SECOND DIVISION

[G.R. No. 118978. May 23, 1997]

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.
DECISION
REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT&T) invokes the alleged concealment of civil status and defalcation
of company funds as grounds to terminate the services of an employee. That employee, herein private
respondent Grace de Guzman, contrarily argues that what really motivated PT&T to terminate her
services was her having contracted marriage during her employment, which is prohibited by
petitioner in its company policies. She thus claims that she was discriminated against in gross
violation of law, such a proscription by an employer being outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a Supernumerary
Project Worker for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio
who went on maternity leave. Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration of the agreed period.
Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondents services as reliever were again engaged by petitioner, this time in replacement of one
Erlinda F. Dizon who went on leave during both periods. After August 8, 1991, and pursuant to their
Reliever Agreement, her services were terminated. On September 2, 1991, private respondent was
once more asked to join petitioner company as a probationary employee, the probationary period to
cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she
indicated in the portion for civil status therein that she was single although she had contracted
marriage a few months earlier, that is, on May 26, 1991. It now appears that private respondent had
made the same representation in the two successive reliever agreements which she signed on June 10,
1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch supervisor
in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992
requiring her to explain the discrepancy. In that memorandum, she was reminded about the
companys policy of not accepting married women for employment. In her reply letter dated January
17, 1992, private respondent stated that she was not aware of PT&Ts policy regarding married women
at the time, and that all along she had not deliberately hidden her true civil status. Petitioner
nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the
company effective January 29, 1992, which she readily contested by initiating a complaint for illegal
dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the
Regional Arbitration Branch of the National Labor Relations Commission in Baguio City. At the
preliminary conference conducted in connection therewith, private respondent volunteered the
information, and this was incorporated in the stipulation of facts between the parties, that she had
failed to remit the amount of P2, 380.75 of her collections. She then executed a promissory note for
that amount in favor of petitioner. All of these took place in a formal proceeding and with the
agreement of the parties and/or their counsel. On November 23, 1993, Labor Arbiter Irenarco R.
Rimando handed down a decision declaring that private respondent (who had already gained the
status of a regular employee), was illegally dismissed by petitioner. Her reinstatement, plus payment
of the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of
the firmly expressed view that the ground relied upon by petitioner in dismissing private respondent
was clearly insufficient, and that it was apparent that she had been discriminated against on account
of her having contracted marriage in violation of company rules. On appeal to the National Labor
Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its decision
dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and
unlawful discrimination by her employer, PT&T. However, the decision of the labor arbiter was
modified with the qualification that Grace de Guzman deserved to be suspended for three months in
view of the dishonest nature of her acts which should not be condoned. In all other respects, the
NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of private
respondent in her employment with PT&T. The subsequent motion for reconsideration filed by
petitioner was rebuffed by respondent NLRC in its resolution of November 9, 1994, hence this special
civil action assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well as
the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal employment
opportunities and standards. In the Philippine setting, women have traditionally been considered as
falling within the vulnerable groups or types of workers who must be safeguarded with preventive and
remedial social legislation against discriminatory and exploitative practices in hiring, training,
benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all phases of
social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones,
Section 14, Article II on the Declaration of Principles and State Policies, expressly recognizes the role
of women in nation-building and commands the State to ensure, at all times, the fundamental equality
before the law of women and men. Corollary thereto, Section 3 of Article XIII (the progenitor whereof
dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full
protection to labor and to promote full employment and equality of employment opportunities for all,
including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of
Article XIII mandates that the State shall protect workingwomen through provisions for opportunities
that would enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due
to our countrys commitment as a signatory to the United Nations Convention on the Elimination of All
Forms of Discrimination Against Women (CEDAW). Principal among these laws are Republic Act No.
6727 which explicitly prohibits discrimination against women with respect to terms and conditions of
employment, promotion, and training opportunities; Republic Act No. 6955 which bans the mail-order-
bride practice for a fee and the export of female labor to countries that cannot guarantee protection to
the rights of women workers; Republic Act No. 7192, also known as the Women in Development and
Nation Building Act, which affords women equal opportunities with men to act and to enter into
contracts, and for appointment, admission, training, graduation, and commissioning in all military or
similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act
No. 7322 increasing the maternity benefits granted to women in the private sector; Republic Act No.
7877 which outlaws and punishes sexual harassment in the workplace and in the education and
training environment; and Republic Act No. 8042, or the Migrant Workers and Overseas Filipinos Act
of 1995, which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with
emphasis on women, only in countries where their rights are secure. Likewise, it would not be amiss
to point out that in the Family Code, womens rights in the field of civil law have been greatly
enhanced and expanded. In the Labor Code, provisions governing the rights of women workers are
found in Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of night
work while Article 132 ensures the right of women to be provided with facilities and standards which
the Secretary of Labor may establish to ensure their health and safety. For purposes of labor and
social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other
similar establishments shall be considered as an employee under Article 138. Article 135, on the other
hand, recognizes a womans right against discrimination with respect to terms and conditions of
employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136
explicitly prohibits discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua non
prior to severance of the employment ties of an individual under his employ, to convincingly establish,
through substantial evidence, the existence of a valid and just cause in dispensing with the services of
such employee, ones labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the so-
called management prerogatives, which prescriptions encompass the matter of hiring, supervision of
workers, work assignments, working methods and assignments, as well as regulations on the transfer
of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. As put in a
case, an employer is free to regulate, according to his discretion and best business judgment, all
aspects of employment, from hiring to firing, except in cases of unlawful discrimination or those which
may be provided by law. In the case at bar, petitioners policy of not accepting or considering as
disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the
right against, discrimination, afforded all women workers by our labor laws and by no less than the
Constitution. Contrary to petitioners assertion that it dismissed private respondent from employment
on account of her dishonesty, the record discloses clearly that her ties with the company were
dissolved principally because of the companys policy that married women are not qualified for
employment in PT&T, and not merely because of her supposed acts of dishonesty. That it was so can
easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch
supervisor of the company, with the reminder, in the words of the latter, that youre fully aware that
the company is not accepting married women employee (sic), as it was verbally instructed to you.
Again, in the termination notice sent to her by the same branch supervisor, private respondent was
made to understand that her severance from the service was not only by reason of her concealment of
her married status but, over and on top of that, was her violation of the companys policy against
marriage (and even told you that married women employees are not applicable [sic] or accepted in our
company). Parenthetically, this seems to be the curious reason why it was made to appear in the
initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by
its highest ranking officers who would otherwise be solidarily liable with the corporation. Verily,
private respondents act of concealing the true nature of her status from PT&T could not be properly
characterized as willful or in bad faith as she was moved to act the way she did mainly because she
wanted to retain a permanent job in a stable company. In other words, she was practically forced by
that very same illegal company policy into misrepresenting her civil status for fear of being
disqualified from work. While loss of confidence is a just cause for termination of employment, it
should not be simulated. It must rest on an actual breach of duty committed by the employee and not
on the employers caprices. Furthermore, it should never be used as a subterfuge for causes which are
improper, illegal, or unjustified. In the present controversy, petitioners expostulations that it
dismissed private respondent, not because the latter got married but because she concealed that fact,
does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence the consequent
loss of confidence in her which justified her dismissal. Petitioner would asseverate, therefore, that
while it has nothing against marriage, it nonetheless takes umbrage over the concealment of that fact.
This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent
may well be minded to claim that the imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against its
female employees contracting marriage, what could be an act of insubordination was inconsequential.
What it submits as unforgivable is her concealment of that marriage yet, at the same time, declaring
that marriage as a trivial matter to which it supposedly has no objection. In other words, PT&T says it
gives its blessings to its female employees contracting marriage, despite the maternity leaves and
other benefits it would consequently respond for and which obviously it would have wanted to avoid. If
that employee confesses such fact of marriage, there will be no sanction; but if such employee
conceals the same instead of proceeding to the confessional, she will be dismissed. This line of
reasoning does not impress us as reflecting its true management policy or that we are being regaled
with responsible advocacy. This Court should be spared the ennui of strained reasoning and the
tedium of propositions, which confuse through less than candid arguments. Indeed, petitioner glosses
over the fact that it was its unlawful policy against married women, both on the aspects of
qualification and retention, which compelled private respondent to conceal her supervenient
marriage. It was, however, that very policy alone which was the cause of private respondents secretive
conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of
the cause is the cause of the evil caused. Finally, petitioners collateral insistence on the admission of
private respondent that she supposedly misappropriated company funds, as an additional ground to
dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent
admitted in the course of the proceedings that she failed to remit some of her collections, but that is
an altogether different story. The fact is that she was dismissed solely because of her concealment of
her marital status, and not on the basis of that supposed defalcation of company funds . That the labor
arbiter would thus consider petitioners submissions on this supposed dishonesty as a mere
afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in
labor cases. For, there was no showing that private respondent deliberately misappropriated the
amount or whether her failure to remit the same was through negligence and, if so, whether the
negligence was in nature simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the matter was deemed settled as a
peripheral issue in the labor case. Private respondent, it must be observed, had gained regular status
at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was
about to complete the probationary period of 150 days as she was contracted as a probationary
employee on September 2, 1991. That her dismissal would be effected just when her probationary
period was winding down clearly raises the plausible conclusion that it was done in order to prevent
her from earning security of tenure. On the other hand, her earlier stints with the company as reliever
were undoubtedly those of a regular employee, even if the same were for fixed periods, as she
performed activities which were essential or necessary in the usual trade and business of PT&T. The
primary standard of determining regular employment is the reasonable connection between the
activity performed by the employee in relation to the business or trade of the employer . As an
employee who had therefore gained regular status, and as she had been dismissed without just cause,
she is entitled to reinstatement without loss of seniority rights and other privileges and to full back
wages, inclusive of allowances and other benefits or their monetary equivalent. However, as she had
undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of an
unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be
upheld to obviate the impression or inference that such act should be condoned. It would be unfair to
the employer if she were to return to its fold without any sanction whatsoever for her act which was
not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting
therefrom the amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:
ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition
of employment or continuation of employment that a woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of marriage. This provision had a studied history for its origin can be traced to
Section 8 of Presidential Decree No. 148, better known as the Women and Child Labor Law, which
amended paragraph (c), Section 12 of Republic Act No. 679, entitled An Act to Regulate the
Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other
Purposes. The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became
law on March 16, 1923 and which regulated the employment of women and children in shops,
factories, industrial, agricultural, and mercantile establishments and other places of labor in the then
Philippine Islands. It would be worthwhile to reflect upon and adopt here the rationalization in
Zialcita, et al. vs. Philippine Air Lines, a decision that emanated from the Office of the President.
There, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and
that they will be automatically separated from the service once they marry was declared void, it being
violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against
married women. Thus:
Of first impression is the incompatibility of the respondents policy or regulation with the codal
provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies
only to women employed in ordinary occupations and that the prohibition against marriage of women
engaged in extraordinary occupations, like flight attendants, is fair and reasonable, considering the
pecularities of their chosen profession. We cannot subscribe to the line of reasoning pursued by
respondent. All along, it knew that the controverted policy has already met its doom as early as March
13, 1973 when Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was
promulgated. But for the timidity of those affected or their labor unions in challenging the validity of
the policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree,
which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on May
1, 1974 to take effect six (6) months later, or on November 1, 1974. It cannot be gainsaid that, with
the reiteration of the same provision in the new Labor Code, all policies and acts against it are
deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish
standards that will ensure the safety and health of women employees and in appropriate cases shall
by regulation require employers to determine appropriate minimum standards for termination in
special occupations, such as those of flight attendants, but that is precisely the factor that militates
against the policy of respondent. The standards have not yet been established as set forth in the first
paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants. It is
logical to presume that, in the absence of said standards or regulations, which are as yet to be
established, the policy of respondent against marriage is patently illegal. This finds support in Section
9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employees. The State shall assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work x x x.
Moreover, we cannot agree to the respondents proposition that termination from employment of flight
attendants on account of marriage is a fair and reasonable standard designed for their own health,
safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its
concern is not so much against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-
pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy
on flight attendants in the course of their employment. We feel that this needs no further discussion as
it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976. In a vain
attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles
52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution
and the family as a basic social institution, respectively, as bases for its policy of non-marriage. In both
instances, respondent predicates absence of a flight attendant from her home for long periods of time
as contributory to an unhappy married life. This is pure conjecture not based on actual conditions,
considering that, in this modern world, sophisticated technology has narrowed the distance from one
place to another. Moreover, respondent overlooked the fact that married flight attendants can
program their lives to adapt to prevailing circumstances and events. Article 136 is not intended to
apply only to women employed in ordinary occupations, or it should have categorically expressed so.
The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole
text and supported by Article 135 that speaks of non-discrimination on the employment of women. The
judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation
considered as void a policy of the same nature. In said case, respondent, in dismissing from the
service the complainant, invoked a policy of the firm to consider female employees in the project it
was undertaking as separated the moment they get married due to lack of facilities for married
women. Respondent further claimed that complainant was employed in the project with an oral
understanding that her services would be terminated when she gets married. Branding the policy of
the employer as an example of discriminatory chauvinism tantamount to denying equal employment
opportunities to women simply on account of their sex, the appellate court struck down said employer
policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the
Constitution. Under American jurisprudence, job requirements which establish employer preference
or conditions relating to the marital status of an employee are categorized as a sex-plus discrimination
where it is imposed on one sex and not on the other. Further, the same should be evenly applied and
must not inflict adverse effects on a racial or sexual group which is protected by federal job
discrimination laws. Employment rules that forbid or restrict the employment of married women, but
do not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of
1964, the main federal statute prohibiting job discrimination against employees and applicants on the
basis of, among other things, sex. Further, it is not relevant that the rule is not directed against all
women but just against married women. And, where the employer discriminates against married
women, but not against married men, the variable is sex and the discrimination is unlawful. Upon the
other hand, a requirement that a woman employee must remain unmarried could be justified as a
bona fide occupational qualification, or BFOQ, where the particular requirements of the job would
justify the same, but not on the ground of a general principle, such as the desirability of spreading
work in the workplace. A requirement of that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule
applicable to both male and female flight attendants, was regarded as unlawful since the restriction
was not related to the job performance of the flight attendants.
5. Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on the
right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual
as an intangible and inalienable right. Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem convenient, the same should not
be contrary to law, morals, good customs, public order, or public policy. Carried to its logical
consequences, it may even be said that petitioners policy against legitimate marital bonds would
encourage illicit or common-law relations and subvert the sacrament of marriage. Parenthetically, the
Civil Code provisions on the contract of labor state that the relations between the parties, that is, of
capital and labor, are not merely contractual, impressed, as they are with so much public interest that
the same should yield to the common good. It goes on to intone that neither capital nor labor should
visit acts of oppression against the other, nor impair the interest or convenience of the public. In the
final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that
it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and,
ultimately, of the family as the foundation of the nation. That it must be effectively interdicted here in
all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the
land is not only in order but imperatively required. ON THE FOREGOING PREMISES, the petition
of Philippine Telegraph and Telephone Company is hereby DISMISSED for lack of merit, with double
costs against petitioner. SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 94951 April 22, 1991
APEX MINING COMPANY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
and SINCLITICA CANDIDO, respondents.
Bernabe B. Alabastro for petitioner.Angel Fernandez for private respondent.
GANCAYCO, J.:
Is the househelper in the staff houses of an industrial company a domestic helper or a regular
employee of the said firm? This is the novel issue raised in this petition. Private respondent Sinclita
Candida was employed by petitioner Apex Mining Company, Inc. on May 18, 1973 to perform laundry
services at its staff house located at Masara, Maco, Davao del Norte. In the beginning, she was paid
on a piece rate basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a
month which was ultimately increased to P575.00 a month. On December 18, 1987, while she was
attending to her assigned task and she was hanging her laundry, she accidentally slipped and hit her
back on a stone. She reported the accident to her immediate supervisor Mila de la Rosa and to the
personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue with her
work. She was permitted to go on leave for medication. De la Rosa offered her the amount of P
2,000.00 which was eventually increased to P5,000.00 to persuade her to quit her job, but she refused
the offer and preferred to return to work. Petitioner did not allow her to return to work and dismissed
her on February 4, 1988. On March 11, 1988, private respondent filed a request for assistance with
the Department of Labor and Employment. After the parties submitted their position papers as
required by the labor arbiter assigned to the case on August 24, 1988 the latter rendered a decision,
the dispositive part of which reads as follows:
WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the
respondent, Apex Mining Company, Inc., Masara, Davao del Norte, to pay the complainant, to wit:
1 Salary
Differential P16,289.20
2. Emergency Living
Allowance 12,430.00
3. 13th Month Pay
Differential 1,322.32
4. Separation Pay
(One-month for
every year of
service [1973-19881) 25,119.30
or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100
(P55,161.42).
SO ORDERED.
Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations
Commission (NLRC), wherein in due course a decision was rendered by the Fifth Division thereof on
July 20, 1989 dismissing the appeal for lack of merit and affirming the appealed decision. A motion for
reconsideration thereof was denied in a resolution of the NLRC dated June 29, 1990. Hence, the
herein petition for review by certiorari, which appopriately should be a special civil action for
certiorari, and which in the interest of justice, is hereby treated as such. 2 The main thrust of the
petition is that private respondent should be treated as a mere househelper or domestic servant and
not as a regular employee of petitioner. The petition is devoid of merit. Under Rule XIII, Section l(b),
Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are defined as
follows:
The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer
to any person, whether male or female, who renders services in and about the employer's home and
which services are usually necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the employer's family. The foregoing
definition clearly contemplates such househelper or domestic servant who is employed in the
employer's home to minister exclusively to the personal comfort and enjoyment of the employer's
family. Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners,
houseboys and other similar househelps. The definition cannot be interpreted to include househelp or
laundrywomen working in staffhouses of a company, like petitioner who attends to the needs of the
company's guest and other persons availing of said facilities. By the same token, it cannot be
considered to extend to then driver, houseboy, or gardener exclusively working in the company, the
staffhouses and its premises. They may not be considered as within the meaning of a "househelper" or
"domestic servant" as above-defined by law. The criteria is the personal comfort and enjoyment of the
family of the employer in the home of said employer. While it may be true that the nature of the work
of a househelper, domestic servant or laundrywoman in a home or in a company staffhouse may be
similar in nature, the difference in their circumstances is that in the former instance they are actually
serving the family while in the latter case, whether it is a corporation or a single proprietorship
engaged in business or industry or any other agricultural or similar pursuit, service is being rendered
in the staffhouses or within the premises of the business of the employer. In such instance, they are
employees of the company or employer in the business concerned entitled to the privileges of a
regular employee. Petitioner contends that it is only when the househelper or domestic servant is
assigned to certain aspects of the business of the employer that such househelper or domestic servant
may be considered as such as employee. The Court finds no merit in making any such distinction. The
mere fact that the househelper or domestic servant is working within the premises of the business of
the employer and in relation to or in connection with its business, as in its staffhouses for its guest or
even for its officers and employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the employer and not as a mere family
househelper or domestic servant as contemplated in Rule XIII, Section l(b), Book 3 of the Labor Code,
as amended. Petitioner denies having illegally dismissed private respondent and maintains that
respondent abandoned her work. This argument notwithstanding, there is enough evidence to show
that because of an accident which took place while private respondent was performing her laundry
services, she was not able to work and was ultimately separated from the service. She is, therefore,
entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private respondent
appears not to be interested in returning to her work for valid reasons, the payment of separation pay
to her is in order. WHEREFORE, the petition is DISMISSED and the appealed decision and resolution
of public respondent NLRC are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO ZAMORA, the
Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE,
respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar is whether or not the provisions of the Labor Code,
as amended, have anathematized "fixed period employment" or employment for a term. The root of the
controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as
athletic director by Brent School, Inc. at a yearly compensation of P20, 000.00. The contract fixed a
specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the
agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28,
1973, and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as
those contained in the original contract of July 18, 1971. Some three months before the expiration of
the stipulated period, or more precisely on April 20,1976, Alegre was given a copy of the report filed
by Brent School with the Department of Labor advising of the termination of his services effective on
July 16, 1976. The stated ground for the termination was "completion of contract, expiration of the
definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the
amount of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services
for the period May 16, to July 17, 1976 as full payment of contract." However, at the investigation
conducted by a Labor Conciliator of said report of termination of his services, Alegre protested the
announced termination of his employment. He argued that although his contract did stipulate that the
same would terminate on July 17, 1976, since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for five years, he had acquired the status of
a regular employee and could not be removed except for valid cause. 6 The Regional Director
considered Brent School's report as an application for clearance to terminate employment (not a
report of termination), and accepting the recommendation of the Labor Conciliator, refused to give
such clearance and instead required the reinstatement of Alegre, as a "permanent employee," to his
former position without loss of seniority rights and with full back wages. The Director pronounced
"the ground relied upon by the respondent (Brent) in terminating the services of the complainant
(Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series
of 1969, of the Bureau of Private Schools. Brent School filed a motion for reconsideration. The
Regional Director denied the motion and forwarded the case to the Secretary of Labor for review. 8
The latter sustained the Regional Director. Brent appealed to the Office of the President. Again it was
rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who could not be dismissed except for just
cause, and expiration of the employment contract was not one of the just causes provided in the Labor
Code for termination of services. The School is now before this Court in a last attempt at vindication.
That it will get here. The employment contract between Brent School and Alegre was executed on July
18, 1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated.
Indeed, the Code did not come into effect until November 1, 1974, some three years after the
perfection of the employment contract, and rights and obligations thereunder had arisen and been
mutually observed and enforced. At that time, i.e., before the advent of the Labor Code, there was no
doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly
recognized by the Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787. 12 Basically, this
statute provided thatIn cases of employment, without a definite period, in a commercial, industrial,
or agricultural establishment or enterprise, the employer or the employee may terminate at any time
the employment with just cause; or without just cause in the case of an employee by serving written
notice on the employer at least one month in advance, or in the case of an employer, by serving such
notice to the employee at least one month in advance or one-half month for every year of service of
the employee, whichever is longer, a fraction of at least six months being considered as one whole
year. The employer, upon whom no such notice was served in case of termination of employment
without just cause, may hold the employee liable for damages. The employee, upon whom no such
notice was served in case of termination of employment without just cause, shall be entitled to
compensation from the date of termination of his employment in an amount equivalent to his salaries
or wages corresponding to the required period of notice. There was, to repeat, clear albeit implied
recognition of the licitness of term employment. RA 1787 also enumerated what it considered to be
just causes for terminating an employment without a definite period, either by the employer or by the
employee without incurring any liability therefor. Prior, thereto, it was the Code of Commerce which
governed employment without a fixed period, and also implicitly acknowledged the propriety of
employment with a fixed period. Its Article 302 provided that
In cases in which the contract of employment does not have a fixed period, any of the parties may
terminate it, notifying the other thereof one month in advance. The factor or shop clerk shall have a
right, in this case, to the salary corresponding to said month. The salary for the month directed to be
given by the said Article 302 of the Code of Commerce to the factor or shop clerk, was known as the
mesada (from mes, Spanish for "month"). When Article 302 (together with many other provisions of
the Code of Commerce) was repealed by the Civil Code of the Philippines, Republic Act No. 1052 was
enacted avowedly for the precise purpose of reinstating the mesada. Now, the Civil Code of the
Philippines, which was approved on June 18, 1949 and became effective on August 30,1950, itself
deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of
labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No
prohibition against term-or fixed-period employment is contained in any of its articles or is otherwise
deducible therefrom. It is plain then that when the employment contract was signed between Brent
School and Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation
fixing the duration thereof Stipulations for a term were explicitly recognized as valid by this Court, for
instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31, 1977, 13 and J. Walter
Thompson Co. (Phil.) v. NLRC, promulgated on December 29, 1983. 14 The Thompson case involved an
executive who had been engaged for a fixed period of three (3) years. Biboso involved teachers in a
private school as regards whom, the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a
limited duration. Upon its termination, both parties to the employment relationship were free to
renew it or to let it lapse. (p. 254) Under American law the principle is the same. "Where a contract
specifies the period of its duration, it terminates on the expiration of such period." "A contract of
employment for a definite period terminates by its own terms at the end of such period." The status of
legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code
(Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained
explicit references to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment began to take place at
about this time. Article 320, entitled "Probationary and fixed period employment," originally stated
that the "termination of employment of probationary employees and those employed WITH A FIXED
PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of the employee to be secured in their
employment as provided . . . (in the Code)." Article 321 prescribed the just causes for which an
employer could terminate "an employment without a definite period." And Article 319 undertook to
define "employment without a fixed period" in the following manner:
An employment shall be deemed to be without a definite period for purposes of this Chapter 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. The question immediately provoked by a reading of
Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where
the employee "has been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer." The definition seems a non sequitur. From the premise
that the duties of an employee entail "activities which are usually necessary or desirable in the usual
business or trade of the employer the" conclusion does not necessarily follow that the employer and
employee should be forbidden to stipulate any period of time for the performance of those activities.
There is nothing essentially contradictory between a definite period of an employment contract and
the nature of the employee's duties set down in that contract as being "usually necessary or desirable
in the usual business or trade of the employer." The concept of the employee's duties as being "usually
necessary or desirable in the usual business or trade of the employer" is not synonymous with or
identical to employment with a fixed term. Logically, the decisive determinant in term employment
should not be the activities that the employee is called upon to perform, but the day certain agreed
upon by the parties for the commencement and termination of their employment relationship, a day
certain being understood to be "that which must necessarily come, although it may not be known
when." Seasonal employment, and employment for a particular project are merely instances
employment in which a period, where not expressly set down, necessarily implied. Of course, the term
period has a definite and settled signification. It means, "Length of existence; duration. A point of
time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion;
termination. A series of years, months or days in which something is completed. A time of definite
length. . . . the period from one fixed date to another fixed date . . ." 20 It connotes a "space of time
which has an influence on an obligation as a result of a juridical act, and either suspends its
demandableness or produces its extinguishment." 21 It should be apparent that this settled and
familiar notion of a period, in the context of a contract of employment, takes no account at all of the
nature of the duties of the employee; it has absolutely no relevance to the character of his duties as
being "usually necessary or desirable to the usual business of the employer," or not. Subsequently, the
foregoing articles regarding employment with "a definite period" and "regular" employment were
amended by Presidential Decree No. 850, effective December 16, 1975. Article 320, dealing with
"Probationary and fixed period employment," was altered by eliminating the reference to persons
"employed with a fixed period," and was renumbered (becoming Article 271). The article now reads:
Probationary employmentProbationary 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. Also
amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting
mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring
irrelevant written or oral agreements "to the contrary," and (c) making the provision treat exclusively
of "regular" and "casual" employment. As revised, said article, renumbered 270, now reads:
Regular and Casual EmploymentThe 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
employed is seasonal in nature and the employment is for the duration of the season. An employment
shall be deemed to he 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. The first paragraph is identical to
Article 319 except that, as just mentioned, a clause has been added, to wit: "The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreements of the parties . . ."
The clause would appear to be addressed inter alia to agreements fixing a definite period for
employment. There is withal no clear indication of the intent to deny validity to employment for a
definite period. Indeed, not only is the concept of regular employment not essentially inconsistent
with employment for a fixed term, as above pointed out, Article 272 of the Labor Code, as amended by
said PD 850, still impliedly acknowledged the propriety of term employment: it listed the "just causes"
for which "an employer may terminate employment without a definite period," thus giving rise to the
inference that if the employment be with a definite period, there need be no just cause for termination
thereof if the ground be precisely the expiration of the term agreed upon by the parties for the
duration of such employment. Still later, however, said Article 272 (formerly Article 321) was further
amended by Batas Pambansa Bilang 130, to eliminate altogether reference to employment without a
definite period. As lastly amended, the opening lines of the article (renumbered 283), now pertinently
read: "An employer may terminate an employment for any of the following just causes: . . . " BP 130
thus completed the elimination of every reference in the Labor Code, express or implied, to
employment with a fixed or definite period or term. It is in the light of the foregoing description of the
development of the provisions of the Labor Code bearing on term or fixed-period employment that the
question posed in the opening paragraph of this opinion should now be addressed. Is it then the
legislative intention to outlaw stipulations in employment contracts laying down a definite period
therefor? Are such stipulations in essence contrary to public policy and should not on this account be
accorded legitimacy? On the one hand, there is the gradual and progressive elimination of references
to term or fixed-period employment in the Labor Code, and the specific statement of the rule that
Regular and Casual Employment The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service to be
employed is seasonal in nature and the employment is for the duration of the season. An employment
shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed
and his employment shall continue while such actually exists. There is, on the other hand, the Civil
Code, which has always recognized, and continues to recognize, the validity and propriety of contracts
and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties
to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or public policy.
Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are
not limited, as they are under the present Labor Code, to those by nature seasonal or for specific
projects with pre-determined dates of completion; they also include those to which the parties by free
choice have assigned a specific date of termination. Some familiar examples may be cited of
employment contracts which may be neither for seasonal work nor for specific projects, but to which a
fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of regular employment will all that it
implies does not appear ever to have been applied, Article 280 of the Labor Code not withstanding;
also appointments to the positions of dean, assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by practice or tradition rotated among the
faculty members, and where fixed terms are a necessity, without which no reasonable rotation would
be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of
Labor implicitly recognize that certain company officials may be elected for what would amount to
fixed periods, at the expiration of which they would have to stand down, in providing that these
officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because
the stockholders or the board of directors for one reason or another did not re-elect them." There can
of course be no quarrel with the proposition that where from the circumstances it is apparent that
periods have been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g.,
where it is indeed the employee himself who insists upon a period or where the nature of the
engagement is such that, without being seasonal or for a specific project, a definite date of
termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit,
therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly
was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his)
employment?" As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period would be an anomaly, but would also appear
to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his
employer the duration of his engagement, it logically follows that such a literal interpretation should
be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in
its application. Outlawing the whole concept of term employment and subverting to boot the principle
of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees
from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly,
curing a headache by lopping off the head. It is a salutary principle in statutory construction that
there exists a valid presumption that undesirable consequences were never intended by a legislative
measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid
all objectionable mischievous, indefensible, wrongful, evil and injurious consequences. Nothing is
better settled than that courts are not to give words a meaning which would lead to absurd or
unreasonable consequences. That s a principle that does back to In re Allen decided oil October 27,
1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to
absurd results. That is a strong argument against its adoption. The words of Justice Laurel are
particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would
lead to an absurdity is another argument for rejecting it. . . ." We have, here, then a case where the
true intent of the law is clear that calls for the application of the cardinal rule of statutory
construction that such intent of spirit must prevail over the letter thereof, for whatever is within the
spirit of a statute is within the statute, since adherence to the letter would result in absurdity,
injustice and contradictions and would defeat the plain and vital purpose of the statute. Accordingly,
and since the entire purpose behind the development of legislation culminating in the present Article
280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of
the employee's right to be secure in his tenure, the clause in said article indiscriminately and
completely ruling out all written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the substantive evil that the Code itself
has singled out: agreements 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. Such interpretation puts the seal on Bibiso upon the effect of the expiry of an agreed
period of employment as still good rulea rule reaffirmed in the recent case of Escudero vs. Office of
the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being
served by her school a notice of termination following the expiration of the last of three successive
fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was
probationary, contractual in nature, and one with a definitive period. At the expiration of the period
stipulated in the contract, her appointment was deemed terminated and the letter informing her of the
non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of
employment was due to expire and that the contract would no longer be renewed. It is not a letter of
termination. The interpretation that the notice is only a reminder is consistent with the court's finding
in Labajo supra. ...
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his
last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance
written advice given the Department of Labor with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of termination, nor an application for clearance to
terminate which needed the approval of the Department of Labor to make the termination of his
services effective. In any case, such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE.
Respondent Alegre's contract of employment with Brent School having lawfully terminated with and
by reason of the expiration of the agreed term of period thereof, he is declared not entitled to
reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No
pronouncement as to costs. SO ORDERED.

FIRST DIVISION
[G.R. No. 106600. March 29, 1996]
COSMOS BOTTLING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and GIL C. CASTRO, respondents.
DECISION
KAPUNAN, J.:
Gil C. Castro was employed by the Cosmos Bottling Corporation for a specific period from September
5, 1988 to October 4, 1988. He was re-hired for another specific period from May 30, 1989 to
November 6, 1989. Having satisfactorily served the company for two (2) terms, Castro was
recommended for reemployment with the companys Maintenance Team for the Davao Project on
November 22, 1989. On December 22, 1989, he was re-hired and assigned to the Maintenance
Division of the Davao Project tasked to install the private respondents annex plant machines in its
Davao plant. On May 21, 1990, Castros employment was terminated due to the completion of the
special project. Meanwhile, on May 27, 1990, Cosmos Bottling Corporation in valid exercise of its
management prerogative terminated the services of some 228 regular employees by reason of
retrenchment. For obvious reasons, Castro was not among the list of those regular employees whose
services were terminated by reason of retrenchment or those who voluntarily resigned. On May 25,
1990, Castro filed a complaint for illegal dismissal against Cosmos Bottling Corporation with the
Labor Arbiter contending that being a regular employee, he could not be dismissed without a just and
valid cause. The case was docketed as NLRC-NCR Case No. 00-05-02902-90. On its part, the company
alleged that Castro was a mere project employee whose employment was co-terminous with the
project for which he was hired. After the parties submitted their respective position papers, reply and
rejoinder thereto, the Labor Arbiter rendered a decision on March 13, 1991 finding Castro a regular
employee but ruling that his employment was validly terminated because of retrenchment. Hence,
Castro was awarded 45-days separation pay, one (1) month salary as financial assistance and
proportionate 13th month pay. The dispositive portion of the decision reads:
Premises considered, COSMOS is hereby directed to pay complainants compensation package in the
total amount of P11, 231.83 by reason of the retrenchment. The charge of illegal dismissal is hereby
DISMISSED for lack of merit. SO ORDERED. Both parties appealed the decision to the National Labor
Relations Commission (NLRC) which rendered the assailed decision dated June 10, 1992, the decretal
portion of which reads:
ACCORDINGLY, the decision appealed from is hereby modified to the effect that respondent is
declared guilty of illegal dismissal and is hereby ordered to reinstate complainant to his former
position as equivalent one without loss of seniority and other benefits and to pay him backwages
computed from the time of his dismissal up to the time of his reinstatement. SO ORDERED.
Cosmos Bottling Corporations motion for reconsideration of the above decision having been denied,
the instant petition for certiorari was filed. Petitioner argues that private respondent was a mere
project employee and that his services were co-terminous with the project, hence, may be terminated
upon the end or completion of the project for which he was hired. Respondent NLRC and private
respondent, on the other hand, maintain that private respondent is a regular employee of petitioner
company because his job is necessary and desirable to the petitioners main business. The Office of the
Solicitor General filed a Manifestation in Lieu of Comment and supported petitioners contention that
private respondent is not a regular employee. The pivotal issue therefore is whether or not private
respondent Gil C. Castro is a regular employee or was a mere project employee of petitioner Cosmos
Bottling Corporation.
After a careful examination of the records of the case, we find merit in the petition and hold that
respondent NLRC gravely abused its discretion when it rendered the challenged decision finding
private respondent a regular employee. Article 280 of the Labor Code which defines regular, project
and casual employment is applicable here. The same reads in full:
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 actually exists. The first paragraph provides 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 trade or business of the employer. A project employee, on
the other hand, 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. The second paragraph of the provision defines
casual employees as those who do not fall under the definition of the first paragraph. However, with
respect to the first two kinds of employees, the principal test for determining whether an employee is
a project employee or a regular employee is whether or not the project employee was assigned to
carry out a specific project or undertaking, the duration and scope of which were specified at the time
the employee was engaged for that period. In a recent case decided by this Court, the nature of
project employment was explained. We noted that in the realm of business and industry, project could
refer to at least two (2) distinguishable types of activities. First, 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. Second, a project could also
refer to 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. The case at bar presents what appears, to our mind, as a typical example of the
first type. Petitioner Cosmos Bottling Corporation is a duly organized corporation engaged in the
manufacture, production, bottling, sale and distribution of beverage. In the course of its business, it
undertakes distinct identifiable projects as it did in the instant case when it formed special teams
assigned to install and dismantle its annex plant machines in various plants all over the country. These
projects are distinct and separate, and are identifiable as such, from its usual business of bottling
beverage. Their duration and scope are made known prior to their undertaking and their specified
goal and purpose are fulfilled once the projects are completed. When private respondent was initially
hired for a period of one month and re-hired for another five months, and then subsequently re-hired
for another five months, he was assigned to the petitioners Maintenance Division tasked with the
installation and dismantling of its annex plant machines. Evidently, these projects or undertakings, the
duration and scope of which had been determined and made known to private respondent at the time
of his employment, can properly be treated as projects within the meaning of the first kind.
Considered as such, the services rendered by private respondent hired therein for the duration of the
projects may lawfully be terminated at the end or completion of the same. In the recent case of
Archbuild Masters and Construction, Inc. v. NLRC, we ruled accordingly:
It is not disputed that private respondent was a project employee of ARMACON. As such he was
employed in connection with a particular project the completion of which had been determined at the
time of his employment. Consequently, as a project employee of ARMACON, his employment may be
terminated upon the completion of the project as there would be no further need for his services.
Since a project employees work depends on the availability of projects, necessarily the duration of his
employment is not permanent but co-terminous with the work to which he is assigned. It would be
extremely burdensome for the employer, who depends on the availability of projects, to carry him as a
permanent employee and pay him wages even if there are no projects for him to work on. The
rationale behind this is that once the project is completed it would be unjust to require the employer
to maintain these employees in their payroll. To do so would make the employee a privileged retainer
who collects payment from his employer for work not done. This is extremely unfair and amounts to
labor coddling at the expense of management. Another observation worthwhile noting were the
appreciable gaps between the periods of time private respondent was hired and re-hired. He was
hired on September 5, 1988 for a period of one (1) month. He was re-hired on May 30, 1989 or almost
seven (7) months after the termination of his first job. His second reemployment was no different. He
was re-hired almost two (2) months after his first reemployment. Certainly, the lengthy gaps between
his employments, together with the fact that his services were contracted for specific undertakings,
convincingly show that the services of private respondent were terminated upon completion of a
particular project and were sought only when another one was undertaken. Moreover, the mere fact
that a project employee has worked on the specific project for more than one (1) year, does not
necessary change his status as project employee and convert it to regular or permanent employment.
For it is obvious that the second paragraph of Article 280 of the Labor Code, quoted above, providing
that an employee who has served for at least one (1) year, shall be considered a regular employee,
relates only to casual employees, not to project employees. Consequently, private respondents
protestation that his period of employment had exceeded one year and hence must be converted into
regular employment is completely baseless because being a project employee, he does not fall within
the ambit of the pertinent provision above-stated. Clearly, therefore, private respondent being a
project employee, or to use the correct term, seasonal employee, considering that his employment was
limited to the installation and dismantling of petitioners annex plant machines after which there was
no more work to do, his employment legally ended upon completion of the project. That being so, the
termination of his employment cannot and should not constitute an illegal dismissal. Neither should it
constitute retrenchment as private respondent was a seasonal employee whose services were already
terminated on May 21, 1990 prior to the termination of the other regular employees of Cosmos by
reason of retrenchment. WHEREFORE, premises considered the instant petition is given DUE
COURSE and is hereby GRANTED. The judgment of respondent NLRC appealed from is hereby
REVERSED and SET ASIDE. Consequently, the complaint for illegal dismissal against petitioner
Cosmos Bottling Corporation is hereby DISMISSED. SO ORDERED.

FIRST DIVISION
[G.R. No. 122653. December 12, 1997]
PURE FOODS CORPORATON, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
RODOLFO CORDOVA, VIOLETA CRUSIS, ET AL., respondents.
DECISION
DAVIDE, JR., J.:
The crux of this petition for certiorari is the issue of whether employees hired for a definite period and
whose services are necessary and desirable in the usual business or trade of the employer are regular
employees. The private respondents (numbering 906) were hired by petitioner Pure Foods
Corporation to work for a fixed period of five months at its tuna cannery plant in Tambler, General
Santos City. After the expiration of their respective contracts of employment in June and July 1991,
their services were terminated. They forthwith executed a Release and Quitclaim stating that they had
no claim whatsoever against the petitioner. On 29 July 1991, the private respondents filed before the
National Labor Relations Commission (NLRC) Sub-Regional Arbitration Branch No. XI, General Santos
City, a complaint for illegal dismissal against the petitioner and its plant manager, Marciano Aganon.
This case was docketed as RAB-11-08-50284-91. On 23 December 1992, Labor Arbiter Arturo P.
Aponesto handed down a decision dismissing the complaint on the ground that the private
respondents were mere contractual workers, and not regular employees; hence, they could not avail
of the law on security of tenure. The termination of their services by reason of the expiration of their
contracts of employment was, therefore, justified. He pointed out that earlier he had dismissed a case
entitled Lakas ng Anak-Pawis- NOWM v. Pure Foods Corp. (Case No. RAB-11-02-00088-88) because
the complainants therein were not regular employees of Pure Foods, as their contracts of employment
were for a fixed period of five months. Moreover, in another case involving the same contractual
workers of Pure Foods (Case No. R-196-ROXI- MED- UR-55-89), then Secretary of Labor Ruben Torres
held, in a Resolution dated 30 April 1990, that the said contractual workers were not regular
employees. The Labor Arbiter also observed that an order for private respondents reinstatement
would result in the reemployment of more than 10,000 former contractual employees of the petitioner.
Besides, by executing a Release and Quitclaim, the private respondents had waived and relinquished
whatever right they might have against the petitioner. The private respondents appealed from the
decision to the National Labor Relations Commission (NLRC), Fifth Division, in Cagayan de Oro City,
which docketed the case as NLRC CA No. M-001323-93. On 28 October 1994, the NLRC affirmed the
Labor Arbiter's decision. However, on private respondents motion for reconsideration, the NLRC
rendered another decision on 30 January 1995 vacating and setting aside its decision of 28 October
1994 and holding that the private respondents and their co-complainants were regular employees. It
declared that the contract of employment for five months was a clandestine scheme employed by [the
petitioner] to stifle [private respondents] right to security of tenure and should therefore be struck
down and disregarded for being contrary to law, public policy, and morals. Hence, their dismissal on
account of the expiration of their respective contracts was illegal. Accordingly, the NLRC ordered the
petitioner to reinstate the private respondents to their former position without loss of seniority rights
and other privileges, with full back wages; and in case their reinstatement would no longer be
feasible, the petitioner should pay them separation pay equivalent to one-month pay or one-half-month
pay for every year of service, whichever is higher, with back wages and 10% of the monetary award as
attorneys fees. Its motion for reconsideration having been denied, the petitioner came to this Court
contending that respondent NLRC committed grave abuse of discretion amounting to lack of
jurisdiction in reversing the decision of the Labor Arbiter. The petitioner submits that the private
respondents are now estopped from questioning their separation from petitioners employ in view of
their express conformity with the five-month duration of their employment contracts. Besides, they fell
within the exception provided in Article 280 of the Labor Code which reads: 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. Moreover, the first
paragraph of the said article must be read and interpreted in conjunction with the proviso in the
second paragraph, which reads: 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.... In the instant case, the private respondents were
employed for a period of five months only. In any event, private respondents' prayer for reinstatement
is well within the purview of the Release and Quitclaim they had executed wherein they
unconditionally released the petitioner from any and all other claims which might have arisen from
their past employment with the petitioner. In its Comment, the Office of the Solicitor General (OSG)
advances the argument that the private respondents were regular employees, since they performed
activities necessary and desirable in the business or trade of the petitioner. The period of employment
stipulated in the contracts of employment was null and void for being contrary to law and public
policy, as its purpose was to circumvent the law on security of tenure. The expiration of the contract
did not, therefore, justify the termination of their employment. The OSG further maintains that the
ruling of the then Secretary of Labor and Employment in LAP-NOWM v. Pure Foods Corporation is not
binding on this Court; neither is that ruling controlling, as the said case involved certification election
and not the issue of the nature of private respondents employment. It also considers private
respondents quitclaim as ineffective to bar the enforcement for the full measure of their legal rights.
The private respondents, on the other hand, argue that contracts with a specific period of employment
may be given legal effect provided, however, that they are not intended to circumvent the
constitutional guarantee on security of tenure. They submit that the practice of the petitioner in hiring
workers to work for a fixed duration of five months only to replace them with other workers of the
same employment duration was apparently to prevent the regularization of these so-called casuals,
which is a clear circumvention of the law on security of tenure. We find the petition devoid of merit.
Article 280 of the Labor Code defines regular and casual employment as follows:
ART. 280. Regular and Casual Employment.-- The provisions of written agreement to the contrary
notwithstanding and regardless of the oral argument 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. Thus, the two kinds of regular employees
are (1) those who are 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 activity in which they are
employed. In the instant case, the private respondents activities consisted in the receiving, skinning,
loining, packing, and casing-up of tuna fish, which were then exported by the petitioner. Indisputably,
they were performing activities, which were necessary and desirable in petitioners business or trade.
Contrary to petitioner's submission, the private respondents could not be regarded as having been
hired for a specific project or undertaking. The term specific project or undertaking under Article 280
of the Labor Code contemplates an activity which is not commonly or habitually performed or such
type of work which is not done on a daily basis but only for a specific duration of time or until
completion; the services employed are then necessary and desirable in the employers usual business
only for the period of time it takes to complete the project. The fact that the petitioner repeatedly and
continuously hired workers to do the same kind of work as that performed by those whose contracts
had expired negates petitioners contention that those workers were hired for a specific project or
undertaking only. Now on the validity of private respondents' five-month contracts of employment. In
the leading case of Brent School, Inc. v. Zamora, which was reaffirmed in numerous subsequent cases,
this Court has upheld the legality of fixed-term employment. It ruled that the decisive determinant in
term employment should not be the activities that the employee is called upon to perform but the day
certain agreed upon by the parties for the commencement and termination of their employment
relationship. But, this Court went on to say that where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy and morals. Brent also laid down the
criteria under which term employment cannot be said to be in circumvention of the law on security of
tenure:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
None of these criteria had been met in the present case. As pointed out by the private respondents:
It could not be supposed that private respondents and all other so-called casual workers of [the
petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always, they agree to any terms of an
employment contract just to get employed considering that it is difficult to find work given their
ordinary qualifications. Their freedom to contract is empty and hollow because theirs is the freedom
to starve if they refuse to work as casual or contractual workers. Indeed, to the unemployed, security
of tenure has no value. It could not then be said that petitioner and private respondents "dealt with
each other on more or less equal terms with no moral dominance whatever being exercised by the
former over the latter. The petitioner does not deny or rebut private respondents' averments (1) that
the main bulk of its workforce consisted of its so-called casual employees; (2) that as of July 1991,
casual workers numbered 1,835; and regular employees, 263; (3) that the company hired casual every
month for the duration of five months, after which their services were terminated and they were
replaced by other casual employees on the same five-month duration; and (4) that these casual
employees were actually doing work that were necessary and desirable in petitioners usual business.
As a matter of fact, the petitioner even stated in its position paper submitted to the Labor Arbiter that,
according to its records, the previous employees of the company hired on a five-month basis
numbered about 10,000 as of July 1990. This confirms private respondents allegation that it was really
the practice of the company to hire workers on a uniformly fixed contract basis and replace them upon
the expiration of their contracts with other workers on the same employment duration. This scheme of
the petitioner was apparently designed to prevent the private respondents and the other casual
employees from attaining the status of a regular employee. It was a clear circumvention of the
employees right to security of tenure and to other benefits like minimum wage, cost-of-living
allowance, sick leave, holiday pay, and 13th month pay. Indeed, the petitioner succeeded in evading
the application of labor laws. Also, it saved itself from the trouble or burden of establishing a just
cause for terminating employees by the simple expedient of refusing to renew the employment
contracts. The five-month period specified in private respondents employment contracts having been
imposed precisely to circumvent the constitutional guarantee on security of tenure should, therefore,
be struck down or disregarded as contrary to public policy or morals. To uphold the contractual
arrangement between the petitioner and the private respondents would, in effect, permit the former
to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis,
thereby violating the employees security of tenure in their jobs. The execution by the private
respondents of a Release and Quitclaim did not preclude them from questioning the termination of
their services. Generally, quitclaims by laborers are frowned upon as contrary to public policy and are
held to be ineffective to bar recovery for the full measure of the workers rights. The reason for the
rule is that the employer and the employee do not stand on the same footing. Notably, the private
respondents lost no time in filing a complaint for illegal dismissal. This act is hardly expected from
employees who voluntarily and freely consented to their dismissal. The NLRC was, thus, correct in
finding that the private respondents were regular employees and that they were illegally dismissed
from their jobs. Under Article 279 of the Labor Code and the recent jurisprudence, the legal
consequence of illegal dismissal is reinstatement without loss of seniority rights and other privileges,
with full back wages computed from the time of dismissal up to the time of actual reinstatement,
without deducting the earnings derived elsewhere pending the resolution of the case. However, since
reinstatement is no longer possible because the petitioner's tuna cannery plant had, admittedly, been
closed in November 1994, the proper award is separation pay equivalent to one month pay or one-half
month pay for every year of service, whichever is higher, to be computed from the commencement of
their employment up to the closure of the tuna cannery plant. The amount of back wages must be
computed from the time the private respondents were dismissed until the time petitioner's cannery
plant ceased operation. WHEREFORE, for lack of merit, the instant petition is DISMISSED and the
challenged decision of 30 January 1995 of the National Labor Relations Commission in NLRC CA No.
M-001323-93 is hereby AFFIRMED subject to the above modification on the computation of the
separation pay and back wages. SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner, vs. ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an independent
contractor rather than a regular employee with or without a fixed term. That a person has a disease
does not per se entitle the employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the disease cannot be cured
within six ( 6) months, even with appropriate treatment. We decide this petition for review 1 on
certiorari filed by Fuji Television Network, Inc., seeking the reversal of the Court of Appeals Decision
dated June 25, 2012, affirming with modification the decision of the National Labor Relations
Commission. In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer "tasked to report Philippine news to Fuji through its Manila
Bureau field office." Arlenes employment contract initially provided for a term of one (1) year but was
successively renewed on a yearly basis with salary adjustment upon every renewal. Sometime in
January 2009, Arlene was diagnosed with lung cancer. She informed Fuji about her condition. In turn,
the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem
renewing her contract" since it would be difficult for her to perform her job. She "insisted that she
was still fit to work as certified by her attending physician." After several verbal and written
communications, Arlene and Fuji signed a non-renewal contract on May 5, 2009 where it was
stipulated that her contract would no longer be renewed after its expiration on May 31, 2009. The
contract also provided that the parties release each other from liabilities and responsibilities under
the employment contract. In consideration of the non-renewal contract, Arlene "acknowledged receipt
of the total amount of US$18,050.00 representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay." However, Arlene affixed her signature on the
nonrenewal contract with the initials "U.P." for "under protest." On May 6, 2009, the day after Arlene
signed the non-renewal contract, she filed a complaint for illegal dismissal and attorneys fees with
the National Capital Region Arbitration Branch of the National Labor Relations Commission. She
alleged that she was forced to sign the nonrenewal contract when Fuji came to know of her illness and
that Fuji withheld her salaries and other benefits for March and April 2009 when she refused to sign.
Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her salaries and bonuses, in addition to separation pay
equivalent to four (4) years. In the decision dated September 10, 2009, Labor Arbiter Corazon C.
Borbolla dismissed Arlenes complaint. Citing Sonza v. ABS-CBN and applying the four-fold test, the
Labor Arbiter held that Arlene was not Fujis employee but an independent contractor. Arlene
appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the
National Labor Relations Commission reversed the Labor Arbiters decision. It held that Arlene was a
regular employee with respect to the activities for which she was employed since she continuously
rendered services that were deemed necessary and desirable to Fujis business. The National Labor
Relations Commission ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The
Decision of the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a
new one is issued ordering respondents-appellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this Decision. SO ORDERED. Arlene and Fuji filed
separate motions for reconsideration. Both motions were denied by the National Labor Relations
Commission for lack of merit in the resolution dated April 26, 2010. From the decision of the National
Labor Relations Commission, both parties filed separate petitions for certiorari before the Court of
Appeals. The Court of Appeals consolidated the petitions and considered the following issues for
resolution:
1) Whether or not Espiritu is a regular employee or a fixed-term contractual employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espiritu is entitled to damages and attorneys fees.
In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with
the modification that Fuji immediately reinstate Arlene to her position as News Producer without loss
of seniority rights, and pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave
and vacation leave with pay until reinstated, moral damages, exemplary damages, attorneys fees, and
legal interest of 12% per annum of the total monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is
DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March 5,
2010 of the National Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09
and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as
follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position
as News Producer without loss of seniority rights and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal),
until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date of
dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date of
dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated;
and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until
reinstated.
7. The amount of P100, 000.00 as moral damages;
8. The amount of P50, 000.00 as exemplary damages;
9. Attorneys fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from
May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above monetary awards
consistent with the above directives. SO ORDERED. In arriving at the decision, the Court of Appeals
held that Arlene was a regular employee because she was engaged to perform work that was
necessary or desirable in the business of Fuji, and the successive renewals of her fixed-term contract
resulted in regular employment. According to the Court of Appeals, Sonza does not apply in order to
establish that Arlene was an independent contractor because she was not contracted on account of
any peculiar ability, special talent, or skill. The fact that everything used by Arlene in her work was
owned by Fuji negated the idea of job contracting. The Court of Appeals also held that Arlene was
illegally dismissed because Fuji failed to comply with the requirements of substantive and procedural
due process necessary for her dismissal since she was a regular employee. The Court of Appeals found
that Arlene did not sign the non-renewal contract voluntarily and that the contract was a mere
subterfuge by Fuji to secure its position that it was her choice not to renew her contract. She was left
with no choice since Fuji was decided on severing her employment. Fuji filed a motion for
reconsideration that was denied in the resolution dated December 7, 2012 for failure to raise new
matters. Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in
affirming with modification the National Labor Relations Commissions decision, holding that Arlene
was a regular employee and that she was illegally dismissed. Fuji also questioned the award of
monetary claims, benefits, and damages. Fuji points out that Arlene was hired as a stringer, and it
informed her that she would remain one. She was hired as an independent contractor as defined in
Sonza. Fuji had no control over her work. The employment contracts were executed and renewed
annually upon Arlenes insistence to which Fuji relented because she had skills that distinguished her
from ordinary employees. Arlene and Fuji dealt on equal terms when they negotiated and entered into
the employment contracts. There was no illegal dismissal because she freely agreed not to renew her
fixed-term contract as evidenced by her e-mail correspondences with Yoshiki Aoki. In fact, the signing
of the non-renewal contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract." Finally, Fuji had dealt with Arlene in good faith thus, she
should not have been awarded damages. Fuji alleges that it did not need a permanent reporter since
the news reported by Arlene could easily be secured from other entities or from the internet. Fuji
"never controlled the manner by which she performed her functions. It was Arlene who insisted that
Fuji execute yearly fixed-term contracts so that she could negotiate for annual increases in her pay.
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in
March 2009, and one (1) day in April 2009. Despite the provision in her employment contract that sick
leaves in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the months of
March, April, and May; four (4) months of separation pay; and a bonus for two and a half months for a
total of US$18,050.00. Despite having received the amount of US$18,050.00, Arlene still filed a case
for illegal dismissal. Fuji further argues that the circumstances would show that Arlene was not
illegally dismissed. The decision to not renew her contract was mutually agreed upon by the parties as
indicated in Arlenes e-mail dated March 11, 2009 where she consented to the non-renewal of her
contract but refused to sign anything. Aoki informed Arlene in an e-mail dated March 12, 2009 that
she did not need to sign a resignation letter and that Fuji would pay Arlenes salary and bonus until
May 2009 as well as separation pay. Arlene sent an e-mail dated March 18, 2009 with her version of
the non-renewal agreement that she agreed to sign this time. This attached version contained a
provision that Fuji shall re-hire her if she was still interested to work for Fuji. For Fuji, Arlenes e-mail
showed that she had the power to bargain. Fuji then posits that the Court of Appeals erred when it
held that the elements of an employer-employee relationship are present, particularly that of control;
that Arlenes separation from employment upon the expiration of her contract constitutes illegal
dismissal; that Arlene is entitled to reinstatement; and that Fuji is liable to Arlene for damages and
attorneys fees. This petition for review on certiorari under Rule 45 was filed on February 8, 2013. On
February 27, 2013, Arlene filed a manifestation stating that this court may not take jurisdiction over
the case since Fuji failed to authorize Corazon E. Acerden to sign the verification. Fuji filed a comment
on the manifestation on March 9, 2013. Based on the arguments of the parties, there are procedural
and substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the
verification and certification of non-forum shopping of the petition, had no authority to sign the
verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was
committed by the National Labor Relations Commission when it ruled that Arlene was a regular
employee, not an independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations Commissions
decision by awarding reinstatement, damages, and attorneys fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlenes manifestation, Fuji alleges that Corazon was authorized to sign the
verification and certification of non-forum shopping because Mr. Shuji Yano was empowered under the
secretarys certificate to delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping. On the other hand, Arlene points out that the
authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretarys certificate is only for the petition
for certiorari before the Court of Appeals. Fuji did not attach any board resolution authorizing
Corazon or any other person to file a petition for review on certiorari with this court. Shuji Yano and
Jin Eto could not re-delegate the power that was delegated to them. In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated that she was empowered to sign on
behalf of Shuji Yano, and not on behalf of Fuji.
The Rules of Court requires thesubmission of verification andcertification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while
Section 5 of the same rule provides the requirement of certification against forum shopping. These
sections state:
SEC. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need not
be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his knowledge and belief. A pleading required to be verified which
contains a verification based on "information and belief," or upon "knowledge, information and belief,"
or lacks a proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping The plaintiff or principal party shall certify under oath
in the complaint or other initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and,
to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by
mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of
the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission
of a false certification or non-compliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions. If the
acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions. Section 4(e) of Rule 45 requires that petitions for review should
"contain a sworn certification against forum shopping as provided in the last paragraph of section 2,
Rule 42." Section 5 of the same rule provides that failure to comply with any requirement in Section 4
is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank discussed the effect of non-compliance with regard to verification and stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement
is simply a condition affecting the form of pleading, the non-compliance of which does not necessarily
render the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed with in order that the
ends of justice may thereby be served. (Citations omitted) Shipside Incorporated v. Court of Appeals
cited the discussion in Uy and differentiated its effect from non-compliance with the requirement of
certification against forum shopping:
On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground
for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized
to file a petition on behalf of the corporation. (Emphasis supplied) Effects of substantial compliance
with the requirement of verification and certification against forum shopping. Although the general
rule is that failure to attach a verification and certification against forum shopping is a ground for
dismissal, there are cases where this court allowed substantial compliance. In Loyola v. Court of
Appeals, petitioner Alan Loyola submitted the required certification one day after filing his electoral
protest. This court considered the subsequent filing as substantial compliance since the purpose of
filing the certification is to curtail forum shopping. In LDP Marketing, Inc. v. Monter, Ma. Lourdes Dela
Pea signed the verification and certification against forum shopping but failed to attach the board
resolution indicating her authority to sign. In a motion for reconsideration, LDP Marketing attached
the secretarys certificate quoting the board resolution that authorized Dela Pea. Citing Shipside, this
court deemed the belated submission as substantial compliance since LDP Marketing complied with
the requirement; what it failed to do was to attach proof of Dela Peas authority to sign. Havtor
Management Phils., Inc. v. National Labor Relations Commission and General Milling Corporation v.
National Labor Relations Commission involved petitions that were dismissed for failure to attach any
document showing that the signatory on the verification and certification against forum-shopping was
authorized. In both cases, the secretarys certificate was attached to the motion for reconsideration.
This court considered the subsequent submission of proof indicating authority to sign as substantial
compliance. Altres v. Empleo summarized the rules on verification and certification against forum
shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements . . . respecting non-compliance with the requirement on, or submission of defective,
verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or submission of
defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample knowledge to swear to
the truth of the allegations in the complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in
verification, is generally not curable by its subsequent submission or correction thereof, unless there
is a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the signature of only one of them inthe certification
against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of record to sign on his behalf. 92
There was substantial complianceby Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly
authorized officers and agents. Thus, the physical act of signing the verification and certification
against forum shopping can only be done by natural persons duly authorized either by the corporate
by-laws or a board resolution. In its petition for review on certiorari, Fuji attached Hideaki Otas
secretarys certificate, authorizing Shuji Yano and Jin Eto to represent and sign for and on behalf of
Fuji. The secretarys certificate was duly authenticated by Sulpicio Confiado, Consul-General of the
Philippines in Japan. Likewise attached to the petition is the special power of attorney executed by
Shuji Yano, authorizing Corazon to sign on his behalf. The verification and certification against forum
shopping was signed by Corazon. Arlene filed the manifestation dated February 27, 2013, arguing that
the petition for review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping. Fuji filed a comment on Arlenes manifestation,
stating that Corazon was properly authorized to sign. On the basis of the secretarys certificate, Shuji
Yano was empowered to delegate his authority. Quoting the board resolution dated May 13, 2010, the
secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines
National Labor Relations Commission ("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case
No. LAC 00-002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji Television
Network, Inc./Yoshiki Aoki", and participate in any other subsequent proceeding that may necessarily
arise therefrom, including but not limited to the filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to verify and execute
the certification against nonforum shopping which may be necessary or required to be attached to any
pleading to [sic] submitted to the Court of Appeals; and the authority to so verify and certify for the
Corporation in favor of the said persons shall subsist and remain effective until the termination of the
said case;
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to represent and
appear on behalf the [sic] Corporation in all stages of the [sic] this case and in any other proceeding
that may necessarily arise thereform [sic], and to act in the Corporations name, place and stead to
determine, propose, agree, decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action. (Emphasis in the original;
Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as his attorneys-in-fact. The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku,
Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the attached
Secretarys Certificate) one of the respondents in NLRC-NCR Case No. 05-06811-00 entitled "Arlene
S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court
of Appeals as C.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889) do hereby make, constitute
and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful attorneys-in
fact for me and my name, place and stead to act and represent me in the above-mentioned case, with
special power to make admission/s and stipulations and/or to make and submit as well as to accept
and approve compromise proposals upon such terms and conditions and under such covenants as my
attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Offices as the
legal counsel to represent the Company in the Supreme Court; The said Attorneys-in-Fact are hereby
further authorized to make, sign, execute and deliver such papers or documents as may be necessary
in furtherance of the power thus granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be filed. In its comment on Arlenes manifestation, Fuji
argues that Shuji Yano could further delegate his authority because the board resolution empowered
him to "act in the Corporations name, place and stead to determine, propose, agree, decided [sic], do
and perform any and all of the following: . . . such other matters as may aid in the prompt disposition
of the action." To clarify, Fuji attached a verification and certification against forum shopping, but
Arlene questions Corazons authority to sign. Arlene argues that the secretarys certificate
empowered Shuji Yano to file a petition for certiorari before the Court of Appeals, and not a petition
for review before this court, and that since Shuji Yanos authority was delegated to him, he could not
further delegate such power. Moreover, Corazon was representing Shuji Yano in his personal capacity,
and not in his capacity as representative of Fuji. A review of the board resolution quoted in the
secretarys certificate shows that Fuji shall "file a Petition for Certiorari with the Court of Appeals"
and "participate in any other subsequent proceeding that may necessarily arise therefrom, including
but not limited to the filing of appeals in the appropriate venue," and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may necessarily arise there form [sic]." As
pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to "act in the Corporations name,
place and stead to determine, propose, agree, decide, do, and perform any and all of the following: . . .
5. Such other matters as may aid in the prompt disposition of the action." Considering that the
subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is the
filing of a petition for review with this court, Fuji substantially complied with the procedural
requirement. On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article
1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person appointed was
notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the
principal shall be void.
The secretarys certificate does not state that Shuji Yano is prohibited from appointing a substitute. In
fact, heis empowered to do acts that will aid in the resolution of this case. This court has recognized
that there are instances when officials or employees of a corporation can sign the verification and
certification against forum shopping without a board resolution. In Cagayan Valley Drug Corporation
v. CIR, it was held that:
In sum, we have held that the following officials or employees of the company can sign the verification
and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2)
the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel
Officer, and (5) an Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being in a position to verify the truthfulness and correctness of the allegations in the
petition.
Corazons affidavit states that she is the "office manager and resident interpreter of the Manila
Bureau of Fuji Television Network, Inc." and that she has "held the position for the last twenty-three
years."
As the office manager for 23 years, Corazon can be considered as having knowledge of all matters in
Fujis Manila Bureau Office and is in a position to verify "the truthfulness and the correctness of the
allegations in the Petition."
Thus, Fuji substantially complied with the requirements of verification and certification against forum
shopping. Before resolving the substantive issues in this case, this court will discuss the procedural
parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code does not provide any mode of appeal for decisions of the National Labor
Relations Commission. It merely states that "[t]he decision of the Commission shall be final and
executory after ten (10) calendar days from receipt thereof by the parties." Being final, it is no longer
appealable. However, the finality of the National Labor Relations Commissions decisions does not
mean that there is no more recourse for the parties. In St. Martin Funeral Home v. National Labor
Relations Commission, this court cited several cases and rejected the notion that this court had no
jurisdiction to review decisions of the National Labor Relations Commission. It stated that this court
had the power to review the acts of the National Labor Relations Commission to see if it kept within
its jurisdiction in deciding cases and also as a form of check and balance. This court then clarified that
judicial review of National Labor Relations Commission decisions shall be by way of a petition for
certiorari under Rule 65. Citing the doctrine of hierarchy of courts, it further ruled that such petitions
shall be filed before the Court of Appeals. From the Court of Appeals, an aggrieved party may file a
petition for review on certiorari under Rule 45. A petition for certiorari under Rule 65 is an original
action where the issue is limited to grave abuse of discretion. As an original action, it cannot be
considered as a continuation of the proceedings of the labor tribunals. On the other hand, a petition
for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to questions of
law. In labor cases, a Rule 45 petition is limited to reviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding other jurisdictional
errors of the National Labor Relations Commission. In Odango v. National Labor Relations
Commission, this court explained that a petition for certiorari is an extraordinary remedy that is
"available only and restrictively in truly exceptional cases" and that its sole office "is the correction of
errors of jurisdiction including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction." A petition for certiorari does not include a review of findings of fact since the findings of
the National Labor Relations Commission are accorded finality. In cases where the aggrieved party
assails the National Labor Relations Commissions findings, he or she must be able to show that the
Commission "acted capriciously and whimsically or in total disregard of evidence material to the
controversy." When a decision of the Court of Appeals under a Rule 65 petition is brought to this court
by way of a petition for review under Rule 45, only questions of law may be decided upon. As held in
Meralco Industrial v. National Labor Relations Commission:
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors
of law, not of fact, unless the factual findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides,
factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are
conclusive upon the parties and binding on this Court. Career Philippines v. Serna, citing Montoya v.
Transmed, is instructive on the parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the
particular parameters of a Rule 45 appeal from the CAs Rule 65 decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis
of whether the NLRC decision on the merits of the case was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. (Emphasis in the original) Justice Brions dissenting opinion in Abott
Laboratories, PhiIippines v. Aicaraz discussed that in petitions for review under Rule 45, "the Court
simply determines whether the legal correctness of the CAs finding that the NLRC ruling . . . had
basis in fact and in Iaw." In this kind of petition, the proper question to be raised is, "Did the CA
correctly determine whether the NLRC committed grave abuse of discretion in ruling on the case?"
Justice Brions dissenting opinion also laid down the following guidelines: If the NLRC ruling has basis
in the evidence and the applicable law and jurisprudence, then no grave abuse of discretion exists and
the CA should so declare and, accordingly, dismiss the petition. If grave abuse of discretion exists,
then the CA must grant the petition and nullify the NLRC ruling, entering at the same time the ruling
that is justified under the evidence and the governing law, rules and jurisprudence. In our Rule 45
review, this Court must deny the petition if it finds that the CA correctly acted. (Emphasis in the
original) These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that
Arlene was an independent contractor, while Arlene alleges that she was a regular employee. To
resolve this issue, we ascertain whether an employer-employee relationship existed between Fuji and
Arlene. This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most important. As to how the
elements in the four-fold test are proven, this court has discussed that:
there is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status. If the facts of this case vis--vis the
four-fold test show that an employer-employee relationship existed, we then determine the status of
Arlenes employment, i.e., whether she was a regular employee. Relative to this, we shall analyze
Arlenes fixed-term contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall scrutinize
whether the nature of Arlenes work was necessary and desirable to Fujis business or whether Fuji
only needed the output of her work. If the circumstances show that Arlenes work was necessary and
desirable to Fuji, then she is presumed to be a regular employee. The burden of proving that she was
an independent contractor lies with Fuji. In labor cases, the quantum of proof required is substantial
evidence. "Substantial evidence" has been defined as "such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. If Arlene was a regular employee,
we then determine whether she was illegally dismissed. In complaints for illegal dismissal, the burden
of proof is on the employee to prove the fact of dismissal. Once the employee establishes the fact of
dismissal, supported by substantial evidence, the burden of proof shifts to the employer to show that
there was a just or authorized cause for the dismissal and that due process was observed.
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commissions finding that Arlene was a regular employee
Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the
following facts: (1) she was hired because of her skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to bargain with her employer; and (4) her contract
was for a fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene was
forced to sign the non-renewal agreement, considering that she sent an email with another version of
the non-renewal agreement. Further, she is not entitled to moral damages and attorneys fees because
she acted in bad faith when she filed a labor complaint against Fuji after receiving US$18,050.00
representing her salary and other benefits. 141 Arlene argues that she was a regular employee because
Fuji had control and supervision over her work. The news events that she covered were all based on
the instructions of Fuji.142 She maintains that the successive renewal of her employment contracts for
four (4) years indicates that her work was necessary and desirable. In addition, Fujis payment of
separation pay equivalent to one (1) months pay per year of service indicates that she was a regular
employee. To further support her argument that she was not an independent contractor, she states
that Fuji owns the laptop computer and mini-camera that she used for work. Arlene also argues that
Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who was a news
anchor, talk show host, and who enjoyed a celebrity status. On her illness, Arlene points out that it
was not a ground for her dismissal because her attending physician certified that she was fit to work.
Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to
its terms, but because she was not in a position to reject the non-renewal agreement. Further, she
badly needed the salary withheld for her sustenance and medication. She posits that her acceptance
of separation pay does not bar filing of a complaint for illegal dismissal. Article 280 of the Labor Code
provides that:
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 heis employed
and his employment shall continue while such activity exist. This provision classifies employees into
regular, project, seasonal, and casual. It further classifies regular employees into two kinds: (1) those
"engaged to perform activities which are usually necessary or desirable in the usual business or trade
of the employer"; and (2) casual employees who have "rendered at least one year of service, whether
such service is continuous or broken." Another classification of employees, i.e., employees with fixed-
term contracts, was recognized in Brent School, Inc. v. Zamora where this court discussed that:
Logically, the decisive determinant in the term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being understood to
be "that which must necessarily come, although it may not be known when." This court further
discussed that there are employment contracts where "a fixed term is an essential and natural
appurtenance"152 such as overseas employment contracts and officers in educational institutions.
Distinctions among fixed-termemployees, independent contractors,and regular employees
GMA Network, Inc. v. Pabriga expounded the doctrine on fixed term contracts laid down in Brentin the
following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts, we
emphasized in Brentthat where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down as
contrary to public policy or morals. We thus laid down indications or criteria under which "term
employment" cannot be said to be in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering into
the contract. The reason for this is evident: when a prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker. Lesser limitations on the parties freedom of
contract are thus required for the protection of the employee. For as long as the guidelines laid down
in Brentare satisfied, this court will recognize the validity of the fixed-term contract. In Labayog v.
M.Y. San Biscuits, Inc., this court upheld the fixed term employment of petitioners because from the
time they were hired, they were informed that their engagement was for a specific period. This court
stated that:
simply put, petitioners were not regular employees. While their employment as mixers, packers and
machine operators was necessary and desirable in the usual business of respondent company, they
were employed temporarily only, during periods when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination because they knew
exactly when their contracts would end. Contracts of employment for a fixed period terminate on their
own at the end of such period. Contracts of employment for a fixed period are not unlawful. What is
objectionable is the practice of some scrupulous employers who try to circumvent the law protecting
workers from the capricious termination of employment. (Citation omitted) Caparoso v. Court of
Appeals upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan were
hired as deliverymen for three (3) months. At the end of the third month, they were hired on a
monthly basis. In total, they were hired for five (5) months. They filed a complaint for illegal
dismissal.159 This court ruled that there was no evidence indicating that they were pressured into
signing the fixed-term contracts. There was likewise no proof that their employer was engaged in
hiring workers for five (5) months only to prevent regularization. In the absence of these facts, the
fixed-term contracts were upheld as valid. On the other hand, an independent contractor is defined as:
one who carries on a distinct and independent business and undertakes to perform the job, work, or
service on its own account and under ones own responsibility according to ones own manner and
method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.
In view of the "distinct and independent business" of independent contractors, no employer-employee
relationship exists between independent contractors and their principals. Independent contractors are
recognized under Article 106 of the Labor Code:
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. 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 latterwere directly employed by
him.
In Department Order No. 18-A, Series of 2011, of the Department of Labor and Employment, a
contractor is defined as having:
Section 3. . . .
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the
performance or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal. This department order also states that there is a trilateral
relationship in legitimate job contracting and subcontracting arrangements among the principal,
contractor, and employees of the contractor. There is no employer-employee relationship between the
contractor and principal who engages the contractors services, but there is an employer-employee
relationship between the contractor and workers hired to accomplish the work for the principal.
Jurisprudence has recognized another kind of independent contractor: individuals with unique skills
and talents that set them apart from ordinary employees. There is no trilateral relationship in this
case because the independent contractor himself or herself performs the work for the principal. In
other words, the relationship is bilateral. In Orozco v. Court of Appeals, Wilhelmina Orozco was a
columnist for the Philippine Daily Inquirer. This court ruled that she was an independent contractor
because of her "talent, skill, experience, and her unique viewpoint as a feminist advocate." In addition,
the Philippine Daily Inquirer did not have the power of control over Orozco, and she worked at her
own pleasure. Semblante v. Court of Appeals involved a masiador and a sentenciador. This court ruled
that "petitioners performed their functions as masiadorand sentenciador free from the direction and
control of respondents and that the masiador and sentenciador "relied mainly on their expertise that
is characteristic of the cockfight gambling." Hence, no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association involved a basketball referee. This court ruled 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 these cases, the
workers were found to be independent contractors because of their unique skills and talents and the
lack of control over the means and methods in the performance of their work. In other words, there
are different kinds of independent contractors: those engaged in legitimate job contracting and those
who have unique skills and talents that set them apart from ordinary employees. Since no employer-
employee relationship exists between independent contractors and their principals, their contracts
are governed by the Civil Code provisions on contracts and other applicable laws. A contract is
defined as "a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service." Parties are free to stipulate on terms and
conditions in contracts as long as these "are not contrary to law, morals, good customs, public order,
or public policy." This presupposes that the parties to a contract are on equal footing. They can
bargain on terms and conditions until they are able to reach an agreement. On the other hand,
contracts of employment are different and have a higher level of regulation because they are
impressed with public interest. Article XIII, Section 3 of the 1987 Constitution provides full protection
to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all. It shall
guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law. The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation, and
shall enforce their mutual compliance therewith to foster industrial peace. The State shall regulate
the relations between workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns on investments, and to
expansion and growth. Apart from the constitutional guarantee of protection to labor, Article 1700 of
the Civil Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects. In contracts of employment, the
employer and the employee are not on equal footing. Thus, it is subject to regulatory review by the
labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special
class that is constitutionally protected because of the inequality between capital and labor. This
presupposes that the labor force is weak. However, the level of protection to labor should vary from
case to case; otherwise, the state might appear to be too paternalistic in affording protection to labor.
As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases where it appears that
the employer and employee are on equal footing. This recognizes the fact that not all workers are
weak. To reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the parties freedom of contract
are thus required for the protection of the employee. The level of protection to labor must be
determined on the basis of the nature of the work, qualifications of the employee, and other relevant
circumstances. For example, a prospective employee with a bachelors degree cannot be said to be on
equal footing with a grocery bagger with a high school diploma. Employees who qualify for jobs
requiring special qualifications such as "[having] a Masters degree" or "[having] passed the licensure
exam" are different from employees who qualify for jobs that require "[being a] high school graduate;
with pleasing personality." In these situations, it is clear that those with special qualifications can
bargain with the employer on equal footing. Thus, the level of protection afforded to these employees
should be different. Fujis argument that Arlene was an independent contractor under a fixed-term
contract is contradictory. Employees under fixed-term contracts cannot be independent contractors
because in fixed-term contracts, an employer-employee relationship exists. The test in this kind of
contract is not the necessity and desirability of the employees activities, "but the day certain agreed
upon by the parties for the commencement and termination of the employment relationship." For
regular employees, the necessity and desirability of their work in the usual course of the employers
business are the determining factors. On the other hand, independent contractors do not have
employer-employee relationships with their principals. Hence, before the status of employment can be
determined, the existence of an employer-employee relationship must be established. The four-fold
test180 can be used in determining whether an employer-employee relationship exists. The elements of
the four-fold test are the following: (1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power of control, which is the most important
element. The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission: The power to control refers to the existence of the power and not necessarily to
the actual exercise thereof, nor is it essential for the employer to actually supervise the performance
of duties of the employee. It is enough that the employer has the right to wield that power. (Citation
omitted) Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated
the following: Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the party
hired to the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means used to achieve
it. In Locsin, et al. v. Philippine Long Distance Telephone Company, the "power of control" was defined
as "[the] right to control not only the end to be achieved but also the means to be used in reaching
such end." Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals in determining whether Arlene was an independent contractor or a regular employee. In
deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved
newscasters and anchors. However, Sonza was held to be an independent contractor, while Dumpit-
Murillo was held to be a regular employee.
Comparison of the Sonza andDumpit-Murillo cases usingthe four-fold test.
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not possessed
by ordinary employees." His work was for radio and television programs. On the other hand, Dumpit-
Murillo was hired by ABC as a newscaster and co-anchor. Sonzas talent fee amounted to P317,000.00
per month, which this court found to be a substantial amount that indicated he was an independent
contractor rather than a regular employee. Meanwhile, Dumpit-Murillos monthly salary was P28,
000.00, a very low amount compared to what Sonza received. Sonza was unable to prove that ABS-
CBN could terminate his services apart from breach of contract. There was no indication that he could
be terminated based on just or authorized causes under the Labor Code. In addition, ABS-CBN
continued to pay his talent fee under their agreement, even though his programs were no longer
broadcasted. Dumpit-Murillo was found to have been illegally dismissed by her employer when they
did not renew her contract on her fourth year with ABC. In Sonza, this court ruled that ABS-CBN did
not control how Sonza delivered his lines, how he appeared on television, or how he sounded on
radio.195 All that Sonza needed was his talent. Further, "ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work . . . did not meet ABS-CBNs
approval." In Dumpit-Murillo, the duties and responsibilities enumerated in her contract was a clear
indication that ABC had control over her work.
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling
of the National Labor Relations Commission finding that Arlene was a regular employee. Arlene was
hired by Fuji as a news producer, but there was no showing that she was hired because of unique
skills that would distinguish her from ordinary employees. Neither was there any showing that she
had a celebrity status. Her monthly salary amounting to US$1,900.00 appears tobe a substantial sum,
especially if compared to her salary when she was still connected with GMA. Indeed, wages may
indicate whether one is an independent contractor. Wages may also indicate that an employee is able
to bargain with the employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor. Fuji had the power to dismiss
Arlene, as provided for in paragraph 5 of her professional employment contract. Her contract also
indicated that Fuji had control over her work because she was required to work for eight (8) hours
from Monday to Friday, although on flexible time. Sonza was not required to work for eight (8) hours,
while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks. On the power to control,
Arlene alleged that Fuji gave her instructions on what to report. Even the mode of transportation in
carrying out her functions was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of work, the train,
bus, or public transport shall be used for the trip. If the Employee uses the private car during the
work and there is an accident the Employer shall not be responsible for the damage, which may be
caused to the Employee.
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations
Commission that Arlene was not an independent contractor. Having established that an employer-
employee relationship existed between Fuji and Arlene, the next questions for resolution are the
following: Did the Court of Appeals correctly affirm the National Labor Relations Commission that
Arlene had become a regular employee? Was the nature of Arlenes work necessary and desirable for
Fujis usual course of business?
Arlene was a regular employeewith a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection between the
employees activities and the usual business of the employer. Article 280 provides that the nature of
work must be "necessary or desirable in the usual business or trade of the employer" as the test for
determining regular employment. As stated in ABS-CBN Broadcasting Corporation v. Nazareno:
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. However, there may be a situation where an employees work is
necessary but is not always desirable in the usual course of business of the employer. In this situation,
there is no regular employment. In San Miguel Corporation v. National Labor Relations Commission,
Francisco de Guzman was hired to repair furnaces at San Miguel Corporations Manila glass plant. He
had a separate contract for every furnace that he repaired. He filed a complaint for illegal dismissal
three (3) years after the end of his last contract. In ruling that de Guzman did not attain the status of a
regular employee, this court explained:
Note that the plant where private respondent was employed for only seven months is engaged in the
manufacture of glass, an integral component of the packaging and manufacturing business of
petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since
said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case of
need and after being used continuously for a varying period of five (5) to ten (10) years. In 1990, one
of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose, petitioner must hire
workers to undertake the said repair and upgrading. Clearly, private respondent was hired for a
specific project that was not within the regular business of the corporation. For petitioner is not
engaged in the business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity therefor arose only when a particular
furnace reached the end of its life or operating cycle. Or, as in the second undertaking, when a
particular furnace required an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and purposes which are
fulfilled once the designated work was completed. Moreover, such undertakings were also identifiably
separate and distinct from the usual, ordinary or regular business operations of petitioner, which is
glass manufacturing. These undertakings, the duration and scope of which had been determined and
made known to private respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee. Fuji is engaged in the business of broadcasting, including news
programming. It is based in Japan and has overseas offices to cover international news. Based on the
record, Fujis Manila Bureau Office is a small unit and has a few employees. As such, Arlene had to do
all activities related to news gathering. Although Fuji insists that Arlene was a stringer, it alleges that
her designation was "News Talent/Reporter/Producer." A news producer "plans and supervises
newscast . . . [and] work[s] with reporters in the field planning and gathering information. Arlenes
tasks included monitoring and getting news stories, reporting interviewing subjects in front of a
video camera,"217 "the timely submission of news and current events reports pertaining to the
Philippines, and traveling [sic] to [Fujis] regional office in Thailand." She also had to report for work
in Fujis office in Manila from Mondays to Fridays, eight (8) hours per day. She had no equipment and
had to use the facilities of Fuji to accomplish her tasks. The Court of Appeals affirmed the finding of
the National Labor Relations Commission that the successive renewals of Arlenes contract indicated
the necessity and desirability of her work in the usual course of Fujis business. Because of this,
Arlene had become a regular employee with the right to security of tenure. The Court of Appeals ruled
that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was
hired for the primary purpose of news gathering and reporting to the television networks
headquarters. Espiritu was not contracted on account of any peculiar ability or special talent and skill
that she may possess which the network desires to make use of. Parenthetically, if it were true that
Espiritu is an independent contractor, as claimed by Fuji, the fact that everything that she uses to
perform her job is owned by the company including the laptop computer and mini camera discounts
the idea of job contracting. Moreover, the Court of Appeals explained that Fujis argument that no
employer-employee relationship existed in view of the fixed-term contract does not persuade because
fixed-term contracts of employment are strictly construed. 222 Further, the pieces of equipment Arlene
used were all owned by Fuji, showing that she was a regular employee and not an independent
contractor. The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts
that were successively renewed for four (4) years This court held that "[t]his repeated engagement
under contract of hire is indicative of the necessity and desirability of the petitioners work in private
respondent ABCs business." With regard to Fujis argument that Arlenes contract was for a fixed
term, the Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela and held that where an
employees contract "had been continuously extended or renewed to the same position, with the same
duties and remained in the employ without any interruption," then such employee is a regular
employee. The continuous renewal is a scheme to prevent regularization. On this basis, the Court of
Appeals ruled in favor of Arlene. As stated in Price, et al. v. Innodata Corp., et al.:
The employment status of a person is defined and prescribed by law and not by what the parties say it
should be. Equally important to consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply contracting with each
other. Arlenes contract indicating a fixed term did not automatically mean that she could never be a
regular employee. This is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the
exception rather than the general rule. Further, an employee can be a regular employee with a fixed-
term contract. The law does not preclude the possibility that a regular employee may opt to have a
fixed-term contract for valid reasons. This was recognized in Brent: For as long as it was the employee
who requested, or bargained, that the contract have a "definite date of termination," or that the fixed-
term contract be freely entered into by the employer and the employee, then the validity of the fixed-
term contract will be upheld.
V
Whether the Court of Appeals correctly affirmed the National Labor Relations Commissions finding of
illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of
the non-renewal contract voluntarily executed by the parties. Fuji also argues that Arlenes contract
merely expired; hence, she was not illegally dismissed. Arlene alleges that she had no choice but to
sign the non-renewal contract because Fuji withheld her salary and benefits. With regard to this issue,
the Court of Appeals held:
We cannot subscribe to Fujis assertion that Espiritus contract merely expired and that she
voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-Renewal
Contract readily shows that the same was signed by Espiritu under protest. What is apparent is that
the Non-Renewal Contract was crafted merely as a subterfuge to secure Fujis position that it was
Espiritus choice not to renew her contract.
As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just
or authorized causes and after the observance of due process. The right to security of tenure is
guaranteed under Article XIII, Section 3 of the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE
AND HUMAN RIGHTS
LABOR
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law. Article 279 of the Labor Code also provides for the right to security of tenure and
states the following:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause of when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. Thus, on the right to security of tenure, no employee shall be dismissed,
unless there are just or authorized causes and only after compliance with procedural and substantive
due process is conducted. Even probationary employees are entitled to the right to security of tenure.
This was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:
Within the limited legal six-month probationary period, probationary employees are still entitled to
security of tenure. It is expressly provided in the afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify as
a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement.
The expiration of Arlenes contract does not negate the finding of illegal dismissal by Fuji. The manner
by which Fuji informed Arlene that her contract would no longer be renewed is tantamount to
constructive dismissal. To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji. The existence of a fixed-term contract should not mean that there can be no illegal
dismissal. Due process must still be observed in the pre-termination of fixed-term contracts of
employment. In addition, the Court of Appeals and the National Labor Relations Commission found
that Arlene was dismissed because of her health condition. In the non-renewal agreement executed by
Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to
effectively perform her functions under the said Contract such as the timely submission of news and
current events reports pertaining to the Philippines and travelling [sic] to the FIRST PARTYs regional
office in Thailand.
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is prohibited
by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is
paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for
every year of service, whichever is greater, a fraction of at least six (6) months being considered as
one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his co-
employees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health. For dismissal under Article 284 to be valid, two
requirements must be complied with: (1) the employees disease cannot be cured within six (6)
months and his "continued employment is prohibited by law or prejudicial to his health as well as to
the health of his co-employees"; and (2) certification issued by a competent public health authority
that even with proper medical treatment, the disease cannot be cured within six (6) months. The
burden of proving compliance with these requisites is on the employer. Noncompliance leads to the
conclusion that the dismissal was illegal. There is no evidence showing that Arlene was accorded due
process. After informing her employer of her lung cancer, she was not given the chance to present
medical certificates. Fuji immediately concluded that Arlene could no longer perform her duties
because of chemotherapy. It did not ask her how her condition would affect her work. Neither did it
suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did not present
any certificate from a competent public health authority. What Fuji did was to inform her that her
contract would no longer be renewed, and when she did not agree, her salary was withheld. Thus, the
Court of Appeals correctly upheld the finding of the National Labor Relations Commission that for
failure of Fuji to comply with due process, Arlene was illegally dismissed.
VI
Whether the Court of Appeals properly modified the National Labor Relations Commissions decision
when it awarded reinstatement, damages, and attorneys fees
The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the
ground that the filing of the complaint for illegal dismissal may have seriously strained relations
between the parties. Backwages were also awarded, to be computed from date of dismissal until the
finality of the National Labor Relations Commissions decision. However, only backwages were
included in the dispositive portion because the National Labor Relations Commission recognized that
Arlene had received separation pay in the amount of US$7,600.00. The Court of Appeals affirmed the
National Labor Relations Commissions decision but modified it by awarding moral and exemplary
damages and attorneys fees, and all other benefits Arlene was entitled to under her contract with
Fuji. The Court of Appeals also ordered reinstatement, reasoning that the grounds when separation
pay was awarded in lieu of reinstatement were not proven.
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied) The Court of Appeals modification of the National
Labor Relations Commissions decision was proper because the law itself provides that illegally
dismissed employees are entitled to reinstatement, backwages including allowances, and all other
benefits.
On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu
of reinstatement, reasoning "that the filing of the instant suit may have seriously abraded the
relationship of the parties so as to render reinstatement impractical." The Court of Appeals reversed
this and ordered reinstatement on the ground that separation pay in lieu of reinstatement is allowed
only in several instances such as (1) when the employer has ceased operations; (2) when the
employees position is no longer available; (3) strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality. On this matter, Quijano v. Mercury Drug Corp. is
instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a
matter of right. To protect labors security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in "strained relations" and the phrase cannot
be given an overarching interpretation, otherwise, an unjustly dismissed employee can never be
reinstated. The Court of Appeals reasoned that strained relations are a question of fact that must be
supported by evidence. No evidence was presented by Fuji to prove that reinstatement was no longer
feasible. Fuji did not allege that it ceased operations or that Arlenes position was no longer available.
Nothing in the records shows that Arlenes reinstatement would cause an atmosphere of antagonism
in the workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a substantial period to
bar reinstatement. On the award of damages, Fuji argues that Arlene is not entitled to the award of
damages and attorneys fees because the non-renewal agreement contained a quitclaim, which Arlene
signed. Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints
and money claim. As explained by Arlene, she signed the non-renewal agreement out of necessity. In
Land and Housing Development Corporation v. Esquillo, this court explained: We have heretofore
explained that the reason why quitclaims are commonly frowned upon as contrary to public policy, and
why they are held to be ineffective to bar claims for the full measure of the workers legal rights, is
the fact that the employer and the employee obviously do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get hold of money. Because, out of a job, he
had to face the harsh necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. With regard to the Court of Appeals award
of moral and exemplary damages and attorneys fees, this court has recognized in several cases that
moral damages are awarded "when the dismissal is attended by bad faith or fraud or constitutes an
act oppressive to labor, or is done in a manner contrary to good morals, good customs or public
policy." On the other hand, exemplary damages may be awarded when the dismissal was effected "in a
wanton, oppressive or malevolent manner." The Court of Appeals and National Labor Relations
Commission found that after Arlene had informed Fuji of her cancer, she was informed that there
would be problems in renewing her contract on account of her condition. This information caused
Arlene mental anguish, serious anxiety, and wounded feelings that can be gleaned from the tenor of
her email dated March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you
suddenly came to deliver to me the NEWS that you will no longer renew my contract. I knew this will
come but I never thought that you will be so heartless and insensitive to deliver that news just a
month after I informed you that I am sick. I was asking for patience and understanding and your
response was not to RENEW my contract. Apart from Arlenes illegal dismissal, the manner of her
dismissal was effected in an oppressive approach with her salary and other benefits being withheld
until May 5, 2009, when she had no other choice but to sign the non-renewal contract. Thus, there
was legal basis for the Court of Appeals to modify the National Labor Relations Commissions
decision. However, Arlene received her salary for May 2009. Considering that the date of her illegal
dismissal was May 5, 2009, 254 this amount may be subtracted from the total monetary award. With
regard to the award of attorneys fees, Article 111 of the Labor Code states that "[i]n cases of unlawful
withholding of wages, the culpable party may be assessed attorneys fees equivalent to ten percent of
the amount of wages recovered." Likewise, this court has recognized that "in actions for recovery of
wages or where an employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorneys fees is legally and morally justifiable." Due to her illegal dismissal,
Arlene was forced to litigate. In the dispositive portion of its decision, the Court of Appeals awarded
legal interest at the rate of 12% per annum. In view of this courts ruling in Nacar v. Gallery Frames,
the legal interest shall be reducd to a rate of 6% per annum from July 1, 2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is
AFFIRMED with the modification that backwages shall be computed from June 2009. Legal interest
shall be computed at the rate of 6% per annum of the total monetary award from date of finality of
this decision until full satisfaction. SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 209499 January 28, 2015
MA. CHARITO C. GADIA, ERNESTO M. PENAS, GEMMABELLE B. REMO, LORENA S.
QUESEA, MARIE JOY FRANCISCO, BEVERLY A. CABINGAS, IVEE U. BALINGIT, ROMA
ANGELICA 0. BORJA, MARIE JOAN RAMOS, KIM GUEVARRA, LYNN S. DE LOS SANTOS,
CAREN C. ENCANTO, EIDEN BALDOVINO, JACQUELINE B. CASTRENCE,MA.ESTRELLA V.
LAPUZ, JOSELITO L. LORD, RAYMOND G. SANTOS, ABIGAIL M. VILORIA, ROMMEL C.
ACOSTA, FRANCIS JAN S. BAYLON, ERIC 0. PADIERNOS, MA. LENELL P. AARON, CRISNELL
P. AARON, and LAWRENCE CHRISTOPHER F. PAPA, Petitioners,
vs.
SYKES ASIA, INC./ CHUCK SYKES/ MIKE HINDS/ MICHAEL HENDERSON, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari are the Decision dated April 29, 2013 and the
Resolution dated October 3, 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 120433, which
annulled and set aside the Decision dated November 15, 2010 and the Resolution dated May 10, 2011
of the National Labor Relations Commission (NLRC), in NLRC LAC No. 07-001583-10, and reinstated
the Decision dated June 23, 2010 of the Labor Arbiter (LA), holding that herein petitioners Ma. Charito
C. Gadia (Gadia), Ernesto M. Peas, Gemmabelle B. Remo (Remo), Lorena S. Quesea (Quesea), Marie
Joy Francisco, Beverly A. Cabingas, Ivee U. Balingit (Balingit), Roma Angelica O. Borja, Marie Joan
Ramos, Kim Guevarra, Lynn S. De Los Santos, Caren C. Encanto, Eiden Baldovino, Jacqueline B.
Castrence (Castrence), Ma. Estrella V.Lapuz (Lapuz), Joselito L. Lord (Lord), Raymond G. Santos,
Abigail M. Viloria (Viloria), Rommel C. Acosta (Acosta), Francis Jan S. Baylon,Eric O. Padiernos, Ma.
Lenell P. Aaron, Crisnell P. Aaron, and Lawrence Christopher F.Papa (petitioners) are project
employees of respondent Sykes Asia, Inc. (Sykes Asia), and thus, were validly terminated from
employment.
The Facts
Sykes Asia is a corporation engaged in Business Process Outsourcing (BPO) which provides support to
its international clients from various sectors (e.g., technology, telecommunications, retail services) by
carrying on some of their operations, governed by service contracts that it enters with them. On
September 2, 2003, Alltel Communications, Inc. (Alltel), a United States-based telecommunications
firm, contracted Sykes Asias services to accommodate the needs and demands of Alltel clients for its
postpaid and prepaid services (Alltel Project). Thus, on different dates, Sykes Asia hired petitioners as
customer service representatives, team leaders, and trainers for the Alltel Project. Services for the
said project went on smoothly until Alltel sent two (2) letters to Sykes Asia dated August 7, 2009 and
September 9, 2009 informing the latter that it was terminating all support services provided by Sykes
Asia related to the Alltel Project. In view of this development, Sykes Asia sent each of the petitioners
end-of-life notices, informing them of their dismissal from employment due to the termination of the
Alltel Project. Aggrieved, petitioners filed separate complaints for illegal dismissal against
respondents Sykes Asia, Chuck Sykes, the President and Chief Operating Officer of Sykes Enterprise,
Inc., and Mike Hinds and Michael Henderson, the President and Operations Director, respectively, of
Sykes Asia (respondents), praying for reinstatement, backwages, 13th month pay, service incentive
leave pay, night shift differential, moral and exemplary damages, and attorneys fees. In their
complaints, petitioners alleged that their dismissal from service was unjust as the same was effected
without substantive and procedural due process. In their defense, respondents averred that
petitioners were not regular employees but merely project-based employees, and as such, the
termination of the Alltel Project served as a valid ground for their dismissal. In support of their
position, respondents noted that it was expressly indicated in petitioners respective employment
contracts that their positions are "project-based" and thus, "co-terminus to the project." Respondents
further maintained that they complied with the requirements of procedural due process in dismissing
petitioners by furnishing each of them their notices of termination at least thirty (30) days prior to
their respective dates of dismissal.
The LA Ruling
In a Decision dated June 23, 2010 the LA ruled in favor of respondents, and accordingly, dismissed
petitioners complaints for lack of merit. It found that petitioners are merely project-based employees,
as their respective employment contracts indubitably provided for the duration and term of their
employment, as well as the specific project to which they were assigned, i.e., the Alltel Project. Hence,
the LA concluded that the cessation of the Alltel Project naturally resulted in the termination of
petitioners employment in Sykes Asia. Dissatisfied, petitioners appealed to the NLRC.
The NLRC Ruling
In a Decision dated November 15, 2010, the NLRC modified the LA Decision, ruling that petitioners
are regular employees but were validly terminated due to redundancy. Accordingly, petitioners, except
Viloria and Acosta whose complaints were dismissed without prejudice for failure to prosecute, were
awarded their separation pay with interest of 12% per annum reckoned from the date of their actual
dismissal until full payment, plus attorneys fees amounting to 10% of the total monetary award. In
addition, the NLRC awarded nominal damages in the amount of P10,000.00 each to petitioners Gadia,
Remo, Quesea, Balingit, Castrence, Lapuz, and Lord for respondents failure to furnish them the
required written notice of termination within the prescribed period. Contrary to the LAs finding, the
NLRC found that petitioners could not be properly characterized as project-based employees,
ratiocinating that while it was made known to petitioners that their employment would be co-terminus
to the Alltel Project, it was neither determined nor made known to petitioners, at the time of hiring,
when the said project would end, be terminated, or be completed. In this relation, the NLRC
concluded that inasmuch as petitioners had been engaged to perform activities which are necessary
or desirable in respondents usual business or trade of BPO, petitioners should be deemed regular
employees of Sykes Asia. This notwithstanding, and in view of the cessation of the Alltel Project, the
NLRC found petitioners employment with Sykes Asia to be redundant; hence, declared that they were
legally dismissed from service and were only entitled to receive their respective separation pay.
Respondents moved for reconsideration, which was, however, denied in a Resolution dated May 10,
2011. Unconvinced, Sykes Asia elevated the case to the CA on certiorari.
The CA Ruling
In a Decision dated April 29, 2013, the CA annulled and set aside the ruling of the NLRC, and
accordingly, reinstated that of the LA. It held that a perusal of petitioners respective employment
contracts readily shows that they were hired exclusively for the Alltel Project and that it was
specifically stated therein that their employment would be project-based. The CA further held that
petitioners employment contracts need not state an actual date as to when their employment would
end, opining that it is enough that such date is determinable. Petitioners moved for reconsideration,
which was, however, denied in a Resolution dated October 3, 2013, hence, this petition.
The Issue Before the Court
The primordial issue for the Courts resolution is whether or not the CA correctly granted
respondents petition for certiorari, thereby setting aside the NLRCs decision holding that petitioners
were regular employees and reinstating the LA ruling that petitioners were merely project-based
employees, and thus, validly dismissed from service.
The Courts Ruling
The petition is without merit. At the outset, it must be stressed that to justify the grant of the
extraordinary remedy of certiorari, petitioners must satisfactorily show that the court or quasi-judicial
authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes
judgment exercised in a capricious and whimsical manner that is tantamount to lack of jurisdiction. To
be considered "grave," discretion must be exercised in a despotic manner by reason of passion or
personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all in contemplation of law. In labor
disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and the
conclusions reached thereby are not supported by substantial evidence. This requirement of
substantial evidence is clearly expressed in Section 5, Rule 133 of the Rules of Court which provides
that "in cases filed before administrative or quasi-judicial bodies, a fact may be deemed established if
it is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion." Tested against these considerations, the Court finds
that the CA correctly granted respondents certiorari petition before it, since the NLRC gravely
abused its discretion in ruling that petitioners were regular employees of Sykes Asia when the latter
had established by substantial evidence that they were merely project-based. Article 294 of the Labor
Code, as amended, distinguishes a project-based employee from a regular employee as follows:
Art. 294. Regular and casual employmentThe 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.
(Emphasis and underscoring supplied)
In Omni Hauling Services, Inc. v. Bon, the Court extensively discussed how to determine whether an
employee may be properly deemed project-based or regular, to wit:
A project employee is assigned to a project which begins and ends at determined or determinable
times. Unlike regular employees who may only be dismissed for just and/or authorized causes under
the Labor Code, the services of employees who are hired as "project[-based] employees" may be
lawfully terminated at the completion of the project. According to jurisprudence, the principal test for
determining whether particular employees are properly characterized as "project[-based] employees"
as distinguished from "regular employees," is whether or not the employees were assigned to carry
out a "specific project or undertaking," the duration (and scope) of which were specified at the time
they were engaged for that project. The project could either be (1) 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; or (2) a particular job or
undertaking that is not within the regular business of the corporation. In order to safeguard the rights
of workers against the arbitrary use of the word "project" to prevent employees from attaining a
regular status, employers claiming that their workers are project[-based] employees should not only
prove that the duration and scope of the employment was specified at the time they were engaged,
but also, that there was indeed a project. (Emphases and underscoring supplied) Verily, for an
employee to be considered project-based, the employer must show compliance with two (2) requisites,
namely that: (a) the employee was assigned to carry out a specific project or undertaking; and (b) the
duration and scope of which were specified at the time they were engaged for such project. In this
case, records reveal that Sykes Asia adequately informed petitioners of their employment status at the
time of their engagement, as evidenced by the latters employment contracts which similarly provide
that they were hired in connection with the Alltel Project, and that their positions were "project-based
and as such is co-terminus to the project." In this light, the CA correctly ruled that petitioners were
indeed project-based employees, considering that: (a) they were hired to carry out a specific
undertaking, i.e., the Alltel Project; and (b) the duration and scope of such project were made known
to them at the time of their engagement, i.e., "co-terminus with the project." As regards the second
requisite, the CA correctly stressed that "[t]he law and jurisprudence dictate that the duration of the
undertaking begins and ends at determined or determinable times" while clarifying that "[t]he phrase
determinable times simply means capable of being determined or fixed." In this case, Sykes Asia
substantially complied with this requisite when it expressly indicated in petitioners employment
contracts that their positions were "co-terminus with the project." To the mind of the Court, this
caveat sufficiently apprised petitioners that their security of tenure with Sykes Asia would only last as
long as the Alltel Project was subsisting. In other words, when the Alltel Project was terminated,
petitioners no longer had any project to work on, and hence, Sykes Asia may validly terminate them
from employment. Further, the Court likewise notes the fact that Sykes Asia duly submitted an
Establishment Employment Report and an Establishment Termination Report to the Department of
Labor and Employment Makati-Pasay Field Office regarding the cessation of the Alltel Project and the
list of employees that would be affected by such cessation. As correctly pointed out by the CA, case
law deems such submission as an indication that the employment was indeed project-based. In sum,
respondents have shown by substantial evidence that petitioners were merely project-based
employees, and as such, their services were lawfully terminated upon the cessation of the Alltel
Project. WHEREFORE, the petition is DENIED. Accordingly, the Decision dated April 29, 2013 and the
Resolution dated October 3, 2013 of the Court of Appeals in CA-G.R. SP No. 120433 are hereby
AFFIRMED. SO ORDERED.

G.R. No. 205300

FONTERRA BRANDS PHILS., INC., Petitioner,
vs.
LEONARDO1 LARGADO and TEOTIMO ESTRELLADO, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal
and setting aside of the Decision of the Court of Appeals (CA) dated September 6, 2012, as well as its
January 11, 2013 Resolution denying reconsideration thereof, in CA-G.R. SP No. 114227, entitled
Leonardo Largado and Teotimo P. Estrellado v. National Labor Relations Commission (NLRC),
Fonterra Brands Phils., lnc./Carlo Mendoza, Zytron Marketing & Promotions Corp./Francisco
Valencia, A. C. Sicat Marketing & Promotional Services/Arturo Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and
Promotions Corp. (Z)rtron) for the marketing and promotion of its milk and dairy products. Pursuant
to the contract, Zytron provided Fonterra with trade merchandising representatives (TMRs), including
respondents Leonardo Largado (Largado) and Teotimo Estrellado (Estrellado). The engagement of
their services began on September 15, 2003 and May 27, 2002, respectively, and ended on June 6,
2006. On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective
June 5, 2006. Fonterra then entered into an agreement for manpower supply with A.C. Sicat
Marketing and Promotional Services (A.C. Sicat). Desirous of continuing their work as TMRs,
respondents submitted their job applications with A.C. Sicat, which hired them for a term of five (5)
months, beginning June 7, 2006 up to November 6, 2006. When respondents 5-month contracts with
A.C. Sicat were about to expire, they allegedly sought renewal thereof, but were allegedly refused.
This prompted respondents to file complaints for illegal dismissal, regularization, non-payment of
service incentive leave and 13th month pay, and actual and moral damages, against petitioner, Zytron,
and A.C. Sicat. The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not
illegally dismissed. As a matter of fact, they were the ones who refused to renew their contract and
that they voluntarily complied with the requirements for them to claim their corresponding monetary
benefits in relation thereto; and (2) they were consecutively employed by Zytron and A.C. Sicat, not by
Fonterra. The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the instant case
for utter lack of merit. SO ORDERED. The NLRC affirmed the Labor Arbiter, finding that respondents
separation from Zytron was brought about by the execution of the contract between Fonterra and A.C.
Sicat where the parties agreed to absorb Zytrons personnel, including respondents. Too, respondents
failed to present any evidence that they protested this set-up. Furthermore, respondents failed to
refute the allegation that they voluntarily refused to renew their contract with A.C. Sicat. Also,
respondents did not assert any claim against Zytron and A.C. Sicat. The NLRC disposed of the case in
this wise:
WHEREFORE, premises considered, the appeals are hereby ordered DISMISSED and the Decision
of the Labor Arbiter is AFFIRMED [in] toto. SO ORDERED. The NLRC decision was assailed in a
petition under Rule 65 before the CA.
Ruling on the petition, the CA, in the questioned Decision, 4 found that A.C. Sicat satisfies the
requirements of legitimate job contracting, but Zytron does not. According to the CA: (1) Zytrons
paid-in capital of 250,000 cannot be considered as substantial capital; (2) its Certificate of
Registration was issued by the DOLE months after respondents supposed employment ended; and (3)
its claim that it has the necessary tools and equipment for its business is unsubstantiated. Therefore,
according to the CA, respondents were Fonterras employees. Additionally, the CA held that
respondents were illegally dismissed since Fonterra itself failed to prove that their dismissal is lawful.
However, the illegal dismissal should be reckoned from the termination of their supposed employment
with Zytron on June 6, 2006. Furthermore, respondents transfer to A.C. Sicat is tantamount to a
completely new engagement by another employer. Lastly, the termination of their contract with A.C.
Sicat arose from the expiration of their respective contracts with the latter. The CA, thus, ruled that
Fonterra is liable to respondents and ordered the reinstatement of respondents without loss of
seniority rights, with full backwages, and other benefits from the time of their illegal dismissal up to
the time of their actual reinstatement. The fallo of the Decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated
20 November 2009 and Resolution dated 5 March 2010 of the National Labor Relations Commission
(NLRC), Seventh Division, are hereby ANULLED and SET ASIDE. Private respondent Fonterra
Brand, Inc. is hereby ordered to REINSTATE [respondents] without loss of seniority rights. Private
respondents Fonterra Brand, Inc. and Zytron Marketing and Promotional Corp. are hereby further
ORDERED to jointly and severally pay petitioners their full backwages and other benefits from the
time of their illegal dismissal up to the time of their actual reinstatement; and attorneys fees.
SO ORDERED.
Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.
The Issues
Petitioner presents the following issues for Our resolution:
I.The CA erred in ruling that Zytron was a mere labor-only contractor to petitioner Fonterra, in that:
a. As held by the Court, there is no absolute figure that constitutes "substantial" capital for an
independent contractor, and the same should instead be measured against the type of work it is
obligated to do for the principal. It is most respectfully submitted that, here, the merchandising work
undertaken by Zytrons paid-in capital of 250,000 was as of 1990, the year it was incorporated;
b. As shown in its Articles of Incorporation, Zytron had been in business since 1990, or more than a
decade before it signed a merchandising agreement with petitioner Fonterra;
c. Very importantly, petitioner Fonterra never exercised the right to control respondents and other
employees of Zytron. Indeed, respondents neither alleged that petitioner exercised control over them
nor presented proof in support thereof in any of their previous pleadings.
II. Respondents never claimed nor adduced evidence that they were dismissed from employment by
Zytron. In fact, Zytron denies terminating them from work. The CA, thus, erred in finding that
respondents were "illegally dismissed." Succinctly, the issues in the case at bar are: (1) whether or not
Zytron and A.C. Sicat are labor-only contractors, making Fonterra the employer of herein
respondents; and (2) whether or not respondents were illegally dismissed.
Our Ruling
We find merit in the petition.
As regards the CAs conclusion that Zytron is not a legitimate job contractor, We are of the view that
such is immaterial to the resolution of the illegal dismissal issue for one reason: We find that
respondents voluntarily terminated their employment with Zytron, contrary to their allegation that
their employment with Zytron was illegally terminated. We do not agree with the CA that respondents
employment with Zytron was illegally terminated. As correctly held by the Labor Arbiter and the
NLRC, the termination of respondents employment with Zytron was brought about by the cessation of
their contracts with the latter. We give credence to the Labor Arbiters conclusion that respondents
were the ones who refused to renew their contracts with Zytron, and the NLRCs finding that they
themselves acquiesced to their transfer to A.C. Sicat. By refusing to renew their contracts with
Zytron, respondents effectively resigned from the latter. Resignation is the voluntary act of employees
who are compelled by personal reasons to dissociate themselves from their employment, done with
the intention of relinquishing an office, accompanied by the act of abandonment. Here, it is obvious
that respondents were no longer interested in continuing their employment with Zytron. Their
voluntary refusal to renew their contracts was brought about by their desire to continue their
assignment in Fonterra which could not happen in view of the conclusion of Zytrons contract with
Fonterra. Hence, to be able to continue with their assignment, they applied for work with A.C. Sicat
with the hope that they will be able to continue rendering services as TMRs at Fonterra since A.C.
Sicat is Fonterras new manpower supplier. This fact is even acknowledged by the CA in the assailed
Decision where it recognized the reason why respondents applied for work at A.C. Sicat. The CA
stated that "[t]o continuously work as merchandisers of Fonterra products, [respondents] submitted
their job applications to A.C. Sicat" This is further bolstered by the fact that respondents voluntarily
complied with the requirements for them to claim their corresponding monetary benefits in relation to
the cessation of their employment contract with Zytron. In short, respondents voluntarily terminated
their employment with Zytron by refusing to renew their employment contracts with the latter,
applying with A.C. Sicat, and working as the latters employees, thereby abandoning their previous
employment with Zytron. Too, it is well to mention that for obvious reasons, resignation is inconsistent
with illegal dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents, contrary to the findings of the CA. As regards respondents employment with A.C. Sicat
and its termination via non-renewal of their contracts, considering that in labor-only contracting, the
law creates an employer-employee relationship between the principal and the labor-only contractors
employee as if such employees are directly employed by the principal employer, and considers the
contractor as merely the agent of the principal, it is proper to dispose of the issue on A.C. Sicats
status as a job contractor first before resolving the issue on the legality of the cessation of
respondents employment. In this regard, We defer to the findings of the CA anent A.C. Sicats status
as a legitimate job contractor, seeing that it is consistent with the rules on job contracting and is
sufficiently supported by the evidence on record. A person is considered engaged in legitimate job
contracting or subcontracting if the following conditions concur:
1.The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its
own manner and method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;
2.The contractor or subcontractor has substantial capital or investment; and
3.The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.
On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal and if any of the following
elements are present, thus:
1.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
2.The contractor does not exercise the right to control over the performance of the work of the
contractual employee.
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C.
Sicat was able to prove its status as a legitimate job contractor for having presented the following
evidence, to wit:
1.Certificate of Business Registration;
2.Certificate of Registration with the Bureau of Internal Revenue;
3.Mayors Permit;
4.Certificate of Membership with the Social Security System;
5.Certificate of Registration with the Department of Labor and Employment;
6.Company Profile; and
7.Certifications issued by its clients.
Furthermore, A.C. Sicat has substantial capital, having assets totaling 5,926,155.76 as of December
31, 2006. Too, its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the
wages and salaries of its employees or workers, including benefits, premiums, and protection due
them, as well as remittance to the proper government entities of all withholding taxes, Social Security
Service, and Medicare premiums, in accordance with relevant laws. The appellate court further
correctly held that Fonterras issuance of Merchandising Guidelines, stock monitoring and inventory
forms, and promo mechanics, for compliance and use of A.C. Sicats employees assigned to them, does
not establish that Fonterra exercises control over A.C. Sicat. We agree with the CAs conclusion that
these were imposed only to ensure the effectiveness of the promotion services to be rendered by the
merchandisers as it would be risky, if not imprudent, for any company to completely entrust the
performance of the operations it has contracted out. These sufficiently show that A.C. Sicat carries out
its merchandising and promotions business, independent of Fonterras business. Thus, having settled
that A.C. Sicat is a legitimate job contractor, We now determine whether the termination of
respondents employment with the former is valid. We agree with the findings of the CA that the
termination of respondents employment with the latter was simply brought about by the expiration of
their employment contracts. Foremost, respondents were fixed-term employees. As previously held by
this Court, fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those by nature seasonal or for specific projects with predetermined dates of completion;
they also include those to which the parties by free choice have assigned a specific date of
termination. The determining factor of such contracts is not the duty of the employee but the day
certain agreed upon by the parties for the commencement and termination of the employment
relationship.
In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees. In
their employment contract with the latter, it is clearly stated that "[A.C. Sicat is] temporarily
employing [respondents] as TMR[s] effective June 6[, 2006] under the following terms and conditions:
The need for your service being only for a specific project, your temporary employment will be for the
duration only of said project of our client, namely to promote FONTERRA BRANDS products x x x
which is expected to be finished on or before Nov. 06, 2006." Respondents, by accepting the
conditions of the contract with A.C. Sicat, were well aware of and even acceded to the condition that
their employment thereat will end on said pre-determined date of termination. They cannot now argue
that they were illegally dismissed by the latter when it refused to renew their contracts after its
expiration. This is so since the non-renewal of their contracts by A.C. Sicat is a management
prerogative, and failure of respondents to prove that such was done in bad faith militates against their
contention that they were illegally dismissed. The expiration of their contract with A.C. Sicat simply
caused the natural cessation of their fixed-term employment thereat. We, thus, see no reason to
disturb the ruling of the CA in this respect. With these, We need not belabor the other assigned errors.
IN VIEW OF THE FOREGOING, the instant Petition for Review is GRANTED. The assailed Decision
of the Court of Appeals dated September 6, 2012 and its January 11, 2013 Resolution denying
reconsideration thereof, in CA-G.R. SP No. 114227, are hereby REVERSED and SET ASIDE. The
Decision of the National Labor Relations Commission dated November 20, 2009 and its Resolution
dated March 5, 2010 in NLRC Case No. RAB IV 12-23927-06-Q are hereby REINSTATED. SO
ORDERED.