
applicable
wage
orders.
After
all,
the
supporting
records
are
complete.
This Court finds that from 1 January to 30 August 1996 and 1 July 1997 to 31 May 1998, petitioner had
received a wage less than the minimum mandated by law. Therefore, he is entitled to a salary differential.
d. Piece Rate Workers
Labor congress of the Phils. Et al. vs NLRC
Facts:
It rooted on a chaotic strike due to ULP and charges of underpayment of wages. The LA ruled:
Anent the charge that there was underpayment of wages, the evidence points to the contrary. The
enumeration of complainants' wages in their consolidated Affidavits of merit and position paper which
implies underpayment has no leg to stand on in the light of the fact that complainants' admission that they
are piece workers or paid on a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese
curls or other products repacked. The only limitation for piece workers or pakiao workers is that they
should receive compensation no less than the minimum wage for an eight (8) hour work [sic]. And
compliance therewith was satisfactorily explained by respondent Gonzalo Kehyeng in his testimony (TSN,
p. 12-30) during the July 31, 1991 hearing. On cross-examination, complainants failed to rebut or deny
Gonzalo Kehyeng's testimony that complainants have been even receiving more than the minimum wage
for an average workers [sic]. Certainly, a lazy worker earns less than the minimum wage but the same
cannot be attributable to respondents but to the lazy workers. NLRC affirmed.
Issue:

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WON the employees as piece rate workers cannot be considered as regular employees
Ruling:
That petitioner employees are "pakyao" or piece workers does not imply that they are not regular
employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court
held that the work of merchandisers of processed food, who coordinate with grocery stores and other
outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the company. With
more reason, the work of processed food repackers is necessary in the day-to-day operation[s] of
respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the existence of just cause for dismissing an
employee, such as abandonment, rests on the employer, 11 a burden private respondents failed to
discharge.
Private respondents, moreover, in considering petitioners' employment to have been terminated by
abandonment, violated their rights to security of tenure and constitutional right to due process in not even
serving them with a written notice of such termination. 12 Section 2, Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code provides:
Sec. 2. Notice of Dismissal Any employer who seeks to dismiss a worker shall furnish him a written
notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's last known address.
Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279 of the Labor
Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking into account the
number of employees involved, the length of time that has lapsed since their dismissal, and the
perceptible resentment and enmity between petitioners and private respondents which necessarily
strained their relationship, reinstatement would be impractical and hardly promotive of the best interests
of the parties. In lieu of reinstatement then, separation pay at the rate of one month for every year of
service,
with
a fraction of at least six (6) months of service considered as one (1) year, is in order. 13
That being said, the amount of back wages to which each petitioner is entitled, however, cannot be fully
settled at this time. Petitioners, as piece-rate workers having been paid by the piece, 14 there is need to
determine the varying degrees of production and days worked by each worker. Clearly, this issue is best
left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay and service incentive leave
which the labor arbiter failed to rule on but which petitioners prayed for in their complaint, 15 we hold that
petitioners are so entitled to these benefits. Three (3) factors lead us to conclude that petitioners, although
piece-rate workers, were regular employees of private respondents. First, as to the nature of petitioners'
tasks, their job of repacking snack food was necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and selling of such food products; second, petitioners
worked for private respondents throughout the year, their employment not having been dependent on a
specific project or season; and third, the length of time 16 that petitioners worked for private respondents.
Thus, while petitioners' mode of compensation was on a "per piece basis," the status and nature of their
employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as
nighttime pay, holiday pay, service incentive leave 17 and 13th month pay, 18 inter alia, "field personnel
and other employees whose time and performance is unsupervised by the employer, including those who
are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof." Plainly, petitioners as

Page 76 of 98

piece-rate workers do not fall within this group. As mentioned earlier, not only did petitioners labor under
the control of private respondents as their employer, likewise did petitioners toil throughout the year with
the fulfillment of their quota as supposed basis for compensation. Further, in Section 8 (b), Rule IV, Book III
which we quote hereunder, piece workers are specifically mentioned as being entitled to holiday pay.
Sec. 8. Holiday pay of certain employees.
(b) Where a covered employee is paid by results or output, such as payment on piece work, his holiday pay
shall not be less than his average daily earnings for the last seven (7) actual working days preceding the
regular holiday: Provided, however, that in no case shall the holiday pay be less than the applicable
statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the employer of piece rate
workers from those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary or task basis, and those who are paid
a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof,
except where the workers are paid on piece-rate basis in which case the employer shall grant the required
13th month pay to such workers. (emphasis supplied)
The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard amount for every piece or unit of work produced that
is more or less regularly replicated, without regard to the time spent in producing the same. 20
As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-work, takay,
pakiao, or task basis, if their output rates are in accordance with the standards prescribed under Sec. 8,
Rule VII, Book III, of these regulations, or where such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to receive overtime pay. Here, private respondents
did not allege adherence to the standards set forth in Sec. 8 nor with the rates prescribed by the Secretary
of Labor. As such, petitioners are beyond the ambit of exempted persons and are therefore entitled to
overtime pay. Once more, the National Labor Relations Commission would be in a better position to
determine the exact amounts owed petitioners, if any.
AVELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and J.C. TAILOR SHOP and/or JOHNNY CO, respondents.
Facts:
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor
Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively. They worked from 8:00
a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case of the other 100 employees of
private respondents, petitioners were paid on a piece-work basis, according to the style of suits they made.
Regardless of the number of pieces they finished in a day, they were each given a daily pay of at least
P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and
sought recovery of overtime pay, holiday pay, premium pay on holiday and rest day, service incentive
leave pay, separation pay, 13th month pay, and attorneys fees.

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Issue:
Won petitioners are piece rate employees
Ruling:
Yes piece rate but that wont neglect their status as regular employees.
There is no dispute that petitioners were employees of private respondents although they were paid not on
the basis of time spent on the job but according to the quantity and the quality of work produced by them.
There are two categories of employees paid by results: (1) those whose time and performance are
supervised by the employer. (Here, there is an element of control and supervision over the manner as to
how the work is to be performed. A piece-rate worker belongs to this category especially if he performs his
work in the company premises.); and (2) those whose time and performance are unsupervised. (Here, the
employers control is over the result of the work. Workers on pakyao and takay basis belong to this group.)
Both classes of workers are paid per unit accomplished. Piece-rate payment is generally practiced in
garment factories where work is done in the company premises, while payment on pakyao and takay basis
is commonly observed in the agricultural industry, such as in sugar plantations where the work is
performed in bulk or in volumes difficult to quantify. i[4] Petitioners belong to the first category, i.e.,
supervised employees.
In determining the existence of an employer-employee relationship, the following elements must be
considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employees conduct. ii[5] Of these elements, the most
important criterion is whether the employer controls or has reserved the right to control the employee not
only as to the result of the work but also as to the means and methods by which the result is to be
accomplished.iii[6]
In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners
worked in the companys premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The
mere fact that they were paid on a piece-rate basis does not negate their status as regular employees of
private respondents. The term wage is broadly defined in Art. 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece or commission basis. Payment by the piece is just a method of compensation and does not define
the essence of the relations. iv[7] Nor does the fact that petitioners are not covered by the SSS affect the
employer-employee relationship.
Indeed, the following factors show that petitioners, although piece-rate workers, were regular employees of
private respondents: (1) within the contemplation of Art. 280 of the Labor Code, their work as tailors was
necessary or desirable in the usual business of private respondents, which is engaged in the tailoring
business; (2) petitioners worked for private respondents throughout the year, their employment not being
dependent on a specific project or season; and, (3) petitioners worked for private respondents for more
than one year.v[8]
Additionally, respondents cannot be considered as project or program employees because no evidence was
presented to show that the duration and scope of the project were determined or specified at the time of
their engagement. Under existing jurisprudence, project could refer to two distinguishable types of
activities. First, a project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or determinable
times. Second, the term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct

Page 78 of 98

from the ordinary or regular business operations of the employer. The job or undertaking also begins and
ends at determined or determinable times.173[38]
The principal test is whether or not the project employees were assigned to carry out a specific project or
undertaking, the duration and scope of which were specified at the time the employees were engaged for
that project.174[39]
In this case, it is undisputed that respondents had continuously performed the same activities for an
average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of the
petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability
of such services to petitioners business or trade.175[40] While length of time may not be a sole controlling
test for project employment, it can be a strong factor to determine whether the employee was hired for a
specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to
the usual trade or business of the employer. 176[41] We note further that petitioner did not report the
termination of respondents employment in the particular project to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace within 30 days following the date of
their separation from work, using the prescribed form on employees termination/suspension/dismissals.
MARK ROCHE INTERNATIONAL AND/OR EDUARDO DAYOT and SUSAN DAYOT, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, MARK ROCHE WORKERS UNION and WILMA
PATACAY, EILEEN RUFON, LILIA BRIONES, BEATRIZ MANAGAYTAY, DELIA ARELLANO, ANITA
MARCELO, RIO MARIANO, MARISSA SADILI, ESTRELLA MALLARI, DELIA LAROYA, and DIVINA
VILLARBA, respondents.
Facts:
Petitioners Eduardo Dayot and Susan Dayot were President and Vice President, respectively, of their copetitioner Mark Roche International (MRI), a corporation organized and existing under the laws of the
Philippines, engaged in the garments business. Private respondents Eileen Rufon, Lilia Briones, Beatriz
Managaytay, Delia Arellano, Anita Marcelo, Rio Mariano, Marissa Sadili, Wilma Patacay, Estella Mallari,
Delia Laroya and Divina Villarba were employed as sewers of MRI with lengths of service varying from
three (3) to nine (9) years.
On different dates private respondents filed separate complaints for underpayment of wages and nonpayment of overtime pay against petitioners MRI, Eduardo Dayot and Susan Dayot. Private respondents
alleged that they usually worked eleven (11) to twelve (12) hours daily, except on Mondays during which
they worked eight (8) hours, and were paid wages on a piece-rate basis amounting to P450.00 to P600.00
per week. They likewise asserted that sometime in 1992 they were unable to avail of their SSS benefits,
e.g., salary loan, sickness benefits and maternity benefits because, as they found out, the company did not
remit their contributions to the SSS.
On 11 October 1992 private respondents sought the assistance of a labor organization which helped them
organize the Mark Roche Workers Union (MRWU). On 14 October 1992 they registered the union with the
Department of Labor and Employment National Capital Region (DOLE-NCR) and on the same date filed a
Petition for Certification Election before the Med-Arbitration Board.

173
174
175
176

Page 79 of 98

On 27 October 1992 petitioners received a notice of hearing of the petition. Apparently irked by the idea of
a union within the company, petitioners ordered private respondents to withdraw the petition and further
threatened them that should they insist in the organization of a union they would be dismissed. Unfazed,
private respondents refused. As expected, on 29 October 1992 they were discharged from work.
On 30 October 1992 private respondents amended their earlier complaints to include as additional causes
of action their illegal dismissal, unfair labor practice, non-payment of 13th month pay, underpayment for
legal holidays, and for damages.
Issue:
Won the respondents are piece rate workers
Ruling:
The respondents are piece rate workers.
Finally, as correctly held by the NLRC, private respondents as piece-rate employees are not entitled to
service incentive leave pay as well as holiday pay even if they are entitled to other benefits like COLA and
13th month pay. Service incentive leave pay shall not apply to employees whose performance is
unsupervised by the employer, including those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof. 7
WHEREFORE, this Court finds that private respondents Eileen Rufon, Lilia Briones, Beatriz Managaytay,
Delia Arellano, Anita Marcelo, Rio Mariano, Marissa Sadili, Wilma Patacay, Estrella Malari, Delia Laroya and
Divina Villarba were illegally dismissed not merely illegally constructively dismissed by petitioners
Mark Roche International and/or Eduardo Dayot and Susan Dayot, and to this extent, the assailed Decision
of public respondent National Labor Relations Commission affirming that of the Labor Arbiter, is MODIFIED.
However, it is AFFIRMED insofar as it ordered the reinstatement of private respondents with back wages,
salary differentials and 13th month pay. The service incentive leave pay awarded by the Labor Arbier but
deleted by the National Labor Relations Commission is likewise DELETED.1wphi1.nt
e. probationary employees
CEBU MARINE BEACH RESORT, OFELIA PELAEZ AND TSUYOSHI SASAKI, petitioners, vs.NATIONAL
LABOR RELATIONS COMMISSION (FOURTH DIVISION), RIC RODRIGO RODRIGUEZ, MANULITO
VILLEGAS and LORNA G. IGOT, respondents.
Facts:
Cebu Marine Beach Resort (herein petitioner company), a single proprietorship owned by Victor Dualan,
commenced its operations sometime in January, 1990 with the recruitment of its employees, including Ric
Rodrigo Rodriguez, Manulita Villegas and Lorna G. Igot, respondents.
On the last week of March, 1990 when Japanese tourists began arriving at the resort, petitioner company
became fully operational.Inasmuch as the beach resort was intended to cater principally to Japanese
tourists, respondents had to undergo a special training in Japanese customs, traditions, discipline as well
as hotel and resort services. This special training was supervised by Tsuyoshi Sasaki, also a petitioner.
During a seminar conducted on May 24, 1990, petitioner Sasaki suddenly scolded respondents and hurled
brooms, floor maps, iron trays, fire hoses and other things at them. In protest, respondents staged a walkout and gathered in front of the resort.
Immediately, petitioner Sasaki reacted by shouting at them to go home and never to report back to work.
Heeding his directive, respondents left the premises. Eventually, they filed with the Regional Arbitration

Page 80 of 98

Branch at Cebu City a complaint for illegal dismissal and other monetary claims against petitioners. On
May 28, 1990, petitioner company, through its acting general manager, Ofelia Pelaez, also a petitioner,
sent letters to respondents requiring them to explain why they should not be terminated from employment
on the grounds of abandonment of work and failure to qualify with the standards for probationary
employees.
Issue:
whether respondents were illegally dismissed from employment by petitioner company (as probationary
employees)
Ruling:
Yes they are illegally dismissed.
We hold that the Court of Appeals did not err when it ruled that respondents were illegally dismissed from
the service.
It is settled that while probationary employees do not enjoy permanent status, they are entitled to the
constitutional protection of security of tenure. Their employment may only be terminated for just
cause or when they fail to qualify as regular employees in accordance with reasonable
standards made known to them by their employer at the time of engagement, and after due
process.5
Here, petitioners terminated respondents probationary employment on the grounds of abandonment and
failure to qualify for the positions for which they were employed.
On this point, we quote with approval the findings of the Court of Appeals, thus:
"x x x. It is undisputed that Mr. Sasaki made an utterance to the effect that private respondents should go
home and never come back to work for the company again. Such utterance is tantamount to a dismissal.
Its meaning is also clear and unmistakable no matter which accent was used by Mr. Sasaki. Considering
further that Mr. Sasaki was in charge of the training of the private respondents, his words carry authority
and conviction. Even assuming for the sake of argument that Mr. Sasaki was never vested with the power
of dismissal, the petitioner company ratified Mr. Sasakis acts. When petitioner company sent a strongly
worded memorandum to private respondents asking them to explain why their services should not be
terminated for failure to live up to the companys expectations, it showed intention to terminate. x x x"x x
x
"The subsequent issuances of the memos were, as rightly interpreted by the public respondent, merely an
afterthought to escape the legal liability arising from the illegal termination of the private respondents
services.
That respondents failed to qualify for their positions, suffice it to state that at the time they were
dismissed, they were still in a "trial period" or probationary period. 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. While the employer observes
the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other hand, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment which obviously were made
known to him.7 To reiterate, in the case at bar, far from allowing the respondents to prove that they
possessed the qualifications to meet the reasonable standards for their permanent employment,
petitioners peremptorily dismissed them from the service.

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On another tack, petitioners argument that the Appellate Courts award of full backwages and separation
pay in effect unilaterally extended respondents 6-month probationary employment is bereft of merit.
In Philippine Manpower Services, Inc. vs. NLRC,8 we held that "absent the grounds for termination of a
probationary employee, he is entitled to continued employment even beyond the probationary period."
On a similar note, our ruling in Lopez vs. Javier9 is quite explicit, thus:
"x x x, probationary employees who are unjustly dismissed from work during the probationary period shall
be entitled to reinstatement and payment of full backwages and other benefits and privileges from
the time they were dismissed up to their actual reinstatement, conformably with Article 279 of the
Labor Code, as amended by Section 34 of Republic Act No. 6715, which took effect on March 21, 1989:
x x x 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."
**** (!!!!!) check mistsubishi case!!!! RADIN C. ALCIRA, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, MIDDLEBY PHILIPPINES CORPORATION/FRANK THOMAS, XAVIER G.
PEA and TRIFONA F. MAMARADLO, respondents.
Facts: (caveat) the recent ruling is mitsubishi motors vs chrysler phils labor union GR No.
148738 June 29, 2004- regarding the computation of the last days of 180 days trial period.
Respondent Middleby Philippines Corporation (Middleby) hired petitioner as engineering support services
supervisor on a probationary basis for six months. Apparently unhappy with petitioners performance,
respondent Middleby terminated petitioners services. The bone of contention centered on whether the
termination occurred before or after the six-month probationary period of employment.
The parties, presenting their respective copies of Alciras appointment paper, claimed conflicting starting
dates of employment: May 20, 1996 according to petitioner and May 27, 1996 according to respondent.
Both documents indicated petitioners employment status as probationary (6 mos.) and a remark that
after five months (petitioners) performance shall be evaluated and any adjustment in salary shall depend
on (his) work performance.177[6]
Petitioner asserts that, on November 20, 1996, in the presence of his co-workers and subordinates, a
senior officer of respondent Middleby in bad faith withheld his time card and did not allow him to work.
Considering this as a dismissal after the lapse of his probationary employment, petitioner filed on
November 21, 1996 a complaint in the National Labor Relations Commission (NLRC) against respondent
Middleby contending that he had already become a regular employee as of the date he was illegally
dismissed. Included as respondents in the complaint were the following officers of respondent Middleby:
Frank Thomas (General Manager), Xavier Pea (Human Resources Manager) and Trifona Mamaradlo
(Engineering Manager).
In their defense, respondents claim that, during petitioners probationary employment, he showed poor
performance in his assigned tasks, incurred ten absences, was late several times and violated company
rules on the wearing of uniform. Since he failed to meet company standards, petitioners application to
become a regular employee was disapproved and his employment was terminated.
Issue:
WON the petitioners dismissal as probationary employee is valid

177

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Ruling:
Petitioner insists that he already attained the status of a regular employee when he was dismissed on
November 20, 1996 because, having started work on May 20, 1996, the six-month probationary period
ended on November 16, 1996. According to petitioners computation, since Article 13 of the Civil Code
provides that one month is composed of thirty days, six months total one hundred eighty days. As the
appointment provided that petitioners status was probationary (6 mos.) without any specific date of
termination, the 180th day fell on November 16, 1996. Thus, when he was dismissed on November 20,
1996, he was already a regular employee.
Petitioners contention is incorrect. In CALS Poultry Supply Corporation, et. al. vs. Roco, et. al.,178[11] this
Court dealt with the same issue of whether an employment contract from May 16, 1995 to November 15,
1995 was within or outside the six-month probationary period. We ruled that November 15, 1995 was still
within the six-month probationary period. We reiterate our ruling in CALS Poultry Supply:
(O)ur computation of the 6-month probationary period is reckoned from the date of appointment up to the
same calendar date of the 6th month following.(italics supplied)
In short, since the number of days in each particular month was irrelevant, petitioner was still a
probationary employee when respondent Middleby opted not to regularize him on November 20, 1996.
The second issue is whether respondent Middleby informed petitioner of the standards for regularization
at the start of his employment.
Section 6 (d) of Rule 1 of the Implementing Rules of Book VI of the Labor Code (Department Order No. 10,
Series of 1997) provides that:
xxx

xxx

xxx

(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where no
standards are made known to the employee at that time, he shall be deemed a regular employee.
xxx

xxx

xxx

We hold that respondent Middleby substantially notified petitioner of the standards to qualify as a regular
employee when it apprised him, at the start of his employment, that it would evaluate his supervisory skills
after five months. In Orient Express Placement Philippines vs. National Labor Relations Commission,179[12]
we ruled that an employer failed to inform an employee of the reasonable standards for becoming a
regular employee:
Neither private respondent's Agency-Worker Agreement with ORIENT EXPRESS nor his Employment
Contract with NADRICO ever mentioned that he must first take and pass a Crane Operator's License
Examination in Saudi Arabia before he would be allowed to even touch a crane. Neither did he know that
he would be assigned as floorman pending release of the results of the examination or in the event that he
failed; more importantly, that he would be subjected to a performance evaluation by his superior one (1)
month after his hiring to determine whether the company was amenable to continuing with his
employment. Hence, respondent Flores could not be faulted for precisely harboring the impression that he
was hired as crane operator for a definite period of one (1) year to commence upon his arrival at the worksite and to terminate at the end of one (1) year. No other condition was laid out except that he was to be
on probation for three (3) months.(emphasis supplied)

178
179

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Conversely, an employer is deemed to substantially comply with the rule on notification of standards if he
apprises the employee that he will be subjected to a performance evaluation on a particular date after his
hiring. We agree with the labor arbiter when he ruled that:
In the instant case, petitioner cannot successfully say that he was never informed by private respondent of
the standards that he must satisfy in order to be converted into regular status. This rans (sic) counter to
the agreement between the parties that after five months of service the petitioners performance would be
evaluated. It is only but natural that the evaluation should be made vis--vis the performance standards
for the job. Private respondent Trifona Mamaradlo speaks of such standard in her affidavit referring to the
fact that petitioner did not perform well in his assigned work and his attitude was below par compared to
the companys standard required of him.180[13]
The third issue for resolution is whether petitioner was illegally dismissed when respondent Middleby opted
not to renew his contract on the last day of his probationary employment.
It is settled that even if probationary employees do not enjoy permanent status, they are accorded the
constitutional protection of security of tenure. This means they may only be terminated for just cause or
when they otherwise fail to qualify as regular employees in accordance with reasonable standards made
known to them by the employer at the time of their engagement. 181[14]
But we have also ruled in Manlimos, et. al. vs. National Labor Relations Commission 182[15] that this
constitutional protection ends on the expiration of the probationary period. On that date, the parties are
free to either renew or terminate their contract of employment. Manlimos concluded that (t)his
development has rendered moot the question of whether there was a just cause for the dismissal of the
petitioners xxx.183[16] In the case at bar, respondent Middleby exercised its option not to renew the
contract when it informed petitioner on the last day of his probationary employment that it did not intend
to grant him a regular status.
Although we can regard petitioners severance from work as dismissal, the same cannot be deemed illegal.
As found by the labor arbiter, the NLRC and the Court of Appeals, petitioner (1) incurred ten absences (2)
was tardy several times (3) failed to wear the proper uniform many times and (4) showed inferior
supervisory skills. Petitioner failed to satisfactorily refute these substantiated allegations. Taking all this in
its entirety, respondent Middleby was clearly justified to end its employment relationship with petitioner.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, petitioner, vs.CHRYSLER PHILIPPINES LABOR
UNION and NELSON PARAS, respondents. (the prevailing ruling)
Facts:
Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation engaged in the assembly and
distribution of Mitsubishi motor vehicles. Chrysler Philippines Labor Union (CPLU) is a legitimate labor
organization and the duly certified bargaining agent of the hourly-paid regular rank and file employees of
MMPC. Nelson Paras was a member of CPLU. His wife, Cecille Paras, was the President of the Chrysler
Philippines Salaried Employees Union (CPSU).
Nelson Paras was first employed by MMPC as a shuttle bus driver on March 19, 1976. He resigned on June
16, 1982. He applied for and was hired as a diesel mechanic and heavy equipment operator in Saudi

180
181
182
183

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Arabia from 1982 to 1993. When he returned to the Philippines, he was re-hired as a welder-fabricator at
the MMPC tooling shop from October 3, 1994 to October 31, 1994. 2 On October 29, 1994, his contract was
renewed from November 1, 1994 up to March 3, 1995.3
Sometime in May of 1996, Paras was re-hired on a probationary basis as a manufacturing trainee at the
Plant Engineering Maintenance Department. He and the new and re-hired employees were given an
orientation on May 15, 19964 by Emma P. Aninipot, respecting the companys history, corporate
philosophy, organizational structure, and company rules and regulations, including the company standards
for regularization, code of conduct and company-provided benefits.5
Paras started reporting for work on May 27, 1996. He was assigned at the paint ovens, air make-up and
conveyors. As part of the MMPCs policy, Paras was evaluated by his immediate supervisors Lito R.
Lacambacal6 and Wilfredo J. Lopez7 after six (6) months, and received an average rating. Later, Lacambacal
informed Paras that based on his performance rating, he would be regularized. 8
However, the Department and Division Managers, A.C. Velando and H.T. Victoria, 9 including Mr. Dante
Ong,10 reviewed the performance evaluation made on Paras. They unanimously agreed, along with Paras
immediate supervisors, that the performance of Paras was unsatisfactory. 11 As a consequence, Paras was
not considered for regularization. On November 26, 1996, he received a Notice of Termination dated
November 25, 1996, informing him that his services were terminated effective the said date since he failed
to meet the required company standards for regularization. 12
Utilizing the grievance machinery in the collective bargaining agreement, the CPLU demanded the
settlement of the dispute which arose from Paras termination. 13 The dispute was thereafter submitted for
voluntary arbitration, as the parties were unable to agree on a mutually acceptable solution. CPLU posited
that Paras was dismissed on his one hundred eighty third (183rd) day of employment, or three (3) days
after the expiration of the probationary period of six (6) months. It was contended that Paras was already a
regular employee on the date of the termination of his "probationary employment."
Issue:
When is the last ay of 180days trial period in probationary employment?
Ruling:
Regularization of Employment
Indeed, an employer, in the exercise of its management prerogative, may hire an employee on a
probationary basis in order to determine his fitness to perform work. 29 Under Article 281 of the Labor Code,
the employer must inform the employee of the standards for which his employment may be considered for
regularization. Such probationary period, unless covered by an apprenticeship agreement, shall not exceed
six (6) months from the date the employee started working. The employees services may be terminated
for just cause or for his failure to qualify as a regular employee based on reasonable standards made
known to him.30
Respondent Paras was employed as a management trainee on a probationary basis. During the orientation
conducted on May 15, 1996, he was apprised of the standards upon which his regularization would be
based. He reported for work on May 27, 1996. As per the companys policy, the probationary period was
from three (3) months to a maximum of six (6) months.
Applying Article 13 of the Civil Code, 31 the probationary period of six (6) months consists of one hundred
eighty (180) days.32 This is in conformity with paragraph one, Article 13 of the Civil Code, which provides
that the months which are not designated by their names shall be understood as consisting of thirty (30)

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days each. The number of months in the probationary period, six (6), should then be multiplied by the
number of days within a month, thirty (30); hence, the period of one hundred eighty (180) days.
As clearly provided for in the last paragraph of Article 13, in computing a period, the first day shall be
excluded and the last day included. Thus, the one hundred eighty (180) days commenced on May 27,
1996, and ended on November 23, 1996. The termination letter dated November 25, 1996 was served on
respondent Paras only at 3:00 a.m. of November 26, 1996. He was, by then, already a regular employee of
the petitioner under Article 281 of the Labor Code.
DUSIT HOTEL NIKKO, Petitioner, vs.RENATO M. GATBONTON, Respondent
Facts:
On November 21, 1998,4 respondent Renato M. Gatbonton was hired as Chief Steward in petitioner Dusit
Hotel Nikkos Food and Beverage Department. He signed a three-month probationary employment contract
until February 21, 1999,5 with a monthly salary of P25,000. At the start of his employment, the standards
by which he would be assessed to qualify for regular employment were explained to him.
The hotel alleged that at the end of the probation period, Ingo Rauber, Director of its Food and Beverage
Department, observed that Gatbonton failed to meet the qualification standards for Chief Steward, and
Rauber recommended a two-month extension of Gatbontons probationary period, or until April 22, 1999.
At the end of the 4th month, on March 24, 1999, Rauber informed Gatbonton that the latter had poor
ratings on staff supervision, productivity, quantity of work, and overall efficiency and did not qualify as
Chief Steward. Gatbonton requested another month or until April 22, 1999 to improve his performance, to
which Rauber agreed but allegedly refused to sign the Performance Evaluation Form. Neither did he sign
the Memorandum on the extension.
On March 31, 1999, a notice 6 of termination of probationary employment effective April 9, 1999, on the
above alleged grounds was served on Gatbonton. On April 12, 1999, he filed a complaint for illegal
dismissal and non-payment of wages, with prayers for reinstatement, full backwages, and damages,
including attorneys fees.
Issue:
Won his probationary employment termination is valid
Ruling:
He is illegally dismissed.
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.
As Article 281 clearly states, a probationary employee can be legally terminated either: (1) for a just
cause; or (2) when the employee fails to qualify as a regular employee in accordance with the reasonable
standards made known to him by the employer at the start of the employment. 10 Nonetheless, the power
of the employer to terminate an employee on probation is not without limitations. First, this power must be
exercised in accordance with the specific requirements of the contract. Second, the dissatisfaction on the
part of the employer must be real and in good faith, not feigned so as to circumvent the contract or the

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law; and third, there must be no unlawful discrimination in the dismissal. In termination cases, the burden
of proving just or valid cause for dismissing an employee rests on the employer. 11
Here, the petitioner did not present proof that the respondent was evaluated from November 21, 1998 to
February 21, 1999, nor that his probationary employment was validly extended.
The petitioner alleged that at the end of the respondents three-month probationary employment, Rauber
recommended that the period be extended for two months since respondent Gatbonton was not yet ready
for regular employment.12 The petitioner presented a Personnel Action Form 13 containing the
recommendation. We observed, however, that this document was prepared on March 31, 1999, the end of
the 4th month of the respondents employment. In fact, the recommended action was termination of
probationary employment effective April 9, 1999, and not extension of probation period. 14 Upon appeal to
the NLRC, the petitioner presented another Personnel Action Form 15 prepared on March 2, 1999, showing
that the respondents probationary employment was extended for two months effective February 23, 1999.
The Personnel Action Form dated March 2, 1999, contained the following remarks: "subject to undergo
extension of probation for two (2) months as per attached memo." Yet, we find this document inconclusive.
First, the action form did not contain the results of the respondents evaluation. Without the evaluation, the
action form had no basis. Second, the action form spoke of an attached memo which the petitioner
identified as Raubers Memorandum, recommending the extension of the respondents probation period for
two months. Again, the supposed Memorandum was not presented. Third, the action form did not bear the
respondents signature.
In the absence of any evaluation or valid extension, we cannot conclude that respondent failed to meet the
standards of performance set by the hotel for a chief steward. At the expiration of the three-month period,
Gatbonton had become a regular employee. It is an elementary rule in the law on labor relations that a
probationary employee engaged to work beyond the probationary period of six months, as provided under
Article 281 of the Labor Code, or for any length of time set forth by the employer (in this case, three
months), shall be considered a regular employee. 16 This is clear in the last sentence of Article 281. Any
circumvention of this provision would put to naught the States avowed protection for labor.
Since respondent was not dismissed for a just or authorized cause, his dismissal was illegal, and he is
entitled to reinstatement without loss of seniority rights, and other privileges as well as to full backwages,
inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
YOLANDA M. MERCADO,CHARITO S. DE LEON, DIANA R. LACHICA, MARGARITO M. ALBA, JR., and
FELIX A. TONOG,Petitioners,versus
-AMA COMPUTER COLLEGE-PARAAQUE CITY
Respondent.
Facts:
AMACC is an educational institution engaged in computer-based education in the country. One of AMACCs
biggest schools in the country is its branch at Paraaque City. The petitioners were faculty members who
started teaching at AMACC on May 25, 1998. The petitioner Mercado was engaged as a Professor 3, while
petitioner Tonog was engaged as an Assistant Professor 2. On the other hand, petitioners De Leon, Lachica
and Alba, Jr., were all engaged as Instructor 1.184[5] The petitioners executed individual Teachers
Contracts for each of the trimesters that they were engaged to teach, with the following common
stipulation:185[6]

184
185

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1.

POSITION. The TEACHER has agreed to accept a non-tenured appointment to work in the College
of xxx effective xxx to xxx or for the duration of the last term that the TEACHER is given a
teaching load based on the assignment duly approved by the DEAN/SAVP-COO. [Emphasis
supplied]

For the school year 2000-2001, AMACC implemented new faculty screening guidelines, set forth in its
Guidelines on the Implementation of AMACC Faculty Plantilla. 186[7] Under the new screening guidelines,
teachers were to be hired or maintained based on extensive teaching experience, capability, potential,
high academic qualifications and research background. The performance standards under the new
screening guidelines were also used to determine the present faculty members entitlement to salary
increases. The petitioners failed to obtain a passing rating based on the performance
standards; hence AMACC did not give them any salary increase. 187[8]
Because of AMACCs action on the salary increases, the petitioners filed a complaint with the Arbitration
Branch of the NLRC on July 25, 2000, for underpayment of wages, non-payment of overtime and overload
compensation, 13th month pay, and for discriminatory practices.188[9]
On September 7, 2000, the petitioners individually received a memorandum from AMACC, through Human
Resources Supervisor Mary Grace Beronia, informing them that with the expiration of their contract to
teach, their contract would no longer be renewed.
Issue:
Won the probationary employment was validly terminated
Ruling:
They are illegally dismissed.
a. Rule on Employment on Probationary Status
A reality we have to face in the consideration of employment on probationary status of teaching personnel
is that they are not governed purely by the Labor Code. The Labor Code is supplemented with respect to
the period of probation by special rules found in the Manual of Regulations for Private Schools. 189[27] On
the matter of probationary period, Section 92 of these regulations provides:
Section 92. Probationary Period. Subject in all instances to compliance with the 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 a trimester basis. [Emphasis supplied]
The CA pointed this out in its decision (as the NLRC also did), and we confirm the correctness of this
conclusion. Other than on the period, the following quoted portion of Article 281 of the Labor Code still
fully applies:

186
187
188
189

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x x x The services of an employee who has been engaged on a probationary basis may be terminated
for a just cause 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.
[Emphasis supplied]
b. Fixed-period Employment
The use of employment for fixed periods during the teachers probationary period is likewise an accepted
practice in the teaching profession. We mentioned this in passing in Magis Young Achievers Learning
Center v. Adelaida P. Manalo, 190[28] albeit a case that involved elementary, not tertiary, education, and
hence spoke of a school year rather than a semester or a trimester. We noted in this case:
The common practice is for the employer and the teacher to enter into a contract, effective for
one school year. At the end of the school year, the employer has the option not to renew the contract,
particularly considering the teachers performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary
employment continues. Again, at the end of that period, the parties may opt to renew or not to renew the
contract. If renewed, this second renewal of the contract for another school year would then be the last
year since it would be the third school year of probationary employment. At the end of this third
year, the employer may now decide whether to extend a permanent appointment to the
employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year
period, the teacher remains under probation.
Upon the expiration of his contract of
employment, being simply on probation, he cannot automatically claim security of tenure and
compel the employer to renew his employment contract. It is when the yearly contract is renewed
for the third time that Section 93 of the Manual becomes operative, and the teacher then is entitled to
regular or permanent employment status.
It is important that the contract of probationary employment specify the period or term of its effectivity.
The failure to stipulate its precise duration could lead to the inference that the contract is binding for the
full three-year probationary period.
We have long settled the validity of a fixed-term contract in the case Brent School, Inc. v. Zamora191[29]
that AMACC cited. Significantly, Brent happened in a school setting. Care should be taken, however, in
reading Brent in the context of this case as Brent did not involve any probationary employment issue; it
dealt purely and simply with the validity of a fixed-term employment under the terms of the Labor Code,
then newly issued and which does not expressly contain a provision on fixed-term employment.
c. Academic and Management Prerogative
Last but not the least factor in the academic world, is that a school enjoys academic freedom a
guarantee that enjoys protection from the Constitution no less. Section 5(2) Article XIV of the Constitution
guarantees all institutions of higher learning academic freedom. 192[30]
The institutional academic freedom includes the right of the school or college to decide and adopt its aims
and objectives, and to determine how these objections can best be attained, free from outside coercion or
interference, save possibly when the overriding public welfare calls for some restraint. The essential
freedoms subsumed in the term academic freedom encompass the freedom of the school or college to

190
191
192

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determine for itself: (1) who may teach; (2) who may be taught; (3) how lessons shall be taught; and (4)
who may be admitted to study.193[31]
AMACCs right to academic freedom is particularly important in the present case, because of the new
screening guidelines for AMACC faculty put in place for the school year 2000-2001. We agree with the CA
that AMACC has the inherent right to establish high standards of competency and efficiency for its faculty
members in order to achieve and maintain academic excellence. The schools prerogative to provide
standards for its teachers and to determine whether or not these standards have been met is in
accordance with academic freedom that gives the educational institution the right to choose who should
teach.194[32] In Pea v. National Labor Relations Commission,195[33] we emphasized:
It is the prerogative of the school to set high standards of efficiency for its teachers since quality education
is a mandate of the Constitution. As long as the standards fixed are reasonable and not arbitrary, courts
are not at liberty to set them aside. Schools cannot be required to adopt standards which barely satisfy
criteria set for government recognition.
The same academic freedom grants the school the autonomy to decide for itself the terms and conditions
for hiring its teacher, subject of course to the overarching limitations under the Labor Code. Academic
freedom, too, is not the only legal basis for AMACCs issuance of screening guidelines. The authority to hire
is likewise covered and protected by its management prerogative the right of an employer to regulate all
aspects of employment, such as hiring, the freedom to prescribe work assignments, working methods,
process to be followed, regulation regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of workers.196[34] Thus, AMACC has every right to determine for itself
that it shall use fixed-term employment contracts as its medium for hiring its teachers. It also acted within
the terms of the Manual of Regulations for Private Schools when it recognized the petitioners to be merely
on probationary status up to a maximum of nine trimesters.
The Conflict: Probationary Status and Fixed-term Employment
The existence of the term-to-term contracts covering the petitioners employment is not disputed, nor is it
disputed that they were on probationary status not permanent or regular status from the time they
were employed on May 25, 1998 and until the expiration of their Teaching Contracts on September 7,
2000. As the CA correctly found, their teaching stints only covered a period of at least seven (7)
consecutive trimesters or two (2) years and three (3) months of service. This case, however, brings to
the fore the essential question of which, between the two factors affecting employment,
should prevail given AMACCs position that the teachers contracts expired and it had the right
not to renew them. In other words, should the teachers probationary status be disregarded simply
because the contracts were fixed-term?
The provision on employment on probationary status under the Labor Code 197[35] is a primary example of
the fine balancing of interests between labor and management that the Code has institutionalized
pursuant to the underlying intent of the Constitution. 198[36]

193
194
195
196
197
198

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On the one hand, employment on probationary status affords management the chance to fully scrutinize
the true worth of hired personnel before the full force of the security of tenure guarantee of the
Constitution comes into play. 199[37] Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period to reject hirees who fail to
meet its own adopted but reasonable standards.200[38] These standards, together with the just201[39] and
authorized causes202[40] for termination of employment the Labor Code expressly provides, are the
grounds available to terminate the employment of a teacher on probationary status. For example, the
school may impose reasonably stricter attendance or report compliance records on teachers on probation,
and reject a probationary teacher for failing in this regard, although the same attendance or compliance
record may not be required for a teacher already on permanent status. At the same time, the same just
and authorizes causes for dismissal under the Labor Code apply to probationary teachers, so that they
may be the first to be laid-off if the school does not have enough students for a given semester or
trimester. Termination of employment on this basis is an authorized cause under the Labor Code. 203[41]
Labor, for its part, is given the protection during the probationary period of knowing the company
standards the new hires have to meet during the probationary period, and to be judged on the basis of
these standards, aside from the usual standards applicable to employees after they achieve permanent
status. Under the terms of the Labor Code, these standards should be made known to the teachers on
probationary status at the start of their probationary period, or at the very least under the circumstances
of the present case, at the start of the semester or the trimester during which the probationary standards
are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that
the school should show as a matter of due process how these standards have been applied. This is
effectively the second notice in a dismissal situation that the law requires as a due process guarantee
supporting the security of tenure provision, 204[42] and is in furtherance, too, of the basic rule in employee
dismissal that the employer carries the burden of justifying a dismissal. 205[43] These rules ensure
compliance with the limited security of tenure guarantee the law extends to probationary employees. 206
[44]
When fixed-term employment is brought into play under the above probationary period rules, the situation
as in the present case may at first blush look muddled as fixed-term employment is in itself a valid
employment mode under Philippine law and jurisprudence. 207[45] The conflict, however, is more apparent
than real when the respective nature of fixed-term employment and of employment on probationary status
are closely examined.
The fixed-term character of employment essentially refers to the period agreed upon between the
employer and the employee; employment exists only for the duration of the term and ends on its own
when the term expires. In a sense, employment on probationary status also refers to a period because of

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the technical meaning probation carries in Philippine labor law a maximum period of six months, or in
the academe, a period of three years for those engaged in teaching jobs. Their similarity ends there,
however, because of the overriding meaning that being on probation connotes, i.e., a process of testing
and observing the character or abilities of a person who is new to a role or job. 208[46]
Understood in the above sense, the essentially protective character of probationary status for
management can readily be appreciated.
But this same protective character gives rise to the
countervailing but equally protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly communicated standards. Otherwise
stated, within the period of the probation, any employer move based on the probationary standards and
affecting the continuity of the employment must strictly conform to the probationary rules.
Under the given facts where the school year is divided into trimesters, the school apparently utilizes its
fixed-term contracts as a convenient arrangement dictated by the trimestral system and not because the
workplace parties really intended to limit the period of their relationship to any fixed term and to finish this
relationship at the end of that term. If we pierce the veil, so to speak, of the parties so-called fixed-term
employment contracts, what undeniably comes out at the core is a fixed-term contract conveniently used
by the school to define and regulate its relations with its teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship in this manner. The school,
however, cannot forget that its system of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to the terms of Article 281 of the Labor Code. Unless
this reconciliation is made, the requirements of this Article on probationary status would be
fully negated as the school may freely choose not to renew contracts simply because their
terms have expired.
The inevitable effect of course is to wreck the scheme that the
Constitution and the Labor Code established to balance relationships between labor and
management.
Given the clear constitutional and statutory intents, we cannot but conclude that in a situation where the
probationary status overlaps with a fixed-term contract not specifically used for the fixed term it offers,
Article 281 should assume primacy and the fixed-period character of the contract must give way. This
conclusion is immeasurably strengthened by the petitioners and the AMACCs hardly concealed
expectation that the employment on probation could lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the schools standards.
To highlight what we mean by a fixed-term contract specifically used for the fixed term it offers, a
replacement teacher, for example, may be contracted for a period of one year to temporarily take the
place of a permanent teacher on a one-year study leave. The expiration of the replacement teachers
contracted term, under the circumstances, leads to no probationary status implications as she was never
employed on probationary basis; her employment is for a specific purpose with particular focus on the
term and with every intent to end her teaching relationship with the school upon expiration of this term.
If the school were to apply the probationary standards (as in fact it says it did in the present case), these
standards must not only be reasonable but must have also been communicated to the teachers at the start
of the probationary period, or at the very least, at the start of the period when they were to be applied.
These terms, in addition to those expressly provided by the Labor Code, would serve as the just cause for
the termination of the probationary contract. As explained above, the details of this finding of just cause
must be communicated to the affected teachers as a matter of due process.
AMACC, by its submissions, admits that it did not renew the petitioners contracts because they failed to
pass the Performance Appraisal System for Teachers (PAST) and other requirements for regularization that
the school undertakes to maintain its high academic standards. 209[47] The evidence is unclear on the
exact terms of the standards, although the school also admits that these were standards under the

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Guidelines on the Implementation of AMACC Faculty Plantilla put in place at the start of school year 20002001.
While we can grant that the standards were duly communicated to the petitioners and could be applied
beginning the 1st trimester of the school year 2000-2001, glaring and very basic gaps in the schools
evidence still exist. The exact terms of the standards were never introduced as evidence; neither does the
evidence show how these standards were applied to the petitioners. 210[48] Without these pieces of
evidence (effectively, the finding of just cause for the non-renewal of the petitioners contracts), we have
nothing to consider and pass upon as valid or invalid for each of the petitioners. Inevitably, the nonrenewal (or effectively, the termination of employment of employees on probationary status) lacks the
supporting finding of just cause that the law requires and, hence, is illegal.
TAMSONS ENTERPRISES, INC., NELSON LEE, LILIBETH ONG and JOHNSON NG,Petitioners,- versus
-COURT OF APPEALS and ROSEMARIE L. SY,Respondents.
Facts:
This case stemmed from a complaint for illegal dismissal with money claims filed by respondent Rosemarie
L. Sy (Sy) before the Arbitration Branch, National Capital Region, NLRC, against petitioners Tamsons
Enterprises, Inc. (Tamsons), Nelson Lee (Lee), the company President; and Lilibeth Ong (Ong) and Johnson
Ng (Ng), her co-employees. From the records, it appears that on September 1, 2006, Sy was hired by
Tamsons as Assistant to the President. Despite the title, she did not act as such because, per instruction
of Lee, she was directed to act as payroll officer, though she actually worked as a payroll clerk. 211[5] On
February 24, 2007,212[6] four days before she completed her sixth month of working in Tamsons, Ng, the
Sales Project Manager, called her to a meeting with him and Lee. During the meeting, they informed Sy
that her services would be terminated due to inefficiency. She was asked to sign a letter of resignation and
quitclaim. She was told not to report for work anymore because her services were no longer needed. On
her last day of work, Ong humiliated her in front of her officemates by shouting at her and preventing her
from getting her personal things or any other document from the office. During her pre-employment
interview, Lee had nice comments about her good work experience and educational background. She was
assured of a long-term employment with benefits. Throughout her employment, she earnestly performed
her duties, had a perfect attendance record, worked even during brownouts and typhoons, and would often
work overtime just to finish her work.
Sy claimed that the remarks of her superiors about her alleged inefficiency were ill-motivated and made
without any basis. She had been rendering services for almost six (6) months before she was arbitrarily
and summarily dismissed. Her dismissal was highly suspicious as it took place barely four (4) days prior to
the completion of her six-month probationary period. The petitioners did not show her any evaluation or
appraisal report regarding her alleged inefficient performance. As she was terminated without an
evaluation on her performance, she was deprived of the opportunity to be regularly part of the company
and to be entitled to the benefits and privileges of a regular employee. Worse, she was deprived of her
only means of livelihood.
For their part, the petitioners asserted that before Sy was hired, she was apprised that she was being hired
as a probationary employee for six months from September 1, 2006 to February 28, 2007, subject to
extension as a regular employee conditioned on her meeting the standards of permanent employment set
by the company. Her work performance was thereafter monitored and evaluated. On February 1, 2007,

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she was formally informed that her employment would end on February 28, 2007 because she failed to
meet the companys standards. From then on, Sy started threatening the families of the petitioners with
bodily harm. They pointed out that the unpredictable attitude of Sy was one of the reasons for her not
being considered for regular employment.
Issue:
Won Sy was able to meet the probationary standards an deemed regular employee of the petitioner
Ruling:
Sy is a regular employee.
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 employee who has been engaged in 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. (Underscoring
supplied)
There is probationary employment where 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 engagement. 213[14] The probationary employment
is intended to afford the employer an opportunity to observe the fitness of a probationary employee while
at work, and to ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is
qualified for permanent employment, the probationer, on the other hand, seeks to prove to the employer
that he has the qualifications to meet the reasonable standards for permanent employment. Thus, the
word probationary, as used to describe the period of employment, implies the purpose of the term or
period, not its length.214[15]
On the basis of the aforequoted provisions and definition, there is no dispute that Sys employment with
Tamsons on September 1, 2006 was probationary in character. As a probationary employee, her
employment status was only temporary. Although a probationary or temporary employee with a limited
tenure, she was still entitled to a security of tenure.
It is settled that even if probationary employees do not enjoy permanent status, they are accorded the
constitutional protection of security of tenure. This means they may only be terminated for a just cause or
when they otherwise fail to qualify as regular employees in accordance with reasonable standards made
known to them by the employer at the time of their engagement.215[16] Consistently, in Mercado v. AMA
Computer College-Paranaque City, Inc.,216[17] this Court clearly stressed that:
Labor, for its part, is given the protection during the probationary period of knowing the company
standards the new hires have to meet during the probationary period, and to be judged on the basis of
these standards, aside from the usual standards applicable to employees after they achieve permanent
status. Under the terms of the Labor Code, these standards should be made known to the

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[employees] on probationary status at the start of their probationary period, or xxx during which
the probationary standards are to be applied. Of critical importance in invoking a failure to meet the
probationary standards, is that the [employer] should show as a matter of due process how
these standards have been applied. This is effectively the second notice in a dismissal situation that
the law requires as a due process guarantee supporting the security of tenure provision, and is in
furtherance, too, of the basic rule in employee dismissal that the employer carries the burden of justifying
a dismissal. These rules ensure compliance with the limited security of tenure guarantee the law extends
to probationary employees.217[18] [Emphases supplied]
In this case, the justification given by the petitioners for Sys dismissal was her alleged failure to qualify by
the companys standard. Other than the general allegation that said standards were made known to her at
the time of her employment, however, no evidence, documentary or otherwise, was presented to
substantiate the same. Neither was there any performance evaluation presented to prove that indeed hers
was unsatisfactory. Thus, this Court is in full accord with the ruling of the CA when it wrote that:
Private respondents were remiss in showing that petitioner failed to qualify as a regular employee. Except
for their allegations that she was apprised of her status as probationary and that she would be accorded
regular status once she meets their standards, no evidence was presented of these standards and that
petitioner had been apprised of them at the time she was hired as a probationary employee. Neither was
it shown that petitioner failed to meet such standards.
Petitioner should have been informed as to the basis of private respondents decision not to extend her
regular or permanent employment. This case is bereft of any proof like an evaluation or assessment report
which would support private respondents claim that she failed to comply with the standards in order to
become a regular employee.
One of the conditions before an employer can terminate a probationary employee is dissatisfaction on the
part of the employer which must be real and in good faith, not feigned so as to circumvent the contract or
the law. In the case at bar, absent any proof showing that the work performance of petitioner was
unsatisfactory, We cannot conclude that petitioner failed to meet the standards of performance set by
private respondents. This absence of proof, in fact, leads Us to infer that their dissatisfaction with her work
performance was contrived so as not to regularize her employment. 218[19]
For failure of the petitioners to support their claim of unsatisfactory performance by Sy, this Court shares
the view of the CA that Sys employment was unjustly terminated to prevent her from acquiring a regular
status in circumvention of the law on security of tenure. As the Court previously stated, this is a common
and convenient practice of unscrupulous employers to circumvent the law on security of tenure. Security of
tenure, which is a right of paramount value guaranteed by the Constitution, should not be denied to the
workers by such a stratagem. The Court can not permit such a subterfuge, if it is to be true to the law and
social justice.219[20]
In its attempt to justify Sys dismissal, the petitioners relied heavily on the case of Alcira v. NLRC220[21]
where the Court stressed that the constitutional protection ends on the expiration of the probationary
period when the parties are free to either renew or terminate their contract of employment.
Indeed, the Court recognizes the employers power to terminate as an exercise of management
prerogative. The petitioners, however, must be reminded that such right is not without limitations. In this

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connection,
it is well to quote the ruling of the Court in the case of Dusit Hotel Nikko v. Gatbonton,
221
[22] where it was written:
As Article 281 clearly states, a probationary employee can be legally terminated either: (1) for a just
cause; or (2) when the employee fails to qualify as a regular employee in accordance with the reasonable
standards made known to him by the employer at the start of the employment. Nonetheless, the power of
the employer to terminate an employee on probation is not without limitations. First, this power must be
exercised in accordance with the specific requirements of the contract. Second, the dissatisfaction on the
part of the employer must be real and in good faith, not feigned so as to circumvent the contract or the
law; and third, there must be no unlawful discrimination in the dismissal. In termination cases, the burden
of proving just or valid cause for dismissing an employee rests on the employer. 222[23] [Emphases
supplied]
Here, the petitioners failed to convey to Sy the standards upon which she should measure up to be
considered for regularization and how the standards had been applied in her case. As correctly pointed out
by Sy, the dissatisfaction on the part of the petitioners was at best self-serving and dubious as they could
not present concrete and competent evidence establishing her alleged incompetence. Failure on the part
of the petitioners to discharge the burden of proof is indicative that the dismissal was not justified.
The law is clear that in all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time of his engagement.
Where no standards are made known to the employee at that time, he shall be deemed a regular
employee.223[24] The standards under which she would qualify as a regular employee not having been
communicated to her at the start of her probationary period, Sy qualified as a regular employee. As held
by this Court in the very recent case of Hacienda Primera Development Corporation v. Villegas,:224[25]
In this case, petitioner Hacienda fails to specify the reasonable standards by which respondents alleged
poor performance was evaluated, much less to prove that such standards were made known to him at the
start of his employment. Thus, he is deemed to have been hired from day one as a regular
employee. Due process dictates that an employee be apprised beforehand of the condition of his
employment and of the terms of advancement therein. [Emphasis supplied]
Even on the assumption that Sy indeed failed to meet the standards set by them and made known to the
former at the time of her engagement, still, the termination was flawed for failure to give the required
notice to Sy. Section 2, Rule I, Book VI of the Implementing Rules provides:
Section 2. Security of tenure. (a) In cases of regular employment, the employer shall not terminate the
services of an employee except for just or authorized causes as provided by law, and subject to the
requirements of due process.
(b) The foregoing shall also apply in cases of probationary employment; Provided however, that in
such cases, termination of employment due to failure of the employee to qualify in accordance with the
standards of the employer made known to the former at the time of engagement may also be a ground for
termination of employment.xxx
(d) In all cases of termination of employment, the following standards of due process shall be substantially
observed:xxx

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If the termination is brought about by the completion of a contract or phase thereof, or by failure of an
employee to meet the standards of the employer in the case of probationary employment, it shall be
sufficient that a written notice is served the employee, within a reasonable time from the effective date of
termination. [Emphasis and Underscoring supplied]
In this case, the petitioners failed to comply with the requirement of a written notice. Notably, Sy was
merely verbally informed that her employment would be terminated on February 28, 2007, as admitted by
the petitioners.225[26] Considering that the petitioners failed to observe due process in dismissing her, the
dismissal had no legal sanction. It bears stressing that a workers employment is property in the
constitutional sense.226[27]
Being a regular employee whose termination was illegal.

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