LEOPOLDO GUARIN v.
NLRC the COMPANY free and harmless of and from any responsibility, liability or claim
GRIÑO-AQUINO, J.:
The sole issue in this petition for certiorari is whether or not, as found by the National
Labor Relations Commission (or NLRC), respondent Lipercon Services, Inc. is an
independent contractor and that petitioners are its employees.
Novelty Philippines, Inc. is a domestic corporation that is engaged in the garment
manufacturing business. Lipercon Services, Inc. is also a domestic corporation which is
engaged in business as a service contractor providing workers for other companies.
On July 6, 1983, Novelty and Lipercon entered into a "Contract of Services" in which
Lipercon, as the "CONTRACTOR," and Novelty, as the "COMPANY," agreed as follows:
"1. The CONTRACTOR shall provide the COMPANY with Contractual
Laborers/Helpers/Janitors as requested by the COMPANY from time to time and such
other activities that may be contracted out at the discretion of the COMPANY.
"2. In consideration for the above undertakings of the CONTRACTOR, the COMPANY
expressly agrees to pay the CONTRACTOR a fee based on the rates as shown on Annex 'A'
of this agreement which is deemed as incorporated herein. A three (3%) percent
Contractor's Tax shall be charged to the client which is made part of the billing rate.
"3. The CONTRACTOR shall employ the necessary personnel to efficiently, fully and
speedily accomplish the work and services undertaken herein by the CONTRACTOR. The
CONTRACTOR represents that its personnel shall be in such number as will be sufficient
to cope with the requirements of the services and work herein undertaken and that such
personnel shall be physically fit, with good moral character and has not been convicted
of any crime.
"4. The CONTRACTOR shall comply with all labor laws such as Minimum Wage Law, Eight
Hour Labor Law, Social Security System, Medicare, Maternity Contribution, ECC and
other laws relating to employers and employees. It is hereby expressly understood and
agreed that the COMPANY shall not be liable in any manner whatsoever for non-
compliance with any requirements involving employer-employee relationship and other
matters relative to labor laws, and CONTRACTOR hereby renders the COMPANY free and
harmless from any responsibility whatsoever for non-compliance with any such
requirements and for any violation of any laws, rules and regulations.
"5. The CONTRACTOR shall be answerable for any claim for losses caused by its
personnel assigned to the COMPANY and for damages to property of the COMPANY, its
employees, officers or agents or to third parties, or for personal injury, including death
which may arise from the work or services under this contract from negligence of
employees of the CONTRACTOR; provided, however that necessary investigation be
made and that the loss and/or damage sustained was a result of negligence of the
contractor's personnel.
"6. It is the essence of this contract which is hereby agreed and understood by both
parties that there is no employer-employee relationship between the COMPANY and
employee assigned by the CONTRACTOR under this agreement. Therefore, the
CONTRACTOR obliges itself and its successors in interest, to pay whatever salaries and
wages may be due under this contract, including any and all obligations, claims which
may arise as a result of the employer-employee relationship existing between the
CONTRACTOR and its employees assigned under this agreement and warrants to hold
regarding employment.
"7. The CONTRACTOR shall have exclusive discretion in the selection, engagement and
discharge of its personnel, employees or agents or otherwise in the direction and control
of the personnel, workers and employees of the CONTRACTOR shall be within its full
control.
"8. The COMPANY agrees to pay the amount due to the CONTRACTOR under this contract
within seven (7) days after presentation of bills. If payment is not made within thirty (30)
days after due date, a one (1%) percent interest per month shall be added to the unpaid
balance.
"9. This contract shall remain in full force from July 6, 1983 to July 5, 1984 and is
renewable at the option of the COMPANY. Either party may terminate this contract upon.
Petitioners were hired by Lipercon and assigned to Novelty as helpers, janitors,
janitresses, firemen, and mechanics under the above agreement. Petitioners worked for
Novelty for some three years. On December 31, 1986, Novelty terminated its agreement
with Lipercon, resulting in the dismissal of the petitioners.
On January 9, 1987, petitioners filed a complaint for illegal dismissal against both
Lipercon and Novelty (Case No. NLRC-NCR-1-107-87). Lipercon did not answer.
In a decision dated June 29, 1987, the Labor Arbiter ruled that the petitioners were
regular employees of Novelty and declared their dismissal illegal. Both employers
appealed.
Lipercon Services, Inc., on appeal, alleged that the decision was contrary to the facts of
the case and not in conformity with the evidence on record and that the Executive Labor
Arbiter gravely abused his discretion when he ruled that Lipercon Services, Inc. merely
acted as an agent of Novelty Philippines, Inc. in the hiring and placement of the
complainants.
On August 19, 1988, the NLRC rendered a decision holding that Lipercon was an
independent contractor and that the petitioners were its employees. The dispositive
portion of the NLRC's decision reads as follows:
"WHEREFORE, premises considered, the appealed decision is hereby set aside
and another judgment entered, ordering respondent Lipercon Services, Inc. to
reinstate herein complainants to their former positions without loss of
seniority rights and other related benefits granted by law with a limited
backwages of one (1) year without qualification or deduction. In case
reinstatement is no longer feasible, respondent Lipercon Services, Inc, is
hereby ordered to grant complainants separation pay of one (1) month salary
for every year of service, a fraction of six (6) months considered as one (1)
whole year in addition to the one year backwages." (p. 26, Rollo.)
The petition is meritorious.
Articles 106 and 107 of the Labor Code of the Philippines provide:
"ART. 106. Contractor or subcontractor. - Whenever an employer enters into a contract
with another person for the performance of the former's work, the employees of the
 contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
"In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees directly
employed by him.
"The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In
so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this code, to prevent any violation or circumvention of any
provision of this Code.
"There is 'labor-only' contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him."
"ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work,
task, job or project."
Sections 8 and 9, Rule VIII, Book I of the Omnibus Rules implementing the Labor Code
defines "job" contracting and "labor-only" contracting as follows:
"Sec. 8. Job contracting. There is job contracting permissible under the Code if the
following conditions are met:
"(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and
"(2) The contractor has substantial capital or investment in the form of tools, equipments,
machineries, work premises, and other materials which are necessary in the conduct of
his business."
"Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
"(1) Does not have substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials; and
"(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
"(b) Labor-only contracting as defined herein is hereby prohibited and the person acting
as contractor shall be considered merely as an agent or intermediary of the employer
who shall be responsible to the workers in the same manner and extent as if the latter
were directly employed by him.
"(c) For cases not falling under this article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is permissible in
the light of the circumstances of each case and after considering the operating needs of
the employer and the rights of the workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and welfare of the workers."
It is clear from the foregoing definitions that under the "Contract of Services" between
Lipercon and Novelty, Lipercon was a "labor-only" contractor, hence, only an agent of
Novelty to procure workers for the latter, the real employer.
The NLRC's finding that Lipercon was not a mere labor-only contractor because it has
substantial capital or investment in the form of tools, equipment, machineries, work
premises, is based on insubstantial evidence, as the NLRC pointed out, that "it (Lipercon)
claims to be possessed among others, of substantial capital and equipment essential to
carry out its business as a general independent contractor" (p. 25, Rollo).
The law casts the burden on the contractor to prove that he/it has substantial capital,
investment, tools, etc. The petitioners, on the other hand, need not prove the negative fact
that the contractor does not have substantial capital, investment, and tools to engage in
job-contracting.
The jobs assigned to the petitioners as mechanics, janitors, gardeners, firemen and
grasscutters were directly related to the business of Novelty as a garment
manufacturer. In the case of Philippine Bank of Communications vs. NLRC, 146 SCRA 347,
we ruled that the work of a messenger is directly related to a bank's operations. In its
Comment, Novelty contends that the services which are directly related to
manufacturing garments are sewing, textile cutting, designs, dying, quality control,
personnel, administration, accounting, finance, customs, delivery and similar other
activities; and that allegedly, "[i]t is only by stretching the imagination that one may
conclude that the services of janitors, janitresses, firemen, grasscutters, mechanics
and helpers are directly related to the business of manufacturing garments" (p. 78,
Rollo). Not so, for the work of gardeners in maintaining clean and well-kept grounds
around the factory, mechanics to keep the machines functioning properly, and firemen
to look out for fires, are directly related to the daily operations of a garment factory. That
fact is confirmed by Novelty's rehiring the workers or renewing the contract with
Lipercon every year from 1983 to 1986, a period of three (3) years.
As Lipercon was a "labor-only" contractor, the workers it supplied Novelty became
regular employees of the latter.
WHEREFORE, the decision of the NLRC is set aside and that of the Labor Arbiter is
reinstated. Novelty Philippines, Inc. is ordered to reinstate the petitioners with
backwages for one (1) year without qualification or deduction. In case reinstatement is
no longer feasible, respondent Novelty Philippines, Inc. is hereby ordered to grant the
complainants separation pay equivalent to one (1) month salary for every year of service,
a fraction of six (6) months to be considered as one (1) whole year, in addition to their
backwages. Costs against respondent Novelty Philippines, Inc.
SO ORDERED.
Case Title: COCA-COLA BOTTLERS PHILS., INC., Coke, v. ALAN M. AGITO, REGOLO S. OCA
III, ERNESTO G. ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG, URRIQUIA T.
ARVIN, GIL H. FRANCISCO, and EDWIN M. GOLEZ, Respondents.
G.R. No. 179546 February 13, 2009
Justice Chico-Nazario
Facts: Coke is a domestic corporation duly registered with the SEC and engaged in
manufacturing, bottling and distributing soft drink beverages and other allied products.
On 15 April 2002, Agito et al. filed before the NLRC two complaints against Coke,
Interserve, Peerless Integrated Services, Inc. (Interserve), Better Builders, Inc., and
Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment
of 13th month pay, and damages. The two cases were consolidated. Agito et al. alleged
that they were salesmen assigned at the Lagro Sales Office of Coke. They had been in the
employ of Coke for years, but were not regularized. Their employment was terminated
on 8 April 2002 without just cause and due process. However, they failed to state the
reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.;
Better Builders, Inc.; and Excellent Partners, Inc.
Coke averred that Agito et al. were employees of Interserve who were tasked to perform
contracted services in accordance with the provisions of the Contract of Services
executed between Coke and Interserve on 23 March 2002. Said Contract between Coke
and Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted
legitimate job contracting, given that the Interserve was a bona fide independent
contractor with substantial capital or investment in the form of tools, equipment, and
machinery necessary in the conduct of its business. To prove the status of Interserve as
an independent contractor, Coke presented the following pieces of evidence: (1) the
Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve
with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial
Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as
an independent job contractor, issued by DOLE.
As a result, Coke asserted that Agito et al. were employees of Interserve, since it was the
latter which hired them, paid their wages, and supervised their work, as proven by: (1)
their Personal Data Files in the records of Interserve; (2) their Contract of Temporary
Employment with Interserve; and (3) the payroll records of Interserve.
Coke, thus, sought the dismissal of the complaint against it on the ground that the Labor
Arbiter did not acquire jurisdiction over the same in the absence of an employer-
employee relationship between Coke and Agito et al.
LA Ruling/Ratio: The Labor Arbiter found that Agito et al. were employees of Interserve
and not of Coke. She reasoned that the standard put forth in Article 280 of the Labor Code
for determining regular employment (i.e., that the employee is performing activities that
are necessary and desirable in the usual business of the employer) was not
determinative of the issue of whether an employer-employee relationship existed
between the parties. While Agito et al. performed activities that were necessary and
desirable in the usual business or trade of Coke, the LA underscored that their functions
were not indispensable to the principal business of Coke, which was manufacturing and
bottling soft drink beverages and similar products. The LA placed considerable weight
on the fact that Interserve was registered with the DOLE as an independent job
contractor, with total assets amounting to P1,439,785.00 as of 31 December 2001. It was
Interserve that kept and maintained Agito et al.’s employee records, including their
Personal Data Sheets; Contracts of Employment; and remittances to the SSS, Medicare
and Pag-ibig Fund, thus, further supporting the LA’s finding that Agito et al. were
employees of Interserve. She ruled that the circulars, rules and regulations which Coke
issued from time to time to Agito et al. were not indicative of control as to make the latter
its employees. Nevertheless, the LA directed Interserve to pay Agito et al. their pro-
rated 13th month benefits for the period of January 2002 until April 2002.
Aggrieved, Agito et al. filed an appeal with the NLRC. They maintained that contrary to the
finding of the LA, their work was indispensable to the principal business of Coke. They
supported their claim with copies of the Delivery Agreement between Coke and TRMD
Incorporated, stating that Coke was engaged in the manufacture, distribution and sale of
soft drinks and other related products with various plants and sales offices and
warehouses located all over the Philippines. Moreover, Coke supplied the tools and
equipment used by Agito et al. in their jobs such as forklifts, pallet, etc. They were also
required to work in the warehouses, sales offices, and plants of Coke. They pointed out
that, in contrast, Interserve did not own trucks, pallets cartillas, or any other equipment
necessary in the sale of Coca-Cola products.
They further averred that Coke exercised control over workers supplied by various
contractors. They cited as an example the case of Raul Arenajo (Arenajo), who, just like
them, worked for Coke, but was made to appear as an employee of the contractor
Peerless Integrated Services, Inc. As proof of control by Coke, Agito et al. submitted
copies of: (1) a Memorandum dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor
of Coke, addressed to Arenajo, suspending the latter from work until he explained his
disrespectful acts toward the supervisor who caught him sleeping during work hours;
(2) a Memorandum dated 12 August 1998 again issued by Dy to Arenajo, informing the
latter that the company had taken a more lenient and tolerant position regarding his
offense despite having found cause for his dismissal; (3) Memorandum issued by Dy to
the personnel of Peerless Integrated Services, Inc., requiring the latter to present their
timely request for leave or medical certificates for their absences; (4) Personnel
Workers Schedules, prepared by RB Chua, another supervisor of Coke; (5) Daily Sales
Monitoring Report prepared by Coke; and (6) the Conventional Route System Proposed
Set-up of Coke.
NLRC Ruling/Ratio: The NLRC affirmed the LA’s Decision and pronounced that no
employer-employee relationship existed between Coke and Agito et al. It reiterated the
findings of the LA that Interserve was an independent contractor as evidenced by its
substantial assets and registration with the DOLE. In addition, it was Interserve which
hired and paid Agito et al. wages, as well as paid and remitted their SSS, Medicare, and
Pag-ibig contributions. They likewise failed to convince the NLRC that the instructions
issued and trainings conducted by Coke proved that Coke exercised control over Agito et
al. as their employer.
Aggrieved once more, Agito et al. sought recourse with the Court of Appeals.
CA Ruling: CA reversed the NLRC Resolution and ruled that Interserve was a labor-only
contractor, with insufficient capital and investments for the services which it was
contracted to perform. With only P510,000.00 invested in its service vehicles and
P200,000.00 in its machineries and equipment, Interserve would be hard-pressed to
meet the demands of daily soft drink deliveries of Coke in the Lagro area. The Court
Appeals concluded that the respondents used the equipment, tools, and facilities of Coke
in the day-to-day sales operations. Additionally, the CA determined that Coke had
effective control over the means and method of Agito et al. work as evidenced by the
Daily Sales Monitoring Report, the Conventional Route System Proposed Set-up, and the
memoranda issued by the supervisor of Coke addressed to workers, who, like Agito et
al., were supposedly supplied by contractors. The appellate court deemed that Agito et
al., who were tasked to deliver, distribute, and sell Coca-Cola products, carried out
functions directly related and necessary to the main business of Coke. The appellate
court finally noted that certain provisions of the Contract of Service between Coke and
Interserve suggested that the latter’s undertaking did not involve a specific job, but
rather the supply of manpower.
Issue/s: Whether Interserve is a legitimate job contractor
SC Ruling/Ratio: The relations which may arise in a situation, where there is an
employer, a contractor, and employees of the contractor, are identified and
distinguished under Article 106 of the Labor Code:
“Article 106. Contractor or subcontractor. - Whenever an employer enters into
a contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
The Secretary of Labor 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 restriction, 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
employee 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 persons are performing activities which are
directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him.”
The afore-quoted provision recognizes two possible relations among the parties: (1) the
permitted legitimate job contract, or (2) the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters into a contract with a job
contractor for the performance of the formers work, is permitted by law. Thus, the
employer-employee relationship between the job contractor and his employees is
maintained. In legitimate job contracting, the law creates an employer-employee
relationship between the employer and the contractors employees only for a limited
purpose, i.e., to ensure that the employees are paid their wages. The employer becomes
jointly and severally liable with the job contractor only for the payment of the employees
wages whenever the contractor fails to pay the same. Other than that, the employer is
not responsible for any claim made by the contractors employees.
On the other hand, labor-only contracting is an arrangement wherein the contractor
merely acts as an agent in recruiting and supplying the principal employer with workers
for the purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate authorities that a
contractor is a labor-only contractor establishes an employer-employee relationship
between the principal employer and the contractors employees and the former
becomes solidarily liable for all the rightful claims of the employees.
Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended,
provides the guidelines in determining whether labor-only contracting exists:
Section 5. Prohibition against labor-only contracting. Labor-only contracting
is hereby declared prohibited. For this purpose, labor-only contracting shall
refer to an arrangement where the contractor or subcontractor merely
recruits, supplies, or places workers to perform a job, work or service for a
principal, and any of the following elements are [is] present:
i) 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
ii) The contractor does not exercise the right to control the performance
of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article
248(C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor
or subcontractor in the performance or completion of the job, work, or service
contracted out.
 The right to control shall refer to the right reversed to the person for whom the
services of the contractual workers are performed, to determine not only the
end to be achieved, but also the manner and means to be used in reaching that
end. (Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same implementing rules,
describes the consequences thereof:
Section 7. Existence of an employer-employee relationship.The contractor or
subcontractor shall be considered the employer of the contractual employee
for purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable with the contractor
in the event of any violation of any provision of the Labor Code, including the
failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any
of the following case, as declared by a competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof.
According to the foregoing provision, labor-only contracting would give rise to: (1) the
creation of an employer-employee relationship between the principal and the
employees of the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any violation of the Labor
Code.
Coke argues that there could not have been labor-only contracting, since Agito et al. did
not perform activities that were indispensable to its principal business. And, even
assuming that they did, such fact alone does not establish an employer-employee
relationship between Coke and Agito et al., since they were unable to show that Coke
exercised the power to select and hire them, pay their wages, dismiss them, and control
their conduct. But the SC is not convinced. The law clearly establishes an employer-
employee relationship between the principal employer and the contractors employee
upon a finding that the contractor is engaged in labor-only contracting. Article 106 of the
Labor Code categorically states: There is labor-only contracting where the person
supplying workers to an employee 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 persons are performing activities which are directly
related to the principal business of such employer. Thus, performing activities directly
related to the principal business of the employer is only one of the two indicators that
labor-only contracting exists; the other is lack of substantial capital or investment. The
Court finds that both indicators exist in the case at bar.
Agito et al. worked for Coke as salesmen, with the exception of respondent Gil Francisco
whose job was designated as leadman. In the Delivery Agreement between Coke and
TRMD Incorporated, it is stated that Coke is engaged in the manufacture, distribution and
sale of softdrinks and other related products. The work of Agito et al., constituting
distribution and sale of Coca-Cola products, is clearly indispensable to the principal
business of Coke. The repeated re-hiring of some of the Agito et al. supports this finding.
Coke also does not contradict Agito et al.’s allegations that the former has Sales
Departments and Sales Offices in its various offices, plants, and warehouses; and that
Coke hires Regional Sales Supervisors and District Sales Supervisors who supervise
and control the salesmen and sales route helpers.
As to the supposed substantial capital and investment required of an independent job
contractor, Coke calls the attention of the Court to the authorized capital stock of
Interserve amounting to P2,000,000.00. It cites as authority Filipinas Synthetic Fiber
Corp. v. NLRC and Frondozo v. NLRC, where the contractors authorized capital stock of
P1,600,000.00 and P2,000,000.00, respectively, were considered substantial for the
purpose of concluding that they were legitimate job contractors. Coke also refers to Neri
v. NLRC where it was held that a contractor ceases to be a labor-only contractor by
having substantial capital alone, without investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although Interserve has an authorized capital stock
amounting to P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December
2001. The Court does not set an absolute figure for what it considers substantial capital
for an independent job contractor, but it measures the same against the type of work
which the contractor is obligated to perform for the principal. However, this is rendered
impossible in this case since the Contract between Coke and Interserve does not even
specify the work or the project that needs to be performed or completed by the latter’s
employees, and uses the dubious phrase tasks and activities that are considered
contractible under existing laws and regulations. Even in its pleadings, Coke carefully
sidesteps identifying or describing the exact nature of the services that Interserve was
obligated to render to Coke. The importance of identifying with particularity the work or
task which Interserve was supposed to accomplish for Coke becomes even more
evident, considering that the Articles of Incorporation of Interserve states that its
primary purpose is to operate, conduct, and maintain the business of janitorial and allied
services. But Agito et al. were hired as salesmen and leadman for Coke. The Court
cannot, under such ambiguous circumstances, make a reasonable determination if
Interserve had substantial capital or investment to undertake the job it was contracting
with Coke.
In Vinoya v. NLRC, the Court clarified that it was not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work
premises, etc., to be considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of an independent
contractor relationship, several factors may be considered, such as, but not necessarily
confined to, whether the contractor was carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control
and supervision of the workers; the power of the employer with respect to the hiring,
firing and payment of the workers of the contractor; the control of the premises; the duty
to supply premises, tools, appliances, materials and labor; and the mode, manner and
terms of payment.

Insisting that Interserve had substantial investment, Coke assails, for being purely
speculative, the finding of the Court of Appeals that the service vehicles and equipment
of Interserve, with the values of P510,000.00 and P200,000.00, respectively, could not
have met the demands of the Coca-Cola deliveries in the Lagro area.
Coke fails to persuade the Court.
The contractor, not the employee, has the burden of proof that it has the substantial
capital, investment, and tool to engage in job contracting. Although not the contractor
itself (since Interserve no longer appealed the judgment against it by the Labor Arbiter),
said burden of proof herein falls upon Coke who is invoking the supposed status of
Interserve as an independent job contractor. Noticeably, Coke failed to submit evidence
to establish that the service vehicles and equipment of Interserve, valued at P510,000.00
and P200,000.00, respectively, were sufficient to carry out its service contract with Coke.
Certainly, Coke could have simply provided the courts with records showing the
deliveries that were undertaken by Interserve for the Lagro area, the type and number
of equipment necessary for such task, and the valuation of such equipment. Absent
evidence which a legally compliant company could have easily provided, the Court will
not presume that Interserve had sufficient investment in service vehicles and
equipment, especially since respondents allegation that they were using equipment,
such as forklifts and pallets belonging to Coke, to carry out their jobs was
uncontroverted.
In sum, Interserve did not have substantial capital or investment in the form of tools,
equipment, machineries, and work premises; and respondents, its supposed
employees, performed work which was directly related to the principal business of
Coke. It is, thus, evident that Interserve falls under the definition of a labor-only
contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules
Implementing Articles 106-109 of the Labor Code, as amended.
The Court, however, does not stop at this finding. It is also apparent that Interserve is a
labor-only contractor under Section 5(ii)[44] of the Rules Implementing Articles 106-109
of the Labor Code, as amended, since it did not exercise the right to control the
performance of the work of respondents.
The lack of control of Interserve over Agito et al. can be gleaned from the Contract of
Services between Interserve (as the CONTRACTOR) and Coke (as the CLIENT), pertinent
portions of which are reproduced below:
WHEREAS, the CONTRACTOR is engaged in the business, among others, of
performing and/or undertaking, managing for consideration, varied projects,
jobs and other related management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary capital,
expertise, technical know-how and a team of professional management group
and personnel to undertake and assume the responsibility to carry out the
above mentioned project and services;
WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the
CONTRACTOR for emergency needs, rush jobs, peak product loads, temporary,
seasonal and other special project requirements the extent that the available
work of the CLIENT can properly be done by an independent CONTRACTOR
permissible under existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the
CLIENT as stated heretofore, under the terms and conditions herein stated, and
the CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises and of the
mutual covenants and stipulations hereinafter set forth, the parties have
hereto have stated and the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or provide for the
CLIENT, on a non-exclusive basis for tasks or activities that are considered
contractible under existing laws and regulations, as may be needed by the
CLIENT from time to time.
2. To carry out the undertakings specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the necessary personnel like Route
Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least
Technical/Vocational courses graduates provided with adequate uniforms and
appropriate identification cards, who are warranted by the CONTRACTOR to be
so trained as to efficiently, fully and speedily accomplish the work and services
undertaken herein by the CONTRACTOR. The CONTRACTOR represents that its
personnel shall be in such number as will be sufficient to cope with the
requirements of the services and work herein undertaken and that such
personnel shall be physically fit, of good moral character and has not been
convicted of any crime. The CLIENT, however, may request for the replacement
of the CONTRACTORS personnel if from its judgment, the jobs or the projects
being done could not be completed within the time specified or that the quality
of the desired result is not being achieved.
3. It is agreed and understood that the CONTRACTORS personnel will comply
with CLIENT, CLIENTS policies, rules and regulations and will be subjected on-
the-spot search by CLIENT, CLIENTS duly authorized guards or security men
on duty every time the assigned personnel enter and leave the premises during
the entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at times relievers
and/or replacements to ensure continuous and uninterrupted service as in the
case of absences of any personnel above mentioned, and to exercise the
necessary and due supervision over the work of its personnel.
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which
included Agito, et al., would comply with CLIENT as well as CLIENTs policies, rules and
regulations. It even required Interserve personnel to subject themselves to on-the-spot
searches by Coke or its duly authorized guards or security men on duty every time the
said personnel entered and left the premises of Coke. Said paragraph explicitly
established the control of Coke over the conduct of Agito et al. Although under paragraph
4 of the same Contract, Interserve warranted that it would exercise the necessary and
due supervision of the work of its personnel, there is a dearth of evidence to demonstrate
the extent or degree of supervision exercised by Interserve over Agito et al. or the
manner in which it was actually exercised. There is even no showing that Interserve had
representatives who supervised their work while they were in the premises of Coke.
allied services. The delivery and distribution of Coca-Cola products, the work for which
Agito et al. were employed and assigned to Coke, were in no way allied to janitorial
services. While the DOLE may have found that the capital and/or investments in tools and
equipment of Interserve were sufficient for an independent contractor for janitorial
services, this does not mean that such capital and/or investments were likewise
sufficient to maintain an independent contracting business for the delivery and
distribution of Coca-Cola products.

Also significant was the right of Coke under paragraph 2 of the Contract to request the With the finding that Interserve was engaged in prohibited labor-only contracting, Coke
replacement of the CONTRACTORS personnel. True, this right was conveniently qualified shall be deemed the true employer of Agito et al. As regular employees of Coke, they
by the phrase if from its judgment, the jobs or the projects being done could not be cannot be dismissed except for just or authorized causes, none of which were alleged or
completed within the time specified or that the quality of the desired result is not being proven to exist in this case, the only defense of Coke against the charge of illegal
achieved, but such qualification was rendered meaningless by the fact that the Contract dismissal being that they were not its employees. Records also failed to show that Coke
did not stipulate what work or job the personnel needed to complete, the time for its afforded Agito et al. the twin requirements of procedural due process, i.e., notice and
completion, or the results desired. The said provision left a gap which could enable Coke hearing, prior to their dismissal. They were not served notices informing them of the
to demand the removal or replacement of any employee in the guise of his or her inability particular acts for which their dismissal was sought. Nor were they required to give their
to complete a project in time or to deliver the desired result. The power to recommend side regarding the charges made against them. Certainly, their dismissal was not
penalties or dismiss workers is the strongest indication of a companys right of control carried out in accordance with law and, therefore, illegal.
as direct employer.
Given that they were illegally dismissed by Coke, they are entitled to reinstatement, full
Paragraph 4 of the same Contract, in which Interserve warranted to Coke that the former backwages, inclusive of allowances, and to their other benefits or the monetary
would provide relievers and replacements in case of absences of its personnel, raises equivalents thereof computed from the time their compensations were withheld from
another red flag. An independent job contractor, who is answerable to the principal only them up to the time of their actual reinstatement, as mandated under Article 279 of the
for the results of a certain work, job, or service need not guarantee to said principal the Labor Code,.
daily attendance of the workers assigned to the latter. An independent job contractor
would surely have the discretion over the pace at which the work is performed, the Dispositive Portion: IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The
number of employees required to complete the same, and the work schedule which its Court AFFIRMS WITH MODIFICATION the Decision dated 19 February 2007 of the Court of
employees need to follow. Appeals in CA-G.R. SP No. 85320. The Court DECLARES that respondents were illegally
dismissed and, accordingly, ORDERS petitioner to reinstate them without loss of
As the Court previously observed, the Contract of Services between Interserve and Coke seniority rights, and to pay them full back wages computed from the time their
did not identify the work needed to be performed and the final result required to be compensation was withheld up to their actual reinstatement.
accomplished. Instead, the Contract specified the type of workers Interserve must
provide Coke (Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD) and their
qualifications (technical/vocational course graduates, physically fit, of good moral
character, and have not been convicted of any crime). The Contract also states that, to
carry out the undertakings specified in the immediately preceding paragraph, the
CONTRACTOR shall employ the necessary personnel, thus, acknowledging that
Interserve did not yet have in its employ the personnel needed by Coke and would still
pick out such personnel based on the criteria provided by Coke. In other words,
Interserve did not obligate itself to perform an identifiable job, work, or service for Coke,
but merely bound itself to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve was merely a recruiting and
manpower agency providing Coke with workers performing tasks directly related to the
latters principal business.

The certification issued by the DOLE stating that Interserve is an independent job
contractor does not sway this Court to take it at face value, since the primary purpose
stated in the Articles of Incorporation of Interserve is misleading. According to its
Articles of Incorporation, the principal business of Interserve is to provide janitorial and
G.R. No. 174912: July 24, 2013
BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner,v. BANK
OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO M. REYES, CECIL CONANAN and
GEMMA VELEZ, Respondents.
MENDOZA, J.:
FACTS:
BPI Operations Management Corporation (BOMC), which was created pursuant to Central
Bank Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993), and primarily engaged
in providing and/or handling support services for banks and other financial institutions, is a
subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as an entirely
separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPIs Metro Manila
branches. In this agreement, BOMC undertook to provide services such as check clearing,
delivery of bank statements, fund transfers, card production, operations accounting and
control, and cash servicing, conformably with BSP Circular No. 1388. Not a single BPI
employee was displaced and those performing the functions, which were transferred to
BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a
complaint for unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in favor of
the union. The decision was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-
FUBU filed a petition for certiorari before the CA which denied it, holding that BPI transferred
the employees in the affected departments in the pursuit of its legitimate business.
The service agreement was likewise implemented in Davao City. Later, a merger between BPI
and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as the
surviving corporation. Thereafter, BPIs cashiering function and FEBTCs cashiering, distribution
and bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC
employees were transferred to BOMC to complete the latters service complement.
BPI Davaos rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU
(Union), objected to the transfer of the functions and the twelve (12) personnel to BOMC
contending that the functions rightfully belonged to the BPI employees and that the Union
was deprived of membership of former FEBTC personnel who, by virtue of the merger, would
have formed part of the bargaining unit represented by the Union pursuant to its union shop
provision in the CBA.
ISSUE: Whether or not the act of BPI to outsource the cashiering, distribution and
bookkeeping functions to BOMC is in conformity with the law and the existing CBA.
HELD: Yes.
Labor Law- only gross violations of the economic provisions of the CBA are treated as ULP.
Otherwise, they are mere grievances.
In the present case, the alleged violation of the union shop agreement in the CBA, even
assuming it was malicious and flagrant, is not a violation of an economic provision in the
agreement. The provisions relied upon by the Union were those articles referring to the
recognition of the union as the sole and exclusive bargaining representative of all rank-and-
file employees, as well as the articles on union security, specifically, the maintenance of
membership in good standing as a condition for continued employment and the union shop
clause. It failed to take into consideration its recognition of the banks exclusive rights and
prerogatives, likewise provided in the CBA, which included the hiring of employees,
promotion, transfers, and dismissals for just cause and the maintenance of order, discipline
and efficiency in its operations.
The Union, however, insists that jobs being outsourced to BOMC were included in the
existing bargaining unit, thus, resulting in a reduction of a number of positions in such unit.
The reduction interfered with the employees right to self-organization because the power of
a union primarily depends on its strength in number.
It is incomprehensible how the "reduction of positions in the collective bargaining unit"
interferes with the employees right to self-organization because the employees themselves
were neither transferred nor dismissed from the service. In the case at hand, the union has
not presented even an iota of evidence that petitioner bank has started to terminate certain
employees, members of the union. In fact, what appears is that the Bank has exerted utmost
diligence, care and effort to see to it that no union member has been terminated. In the
process of the consolidation or merger of the two banks which resulted in increased
diversification of functions, some of these non-banking functions were merely transferred to
the BOMC without affecting the union membership.
It is to be emphasized that contracting out of services is not illegal per se. It is an exercise of
business judgment or management prerogative. Absent proof that the management acted in
a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by
an employer. In this case, bad faith cannot be attributed to BPI because its actions were
authorized by CBP Circular No. 1388, Series of 1993 issued by the Monetary Board of the
then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas).
DENIED.
Diamond Farms Inc. v. Southern Philippines Federation of Labor (SPFL) Workers
G.R. Nos. 173254-55
Feb 17, 2016
FACTS: Diamond Farms owns an 800-hectare banana plantation in Davao. Pursuant to
R.A. No. 6657 or the Comprehensive Agrarian Reform Law 1988 (CARL) commercial
farms shall be subject to compulsory acquisition and distribution these the original
plantation was covered by the law. However the Department of Agrarian Reform (DAR)
granted DFI a deferment privilege to continue operation till 1980. Due to marketing
problems and observance of “lay-follow” or the resting of a parcel of land for a certain
period of time after exhaustive utilization, DFI closed some areas of operation and laid
off employees. These employees petitioner DAR to cancel DFI’s deferment privilege.
The DAR recalled the deferment privilege pursuant to CARL.
In order to minimize losses, DFI offered to give up its rights and interest over the
original plantation in favor of the government by was of a Voluntary Offer to Sell. DAR
accepted but only to 689.88 hectares of disposition, and the remaining 200 hectares
were retained by DFI. The awarded plantation was turned over to qualified agrarian
reform beneficiaries under the CARL and were the same farmers who were working in
the original plantation. They subsequently organized themselves as a multi-purpose
cooperative “DARBMUPCO”.
On 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement
(BPPA) with DFI. Under the BPPA, DARBMUPCO and its members as owners of the
awarded plantation agreed to grow and cultivate only high grade quality exportable
bananas to be sold exclusively to DFI—this was effective for 10 years. Both parties
entered into the Supplemental to Memorandum Agreement (SMA). The SMA stated that
DFI shall take care of the labor cost arising from the packaging operation, cable
maintenance, irrigation pump and irrigation maintenance. From the start, DARBMUPCO
was hampered by lack of manpower since some of its members were not willing to
work.
Hence, to assist DARBMUPCO, DFI engaged the services of respondent contractors
(SPFL) who recruited workers. The engagement of respondent workers started series
of labor disputes.
Souther Philippine Federation of Labor (SPFL)—a legitimate labor organization with a
local chapter in the plantation filed a petition for certification election in the office of the
Med-Arbiter in Davao City. SPFL filed the petition on behalf of some 400 workers
“jointly employed by DFI and DARBMUPCO working in the awarded plantation.
DARBMUPCO and DFI denied that they are employers of the respondent-workers. The
Med-Arbiter granted the petition for certification election, It directed the conduct of
certification election and declared that DARBMUPCO was the employer of the
respondent-workers.
DARBMUPCO appealed the case stating that DFI is the employer of SPFL. The Sec. of
DOLE declared such. The CA stated that the DFI was the statutory employer of all
respondent-workers.
ISSUE:
(1) Whether or not DFI or DARBMUPCO is the statutory employer of respondent
contractors—DFI
HELD:
DFI is the employer of respondent workers. This case involves job contracting, a labor
arrangement expressly allowed by law. Contracting or subcontracting is an
arrangement whereby a principal agrees to put our or farm out with a contractor or
subcontractor the performance or completion of specific job. work or service within a
definite or predetermined period, regardless of whether such job, work, service is to be
performed or completed within or outside the premises of the principal. Article 106 of
the Labor Code the relation which may aries between an employer, a contractor and the
contractor’s employees. The Omnibus Rules Implementing the Labor Code
distinguishes between permissible job contracting (or independent contractorship)
and
labor-only contracting. Job contracting is permissible under the Code if the conditions
are met:
(a) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner and
method
(b) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials.
In contrast, job contracting shall be deemed as labor-only contracting an arrangement
prohibited by law, if a person who undertakes to supply workers to an employer:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises
(2) Workers recruited perform activity directly related to the principal business of
employer
As a general rule, a contractor is presumed to be labor-only contractor, unless such
contractor overcomes the burden of proving that it had the substantial capital,
investment, tools and the like.
There is no evidence showing that respondents-contractors are independent
contractor.
The respondent-contractor, DFI and DARBMUPCO did not offer any proof that
respondent contractors were not engaged in labor-only contracting.in the case of Caro
v. Rilloraza, if the employer claims that the workmen is an independent contractor, for
whose acts he is not responsible, the burden is on him to show his independence.
To supply its argument that respondent-contractors are the employers of
respondentworkers and not merely labor-only contractors,DFI should have presented
proof showing that respondent-contractor carry on an independent business and have
sufficient capitalization. The record shows that there is no attempt on the part of DFI to
substantiate its argument. DFI cannot cite the resolution of the NLRC as basis since
nowhere does it say that respondent-contractors are independent contractors.
Respondent-contractor even admitted that they are in labor-only contracting in their (1)
formal appearance of counsel and motion for exclusion of individual party-
respondents
(2) Verified explanation and memorandum filed before this court. They admitted that
they do not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials and they rectified workers to perform
activities directly related to the principal operation of their employer. These admission
are legally being on respondent-contractors and need no evidence to prove them.
There exists an employer-employee relationship between the principal DFI and the
workers, respondent SPFL. DFI does not deny that it engaged the services of the
respondent-contractors. It does not dispute the claims of respondent-contractors that
they sent their billing to DFI for payment and that DFI’s manager and personnel are in
close consultation with the respondent-contractors.
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors
because it owns the awarded plantation where they work. It is immaterial whether
DARBMUPCO owns the awarded plantation. In the case of Alilin v. Petron Corporation
the presence of the power of control on the part of the principal over the worker prove
the employer-employee relationship between the former and the latter. DFI also
exercises control through its manager and and supervisors provides for the work
assignments and performance targets of the respondent-workers. The managers and
supervisors also have the power to directly hire and terminate the respondent-
workers.
Evidently, DFI wields control over the worker.
The stipulation in the BPPA that respondent-workers are not employees of DFI is not
controlling as the proven facts show otherwise. The law prevails over the stipulations
of the parties.
G.R. Nos. 183200-01, June 29, 2016
PHILIPPINE NATIONAL OIL COMPANY-ENERGY DEVELOPMENT
CORPORATION AND/OR PAUL AQUINO AND ESTER R.
GUERZON, Petitioners, v. AMELYN A. BUENVIAJE, Respondent.
JARDELEZA, J.:
Before us are consolidated petitions for review on certiorari1 of the
Decision2 dated October 31, 2007 and Resolution3 dated June 3, 2008 of
the Court of Appeals (CA) in CA-G.R. S.P. Nos. 94359 and 94458. The CA
partially modified the Resolutions4 of the National Labor Relations
Commission (NLRC) dated September 27, 2005 and January 31, 2006,
which in turn partially modified the Decision5 of the Labor Arbiter dated
December 10, 2004.
The Facts
Philippine National Oil Company-Energy Development Corporation (PNOC-
EDC) hired Amelyn Buenviaje (Buenviaje) as Assistant to the then
Chairman/President and Chief Executive Officer Sergio A.F. Apostol
(Apostol), her father. Buenviaje's employment contract provided that she
will serve until June 30, 2004 or co-terminous with the tenure of Apostol,
whichever comes first.6ChanRoblesVirtualawlibrary
On August 4, 2003, Apostol approved the creation of PNOC-EDC's new
Marketing Division composed of thirty (30) positions. Seven (7) of these
thirty (30) positions were also newly created,7 one of which was that of a
Marketing Division Manager.8 Buenviaje assumed this position as early as
the time of the creation of the Marketing
Division.9ChanRoblesVirtualawlibrary
On January 5, 2004, Apostol filed his Certificate of Candidacy as Governor
for the province of Leyte, yet continued to discharge his functions as
President in PNOC-EDC.10 Buenviaje also continued to perform her duties
as Assistant to the Chairman/President and Marketing Division Manager in
PNOC-EDC.11ChanRoblesVirtualawlibrary
On February 2, 2004, Paul Aquino (Aquino), the new President of PNOC-
EDC, appointed Buenviaje to the position of Senior Manager for Marketing
Division effective February 1, 2004.12 The appointment letter partly
provides:chanRoblesvirtualLawlibrary
By copy of this letter, HRMD [Human Resources Management Division] is
instructed to amend your present employment status from your present
position as Assistant to the President (co-terminus) to regular status and
as such you will be entitled to all the rights and privileges granted to your
new position under the company's benefit policies subject to existing rules
and regulations. This appointment is subject to confirmation by your
immediate superior based on your performance during the next six
months. x x x For record purposes, please take note that your regular
status is retroactive to July 1, 2001. This date will be used for the
computation of your service credits, retirement and other company
benefits allowed under company policy.13cralawred
Pursuant to the instructions in the appointment letter, Buenviaje affixed
her signature to the letter, signifying that she has read and understood its
contents.14ChanRoblesVirtualawlibrary
In line with PNOC-EDCs policies, Buenviaje was subjected to a
performance appraisal during the first week of May 2004.15 She received a
satisfactory grade of three (3).16 In her subsequent performance appraisal
covering the period of May 1, 2004 to June 30, 2004, she received an
unsatisfactory grade of four (4).17 Thus, Ester Guerzon (Guerzon), Vice
President for Corporate Affairs of PNOC-EDC, informed Buenviaje that she
did not qualify for regular employment.18 PNOC-EDC, through Guerzon,
communicated in writing to Buenviaje her non-confirmation of
appointment as well as her separation from the company effective July 31,
2004.19 On July 2, 2004, Buenviaje gave her written comments on the
results of her second performance appraisal.20 In reply, PNOC-EDC sent
her two (2) more letters reiterating her non-confirmation and separation
from the company.21 Aquino also issued a Memorandum to Buenviaje
instructing her to prepare a turnover report before her physical move-
out.22ChanRoblesVirtualawlibrary
Buenviaje responded by filing a complaint before the Labor Arbiter for
illegal dismissal, unpaid 13thmonth pay, illegal deduction with claim for
moral as well as exemplary damages, including attorney's fees and
backwages.23ChanRoblesVirtualawlibrary
 The Ruling of the Labor Arbiter
The Labor Arbiter rendered a decision in favor of Buenviaje, the dispositive
portion of which states:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
declaring complainant a regular employee. As a consequence thereof, her
dismissal without any basis is hereby deemed illegal. Respondents PNOC-
Energy Development Corporation, and/or Paul Aquino and Ester R.
Guerzon are hereby ordered to reinstate complainant to her former
position without loss of seniority rights and other benefits and with full
backwages reckoned from August 1, 2004 up to her actual or payroll
reinstatement, which as of this date is in the amount of P718,260.40.
Further, for having acted with manifest bad faith and given the extent of
the damage done to complainant who occupies a high managerial position,
respondents are jointly and severally ordered to pay complainant moral
damages in the amount of P1,000,000.00 and exemplary damages in the
amount of P500,000.00.
Finally, respondents are hereby ordered to return to complainant the
amount of P51,692.72, which they illegally deducted from her last salary
and to pay the sum equivalent to ten percent of the judgment award as
and by way of attorney's fees.
SO ORDERED.24 (Emphasis in the original.)cralawred
The Labor Arbiter held that Buenviaje was a regular employee because her
appointment letter clearly says so. Any doubt caused by the statement in
the appointment letter that Buenviaje's appointment was subject to
confirmation must be resolved against PNOC-EDC. In addition, PNOC-EDC
failed to prove that reasonable standards were explained to Buenviaje at
the time of her engagement, thusly negating PNOC-EDC's claim that she
was merely a probationary employee. The Labor Arbiter noted that PNOC-
EDC even admitted that the alleged standards were only set and discussed
with Buenviaje more than a month after her actual
appointment.25ChanRoblesVirtualawlibrary
The Labor Arbiter further ruled that PNOC-EDC also failed to explain why
Buenviaje was allowed to enjoy benefits that were supposed to be
exclusive for regular employees. As a regular employee, therefore,
Buenviaje could only be dismissed for any of the just or authorized causes
under Articles 282 and 28326 of the Labor Code. Since the cause for
Buenviaje's dismissal was not included in any of the grounds enumerated
in either Article, she was considered illegally dismissed. The Labor Arbiter
found Guerzon and Aquino to have acted in bad faith due to their failure to
explain the standards to Buenviaje, as well as why the evaluation form for
regular employees was used in her evaluation. They also failed to respond
to Buenviaje's allegation that the second evaluation was done in bad faith
to serve as an excuse in dismissing her. The Labor Arbiter noted that the
second evaluation appeared irregular because it did not bear the signature
and approval of Aquino. Consequently, for lack of the required approval,
the second evaluation could not serve as a valid basis to remove
Buenviaje.27ChanRoblesVirtualawlibrary
Both parties appealed to the NLRC.
The Ruling of the National Labor Relations Commission
In its Resolution28 dated September 27, 2005, the NLRC
ruled:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeal is partly GRANTED and the
Decision dated 10 December 2004 is hereby MODIFIED ordering
respondent-appellant PNOC-Energy Development Corporation to pay
complainant-appellee financial assistance in the amount of P229,681.35
only and her accrued wages in the amount of P1,224,967.28 for the period
covering December 2004, the date of the decision ordering her
reinstatement until the date of this Resolution. The order to return to
complainant-appellee the amount of P51,692.72, which represents
deduction from her salary and not raised on appeal, STANDS. Finally, the
award of moral and exemplary damages and attorney's fees, as well as the
joint and solidarily (sic) liability of individual respondents Paul A. Aquino
and Ester R. Guerzon are hereby DELETED.
SO ORDERED.29 (Emphasis in the original.)cralawred
The NLRC agreed with the Labor Arbiter that Buenviaje was a regular
employee of PNOC-EDC, noting that the terms of her appointment
expressly grants a regular status of employment.30 The NLRC also found
that PNOC-EDC admitted that Buenviaje has been performing the functions
of a Marketing Division Manager for more than six (6) months before she
was formally appointed to the said position.31 Nevertheless, the NLRC
ruled that she was not illegally dismissed because she did not enjoy
security of tenure.32 The NLRC noted that the condition in Buenviaje's
appointment letter, which provided that her appointment is subject to
confirmation by her immediate superior based on her performance during
the next six (6) months, was clear and understood by her when she affixed
her signature to the appointment letter.33 The NLRC concluded that only
upon confirmation of her appointment will Buenviaje enjoy the right to
security of tenure.34 As it was, PNOC-EDC found her performance
unsatisfactory and Buenviaje failed to disprove these findings. Therefore,
Buenviaje failed to complete her appointment as a regular employee and
her non-confirmation cannot be considered as an illegal
dismissal.35ChanRoblesVirtualawlibrary
With respect to Buenviaje's prayer for moral and exemplary damages, and
attorney's fees, the NLRC found no basis to grant the same. The NLRC also
found no basis for the solidary liability of Aquino and
Guerzon.36ChanRoblesVirtualawlibrary
Both parties asked the NLRC to reconsider its Resolution, but the NLRC
denied their motions. Thus, both parties filed their petitions
for certiorari with the CA.
The Ruling of the Court of Appeals
The CA partially modified the Resolution of the NLRC. The dispositive
portion of the CA Decision37dated October 31, 2007
reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of all the foregoing, the September 27, 2005 and
January 31, 2006 Resolutions of the NLRC are MODIFIED as follows:
For having been illegally dismissed, petitioner Amelyn Buenviaje is entitled
to receive a separation pay equivalent to 1/2 month pay for every year of
service (with a fraction of at least 6 months considered one whole year) in
lieu of reinstatement. In addition she is also to receive full backwages
inclusive of allowances and other benefits or their monetary equivalent,
computed from the time the compensation was withheld up to the finality
of this decision.
The other awards in the NLRC decision as well as the deletion of the joint
and solidary liabilities of Paul A. Aquino and Ester R. Guerzon are hereby
AFFIRMED.
SO ORDERED.38 (Emphasis in the original.)cralawred
The CA found no reason to disturb the findings of both the Labor Arbiter
and the NLRC that Buenviaje was a regular employee of PNOC-EDC.
However, it disagreed with the NLRC's ruling that Buenviaje failed to
acquire security of tenure. The CA stated that where an employee has
been engaged to perform activities which are usually necessary or
desirable in the usual business of the employer, such employee is deemed
a regular employee and is entitled to security of tenure notwithstanding
the contrary provisions of his contract of employment.39 As a regular
employee, Buenviaje may only be dismissed if there are just or authorized
causes. Thus, PNOC-EDC's reasoning that she failed to qualify for the
position cannot be countenanced as a valid basis for her
dismissal.40ChanRoblesVirtualawlibrary
Both parties filed their respective motions for reconsideration, which the
CA denied. Hence, these consolidated petitions, which present the
following issues:chanRoblesvirtualLawlibrary
I. Whether Buenviaje was a permanent employee;
II. Whether Buenviaje was illegally dismissed;
III. Whether Buenviaje is entitled to moral and exemplary damages as
well as attorney's fees;
IV. Whether Buenviaje should be given separation pay in lieu of
reinstatement; and
V. Whether Aquino and Guerzon should be held jointly and severally
liable to Buenviaje.
Our Ruling
Buenviaje was a permanent employee
Buenviaje was hired as a Marketing Division Manager, a position that
performs activities that are usually necessary and desirable to the business
of PNOC-EDC and is thusly, regular. As an employer, PNOC-EDC has an
exclusive management prerogative to hire someone for the position, either
on a permanent status right from the start or place him first on probation.
In either case, the employee's right to security of tenure immediately
attaches at the time of hiring.41 As a permanent employee, he may only be
validly dismissed for a just42 or authorized43 cause. As a probationary
employee, he may also be validly dismissed for a just or authorized cause,
or when he fails to qualify as a regular employee in accordance with
reasonable standards made known to him by the employer at the time of
his engagement.44 Apart from the protection this last ground in the
dismissal of a probationary employee affords the employee, it is also in
line with the right or privilege of the employer to choose who will be
accorded with regular or permanent status and who will be denied
employment after the period of probation. It is within the exercise of this
right that the employers may set or fix a probationary period within which
it may test and observe the employee's conduct before hiring him
permanently.45ChanRoblesVirtualawlibrary
Here, PNOC-EDC exercised its prerogative to hire Buenviaje as a
permanent employee right from the start or on February 1, 2004, the
effectivity date of her appointment. In her appointment letter, PNOC-EDC's
President expressly instructed the HRMD to amend Buenviaje's status from
co-terminous to regular. He also informed her that her regular status shall
be retroactive to July 1, 2001. Nowhere in the appointment letter did
PNOC-EDC say that Buenviaje was being hired on probationary status.
Upon evaluation on two (2) occasions, PNOC-EDC used a performance
appraisal form intended for permanent managerial employees, even if the
company had a form for probationary employees. The intention, therefore,
all along was to grant Buenviaje regular or permanent employment. As
correctly observed by the CA:chanRoblesvirtualLawlibrary
Accordingly, at the time of her formal appointment to the position on
February 2, 2004, Amelyn Buenviaje has been performing the functions of
a Senior Manager of the Marketing Division for almost six months. After
having had the opportunity to observe her performance for almost six
months as Senior Marketing Manager, PNOC should not have formally
appointed her if she appeared to have been unqualified for the position.
But as it is, Amelyn Buenviaje was formally appointed and given a regular
status. x x x46cralawred
This intention was clear notwithstanding the clause in the appointment
letter saying that Buenviaje's appointment was subject to confirmation by
her immediate superior based on her performance during the next six (6)
months. This clause did not make her regularization conditional, but
rather, effectively informed Buenviaje that her work performance will be
evaluated later on. PNOC-EDC, on the other hand, insists that this clause
demonstrates that Buenviaje was merely a probationary employee.
Consequently, when she failed to meet the standards set by PNOC-EDC,
the latter was well within its rights not to confirm her appointment and to
dismiss her.
We are not persuaded.
Firstly, if the clause in the appointment letter did cause an ambiguity in
the employment status of Buenviaje, we hold that the ambiguity should be
resolved in her favor. This is in line with the policy under our Labor Code
to afford protection to labor and to construe doubts in favor of labor.47 We
upheld this policy in De Castro v. Liberty Broadcasting Network,
Inc.,48 ruling that between a laborer and his employer, doubts reasonably
arising from the evidence or interpretation of agreements and writing
should be resolved in the former's favor.49 Hence, what would be more
favorable to Buenviaje would be to accord her a permanent status.
But more importantly, apart from the express intention in her appointment
letter, there is substantial evidence to prove that Buenviaje was a
permanent employee and not a probationary one.
A probationary employee is defined as one who is on trial by an employer
during which the employer determines whether or not he is qualified for
permanent employment.50 In general, probationary employment cannot
exceed six (6) months, otherwise the employee concerned shall be
considered a regular employee.51 It is also indispensable in probationary
employment that the employer informs the employee of the reasonable
standards that will be used as a basis for his or her regularization at the
time of his or her engagement.52 If the employer fails to comply with this,
then the employee is considered a regular
employee.53ChanRoblesVirtualawlibrary
In their reply to Buenviaje dated July 28, 2004, PNOC-EDC reminded
Buenviaje that the standards "were thoroughly discussed with [her]
separately soon alter [she] signed [her] contract, as well as that which
was contained in the job description attached thereto."54 PNOC-EDC
maintained this position in its appeal memorandum,55 asserting that
Buenviaje was apprised of the reasonable standards for regularization by
virtue of the job description attached to her appointment.56 They also
alleged that the standards were discussed with Buenviaje prior to her first
and second appraisals.57We, however, do not find these circumstances
sufficient to categorize Buenviaje as a probationary employee.
In Abbott Laboratories, Philippines v. Alcaraz,58 we were confronted with
the similar question of whether Alcaraz was sufficiently informed of the
reasonable standards that would qualify her as a regular employee. In
affirming that she was, we enumerated the details and circumstances prior
to, during the time of her engagement, and the incipient stages of her
employment that show she was well-apprised of her employer's
expectations that would, in turn, determine her regularization. These
were:chanRoblesvirtualLawlibrary
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein
the job description for as well as the duties and responsibilities attendant
to the aforesaid position; this prompted Alcaraz to submit her application
to Abbott on October 4, 2004;
(b) In Abbott's December 7, 2004 offer sheet, it was stated that Alcaraz
was to be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which
specifically stated, inter alia, that she was to be placed on probation for a
period of six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott's employment offer, Bernardo sent
her copies of Abbott's organizational structure and her job description
through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where
Almazar informed her that she had to implement Abbott's Code of Conduct
and office policies on human resources and finance and that she would be
reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbott's Code of Conduct and Performance
Modules from Misa who explained to her the procedure for evaluating the
performance of probationary employees; she was further notified that
Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical
company and had admitted to have an "extensive training and
background" to acquire the necessary skills for her job.59cralawred
We concluded that "[c]onsidering the totality of the above-stated
circumstances, it cannot, therefore, be doubted that Alcaraz was well-
aware that her regularization would depend on her ability and capacity to
fulfill the requirements of her position as Regulatory Affairs Manager and
that her failure to perform such would give Abbott a valid cause to
terminate her probationary employment."60ChanRoblesVirtualawlibrary
We stress here that the receipt by Buenviaje of her job description does
not make this case on all fours with Abbott. The receipt of job description
and the company's code of conduct in that case was just one of the
attendant circumstances which we found equivalent to being actually
informed of the performance standards upon which a probationary
employee should be evaluated. What was significant in that case was that
both the offer sheet and the employment contract specifically stated that
respondent was being employed on a probationary status. Thus, the
intention of Abbott was to hire Alcaraz as a probationary employee. This
circumstance is not obtaining in this case and the opposite, as we have
already discussed, is true.
Of equal significance, the job description attached to Buenviaje's
appointment letter merely answers the question: "what duties and
responsibilities does the position entail?", but fails to provide the answer/s
to the question: "how would the employer gauge the performance of the
probationary employee?". The job description merely contains her job
identification, her immediate superior and subordinates, a list of her job
objectives, duties and responsibilities, and the qualification guidelines
required of her position (i.e., minimum education, minimum experience,
and special skills). There is no question that performance of duties and
responsibilities is a necessary standard for qualifying for regular
employment. It does not stop on mere performance, however. There must
be a measure as to how poor, fair, satisfactory, or excellent the
performance has been. PNOC-EDC, in fact, used an appraisal form when it
evaluated the performance of Buenviaje twice. A copy of this appraisal
form, unlike in Abbot, was not given to Buenviaje at any time prior to,
during the time of her engagement, and the incipient stages of her
employment. A comparison of the job description and the standards in the
appraisal form reveals that they are distinct. The job description is just
that, an enumeration of the duties and responsibilities of Buenviaje. To
better illustrate, the job objectives, duties and responsibilities of Buenviaje
are set out below:chanRoblesvirtualLawlibrary
III. JOB OBJECTIVE
1. To set the overall marketing objectives and directions of EDC, in
coordination with EDC Operations, through the Department
Managers and Corporate Services units.
2. To initiate the preparation of detailed/specific short (annual) and
medium to long term (2-5 years) marketing plans and programs.
3. To monitor the implementation of the work performance and
execution of the plans and programs of Public & Marketing
Relations, Power & Energy Services, and Market Development.
4. To manage the functional and administrative requirements of the
managers for Public & Marketing Relations, Power & Energy
Services, and Market Development.
IV. DUTIES AND RESPONSIBILITIES
1. Ensures that a survey of potential markets and customers in
relation to newly developed or soon-to-be- completed power
projects are regularly initiated.
2. Develops marketing plans and strategies with Managers and staff,
relevant to new and/or uncommitted power and/or resources for
both contracted and through the Wholesale Electricity Spot Market
(WESM).
3. Develops marketing plans and strategies with managers on new
opportunities for Energy Services (Drilling, Geoscientific, Design
and Engineering, etc.).
4. Ensures and oversees the development of a business networking
system and database.
5. Establishes business contacts (domestic and overseas) and
oversees market development and opportunities through the
subordinate managers.
6. Ensures and oversees the development of an effective advertising
program, annually and as needed (print, publication, etc.), to
propagate and enhance EDC's public image and awareness of its
marketable products and services.
7. Develops new marketable products and services, in coordination
with Operations and Corporate Services.
8. Represents Top Management in various fora, conventions, etc. for
business/marketing opportunities domestically and internationally.
9. Ensures that an effective system of customer after-sales and
service monitoring is in place.
10. Approves all expense disbursements, contracts, and other
corporate documents in accordance with the approval limits
specified in the EDC Approvals Policy.
11. Issues instructions on marketing matters to the subordinate
managers in accordance with decisions from Top
Management/Board and/or as coordinated with Operations and
Corporate Services.
12. Initiates and conducts check-up meetings and conferences with the
subordinate managers and their staff.
13. Functions as budget administrator of the Senior Manager's Office.
14. Oversees the preparation of the consolidated annual capital and
operating expense budget for the division.
15. Lixecutes EDC's marketing/contracts, in accordance with approvals
policy.
16. Oversees the preparation and consolidation of all the personnel
performance appraisals of the division and effectively administers
the forced-ranking program, consistent with company guidelines.
17. Administers the personnel performance appraisal of office staff and
managers.
18. Oversees the preparation of the training requirements of the
subordinate managers and their staff.
19. Performs other duties which may be assigned from time to time.61
The foregoing, however, invite the question as to what are the specific
qualitative and/or quantitative standards of PNOC-EDC. With respect to the
first job objective listed above, for instance, one may ask: "how will PNOC-
EDC measure the performance of Buenviaje as to whether she has
adequately set the overall marketing objectives and directions of PNOC-
EDC, in coordination with PNOC-EDC Operations, through the Department
Managers and Corporate Service units?". The same is true with the first
duty: "how will PNOC-EDC measure the performance of Buenviaje as to
whether she has ensured that a survey of potential markets and customers
in relation to newly developed or soon-to-be-completed power projects are
regularly initiated?".
On the other hand, the appraisal form appraises the elements of
performance, which are categorized into results-based factors, individual
effectiveness and co-worker effectiveness.62 Pertinently, the results-based
factors, which are broken down into output indicators of: 1.) quality, 2.)
quantity, 3.) timeliness, 4.) cost effectiveness, 5.)
safety/housekeeping/environmental consciousness, and 6.) profit
objectives, are rated according to expected outputs or key result areas,
performance standards, and actual accomplishments. Clearly, the form
specifies the performance standards PNOC-EDC will use, which
demonstrates that PNOC-EDC expected a certain manner, level, or extent
by which she should perform her job. PNOC-EDC knew the job description
and the performance appraisal form are not one and the same, having
specifically used the latter when it evaluated Buenviaje and not the job
description attached to the appointment letter. The fact, therefore, that
PNOC-EDC used a performance appraisal form with standards expected
from Buenviaje further negates any assumption that these standards were
of basic knowledge and common sense,63 or that Buenviaje's position was
self-descriptive such that there was no need to spell out the standards at
the time of her engagement.64ChanRoblesVirtualawlibrary
Buenviaje was illegally dismissed
The foregoing discussion proves Buenviaje was hired as a permanent
employee on February 1, 2004. As a permanent employee, she may only
be dismissed by PNOC-EDC after observing the following substantive and
procedural requirements:chanRoblesvirtualLawlibrary
1. The dismissal must be for a just or authorized cause;
2. The employer must furnish the employee with two (2) written
notices before termination of employment can be legally effected.
The first notice states the particular acts or omissions for which
dismissal is sought while the second notice states the employer's
decision to dismiss the employee; and
3. The employee must be given an opportunity to be heard.65
PNOC-EDC failed to observe these requirements because it operated on
the wrong premise that Buenviaje was a probationary employee. But even
if we were to assume that she was, she would still be illegally dismissed in
light of PNOC-EDC's violation of the provisions of the Labor Code in
dismissing a probationary employee.
A probationary employee also enjoys security of tenure, although it is not
on the same plane as that of a permanent employee.66 This is so because
aside from just and authorized causes, a probationary employee may also
be dismissed due to failure to qualify in accordance with the standards of
the employer made known to him at the time of his engagement.67 PNOC-
EDC dismissed Buenviaje on this latter ground; that is, Buenviaje allegedly
failed to meet the standards set by the company. In dismissing
probationary employees on this ground, there is no need for a notice and
hearing.68 The employer, however, must still observe due process of law in
the form of: 1) informing the employee of the reasonable standards
expected of him during his probationary period at the time of his
engagement;69 and 2) serving the employee with a written notice within a
reasonable time from the effective date of termination.70 By the very
nature of a probationary employment, the employee needs to know from
the very start that he will be under close observation and his performance
of his assigned duties and functions would be under continuous scrutiny by
his superiors. It is in apprising him of the standards against which his
performance shall be continuously assessed where due process
lies.71 Likewise, probationary employees are entitled to know the reason
for their failure to qualify as regular
employees.72ChanRoblesVirtualawlibrary
As we have previously settled, PNOC-EDC failed to inform Buenviaje of the
reasonable standards for her regularization at the time of her engagement.
The unfairness of this failure became apparent with the results of
Buenviaje's appraisals. In her first appraisal covering a three-month period
from February 1, 2004 to April 30, 2004, Buenviaje received a satisfactory
rating. It was in her second appraisal covering a two-month period from
May 1, 2004 to June 30, 2004 where she received an unsatisfactory rating
that led to her dismissal. There was no proof, however, that per PNOC-
EDC's standards, receiving an unsatisfactory rating of four (4) from a
satisfactory rating of three (3) will result to failure to qualify for
regularization.
Neither would PNOC-EDC's reason for dismissing Buenviaje qualify as a
just cause. Under Article 297 of the Labor Code, an unsatisfactory rating
can be a just cause for dismissal only if it amounts to gross and habitual
neglect of duties.73 Analogous to this ground, an unsatisfactory
performance may also mean gross inefficiency. "Gross inefficiency" is
closely related to "gross neglect," for both involve specific acts of omission
on the part of the employee resulting in damage to the employer or to his
business.74 Failure to observe prescribed standards of work or to fulfill
reasonable work assignments due to inefficiency may constitute just cause
for dismissal. Such inefficiency is understood to mean failure to attain
others specially the subordinates to her various departments as can
work goals or work quotas, either by failing to complete the same within
to accomplish their tasks be gleaned from the quality of
the allotted reasonable period, or by producing unsatisfactory results. This
diligently.77 work produced particularly in
management prerogative of requiring standards may be availed of so long
Market Development where
as they are exercised in good faith for the advancement of the employer's
results are mere researchers (sic)
interest.75ChanRoblesVirtualawlibrary
without firm recommendations
where applicable.78
The fact that an employee's performance is found to be poor or
unsatisfactory does not necessarily mean that the employee is grossly and Gross negligence implies a want or absence of or failure to exercise slight
habitually negligent of or inefficient in his duties.76Buenviaje's care or diligence, or the entire absence of care. It evinces a thoughtless
performance, poor as it might have been, did not amount to gross and disregard of consequences without exerting any effort to avoid them.79 As
habitual neglect of duties or gross inefficiency. The markedly different a just cause, it also has to be habitual, which implies repeated failure to
results of several factors in the appraisals in a span of five (5) months perform one's duties for a period of time, depending upon the
prove this. To illustrate:chanRoblesvirtualLawlibrary circumstances. A single or isolated act of negligence, as was shown here,
does not constitute a just cause for the dismissal of the
February 1, 2004 - April 30, 2004 May 1, 2004 - June 30, 2004
employee.80ChanRoblesVirtualawlibrary
Quantity — x x x Completed the Quantity — While several
PNOC-EDC would also be in violation of procedural due process if
public relations programs marketing programs have been
Buenviaje were dismissed on the purported ground of gross negligence or
scheduled within the period undertaken, no submissions were
inefficiency. For termination of employees based on just causes, the
including those directed on special made on the projects required by
employer must furnish the employee with two (2) written notices before
assignment basis like the Dr. immediate superior x x x.
termination of employment can be effected: a first written notice that
Alcaraz lounge.
informs the employee of the particular acts or omissions for which his or
her dismissal is sought, and a second written notice which informs the
Timeliness — Timely submission of Timeliness — Mas not met
employee of the employer's decision to dismiss him. In considering
reports and processed invoices. organizational needs as the
whether the charge in the first notice is sufficient to warrant dismissal
PR programs were responsive to required projects on Tongonan I
under the second notice, the employer must afford the employee ample
company's call. and Bacman deemed important
opportunity to be heard.81 Although Buenviaje indeed received two (2)
for the formulation of strategies
letters from PNOC-EDC regarding her termination, these letters fall short
have not been submitted. x x x
of the two (2) notices required under the law. The first letter sent to
Priorities have not been set so as
Buenviaje failed to apprise her of the particular acts or omissions on which
to be responsive to company
her dismissal was based. It was merely a bare statement that Buenviaje's
needs.
performance failed to meet PNOC-EDC's minimum requirements. True,
Buenviaje replied to the first letter, but considering that it did not specify
Cost Effectiveness — Observed in Cost Effectiveness — Some
the acts or omissions warranting her dismissal but only served to inform
general the proper use of recommendations tended to be
her of her termination, Buenviaje was not afforded a reasonable and
operating and capital budgets. expensive and demonstrated non-
meaningful opportunity to explain her side.
optimization of funds, methods
and manpower.
Buenviaje is entitled to separation pay and attorney's fees
Judgment — Able to come up with Judgment — Needed to come up
An employee who is unjustly dismissed from work shall be entitled to
good decisions but has to arrive at with more sound
reinstatement without loss of seniority rights and other privileges and to
more complete and conclusive decisions. Examples: x x x
his full backwages, inclusive of allowances, and to his other benefits or
recommendations. Examples: x x
their monetary equivalent computed from the time his compensation was
x
withheld from him up to the time of his actual reinstatement.82 However,
there are instances when reinstatement is no longer feasible, such as
Leadership — She has a strong Leadership — x x x Not much when the employer-employee relationship has become strained. In these
personality and able to influence supervision and direction is given cases, separation pay may be granted in lieu of reinstatement, the
payment of which favors both parties. As we have previously stated
in Bank of Lubao, Inc. v. Manabat:83
x x x On one hand, such payment [of separation pay] liberates the
employee from what could be a highly oppressive work environment. On
the other hand, it releases the employer from the grossly unpalatable
obligation of maintaining in its employ a worker it could no longer
trust.84cralawred
Separation pay or financial assistance may also be granted to a legally
terminated employee as an act of social justice and equity when the
circumstances so warrant.85 In awarding financial assistance, the interests
of both the employer and the employee must be tempered, if only to
approximate what Justice Laurel calls justice in its secular sense.86 As the
term suggests, its objective is to enable an employee to get by after he
has been stripped of his source of income from which he relies mainly, if
not, solely.87ChanRoblesVirtualawlibrary
We agree with the CA that the reinstatement of Buenviaje is no longer
viable given the irreconcilable differences and strained relations between
her and PNOC-EDC. In light of this, separation pay with full backwages, in
lieu of Buenviaje's reinstatement, is warranted.
Moreover, it is a well-settled rule that in actions for recovery of wages, or
where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interests, attorney's fees may be granted pursuant
to Article 111 of the Labor Code.88 Considering, therefore, that she was
forced to litigate in order to assert her rights,89 Buenviaje is entitled to
attorney's fees in the amount often percent (10%) of the total award of
backwages.90ChanRoblesVirtualawlibrary
Buenviaje is entitled to moral and exemplary damages
The claim for moral damages cannot be justified solely upon the premise
that the employer fired his employee without just cause or due process.
Additional facts must be pleaded and proven to warrant the grant of moral
damages under the Civil Code, these being, that the act of dismissal was
attended by bad faith or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy; and, of course,
that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom.91 Bad faith "implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity."92 Bad faith must
be proven through clear and convincing evidence. This is because bad faith
and fraud are serious accusations that can be so conveniently and casually
invoked, and that is why they are never presumed. They amount to mere
slogans or mudslinging unless convincingly substantiated by whoever is
alleging them.93ChanRoblesVirtualawlibrary
Exemplary damages, on the other hand, may be granted when the
dismissal of the employee was done in a wanton, oppressive or malevolent
manner.94ChanRoblesVirtualawlibrary
Buenviaje argues that she is entitled to an award of these damages
because PNOC-EDC, Aquino, and Guerzon acted in bad faith.95 To
Buenviaje's mind, the following acts of PNOC-EDC, Aquino, and Guerzon
prove that they acted in bad faith:chanRoblesvirtualLawlibrary
1. They used the evaluation form for regular employees in evaluating
Buenviaje;
2. Buenviaje was evaluated using the standards for regular
employees;
3. Unlike the first evaluation, Aquino did not sign the second
evaluation; and
4. The second evaluation was conducted without Buenviaje's
knowledge.96
We agree that there was manifest bad faith when Buenviaje was evaluated
using the standards and performance appraisal form for regular
employees, yet, in dismissing her, she was treated as a probationary
employee. To reiterate, the clear intention of PNOC-EDC from the start
was to grant Buenviaje a permanent status. She was evaluated in a short
span of five (5) months, in which her previous satisfactory outputs turned
unsatisfactory. There were also factors or variables that showed PNOC-
EDC initially found as her strengths but were now inexplicably viewed as
negative. For example, PNOC-EDC found Buenviaje's political connections
helpful in pushing for marketing programs; yet, PNOC-EDC criticized her
for flaunting her strong political connections as an instrument in achieving
the company's objectives.97ChanRoblesVirtualawlibrary
With regard to the third and fourth acts, though, we find no malice or bad
faith against PNOC-EDC. PNOC-EDC was able to refute the allegation that
Aquino did not sign the second evaluation by annexing a signed one in its
appeal memorandum.98 As to the allegation that her second evaluation
was conducted without her knowledge, we find the same inconsequential.
To repeat, Buenviaje's appointment letter apprised her of performance
evaluations in the horizon for the next six (6) months. Even if it weren't
expressly communicated to her, it would have certainly been reasonable
for Buenviaje to expect that her performance would be gauged and
appraised at any given time.
Thus, the Labor Arbiter's award of moral and exemplary damages is
proper. We are wont, however, to reduce the amounts he fixed by reason
alone of the "extent of the damage done to [Buenviaje] who occupies a
high managerial position."99 We find his award excessive in the absence of
evidence to prove the degree of moral suffering or injury that Buenviaje
suffered.100 In line with our ruling in Magsaysay Maritime Corporation v.
Chin, Jr.,101 we hold that an award of P30,000 as moral damages and
P25,000 as exemplary damages is more fair and reasonable. We
explained:chanRoblesvirtualLawlibrary
x x x It has been held that in order to arrive at a judicious approximation
of emotional or moral injury, competent and substantial proof of the
suffering experienced must be laid before the court. It is worthy to stress
that moral damages are awarded as compensation for actual injury
suffered and not as a penalty. The Court believes that an award of
P30,000.00 as moral damages is commensurate to the anxiety and
inconvenience that Chin suffered.
As for exemplary damages, the award of P25,000.00 is already sufficient
to discourage petitioner Magsaysay from entering into iniquitous
agreements with its employees that violate their right to collect the
amounts to which they are entitled under the law. Exemplary damages are
imposed not to enrich one party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb socially deleterious
actions.102 (Citations omitted.)cralawred
However, the extent of liability of the respondents should not be solidary.
A corporation, as a juridical entity, may act only through its directors,
officers and employees. Obligations incurred as a result of the directors'
and officers' acts as corporate agents, are not their personal liability but
the direct responsibility of the corporation they represent. As a rule, they
are only solidarity liable with the corporation for the illegal termination of
services of employees if they acted with malice or bad
faith.103ChanRoblesVirtualawlibrary
To hold a director or officer personally liable for corporate obligations, two
(2) requisites must concur: (1) it must be alleged in the complaint that the
director or officer assented to patently unlawful acts of the corporation or
that the officer was guilty of gross negligence or bad faith; and (2) there
must be proof that the officer acted in bad
faith.104ChanRoblesVirtualawlibrary
While the position paper of Buenviaje alleges that the respondents acted in
bad faith and that Aquino and Guerzon, in particular, conspired with each
other to terminate her illegally, we find these allegations were not clearly
and convincingly proved. To our mind, there was insufficient evidence that
Aquino and Guerzon were personally motivated by ill-will in dismissing
Buenviaje.105ChanRoblesVirtualawlibrary
WHEREFORE, the petition in G.R. Nos. 183200-01 is DENIED while the
petition in G.R. Nos. 183253 and 183257 is PARTIALLY GRANTED.
The October 31, 2007 Decision and June 3, 2008 Resolution of the CA in
CA-G.R. S.P. Nos. 94359 and 94458 are AFFIRMED with
the MODIFICATION that PNOC-EDC is ordered to pay Amelyn Buenviaje
moral damages in the amount of P30,000, exemplary damages in the
amount of P25,000, and attorney's fees equivalent to ten percent (10%) of
the total award of backwages.
SO ORDERED.chanroblesvirtuallawlibrary
MAGIS YOUNG ACHIEVERS' LEARNING CENTER and MRS. VIOLETA T.
CARIÑO v. ADELAIDA P. MANALO
G.R. No. 178835, February 13, 2009
FACTS:
• Respondent Adelaida P. Manalo was hired as a teacher and acting principal of petitioner
Magis Young Achievers’ Learning Center
• on March 29, 2003, respondent wrote a letter of resignation addressed to Violeta T.
Cariño, directress of petitioner
• March 31, 2003, respondent received a letter of termination from petitioner
• The letter stated that the position of PRINCIPAL will be abolished next school
year,therefore respondent cannot renew her contract anymore
• On April 4, 2003, respondent instituted against petitioner a Complaint 3 for illegal
dismissal and non-payment of 13th month pay, with a prayer for reinstatement, award of
full backwages and moral and exemplary damages.
• respondent claimed that her termination violated the provisions of her employment
contract, and that the alleged abolition of the position of Principal was not among the
grounds for termination by an employer under Article 282 5 She also claimed that she was
terminated from service for the alleged expiration of her employment, but that her
contract did not provide for a fixed term or period
• Petitioner, in its position paper,7 countered that respondent was legally terminated
because the one-year probationary period, from April 1, 2002 to March 3, 2003, had
already lapsed
ISSUE:
1. W/N RESIGNATION OF RESPONDENT MANALO DID NOT BECOME
EFFECTIVE DUE TO ALLEGED LACK OF ACCEPTANCE (YES)
2. W/N RESPONDENT MANALO IS A PERMANENT EMPLOYEE (NO)
3. W/N CONTRACT OF EMPLOYMENT BETWEEN PETITIONER AND
RESPONDENT DID NOT STIPULATE A PERIOD.(YES)
4. W/N RESPONDENT WAS ILLEGALLY DISMISSED (YES)
RATIO:
1. RESIGNATION OF RESPONDENT
• The SC agreed with the CA that the resignation of the respondent is not valid, not
only because there was no express acceptance thereof by the employer, but because
there is a cloud of doubt as to the voluntariness of respondent’s resignation.
• Voluntary resignation is made with the intention of relinquishing an office,
accompanied by the act of abandonment. It is the acceptance of an employee’s
resignation that renders it operative
• 41 In this case, respondent actively pursued her illegal dismissal case against
petitioner, such that she cannot be said to have voluntarily resigned from her job
2. EMPLOYMENT STATUS
 • A probationary employee or probationer is one who is on trial for an employer,
during which the latter determines whether or not he is qualified for permanent
employment
• the employer may set or fix a probationary period within which the latter may
test and observe the conduct of the former before hiring him permanently
• however, , the law sets a maximum "trial period" during which the employer
may test the fitness and efficiency of the employee.
• Article 281 of the Labor Code: shall not exceed six (6) months
• Section 92 of the 1992 Manual of Regulations for Private Schools: shall not be
more than three (3) consecutive school years
• no vested right to a permanent appointment shall accrue until the employee has
completed the prerequisite three-year period necessary for the acquisition of a
permanent status
• There should be no question that the employment of the respondent, as teacher,
in petitioner school on April 18, 2002 is probationary in character
• She had rendered service as such only from April 18, 2002 until March 31,
2003. She has not completed the requisite three-year period of probationary
employment, as provided in the Manual. She cannot, by right, claim permanent
status
• An "acting" appointment is essentially a temporary appointment, revocable at
will.
3. STIPULATION OF PERIOD
• It is important that the contract of probationary employment specify the period
or term of its effectivity. The failure to stipulate its precise duration could lead
to the inference that the contract is binding for the full three-year probationary
period.25
• We can only apply Article 1702 of the Civil Code which provides that, in case
of doubt, all labor contracts shall be construed in favor of the laborer. Then,
too, settled is the rule that any ambiguity in a contract whose terms are
susceptible of different interpretations must be read against the party who
drafted it. In the case at bar, the drafter of the contract is herein petitioners and
must, therefore, be read against their contention
• In respondent’s copy, the period of effectivity of the agreement remained blank
• Thus, following Article 1702 of the Civil Code that all doubts regarding labor
contracts should be construed in favor of labor, then it should be respondent’s
copy which did not provide for an express period which should be upheld
4. ILLEGAL DISMISSAL
• probationary employees enjoy security of tenure during the term of their
probationary employment such that they may only be terminated for cause as
provided for by law, or if at the end of the probationary period, the employee
failed to meet the reasonable standards set by the employer at the time of the
employee’s engagement.
• Undeniably, respondent was hired as a probationary teacher and, as such, it
was incumbent upon petitioner to show by competent evidence that she did not
meet the standards set by the school.
• This requirement, petitioner failed to discharge.
• To note, the termination of respondent was effected by that letter stating that
she was being relieved from employment because the school authorities
allegedly decided, as a cost-cutting measure, that the position of "Principal"
was to be abolished. Nowhere in that letter was respondent informed that her
performance as a school teacher was less than satisfactory.
 SECOND DIVISION
G.R. No. 209559, December 09, 2015
ENCHANTED KINGDOM, INC., Petitioner, v. MIGUEL J. VERZO, Respondent.
FACTS:
On August 19, 2009, Verzo was hired by Enchanted to work as Section Head -
Mechanical & Instrumentation Maintenance (SH-MIM) for its theme park in Sta. Rosa
City, Laguna, for a period of six (6) months on probationary status. He was tasked to
conduct "mechanical and structural system assessments," as well as to inspect and
evaluate the "conditions, operations and maintenance requirements of rides, facilities
and buildings to ensure compliance with applicable codes, regulations and
standards."7 He was also provided with a detailed list8 of responsibilities that he
should fulfill.
During the probationary period, Enchanted assessed Verzo's performance as not up
to par. On January 26, 2010, Robert M. Schoefield (Schoefield), one of Verzo's fellow
section heads, made his recommendation to Rizalito M. Velesrubio (Velesrubio),
Verzo's immediate supervisor, that he should not be considered for regularization.
Believing that he was arbitrarily deprived of his employment, Verzo filed a complaint
for illegal dismissal, damages and attorney's fees before the LA.
In his complaint, Verzo claimed that it was only after he was formally hired by
Enchanted that he was informed of his probationary status. And even after despite
being placed on a probationary status, he was not advised as to the standards
required for his regularization.18
ISSUE:
(1) W/N Verzo can be considered as a regular employee.
(2) W/N Verzo was afforded the opportunity to explain his side is of no
consequence.
HELD:
(1) NO, Verzo cannot be considered as a regular employee.
Probationary Employment
A probationary employee is one who, for a given period of time, is being observed
and evaluated to determine whether or not he is qualified for permanent
employment. A probationary appointment affords the employer an opportunity to
observe the skill, competence and attitude of a probationer. The word probationary,
as used to describe the period of employment, implies the purpose of the term or
period. While the employer observes the fitness, propriety and efficiency of a
probationer, to ascertain whether he is qualified for permanent employment, the
probationer, at the same time, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment.41 The
concept of probationary employment was, thus, introduced for the benefit of the
employer to provide him with ample time to observe and determine whether a newly
hired employee has the competence, ability and values necessary to achieve his
objectives.
A probationary employee, like a regular employee, enjoys security of tenure. In cases
of probationary employment, however, aside from just or authorized causes of
termination, under Article 281 of the Labor Code, the probationary employee may
also be terminated for failure to qualify as a regular employee in accordance with the
reasonable standards made known by the employer to the employee at the time of
the engagement.42
In summary, a probationary employee may be terminated for any of the following:
(a) a just; or (b) an authorized cause; and (c) when he fails to qualify as a regular
employee in accordance with the reasonable standards prescribed by the employer.43
Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides
that if the employer fails to inform the probationary employee of the reasonable
standards on which his regularization would be based at the time of the engagement,
then the said employee shall be deemed a regular employee.
Thus:
(d) In all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time
of his engagement. Where no standards are made known to the employee at that
time, he shall be deemed a regular employee.
In Abbott Laboratories v. Alcaraz44 the Court stated that when dealing with a
probationary employee, the employer is made to comply with two (2) requirements:
(1) first, the employer must communicate the regularization
standards to the probationary employee; and
(2) second, the employer must make such communication at
the time of the probationary employee's engagement.
If the employer fails to comply with either, the employee is deemed as a regular and
not a probationary employee.
An exception to the foregoing rule is when the job is self-descriptive, as in the
case of maids, cooks, drivers, or messengers.45
In Aberdeen Court, Inc. v. Agustin46 it has been held that the rule on notifying a
probationary employee of the standards of regularization should not be used to
exculpate an employee who acted in a manner contrary to basic knowledge and
common sense in regard to which there was no need to spell out a policy or standard
to be met. In the same light, an employee's failure to perform the duties and
responsibilities which had been clearly made known to him would constitute a
justifiable basis for a probationary employee's non-regularization.
In the case at bench, the evidence is clear that when Verzo was first hired by
Enchanted, he was placed on a probationary status. The letter, dated August 26,
2009, clearly reflects not only the agreement of both parties as to the probationary
status of the employment and its duration, but also the fact that Enchanted informed
Verzo of the standards for his regularization.
Clearly, Enchanted informed Verzo that he was being placed on probation. Aside from
the probationary nature of his employment, the agreement of the parties specifically
showed: the duration of such status; the benefits to which he was entitled once
regularized; and most importantly, the standard with which he must comply in order
to be regularized.
To deserve regularization, he must be able to conduct "mechanical and structural
system assessments," as well as inspect and evaluate the "conditions, operations and
maintenance requirements of rides, facilities and buildings to ensure compliance with
applicable codes, regulations and standards." A detailed enumeration of his specific
duties accompanied this letter of employment to ensure that he was made aware and
informed of his duties and responsibilities.
Verzo makes much noise of the fact that the letter was not served upon him
immediately at the very start of his employment on August 19, 2009. Suffice it to
state that Enchanted was able to substantially comply with the requirement of the
law in apprising him of the standards for his regularization.
Verily, the purpose of the law in requiring that an employee be notified of
the standards for his regularization during his probationary employment is
to simply afford him due process, so that the employee will be aware that
he will be under close observation and his performance of his assigned
duties and functions would be under continuous scrutiny by his superiors.47
Moreover, while it may be argued that ideally employers should immediately inform a
probationary employee of the standards for his regularization from day one, strict
compliance thereof is not required. The true test of compliance with the requirements
of the law is, of course, one of reasonableness. As long as the probationary employee
is given a reasonable time and opportunity to be made fully aware of what
is expected of him during the early phases of the probationary period, the
requirement of the law has been satisfied.
At any rate, a total of only fourteen (14) days had just lapsed when Verzo officially
received the letter containing what he already knew - that he was still a probationary
employee. It is ludicrous to think that Enchanted conjured this up as an afterthought
to justify his termination before probationary period would be over.
At any rate, contrary to the findings of the CA, the Court finds that
Enchanted had basis when it decided not to continue with the services of
Verzo as SH-MIM.
First, while the CA leaned heavily on the fact that the performance
evaluation given by Enchanted did not specify the instances of Verzo's
unfitness, it should be pointed out that Verzo himself admitted that the
performance evaluation he received on February 3, 2010 was
accompanied by the respective reports of Schoefield, Montemayor and
Velesrubio.48 As earlier stated, these reports detailed the reasons why
Verzo failed to meet the standards set by Enchanted and compromised
the safety of its patrons.
Second, granting that Verzo was not informed of his specific duties and
responsibilities, nonetheless, his dismissal was valid because he failed to
adhere to the dictates of common sense which required that he act in
accordance with the necessary work ethics and basic skills required by his
position as SH-MIM and by his profession as licensed engineer.
Third, while the CA considered the fact that Velesrubio advised Verzo to
resign because he was not going to be regularized even before his
performance appraisal, the Court finds that such should not be taken as
an indication of bad faith on the part of Enchanted. For this Court, the
same could only be Velesrubio's own opinion of Verzo, because he was
the one supervising his performance. Whether Enchanted had decided to
discontinue Verzo's employment cannot, at that point, be said to have
been a foregone conclusion.
Contrary to Verzo's theory that Velesrubio conspired with Enchanted to
oust him from his position, the Court gives credence to the reports made
by Verzo's very own colleagues, Schoefield and Montemayor. As against
Verzo's self-serving theory, Schoefiled and Montemayor clearly detailed
the reasons why Verzo lacked the required competence of a SH-MIM. The
reasons in their reports were numerous and spelled out with particulars,
unlikely products of fabrication.
If only to stress the point, Schoefield's report cited an incident where,
Verzo, after being instructed to check the water level of one of the pools,
reported back that the pool had sufficient water for its operation. It was
found out the following day that one of Enchanted's patrons got injured
due to the pool's low water level. Verzo also mishandled the operation of
the park's submersible pump causing sludge to overflow up to the
 entrance of the parking area. On more than one occasion, Verzo failed to
take action to replace equipment needed for the proper operation of the
park's facilities.
These observations were corroborated by Montemayor, who recounted
that he was slow to make decisions, was often seen using company
computers for personal interests, and was often late to report for work.
With these, it is clear that Velesrubio was correct in not recommending
the regularization of Verzo because he evidently lacked the basic standard
of competence, prudence and due diligence.
On punctuality, in the recent case of Carvajal v. Luzon Development Bank,49 the Court
has emphasized that:
Punctuality is a reasonable standard imposed on every employee, whether in
government or private sector. As a matter of fact, habitual tardiness is a serious
offense that may very well constitute gross or habitual neglect of duty, a just cause
to dismiss a regular employee. Assuming that petitioner was not apprised of the
standards concomitant to her job, it is but common sense that she must abide by the
work hours imposed by the bank.
(2) Whether or not Verzo was afforded the opportunity to explain his
side is of no consequence.
Notice and Hearing Not Required
Under Section 2 Rule I, Book VI of the Implementing Rules of the Labor Code:
Section 2. Security of tenure, (a) In cases of regular employment, the
employer shall not terminate the services of an employee except for just
or authorized causes as provided by law, and subject to the
requirements of due process.
(b)The foregoing shall also apply in cases of probationary employment;
Provided however, that in such cases, termination of employment due to
failure of the employee to qualify in accordance with the standards of
the employer made known to the former at the time of engagement
may also be a ground for termination of employment.
(d) In all cases of termination of employment, the following standards of
due process shall be substantially observed:chanRoblesvirtualLawlibrary
If the termination is brought about by the completion of a contract or
phase thereof, or by failure of an employee to meet the standards of the
employer in the case of probationary employment, it shall be
sufficient that a written notice is served the employee, within a
reasonable time from the effective date of
termination.[Emphasis supplied]
In Philippine Daily Inquirer v. Magtibay,50 the Court stressed that notice and hearing
are not required in case a probationary employee is not retained for failure to comply
with the reasonable standards set by his employer.
Thus:Unlike under the first ground for the valid termination of probationary
employment which is for cause, the second ground does not require notice and
hearing. Due process of law for this second ground consists of making the
reasonable standards expected of the employee during his probationary
period known to him at the time of his probationary employment.
By the very nature of a probationary employment, the employee knows from the very
start that he will be under close observation and his performance of his assigned
duties and functions would be under continuous scrutiny by his superiors. It is in
apprising him of the standards against which his performance shall be
continuously assessed where due process regarding the second ground
lies, and not in notice and hearing as in the case of the first ground.51
Considering that Verzo failed to meet the reasonable standards set out by it,
Enchanted cannot be compelled to regularize Verzo.
Enchanted, being engaged in the business of providing entertainment and
amusement with mechanical rides and facilities, is not duty-bound to retain an
employee who is clearly unfit. With his attitude, inefficiency and incompetency, it is
most likely that an accident would occur for which Enchanted, an amusement
enterprise which caters mostly to children, could be sued for damages.
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights, which,
as such, are entitled to respect and enforcement in the interest of simple fair play.