Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169510 August 8, 2011

ATOK BIG WEDGE COMPANY, INC., Petitioner,

vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision1 dated May
31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August
23, 2005 denying petitioner’s motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on
retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and
Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted
petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal
surface occupants within the area covered by the company's mineral claims. Respondent was
likewise tasked to perform liaison work with several government agencies, which he said was his
expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of ₱3,000.00 a month,3
which was delivered to him either at his residence or in a local restaurant. The parties executed a
retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request. He
later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint4 with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum5 advising respondent that within 30 days from receipt thereof, petitioner is terminating
his retainer contract with the company since his services are no longer necessary.
On February 21, 2003, respondent filed a Complaint6 for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the
National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera
Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was
docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok
Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the
company’s problem involving the 700 million pesos crop damage claims of the residents living at the
minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres
offered to pay him ₱3,000.00 per month plus representation expenses. It was also agreed upon by
him and Torres that his participation in resolving the problem was temporary and there will be no
employer-employee relationship between him and Atok. It was also agreed upon that his
compensation, allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants
barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a
dialogue was made by Atok and the crop damage claimants. Unfortunately, Atok’s representatives,
including him, were virtually held hostage by the irate claimants who demanded on the spot payment
of their claims. He was able to convince the claimants to release the company representatives
pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its
partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties
acquired by the partnership and some receivables by Benguet Corporation was the problem. He was
again entangled with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the properties of the
partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s
accountabilities with Benguet Corporation in the amount of ₱900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok
was relieved of the burden of paying 700 million pesos. In between attending the problems of the
crop damage issue, he was also assigned to do liaison works with the SEC, Bureau of Mines,
municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by
Atok to take charge of some liaison matters and public relations in Baguio and Benguet Province,
and to report regularly to Atok’s office in Manila to attend meetings and so he had to stay in Manila
at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is
already entitled to the benefits due an employee under the law, but management ignored his
requests. However, he continued to avail of his representation expenses and reimbursement of
company-related expenses. He also enjoyed the privilege of securing interest free salary loans
payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation
officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of
Atok.
Since he was getting older, being already 56 years old, he reiterated his request to the company to
cause his registration with the SSS. His request was again ignored and so he filed a complaint with
the SSS. After filing his complaint with the SSS, respondents terminated his services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter
Rolando D. Gambito rendered a Decision8 ruling in favor of the petitioner. Finding no employer-
employee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint
for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution9 affirming the decision of the
Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the Resolution10
dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA
questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No.
87846. In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent
Resolutions of the Honorable Public Respondent affirming the same, are in harmony
with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of

Discretion in Dismissing the Complaint of Petitioner and whether or not the
Honorable Public Respondent Committed a Grave Abuse of Discretion when it
affirmed the said Decision.11

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of
the NLRC, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations
Commission dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE.
Private respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner
Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full
backwages, inclusive of allowances and other benefits or their monetary equivalent computed from
the time these were withheld from him up to the time of his actual and effective reinstatement. This
case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages,
allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge
Company Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter
and the NLRC may have overlooked Article 280 of the Labor Code,13 or the provision which
distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the
provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse
of one year from his employment. Considering also that respondent had been performing services
for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular
employee.
The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same by
repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have
waived his right to attain a regular status of employment when he agreed to perform these tasks on
a temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE
WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN
IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A
PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE
IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR
IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT
THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND
CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition for
certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or
not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming
the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining
whether there was an employer-employee relationship between the petitioner and the respondent.
Petitioner contends that where the existence of an employer-employee relationship is in dispute,
Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a
casual employee from a regular employee for purposes of determining the rights of an employee to
be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err
in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of
the NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As
this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special civil action of
certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper
vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the
Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum
for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous
factual findings should be left to the CA as it is procedurally equipped for that purpose. From the
decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure
before the Supreme Court may be resorted to by the parties. Hence, respondent's resort to the CA
was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between
petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately

a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded
not only respect but even finality when supported by substantial evidence.17 Being a question of fact,
the determination whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence,
such determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably

adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct,
or the so-called "control test."18 Of these four, the last one is the most important.19 The so-called
"control test" is commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to
control not only the end achieved, but also the manner and means to be used in reaching that end.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the

case at bar. Among other things, respondent was not required to report everyday during regular
office hours of petitioner. Respondent's monthly retainer fees were paid to him either at his
residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which
respondent would accomplish any of the tasks in which his expertise as a liaison officer was needed;
respondent was left alone and given the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but petitioner did not control the manner and
methods by which respondent performed these tasks. Verily, the absence of the element of control
on the part of the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly
admitted that petitioner hired him in a limited capacity only and that there will be no employer-
employee relationship between them. As averred in respondent's Position Paper:21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered
him a pay in the amount of Php3,000.00 per month plus representation expenses. It was also agreed
by Mr. Torres and the complainant that his participation on this particular problem of Atok will be
temporary since the problem was then contemplated to be limited in nature, hence, there will be no
employer-employee relationship between him and Atok. Complainant agreed on this arrangement. It
was also agreed that complainant's compensations, allowances, representation expenses and
reimbursement of company- related expenses will be processed and paid through disbursement
vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of
the petitioner and he agreed to perform tasks for the petitioner on a temporary employment status
only. However, respondent anchors his claim that he became a regular employee of the petitioner
based on his contention that the "temporary" aspect of his job and its "limited" nature could not have
lasted for eleven years unless some time during that period, he became a regular employee of the
petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not determinative in
this case. In fact, any agreement may provide that one party shall render services for and in behalf
of another, no matter how necessary for the latter's business, even without being hired as an
employee.23 Hence, respondent's length of service and petitioner's repeated act of assigning
respondent some tasks to be performed did not result to respondent's entitlement to the rights and
privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven
years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits, to join or form a
union, or to security of tenure; it does not apply where the existence of an employment relationship
is in dispute.24 It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in
determining whether an employer-employee relationship exists between respondent and the
petitioner

Considering that there is no employer-employee relationship between the parties, the termination of
respondent's services by the petitioner after due notice did not constitute illegal dismissal warranting
his reinstatement and the payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions
dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are
REINSTATED.

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, Peña & Nolasco for petitioners.

Mauricio G. Domogon for respondent Alegre.

NARVASA, J.:

The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor
Code, 2 as amended,3 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. 4 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. 5

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. 7
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.
9
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. 10

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 that—

In 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 15 the principle is the same. "Where a contract specifies the period of its
duration, it terminates on the expiration of such period." 16 "A contract of employment for a definite
period terminates by its own terms at the end of such period." 17

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: 18

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." 19 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 22 now reads:

. . . Probationary employment.—Probationary employment shall not exceed

six months from the date the employee started working, unless it is covered
by an apprenticeship agreement stipulating a longer period. The services of
an employee who has been engaged in a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee
in accordance with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a regular employee.

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, 23 now
reads:
 . . . 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 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, 24 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 25 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. 26 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 27 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 objecionable mischievous,
undefensible, wrongful, evil and injurious consequences. 28

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. . . ." 29

. . . 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. 30

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 31 upon the effect of the expiry of an agreed period of
employment as still good rule—a 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. ...32

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.

Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Cortés, Griño-
Aquino, Medialdea and Regalado, JJ., concur.

Fernan, C.J., took no part.

Separate Opinions

SARMIENTO, J., concurring and dissenting:

I am agreed that the Labor Code has not foresaken "term employments", held valid in Biboso V.
Victorias Milling Company, Inc. (No. L-44360, March 31, 1977, 76 SCRA 250). That notwithstanding,
I can not liken employment contracts to ordinary civil contracts in which the relationship is
established by stipulations agreed upon. Under the very Civil Code:

Art. 1700. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor 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.

xxx xxx xxx

 Art. 1702. In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer.

The courts (or labor officials) should nevertheless be vigilant as to whether or not the termination of
the employment contract is done by reason of expiration of the period or to cheat the employee out
of office. The latter amounts to circumvention of the law.
MILLARES VS. NCRC

Petitioner

Douglas Millares and Rogelio Lagda

Respondent

National Labor Relations Commission, Trans-Global Maritime Agency, Inc. and Esso International
Shipping Co., Ltd.

Ponente

Kapunan, J.

Docket Number and Date of Decision

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

Significance of the Case

In this landmark case, the Supreme Court, citing Brent case and Coyoca case, ruled that seafarers
are considered contractual employees. They can not be considered as regular employees under
Article 280 of the Labor Code. Their employment is governed by the contracts they sign everytime
they are rehired and their employment is terminated when the contract expires. Their employment is
contractually fixed for a certain period of time.

Facts

Douglas Millares was employed by ESSO International through its local manning agency, Trans-
Global, in 1968 as a machinist. In 1975, he was promoted as Chief Engineer which position he
occupied until he opted to retire in 1989.

In 1989, petitioner Millares filed a leave of absence and applied for optional retirement plan under
the Consecutive Enlistment Incentive Plan (CEIP) considering that he had already rendered more
than twenty years of continuous service.

Esso International denied Millares’ request for optional retirement on the following grounds, to wit:
(1) he was employed on a contractual basis; (2) his contract of enlistment (COE) did not provide for
retirement before the age of sixty years; and (3) he did not comply with the requirement for claiming
benefits under the CEIP, i.e., to submit a written advice to the company of his intention to terminate
his employment within thirty days from his last disembarkation date.

Subsequently, after failing to return to work after the expiration of his leave of absence, Millares was
dropped from the roster of crew members effective September 1, 1989.

On the other hand, petitioner Lagda was employed by Esso International as wiper/oiler in 1969. He
was promoted as Chief Engineer in 1980, a position he continued to occupy until his last COE
expired in 1989.
In 1989, Lagda likewise filed a leave of absence and applied to avail of the optional early retirement
plan in view of his twenty years continuous service in the company.

Trans-global similarly denied Lagda’s request for availment of the optional early retirement scheme
on the same grounds upon which Millares request was denied.

Unable to return for contractual sea service after his leave of absence expire, Lagda was also
dropped from the roster of crew members effective September 1, 1989.

Millares and Lagda filed a complaint-affidavit for illegal dismissal and non-payment of employee
benefits against private respondents Esso International and Trans-Global before the POEA.

The POEA rendered a decision dismissing the complaint for lack of merit. On appeal, NLRC affirmed
the decision of the POEA dismissing the complaint.

NLRC rationcinated that Millares and Lagda, as seamen and overseas contract workers are not
covered by the term “regular employment” as defined under Article 280 of the Labor Code. The
POEA, which is tasked with protecting the rights of the Filipino workers for overseas employment to
fair and equitable recruitment and employment practices and to ensure their welfare, prescribes a
standard employment contract for seamen on board ocean-going vessels for a fixed period but in no
case to exceed twelve months.

Issue

Whether or not seafarers are considered regular employees under Article 280 of the Labor Code.

Ruling

It is for the mutual interest of both the seafarer and the employer why the employment status must be
contractual only or for a certain period of time.

Quoting Brent School Inc. v. Zamora, 1990, and Pablo Coyoca v. NLRC, 1995, the Supreme Court ruled that
seafarers are considered contractual employees. They can not be considered as regular employees
under Article 280 of the Labor Code. Their employment is governed by the contracts they sign everytime
they are rehired and their employment is terminated when the contract expires. Their employment is
contractually fixed for a certain period of time. They fall under the exception of Article 280 whose
employment has been fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.

As ruled in Brent case, there are certain forms of employment which also require the performance of
usual and desirable functions and which exceed one year but do not necessarily attain regular
employment status under Article 280. Overseas workers including seafarers fall under this type of
employment which are governed by the mutual agreements of the parties.

And as stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of
the POEA. The Standard Employment Contract governing the employment of All Filipino seamen on
Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the
contract of seamen shall be for a fixed period. And in no case should the contract of seamen be
longer than 12 months.

Moreover, the Court held that it is an accepted maritime industry practice that employment of
seafarers are for a fixed period only. Constrained by the nature of their employment which is quite
peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why
the employment status must be contractual only or for a certain period of time. Seafarers spend
most of their time at sea and understandably, they can not stay for a long and an indefinite period of
time at sea. Limited access to shore society during the employment will have an adverse impact on
the seafarer. The national, cultural and lingual diversity among the crew during the COE is a reality
that necessitates the limitation of its period.
 [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. i This case was docketed as RAB-11-08-50284-91.
On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a decision ii
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. iii However, on
private respondents motion for reconsideration, the NLRC rendered another decision on
30 January 1995 iv 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,v 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: [E]xcept 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.vi
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.vii
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, viii which was reaffirmed in numerous
subsequent cases, ix 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:
[I]t 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. x
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. xi 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. xii
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.xiii
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. xiv The reason for the rule is that the employer
and the employee do not stand on the same footing.xv
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.xvi
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, xvii 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,xviii 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.xix
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.