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Labor Law Review Digests

Dean Abad 2nd sem AY 2012-2013

GENERAL CONSIDERATIONS
I. EMPLOYER-EMPLOYEE RELATIONSHIP
LVN PICTURES, INC. v. PHILIPPINE MUSICIANS
GUILD
Facts: The Philippine Musicians Guild, composed of
95% of all the musicians playing for the musical
recordings of LVN Pictures, Inc., Sampaguita
Pictures, Inc. and Premiere Productions, Inc., filed a
petition before the Court of Industrial Relations
praying that it be certified as the sole and exclusive
bargaining agency for all musicians working in the
said companies. In their Answer, the companies
denied that they have any musicians as employees
and alleged that these musicians are mere
independent contractors.
The lower court sustained the theory of the Guild
and
granted
the
petition.
A
motion
for
reconsideration was filed but the same was denied
by the court. Hence, LVN Pictures filed a petition for
review on certiorari.
Issue: WON the musicians are employees of the
film companies.
Held: Yes, the musicians are employees of the film
companies.
To determine WON the musicians are employees or
independent contracts of the film companies, the
court used the right of control test. Under this test,
an employer-employee relationship exists where the
person for whom the services are performed
reserves the right to control not only the end to be
achieved, but also the manner and means to be
used in reaching the end.
Applying the foregoing test in the present case, the
Court found that LVN has right of control over the
musicians as shown (1) by calling the musicians
through call slips in the name of the company, (2)
by arranging schedules in its studio for recording
sessions, (3) by furnishing transportation and meals
to musicians, and (4) by supervising and directing in
detail, through the motion picture director, the
performance of the musicians before the camera, in
order to suit the music they are playing to the
picture which is being flashed on the screen.

The Court found all elements of an employeremployee relationship are present in this case.
REPUBLIC v. ASIAPRO COOPERATIVE
1.
Facts: Asiapro Cooperative entered into several
Service Contracts with Stanfilco, a division of DOLE
Philippines, Inc. The owners-members of Asiapro do
not
receive
compensation/wages
from
the
cooperative but instead receive a share in the
service surplus, as determined by the Board of
Directors of the cooperative, which is earned by
Asiapro from different areas of trade it engages in.
In order to enjoy the benefits under the SSS Law,
the owners-members of the cooperative who were
assigned to Stanfilco requested the latter to register
them with SSS as self-employed and to remit their
contributions as such. However, based on the
Service Contracts it executed with Stanfilco, it is
clear that the cooperative is actually a manpower
contractor and the employer of the ownersmembers working with Stanfilco. Hence SSS
instructed Asiapro to register itself with SSS as
employer. Asiapro ignored such demand of SSS.
Hence, SSS filed a petition before the SSC directing
Asiapro or, in the alternative, Stanfilco, to register
as an employer of the owners-members of Asiapro.
Asiapro filed its Answer with MTD alleging the no
employer-employee relationship exists between it
and its owners-members. The SSC denied the MTD.
A motion for reconsideration was filed but the same
was denied by the SSC. Asiapro filed a petition for
certiorari before the CA, which was granted by the
latter. SSS filed a motion for reconsideration but the
same was denied by the CA. Hence, this petition.
Issue:
WON
there
is
employer-employee
relationship between Asiapro and its ownersmembers.
Held: Yes.
The 4 elements for the existence of an employeremployee relationship are:
1. selection
and
engagement
of
the
employees
2. payment of wages
3. power of dismissal
4. power to control the employees conduct

2.

3.

4.

It is expressly provided in the Service Contracts


that it is Asiapro which has the exclusive
discretion in the selection and engagement of
the owners-members as well as its team leaders
who will be assigned at Stanfilco.
The weekly stipends or the so-called shares in
the service surplus given by Asiapro to its
owners-members were in reality wages, as the
same were equivalent to an amount not lower
than that prescribed by existing labor laws,
rules and regulations.
It is expressly provided in the Service Contracts
that it is Asiapro which has the power to
investigate, discipline and remove the ownersmembers and its team leaders who were
rendering services at Stanfilco.
It is Asiapro which has the sole control over the
manner and means of performing the services
under the Service Contracts with Stanfilco as
well as the means and methods of work.

In addition, the Court differentiated the present case


with Cooperative Rural Bank of Davao City, Inc. v.
Ferrer-Calleja, explaining that the said case was
made in context of WON an employee who is also a
member of the cooperative can exercise the right to
bargain collectively with the cooperative while the
issue in the present case is WON an employeremployee
relationship
exist
between
the
cooperative and an owner-member.
OROZCO v. FIFTH DIVISION OF THE COURT OF
APPEALS
Facts: In March 1990, PDI engaged the services of
Orozco to write a weekly column for its Lifestyle
section. She religiously submitted her articles every
week, except for a six-month stint in New York City
when she, nonetheless, sent several articles through
mail. She received compensation of P250, which
was later increased to P300, for every column
published. In 1992, PDI decided to terminate
petitioners column on the ground that Orozco failed
to improve her column. Aggrieved, Orozco fileda
complaint for illegal dismissal before the NLRC.

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

The Labor Arbiter ruled In favor of Orozco on the


ground that PDI exercised full and complete control
over the means and method by which Orozcos work
had to be accomplished. On appeal, the NLRC
upheld the decision of the Labor Arbiter. When the
case was elevated to the CA, the latter reversed the
NLRC and ruled that Orozco is not an employee of
PDI. A motion for reconsideration was filed but the
same was denied by the CA. Hence, this petition.
Issue: WON a newspaper columnist is an employee
of the newspaper which publishes the column.
Held: No, a newspaper columnist is an independent
contractor.
An employer-employee relationship exists where the
employer has a right to control the conduct of the
employee in relation to his work. The Court
emphasized, however, that not every form of control
will have the effect of establishing an employeremployee relationship. A line should be drawn
between rules that merely serve as guidelines,
which only promote the result and rules that fix the
methodology and bind or restrict the party hired to
the use of such means of methods. In case of the
former, no employer-employee relationship exists
while in the case of the latter, employer-employee
relationship exists.
In the present case, the rules laid down by PDI as to
title, space and discipline are inherent conditions in
running a newspaper. Orozco has not shown that
PDI dictated how she was to write or produce her
articles each week. There were no restraints on her
creativity. The apparent limitation that she had to
write only on subjects that benefitted the lifestyle
section was simply a logical consequence of the fact
that her column appeared in that section. In
addition, PDIs power to approve or reject any
specific article she wrote cannot be the control
contemplated in the control test, as it is but
logical that one who commissions another to do a
piece of work should have the right to accept or
reject the product. Moreover, although Orozco had a
weekly deadline to meet, she was not precluded
from submitting her column ahead of time or from
submitting columns to be published at a later time.
More importantly, PDI did not dictate upon Orozco
the subject matter of her columns, but only imposed
the general guideline that the article should

conform to the standards of the newspaper and the


general tone of the particular section.
Aside from control test, the Court also used the
economic reality test. Under this test, the economic
realities prevailing within the activity or between
the parties are examined, taking into consideration
the totality of circumstances surrounding the true
nature of the relationship between the parties. In
our jurisdiction, the benchmark of economic reality
in analyzing possible enjoyment for purposes of
applying the Labor ought to be the economic
dependence of the worker on his employer. In the
present case, the main occupation of Orozco is not
as a columnist but as a womens rights advocate
working in various womens organizations. She also
contributes articles to other publications. Thus, it
cannot be said that Orozco is dependent on PDI for
her continued employment in PDIs line of business.
SOCIAL SECURITY SYSTEM v. CA
Facts: Margarita Tana, widow of Isagani Tana, Jr.,
filed a petition before the SSC, praying that an
Order be issued directing Conchita Ayalde and
Antero Maghari to pay the premium contributions of
Ignanio and report his name for SSS coverage and
SSS to grant Margarita the funeral and pension
benefits due her. In her petition, she alleged that
Isagani was an employee of Ayalde as a farmhand in
the 2 sugarcanes owned by the latter. She further
alleged that Isagani worked continuously for 6 days
a week, 4 weeks a month and for 12 months every
year from January 1961 to April 1979. Isagani
allegedly received a regular salary according to the
prevailing minimum wage. Several deductions such
as social security contributions, medical and
employees compensation premiums, were made
from Isaganis wages. It was only after Isaganis
death that it was discovered that Isagani was never
reported for coverage nor were his contributions
remitted to the SSS.
Ayalde mainly denied the allegation that Isagani
was her employee, admitting only that he was hired
intermittently as independent contractor to plow,
harrow, or burrow the formers hacienda.
After hearing, SSC issued a Resolution finding that
Isagani was an employee of Ayalde from 1961 to

1979 and ordered the latter to pay damages. This


Resolution was reversed by the CA and ruled for the
dismissal of Margaritas complaint.
Issue: WON an agricultural
considered an employee.

laborer

can

be

Held: Yes.
Ayalde presented mere sampling of payrolls. These
documents are not only lacking, they are also
unworthy of credence. The fact that Iganocios
name does not appear in the payrolls for the years
1975, 1976 and part of 1978 and 1979, is no proof
that he did not work in Hda. B70 in the years 1961
to 1974, and the rest of 1978 and 1979. The
veracity of the alleged payrolls are doubtful
considering that the laborers named therein never
affixed their signatures to show that they actually
received the amounts indicated corresponding to
their names. Also, no record was shown pertaining
to Hda. B-15-M, where Ignacio was supposed to
have worked. Even Ayalde admitted that she hired
Ignacio as arador and sometimes as laborer
during milling in Hda. B-15-M.
Moreover, while Ayalde may not have directly
imposed on Ignacio the manner and methods to
follow in performing his tasks, she did exercise
control through her overseer. Be that as it may, the
power of control refers merely to the existence of
the power. It is not essential for the employer to
actually supervise the performance of duties of the
employee; it is sufficient that the former has a right
to wield the power. Certainly, Ayalde wielded the
power to hire or dismiss, to check on the work, be it
in progress or quality, of the laborers. As the
owner/lessee of the plantations, she possessed the
power to control everyone working therein and
everything taking place therein.
There are other equally important considerations
which support the conclusion that Ignacio was not
an independent contractor. First, Ignacio cannot be
said to be engaged in a distinct occupation or
business. His carabao and plow may be useful in his
livelihood, but he is not independently engaged in
the business of farming or plowing. Second, he had
been working exclusively for Ayalde for 18 years
prior to his demise. Third, there is no dispute that
Ayalde was in the business of growing sugarcane in

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

the two plantations for commercial purposes. There


is also no question that plowing or preparing the soil
for planting is a major part of the regular business
of Ayalde.
INSULAR LIFE v. NLRC
Facts: In 1968, Insular Life and Basiao entered into
a contract whereby the latter was authorized to
solicit applications for insurances and annuities. In
return, he would receive compensation in the form
of commissions. The contract likewise contained
provisions governing the relations of the parties, the
duties of the agent, the acts prohibited to him, and
the modes of termination of the agreement.
In 1972, the parties entered into another contract,
i.e. Agency Managers Contract. To implement such
contract, Basiao organized an office while fulfilling
his commitments under the first contract.
In 1979, Insular Life terminated the Agency
Managers Contract. Basiao sue Insular Life, which
prompted the latter to terminate also his
engagement under the first contract. Thereafter,
Basiao filed a complaint with the Ministry of Labor
for recovery of commissions plus attorneys fees.
For its defense, Insular Life challenged the
jurisdiction of the Ministry alleging that Basiao is
only an independent contractor and not an
employee.
The Labor Arbiter, as affirmed by the NLRC, found
for Basiao and ruled that an employer-employee
relationship has been established between Insular
Life and Basiao. Hence, this petition.
Issue: WON Basiao is an employee of Insular Life.
Held: No.
It has been established that control test is a valid
test of the character of a contract or agreement to
render service. However, not every form of control
will have the effect of establishing an employeremployee relationship. A line should be drawn
between rules that merely serve as guidelines,
which only promote the result and rules that fix the
methodology and bind or restrict the party hired to
the use of such means of methods. In case of the

former, no employer-employee relationship exists


while in the case of the latter, employer-employee
relationship exists.
The distinction acquires particular relevance in the
case of an enterprise affected with public interest,
as is the business of insurance, and is on that
account subject to regulation by the State with
respect, not only to the relations between insurer
and insured but also to the internal affairs of the
insurance company. Rules and regulations governing
the conduct of the business are provided for in the
Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected
for an insurance company to promulgate a set of
rules to guide its commission agents in selling its
policies that they may not run afoul of the law and
what it requires or prohibits. Of such a character are
the rules which prescribe the qualifications of
persons who may be insured, subject insurance
applications to processing and approval by the
Company, and also reserve to the Company the
determination of the premiums to be paid and the
schedules of payment. None of these really invades
the agent's contractual prerogative to adopt his
own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship
between him and the company.
TONGKO v. MANUFACTURERS LIFE INSURANCE
CO., INC.
Facts: Manulife is a domestic corporation engaged
in life insurance business. Renato A. Vergel De Dios
was, during the period material, its President and
Chief Executive Officer. Gregorio V. Tongko started
his professional relationship with Manulife on July1,
1977 by virtue of a Career Agent's Agreement
(Agreement) he executedwith Manulife.
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an
independent contractor and nothing contained
herein shall be construed or interpreted as creating
an employer-employee relationship between the
Company and the Agent.

The Company may terminate this Agreement for


any breach or violation of any of the provisions
hereof by the Agent by giving written notice to the
Agent within fifteen (15) days from the time of the
discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the
right to terminate this Agreement by the Company
shall be construed for any previous failure to
exercise its right under any provision of this
Agreement.
Either of the parties hereto may likewise terminate
his Agreement at anytime without cause, by giving
to the other party fifteen (15) days notice in
writing.
In 1983, Tongko was named as a Unit Manager in
Manulife's Sales Agency Organization. In 1990, he
became a Branch Manager. As the CA found,
Tongko's gross earnings from his work at Manulife,
consisting of commissions, persistency income, and
management overrides. The problem started
sometime in 2001, when Manulife instituted
manpower development programs in the regional
sales management level. Relative thereto, De Dios
addressed a letter dated November 6, 2001 to
Tongko regarding an October18, 2001 Metro North
Sales Managers Meeting. Stating that Tongkos
Region was the lowest performer (on a per Manager
basis) in terms of recruiting in2000 and, as of today,
continues to remain one of the laggards in this area.
Other issues were:"Some Managers are unhappy
with their earnings and would want to revert to the
position of agents." And "Sales Managers are doing
what the company asks them to do but, in the
process, they earn less." Tongko was then
terminated.
Therefrom, Tongko filed a Complaint dated
November 25, 2002 with the NLRC against Manulife
for illegal dismissal. In the Complaint. In a Decision
dated April 15, 2004, Labor Arbiter dismissed the
complaint for lack of an employer-employee
relationship.
The NLRC's First Division, while finding an employeremployee relationship between Manulife and Tongko
applying the four-fold test, held Manulife liable for
illegal dismissal. Thus, Manulife filed an appeal with
the CA. Thereafter, the CA issued the assailed

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

Decision dated March 29, 2005, finding the absence


of an employer-employee relationship between the
parties and deeming the NLRC with no jurisdiction
over the case. Hence, this petition.

Tongko was to achieve the company's goals.


More
importantly,
Manulife's
evidence
establishes the fact that Tongko was tasked to
perform administrative duties that establishes
his employment with Manulife. Additionally, it
must be pointed out that the fact that Tongko
was tasked with recruiting a certain number of
agents, in addition to his other administrative
functions, leads to no other conclusion that he
was an employee of Manulife.

Issues:
1. WON Tongko was an employee of Manulife
2. WON Tongko was illegally dismissed.
Held:
1. Yes
In the instant case, Manulife had the power of
control over Tongko that would make him its
employee. Several factors contribute to this
conclusion.
In the Agreement dated July 1, 1977 executed
between Tongko and Manulife, it is provided
that:
The Agent hereby agrees to comply with all
regulations and requirements of the Company
as herein provided as well as maintain a
standard of knowledge and competency in the
sale of the Company's products which satisfies
those set by the Company and sufficiently
meets the volume of new business required of
Production Club membership.
Under this provision, an agent of Manulife must
comply with three (3) requirements: (1)
compliance
with
the
regulations
and
requirements of the company; (2) maintenance
of a level of knowledge of the company's
products that is satisfactory to the company;
and (3) compliance with a quota of new
businesses. Among the company regulations of
Manulife are the different codes of conduct such
as the Agent Code of Conduct, Manulife
Financial Code of Conduct, and Manulife
Financial Code of Conduct Agreement, which
demonstrate the power of control exercised by
the company over Tongko. The fact that Tongko
was obliged to obey and comply with the codes
of conduct was not disowned by respondents.
Thus, with the company regulations and
requirements alone, the fact that Tongko was an
employee of Manulife may already be
established. Certainly, these requirements
controlled the means and methods by which

2.

Yes
Manulife failed to cite a single iota of evidence
to support its claims. Manulife did not even
point out which order or rule that Tongko
disobeyed. More importantly, Manulife did not
point out the specific acts that Tongko was
guilty of that would constitute gross and
habitual neglect of duty or disobedience.
Manulife merely cited Tongko's alleged "laggard
performance," without substantiating such
claim, and equated the same to disobedience
and neglect of duty. Apropos thereto, Art. 277,
par. (b), of the Labor Code mandates in explicit
terms that the burden of proving the validity of
the termination of employment rests on the
employer. Failure to discharge this evidential
burden would necessarily mean that the
dismissal was not justified, and, therefore,
illegal.

merit. On appeal, the NLRC reversed the LA and


ruled that petitioners are employees of Philjama and
declared the latter guilty of illegal dismissal. On
second motion for reconsideration, the NLRC
reversed its decision and ruled that no employeremployee relationship exists between petitioners
and
Philjama.
The
petitioners
sought
reconsideration but the same was denied by the
NLRC. Hence, this petition.
Issue: WON the petitioners (jeepney drivers) are
employees or Philjima.
Held: Yes.
In the case of jeepney owners/operators and
jeepney drivers, the former exercise supervision and
control over the latter. The management of the
business is in the owner's hands. The owner as
holder of the certificate of public convenience must
see to it that the driver follows the route prescribed
by the franchising authority and the rules
promulgated as regards its operation. Now, the fact
that the drivers do not receive fixed wages but get
only that in excess of the so-called "boundary" they
pay to the owner/operator is not sufficient to
withdraw the relationship between them from that
of employer and employee. Hence, petitioners are
undoubtedly employees of private respondent
because as taxi drivers they perform activities
which are usually necessary or desirable in the
usual business or trade of their employer.

JARDIN, ET AL. v. NLRC


Facts: Petitioners were drivers of Philjama
International, Inc., a domestic corporation engaged
in the operation of Goodman Taxi. Petitioners
used to drive Philjamas taxicabs every other day on
a 24-hour work schedule under the boundary
system, where they earned an average of P400
daily. Philjama regularly deducts P30 from the
petitioners daily earnings supposedly for the
washing of the taxi units. Believing that the
deduction is illegal, petitioners decided to form a
labor union.
Upon learning about the plan, Philjama refused to
let petitioners drive the taxicabs. Aggrieved,
petitioners filed a complaint for unfair labor
practice, illegal dismissal and illegal deduction. The
Labor Arbiter dismissed the complaint for lack of

ROSARIO BROTHERS v. OPLE


Facts: Private respondents are tailors, pressers,
stitchers and similar workers hired by Rosario
Brothers in its tailoring department. In 1977, private
respondents filed a complaint against the company
for violation of PD 851 (13 th month pay) and PD
1123 (Emergency Living Allowance) before the
Regional Office of the Department of Labor. The
Labor Arbiter dismissed the complaint upon finding
that private respondents are not employees of
Rosario Brothers. They were thereafter dismissed by
the company, which prompted them to file a case
for illegal dismissal. Meanwhile, the NLRC affirmed
the decision of the LA. However, the Minister of
Labor reversed the NLRC resolution and ruled that
private respondents are employees of the company.

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

Issue: WON an employer-employee relationship


exists between the private respondents (tailors,
pressers, stitchers and similar workers) and Rosario
Brothers.
Held: Yes.
The existence of employer-employee relationship is
determined by the following elements, namely: (1)
the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal;
and (4) the power to control employees' conduct
although the latter is the most important element.
On the other hand, an independent contractor is
one who exercises independent employment and
contracts to do a piece of work according to his own
methods and without being subjected to control of
his employer except as to the result of his work.
1. The selection and hiring of private respondents
were done by the petitioner, through the master
cutter of its tailoring department who was a regular
employee. The procedure was modified when the
employment
of
personnel
in
the
tailoring
department was made by the management itself
after the applicants' qualifications had been passed
upon by a committee of four. Later, further approval
by the Personnel Department was required.
2. Private respondents received their weekly wages
on piece-work basis which is within the scope and
meaning of the term "wage" as defined under
Article 97(f) of the Labor Code. [remuneration or
earnings, however, designated, capable of being
expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission
basis, or other method of calculating the same,
which is payable by an employer to an
employee..]
3. Petitioner had the power to dismiss private
respondents, as shown by the various memoranda
issued for strict compliance by private respondents,
violations of which, in extreme cases, are grounds
for outright dismissal. In fact, they were dismissed
on 02 January 1978, although, the dismissal was
declared illegal by the Labor Arbiter. The case is
pending appeal with the NLRC.

4. Private respondents' conduct in the performance


of their work was controlled by petitioner, such as:
(1) they were required to work from Monday through
Saturday; (2) they worked on job orders without
waiting for the deadline; (3) they were to observe
cleanliness in their place of work and were not
allowed to bring out tailoring shop patterns; and (4)
they were subject to quality control by petitioner.
5. Private respondents were allowed to register with
SSS as employees of petitioner and premiums were
deducted from their wages just like its other
employees. And, withholding taxes were also
deducted from their wages for transmittal to the
BIR.

On appeal, the NLRC issued a joint decision and


ruled
that
there
was
employer-employee
relationship between petitioners and ABS-CBN and
that the 4 petitioners were illegally dismissed.
Both parties moved for reconsideration. The NLRC
resolved these motions by ruling that the petitioners
are employees of ABS-CBN and that there was no
illegal dismissal.
The petitioners filed a petition for certiorari charging
NLRC with grave abuse of discretion. The CA held
that the petitioners are not entitled to CBA benefits
and that the dismissal was legal.
Issue: WON the petitioners are regular employees,
and thus covered by the CBA.

FULACHE v. ABS-CBN
Held: Yes.
Facts: Petitioners filed complaint for regularization,
unfair labor practices and several money claims
against ABS-CBN Cebu. They alleged that they were
excluded from the CBA executed by ABS-CBN Rankand-File Employees Union with the company on the
ground that they were considered temporary and
not regular employees. On the other hand, ABS-CBN
alleged
that
petitioners
were
independent
contractors/off camera talents, and they were not
entitled to the benefits and privileges of regular
employees.
The Labor Arbiter issued a decision holding that the
petitioners were regular employees of ABS-CBN and
are entitled to the benefits and privileges of regular
employees. ABS-CBN appealed the LA ruling before
the NLRC Fourth Division.
While the appeal was pending, ABS-CBN dismissed 4
of the petitioners for their refusal to sign up
contracts of employment with service contractor
Able Services. Aggrieved, they filed a complaint for
illegal dismissal. In its defense, ABS-CBN alleged
that they undertook a comprehensive review of its
organizational structure and decided to course
through legitimate service contractors the services
provided by the petitioners. The Labor Arbiter
dismissed the complaint for illegal dismissal on the
ground that the dismissal was authorized under the
law (redundancy).

As regular employees, petitioners fall within the


coverage of the bargaining unit and are therefore
entitled to CBA benefits as a matter of law and
contract. Under the terms of the CBA, petitioners
are members of the appropriate bargaining unit
because they are regular rank-and-file employees
and do not belong to any of the excluded
categories. Most importantly, the labor arbiters
decision of January 17, 2002 affirmed all the way
to the CA ruled against the companys submission
that they are independent contractors. Thus, as
regular rank-and-file employees, they fall within the
CBA coverage. And, under the CBAs express terms,
they are entitled to its benefits.
CBA coverage is not only a question of fact, but of
law and contract. The factual issue is whether the
petitioners are regular rank-and-file employees of
the company.
The tribunals below uniformly
answered this question in the affirmative. From this
factual finding flows legal effects touching on the
terms and conditions of the petitioners regular
employment.
JAVIER v. FLY ACE CORPORATION, ET AL.
Facts: Bitoy Javier alleged that he was an employee
of respondent Fly Ace Corp., performing various
tasks at its warehouse such as cleaning and
arranging the canned items before their delivery to

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

certain locations, except in instances when he would


be ordered to accompany the companys delivery
vehicles as pahinante. To support his claim, Javier
adduced no other evidence except an affidavit
executed by one Bengie Valenzuela, who only
attested that he would frequently see Javier at the
workplace where he was also hired as stevedore.
Issue: Does Javiers evidence suffice to establish
employer-employee relationship between Fly Ace
and him?
Held: No.
Expectedly, opposing parties would stand poles
apart and proffer allegations as different as chalk
and cheese. It is, therefore, incumbent upon the
Court to determine whether the party on whom the
burden to prove lies was able to hurdle the same.
No particular form of evidence is required to prove
the
existence
of
such
employer-employee
relationship. Any competent and relevant evidence
to prove the relationship may be admitted. Hence,
while no particular form of evidence is required, a
finding that such relationship exists must still rest
on some substantial evidence. Moreover, the
substantiality of the evidence depends on its
quantitative as well as its qualitative aspects.
Although substantial evidence is not a function of
quantity but rather of quality, the x x x
circumstances of the instant case demand that
something more should have been proffered. Had
there been other proofs of employment, such as x x
x inclusion in petitioners payroll, or a clear exercise
of control, the Court would have affirmed the finding
of employer-employee relationship.
In sum, the rule of thumb remains: the onus
probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of
evidence. Whoever claims entitlement to the
benefits provided by law should establish his or her
right thereto x x x.
In this case, the labor arbiter and the Court of
Appeals (CA) both concluded that Javier failed to
establish his employment with Fly Ace. All that
Javier presented were his self-serving statements
purportedly showing his activities as an employee of
Fly Ace. He failed to pass the substantiality
requirement to support his claim. Hence, the Court

sees no reason to depart from the findings of the


CA.
While Javier remains firm in his position that as an
employed stevedore of Fly Ace, he was made to
work in the company premises during weekdays
arranging and cleaning grocery items for delivery to
clients, no other proof was submitted. The lone
affidavit executed by one Bengie Valenzuela was
unsuccessful in strengthening Javiers cause. All
Valenzuela attested to was that he would frequently
see Javier at the workplace where the latter was
also hired as stevedore. Tthe Court cannot ignore
the inescapable conclusion that Javiers mere
presence at the workplace falls short in proving
employment therein. The affidavit could have
bolstered Javiers claim of being tasked to clean
grocery items when there were no scheduled
delivery trips, but no information was offered simply
because the witness had no personal knowledge of
Javiers employment status. The Court cannot
accept Javiers statements, hook, line and sinker.
II.

JOB CONTRACTING & LABOR ONLY


CONTRACTING

ASIAN ALCOHOL CORPORATION v. NLRC


Facts: Due to mounting business losses, the
Parsons family sold their majority rights to Prior
Holdings, Inc. Consequently, Prior Holdings took
over its management and operation.
To thwart further losses, Prior Holdings implemented
a reorganizational plan and other cost-saving
measures, which resulted to the separation of 117
(72 redundant positions: 21 union members; 51
non-union members) out of 360 employees from
services.
6 separated employees, all assigned at the Repair
and Maintenance Section of the Pulupundan Plant,
filed complaints for illegal dismissal, alleging that
Asian Alcohol used the retrenchment program as a
subterfuge for union busting.
The LA dismissed the complaint. On appeal, the
NLRC reversed the LA and ruled that the positions of
the PRs were not redundant (they were replaced by
casuals). NLRC denied MR. Hence, this petition for
certiorari.

Issue: WON the availment of the services of an


independent contractor to replace the services of
the terminated employees is valid.
Held: Yes.
1. Valid retrenchment (requirements: [a] reasonable
and necessary; [b]written notice is served;
[c]payment; [d] good faith and [e] fair and
reasonable criteria) with proof; never
contested
2. Redundancy,
considered
as
retrenchment
measure, is valid. It exists when the service
capability of the work force is in excess of what is
reasonably needed. (requirements: [a] written
notice is served; [b] payment; [c] good faith; and
[d] fair and reasonable criteria)
Water wells - lease contract was terminated;
water had become salty; wells had to be
closed
Briquetting plant operation shifted to use
of bunker fuel; need only 2 operators; Verayo
was the oldest (age = physical strength)
Mechanic more cost efficient to maintain
mechanics; Amacio least efficient due to
poor health condition
3. Re: hiring of casuals
The reduction of the number of workers in a
company made necessary by the introduction of an
independent contractor is justified when the latter is
undertaken in order to effectuate more economic
and efficient methods of production. In this case,
PRs failed to present any proof that the
management acted in a malicious or arbitrary
manner in engaging the services of an independent
contractor in its operations. Thus, there is no basis
to interfere with the bona fide decision of
management to effect more economic and efficient
methods of production.
COCA-COLA BOTTLERS PHILIPPINES, INC. v.
DELA CRUZ
Facts:
Respondents
filed
complaints
for
regularization with money claims against Coca-Cola.
They alleged that they are route helpers assigned to
work in the trucks of Coca-Cola. They go from the
Coca-Cola sales office or plants to customer outlets.
They were hired either directly by the petitioner or
by its contractors. The services they render are

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

necessary and desirable in the regular business of


Coca-Cola. They also alleged that they worked
under the control and supervision of Coca-Colas
supervisors who prepared their work schedules and
assignments. Also, they alleged that Peerless and
Excellent did not have sufficient capital or
investment to provide services to Coca-Cola. Thus,
Peerless and Excellent are in the nature of laboronly contracts prohibited by law.
The LA dismissed the complaint for lack of
jurisdiction, finding that the respondents are
employees of Peerless and Excellent. This was
affirmed by the NLRC. The CA reversed and ruled
that Peerless and Excellent were engaged in laboronly contracting (necessary and desirable; no proof
to show sufficient capital). Hence, this petition.
Issue: WON Peerless and Excellent are engaged in
labor-only contracting.
Held: Yes.
The Court noted that the contract is not the final
word on how the contracted workers relate to the
principal and the purported contractor; the
relationships must be tested on the basis of how
they actually operate. The legitimate job contractor
must have the capitalization and equipment to
undertake the sale and distribution of the
manufacturers products, and must do it on its own
using its own means and selling methods.
In this case, the court noted that both the Peerless
and the Excellent contracts show that their
obligation was solely to provide the company with
the services of contractual employees, and
nothing more. These contracted services were for
the handling and delivery of the companys
products and allied services. Following D.O. 18-02
and the contracts that spoke purely of the supply of
labor, Peerless and Excellent are considered laboronly contractors unless they could prove that they
had the required capitalization and the right of
control over their contracted workers. However,
other than petitioners bare allegation, no proof was
presented to show that Peerless and Excellent had
substantial capital, tools or investment used directly
in providing the contracted services.
The contractors were not independently selling and
distributing company products, using their own

equipment, means and methods of selling and


distribution; they only supplied the manpower that
helped the company in the handing of products for
sale and distribution. The Court held that pure
supply of manpower with the task of assisting in
sales and distribution controlled by a principal falls
within prohibited labor-only contracting. Thus, the
contracted personnel, engaged in component
functions in the main business of the company
under the latters supervision and control, cannot
but be regular company employees.
TEMIC
AUTOMOTIVE
PHILS.
v.
TEMIC
AUTOMOTIVE PHILS. INC. EMPLOYEES UNIONFFW
Facts: Temic Automotive is a company engaged in
the manufacture of electronic brake systems and
comfort body electronics for automotive vehicles, By
practice, it contracts out some of the work in the
warehouse department, to three independent
service providers or forwarders. These forwarders
also have their own employees who hold the
positions of clerk, material handler, system encoder
and general clerk. The regular employees of the
petitioner and those of the forwarders share the
same work area and use the same equipment, tools
and computers all belonging to the petitioner.
This arrangement gave rise to a union grievance on
the issue of the scope and coverage of the
collective bargaining unit. The union thus demanded
that the forwarders' employees be absorbed into
the petitioner's regular employee force and be given
positions within the bargaining unit.
The Voluntary Arbitrator ruled that Temic validly
contracted out its forwarding services but went
beyond the limits of the legally allowable
contracting out because the forwarders employees
encroached upon the function of petitioners rankand-file employees. Thus, VA concluded that the
contractors employees are employees of the
company. This was affirmed by the CA. Hence, this
petition.
Issue: WON there was a valid outsourcing.
Held: Yes.

The employer was within its right in entering the


forwarding agreements with the forwarders as an
exercise of its management prerogative. Temics
declared objective for the arrangement is to achieve
greater economy and efficiency in its operations a
universally accepted business objective and
standard that the union has never questioned. No
evidence or argument questions the companys
basic objective of achieving greater economy and
efficiency
of
operations.
The
forwarding
arrangement has been in place since 1998 and no
evidence has been presented showing that any
regular employee has been dismissed or displaced
by the forwarders employees since then. Also, no
evidence was presented showing that the
outsourcing has resulted in a reduction of work
hours or the splitting of the bargaining unit effects
that under the implementing rules of Art. 106 can
make a contracting arrangement illegal.
The similarities in their functions do not necessarily
mean that all these employees work for the
company. The regular company employees work for
the company under its supervision and control, but
forwarder employees work for the forwarder in the
forwarders own operation that is itself a contracted
work from the company. Moreover, it was proven
that the work done by the contractors employees
was predominantly related to forwarding or the
shipment or transport of the petitioners finished
goods to overseas destinations, particularly to
Germany and USA.
ALIVIADO v. P&G
Facts: Petitioners worked as merchandisers of P&G.
They all individually signed employment contracts
with either Promm-Gem or SAPS for periods of more
or less 5 months at a time. They were assigned at
different outlets, supermarkets and stores where
they handled all the products of P&G. They received
their
wages
from
Promm-Gem
or
SAPS.
Subsequently, petitioners filed a complaint against
P&G for regularization, service incentive leave pay
and other benefits with damages. The complaint
was later amended to include the matter of their
subsequent dismissal.
The LA dismissed the complaint for lack of merit and
ruled that there was no employer-employee

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

relationship between petitioners and P&G. He also


found that Promm-Gem and SAPS were legitimate
independent job contractors. The LA decision was
affirmed by the NLRC and the CA. Hence, this
petition.

contracting". The contractor is considered merely an(ii)


agent of the principal employer and the latter is
responsible to the employees of the labor-only
contractor as if such employees had been directly
employed by the principal employer.

Issue: WON P&G is the employer of petitioners.


PAL v. LIGAN
Held. Qualify.
In order to determine whether P&G is the employer
of petitioners, it is necessary to first determine
whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors. 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.
The Court held that Promm-Gem cannot be
regarded as labor-only contractor but a legitimate
independent contractor because the financial
statement of Promm-Gem shows that it has
authorized capital stock of P1 million and a paid-in
capital, or capital available for operations, of
P500,000.00 as of 1990. It also has long term assets
worth P432, 895.28 and current assets of P719,
042.32. Promm-Gem has also proven that it
maintained its own warehouse and office space with
a floor area of 870 square meters. It also had under
its name three registered vehicles which were used
for its promotional/merchandising business. PrommGem also has other clients aside from P&G.
On the other hand, the AOI of SAPS shows that it
has a paid-in capital of only P31, 250.00. There is no
other evidence presented to show how much its (i)
working capital and assets are. Furthermore, there
is no showing of substantial investment in tools,
equipment or other assets. Considering that SAPS
has no substantial capital or investment and the
workers it recruited are performing activities which
are directly related to the principal business of P&G,
the court held that SAPS is engaged in "labor-only

Facts: PAL and Synergy Services Corporation


entered into an Agreement as principal and
contractor,
respectively,
whereby
Synergy
undertook to provide loading, unloading, delivery of
baggage and cargo and other related services to
and from PALs aircraft at the Mactan Station. The
Agreement expressly provided that Synergy was an
independent contractor and that there would be no
employer-employee relationship between Synergy
and/or its employees on the one hand, and PAL on
the other.
Synergy assigned Ligan and the other respondents
to PAL in 1991. In 1992, Respondents filed
complaints before the NLRC for underpayment, nonpayment of premium pay for holidays, premium
pays for rest days, service incentive leave pay, 13th
month pay and allowances, and for regularization of
employment status with PAL against Synergy,
The LA found Synergy to be an independent
contractor and dismissed respondents complaint for
regularization, but granted their money claims. On
appeal, the NLRC declared that Synergy was a laboronly contractor and ordered PAL to accept
respondents as its regular employees. Only PAL
assailed the NLRC decision. The CA affirmed the
NLRC.
Issue: WON Synergy is a labor-only contractor.
Held: Yes.
For labor-only contracting to exist, any of the 2
elements must be present:
The contractor or subcontractor does not have
substantial capital or investment which relates to
the job, work or service to be performed and the
employees recruited, supplied, or placed by such
contractor or subcontractor are performing
activities which are directly related to the main
business of the principal, or

The contractor does not exercise the right to control


over the performance of the work of the
contractual employee.
In this case, the work performed by almost all of the
respondentsloading and unloading of baggage
and cargo of passengersis directly related to the
main business of PAL. And the equipment used by
respondents as station loaders, such as trailers and
conveyors, are owned by PAL. The records also show
that PAL failed to present evidence that Synergy had
sufficient
capital
to
engage
in
legitimate
contracting. More significantly, however, is that
respondents worked alongside PALs regular
employees who were performing identical work.
Moreover, while PAL claims that it was Synergys
supervisors who actually supervised respondents, it
failed to present evidence thereon. It did not even
specify who the Synergy supervisors assigned at the
workplace were. PAL even admitted that it fixes the
respondents work schedule as their work was
dependent on the frequency of plane arrivals. PALs
managers and supervisors approved respondents
weekly work assignments, and respondents and
other regular PAL employees were all referred to as
station attendants of PALs cargo operation and
airfreight services.
BABAS v. LORENZO SHIPPING CORPORATION
Facts: LSC is a duly organized domestic corporation
engaged in the shipping industry. LSC entered into a
General Equipment Maintenance Repair and
Management Services Agreement (Agreement) with
Best Manpower Services, Inc. (BMSI), whereby the
latter undertook to provide maintenance and repair
services to LSCs container vans, heavy equipment,
trailer chassis, and generator sets, and to provide
checkers to inspect all containers received for
loading to and/or unloading from its vessels.
Simultaneous with the execution of the Agreement,
LSC leased its equipment, tools, and tractors to
BMSI. The period of lease was coterminous with the
Agreement. Thereafter, BMSI then hired petitioners
to work at LSC.
In September 2003, petitioners filed with the LA a
complaint for regularization against LSC and BMSI.

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

In
2003,
LSC
terminated
the
Agreement.
Consequently, petitioners lost their employment.
BMSI asserted that it is an independent contractor.
It averred that it was willing to regularize
petitioners; however, some of them lacked the
requisite qualifications for the job. LSC averred that
petitioners were employees of BMSI and were
assigned to LSC by virtue of the Agreement. BMSI is
an independent job contractor with substantial
capital or investment in the form of tools,
equipment, and machinery necessary in the conduct
of its business.
The LA dismissed the complaint on the ground that
petitioners were employees of BMSI. It was BMSI
which hired petitioners, paid their wages, and
exercised control over them. The NLRC reversed the
LA. Hence, this petition.
Issue: WON
contracting.

BMSI

is

engaged

in

labor-only

Held: Yes.
The character of the business, i.e., whether as laboronly contractor or as job contractor, should be
measured in terms of, and determined by, the
criteria set by statute. The parties cannot dictate by
the mere expedience of a unilateral declaration in a
contract the character of their business.
1) Petitioners worked at LSCs premises, and
nowhere else. There was no showing that it was
BMSI which established petitioners working
procedure
and
methods,
which
supervised
petitioners in their work, or which evaluated the
same. (absolute lack of evidence)
2) LSC was unable to present proof that BMSI had
substantial capital. What is clear was that the
equipment used by BMSI were owned by, and
merely rented from, LSC.
3) Petitioners performed activities which were
directly related to the main business of LSC. The
work of petitioners as checkers, welders, utility men,
drivers, and mechanics could only be characterized
as part of, or at least clearly related to, and in the
pursuit of, LSCs business.

4) BMSI had no other client except for LSC (not


refuted)
Certificate of Registration issued by the DOLE is not
conclusive evidence of such status. The fact of
registration simply prevents the legal presumption
of being a mere labor-only contractor from arising.
SMC v. MAERC INTEGRATED SERVICES, INC., ET
AL.
Facts: 291 workers filed their complaints against
SMC and Maerc Integrated Services, Inc, for illegal
dismissal, underpayment of wages, non-payment of
service incentive leave pays and other labor
standards benefits, and for separation pays The
complainants alleged that they were hired by SMC
through its agent or intermediary MAERC to work in
2 designated workplaces in Mandaue City. They
washed and segregated various kinds of empty
bottles used by SMC to sell and distribute its beer
beverages to the consuming public. They were paid
on a per piece or pakiao basis except for a few who
worked as checkers and were paid on daily wage
basis. Also, they alleged that long before SMC
contracted the services of MAERC, a majority of
them had already been working for SMC under the
guise of being employees of another contractor,
Jopard Services, until the services of the latter were
terminated on 31 January 1988.
The LA rendered a decision holding that MAERC was
an independent contractor. The NLRC ruled that
MAERC was a labor-only contractor and that
complainants were employees of SMC. This was
affirmed by the CA. Hence, this petition.
Issue: WON the MAERC is engaged in labor-only
contracting.
Held: Yes. MAERC employees are SMCs employees.
In ascertaining an employer-employee relationship,
the following factors are considered: (a) the
selection and engagement of employee; (b) the
payment of wages; (c) the power of dismissal; and,
(d) the power to control an employee's conduct.
(a) SMC played a large and indispensable part in the
hiring of MAERC's workers. It also appears that
majority of the complainants had already been

working for SMC long before the signing of the


service contract between SMC and MAERC in 1988.
Moreover, the incorporators of MAERC admitted
having supplied and recruited workers for SMC even
before MAERC was created and that the
complainants who were then already working for
SMC were made to go through the motion of
applying for work with MAERC.
(b) Payment of workers' wages, SMC assumed the
responsibility of paying for the mandated overtime,
holiday and rest day pays of the MAERC workers.
SMC also paid the employer's share of the SSS and
Medicare contributions, the 13th month pay,
incentive leave pay and maternity benefits.
(c) SMC maintained a constant presence in the
workplace
through
its
own
checkers.
The
responsibility of watching over the MAERC workers
by MAERC personnel became superfluous with the
presence of additional checkers from SMC.
***Letter to reconsider the phasing out of SMCs
segregation activities in Mandaue City.
While MAERC's investments in the form of buildings,
tools and equipment amounted to more than P4
Million, one cannot disregard the fact that it was the
SMC which required MAERC to undertake such
investments under the understanding that the
business relationship between petitioner and MAERC
would be on a long term basis.
KIMBERLY
DRILON

INDEPENDENT

LABOR

UNION

v.

Facts: Kimberly Clark executed a 3-year CBA with


UKCEI-PTGWO which expired on 30 June 1986.
Within the 60-day freedom period prior to the
expiration of the CBA, KILUSAN-OLALIA was formed
and thereafter filed a petition for certification
election. Kimberly Clark and UKCEI-PTGWO only
objected to the inclusion of the contractual workers
whose employment was coursed through RANK
(independent contractor).
Med-Arbiter issued an Order declaring the
contractual workers eligible to vote in the
certification election. Kimberly Clark and UKCEIPTGWO challenged the 64 casual workers on the

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

ground that they are employees of RANK. The


certification election was held but the ballots of the
64 casuals were segregated. KILUSAN-OLALIA filed a
motion to open and count the challenged ballots,
arguing that they are employees of Kimberly Clark.
The Minister of Labor issued a decision ruling that
the casual employees not performing janitorial and
yard maintenance services are deemed labor-only
contractual and thus, have attained the status of
regular employees. MRs denied.
Issue: WON workers not performing janitorial or
yard
maintenance
service
became
regular
employees of Kimberly.
Held: Yes.
2 kinds of employees:
1) Engaged to perform activities which are usually
necessary or desirable in the usual business or
trade of employer
2) Rendered at least 1 year of service, whether
continuous or broken, with respect to the activity
in which they are employed
they fall under this category
However, this would not render the service contract
between Kimberly and Rank illegal. The Court noted
that the service contracts executed between
Kimberly and Rank, with respect to the workers
performing janitorial and yard maintenance service
is legal as it is supported by substantial and
convincing evidence.
The Court also took judicial notice of the general
practice adopted in several government and private
institutions and industries of hiring a janitorial
service on an independent contractor basis.
Furthermore,
the
occasional
directives
and
suggestions of KIMBERLY are insufficient to erode
primary and continuous control over the employees
of the independent contractor.
Lastly, the duties performed by these workers are
not independent and integral steps in or aspects of
the essential operations of KIMBERLY which is
engaged in the manufacture of consumer paper
products and cigarette paper, hence said workers
cannot be considered regular employees.

10

III.

PROBATIONARY EMPLOYMENT

BUISER, ET AL. v. LEOGARDO, ET AL.


Facts: Petitioners were employed by the private
respondent GENERAL TELEPHONE DIRECTORY
COMPANY as sales representatives and charged with
the duty of soliciting advertisements for inclusion in
a telephone directory. In their employment contract
(on probationary status), it was stipulated that the
petitioners will be on a probationary status for a
period of 18 months. The company then prescribed
sales quotas to be accomplished or met by the
petitioners.
Failing to meet their respective sales quotas during
the probationary period but almost a year after they
executed the contract, the petitioners were
dismissed from the service by the private
respondent. Aggrieved, they filed a complaint for
illegal dismissal against the company.
The Regional Director dismissed the complaints and
ruled that the petitioners have not attained
permanent status since private respondent was
justified in requiring a longer period of probation,
and that the termination of petitioners' services was
valid since the latter failed to meet their sales
quotas. On appeal, Deputy Minister affirmed the RD
Decision.
Hence, this petition for certiorari.
Issue: WON the probationary employment of 18
months is valid.
Held: Yes.
Generally, the probationary period of employment is
limited to 6 months. The exception to this general
rule is when the parties to an employment contract
may agree otherwise, such as when the same is
established by company policy or when the same is
required by the nature of work to be performed by
the employee. In the latter case, there is recognition
of the exercise of managerial prerogatives in
requiring
a
longer
period
of
probationary
employment, such as in the present case where the
probationary period was set for 18 months,
especially where the employee must learn a
particular kind of work such as selling, or when the

job requires certain qualifications, skills, experience


or training.
In this case, it is shown that the company needs at
least 18 months to determine the character and
selling capabilities of the petitioners as sales
representatives. The Company is engaged in
advertisement and publication in the Yellow Pages of
the PLDT Telephone Directories. Publication of
solicited ads are only made a year after the sale has
been made and only then win the company be able
to evaluate the efficiency, conduct, and selling
ability of its sales representatives, the evaluation
being based on the published ads. Moreover, an
eighteen month probationary period is recognized
by the Labor Union in the private respondent
company, which is Article V of the Collective
Bargaining Agreement.
Lastly, the very contracts of employment signed
and acquiesced to by the petitioners specifically
indicate that "the company hereby employs the
employee as telephone sales representative on a
probationary status for a period of 18 months. This
stipulation is not contrary to law, morals and public
policy.
A.M. ORETA & CO., INC. v. NLRC
Facts: Grulla was engaged by ENDECO, through
A.M. Oreta & Co., Inc., as a carpenter in its project in
Jeddah, Saudi Arabia. The contract of employment
was for a period of 12 months.
While working at the jobsite in Jeddah, he met an
accident which fractured his lumbar vertebrae.
Thus, he was confined in a hospital for 12 days.
Thereafter, Grulla was discharged from the hospital
and was told that he could resume his normal
duties.
A few days after he reported back to work, he
received a notice of termination. Thus, he filed a
complaint for illegal dismissal against A.M. Oreta &
Co., Inc. and ENDECO with the POEA.
POEA held that the dismissal was illegal. On appeal,
the NLRC affirmed in toto the POEA decision. Hence,
this petition, whereby A.M. Oreta & Co., Inc. argued
that Grulla was still a probationary employee and

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

11

that his dismissal was justified on the basis of his


unsatisfactory performance.

Dequila filed a complaint for illegal dismissal with


the Ministry of Labor against Mariwasa.

Issue: WON Grulla was a probationary employee.

The RD dismissed the complaint and ruled that the


termination of Dequila's employment was justified.
On appeal, the Minister reversed and held that
Dequila was already a regular employee at the time
of his dismissal, therefore, could not have been
lawfully dismissed for failure to meet company
standards as a probationary worker. Hence, this
petition.

Held: No.
In all cases involving employees engaged on
probationary period basis, the employer shall make
known to the employee at the time he is hired, the
standards by which he will qualify as a regular
employee.
In this case, nowhere in the employment contract
executed
between
petitioner
company
and
respondent Grulla is there a stipulation that the
latter shall undergo a probationary period for three
months before he can qualify as a regular
employee. There is also no evidence on record
showing that the respondent Grulla has been
appraised of his probationary status and the
requirements which he should comply in order to be
a regular employee. In the absence of this
requisites, there is justification in concluding that
respondent Grulla was a regular employee at the
time he was dismissed by petitioner.
As such, he is entitled to security of tenure during
his period of employment and his services cannot
be terminated except for just and authorized causes
enumerated under the Labor Code and under the
employment contract.
MARIWASA MANUFACTURING, INC. v.
LEOGARDO
Facts: Dequila was hired on probation by Mariwasa
as a general utility worker on January 10, 1979.
Upon the expiration of the probationary period of six
months, Dequila was informed by his employer that
his work had proved unsatisfactory and had failed to
meet the required standards. To give him a chance
to improve his performance and qualify for regular
employment, instead of dispensing with his service
then and there, with his written consent Mariwasa
extended his probation period for another 3 months.
However, his performance did not improve. Thus,
his employment was terminated at the end of the
extended period.

Issue: WON the employer and employee may by


agreement extend the probationary period of
employment beyond 6 months.
Held: Yes.
1. An extension may lawfully be covenanted,
notwithstanding the seemingly restrictive language
of Art. 282. The Court cited Buiser vs. Leogardo, Jr .,
where the Court held that:
Generally,
the
probationary
period
of
employment is limited to six (6) months. The
exception to this general rule is when the parties
to an employment contract may agree otherwise,
such as when the same is established by
company policy or when the same is required by
the nature of work to be performed by the
employee. In the latter case, there is recognition
of the exercise of managerial prerogatives in
requiring a longer period of probationary
employment, especially where the employee
must learn a particular kind of work such as
selling, or when the job requires certain
qualifications, skills experience or training.
2. There is no indication that the extension to which
Dequila gave his agreement was a mere stratagem
of petitioners to avoid the legal consequences of a
probationary period satisfactorily completed. The
Court noted that the extension of Dequila's
probation was an act of liberality on the part of his
employer affording him a second chance to make
good after having initially failed to prove his worth
as an employee.
3. By voluntarily agreeing to an extension of the
probationary period, Dequila in effect waived any
benefit attaching to the completion of said period if
he still failed to make the grade during the period of
extension. The Court finds nothing in the law which

by any fair interpretation prohibits such a waiver.


And no public policy protecting the employee and
the security of his tenure is served by prescribing
voluntary agreements which, by reasonably
extending the period of probation, actually improve
and further a probationary employee's prospects of
demonstrating his fitness for regular employment.
HOLIDAY INN MANILA v. NLRC
Facts: Honasan was employed by Holiday Inn for
on-the-job-training as a telephone operator for a
period of 3 weeks. After completing her training, she
was employed on a probationary basis for a period
of 6 months. In her employment contract, it was
stipulated that her probationary employment may
be terminated at any time prior to the expiration of
the 6-month period.
Four days before the expiration of her contract,
Holiday Inn notified her of her dismissal on the
ground that her performance had not come up to
the standards of the hotel. Thus, Honasan filed a
complaint for illegal dismissal.
The LA dismissed the complaint on the ground that
the dismissal was justified. On appeal, the NLRC
reversed the LA decision and ruled that Honasan
had become a regular employee and thus, could not
be dismissed as a probationer. Hence, this petition.
Issue: WON
employee.

Honasan

is

still

probationary

Held: No.
Probation is the period during which the employer
may determine if the employee is qualified for
possible inclusion in the regular force. In the case at
bar, the period was for three weeks, during
Honasan's on-the-job training. When her services
were continued after this training, the petitioners in
effect recognized that she had passed probation and
was qualified to be a regular employee.
Honasan was certainly under observation during her
three-week on-the-job training. If her services
proved unsatisfactory then, she could have been
dropped as early as during that period. But she was
not. On the contrary, her services were continued,
presumably because they were acceptable,

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Dean Abad 2nd sem AY 2012-2013

although she was formally placed this time on


probation.
Even if it be supposed that the probation did not
end with the three-week period of on-the-job
training, there is still no reason why that period
should not be included in the stipulated six-month
period of probation. Honasan was accepted for onthe-job training on April 15, 1991. Assuming that
her probation could be extended beyond that date,
it nevertheless could continue only up to October
15, 1991, after the end of six months from the
earlier date. Under this more lenient approach, she
had become a regular employee of Holiday Inn and
acquired full security of tenure as of October 15,
1991.
The consequence is that she could no longer be
summarily separated on the ground invoked by the
petitioners.
ST. THERESITAS ACADEMY, ET AL. v NLRC
Facts: Ariola had been employed as a school
teacher by St. Theresitas Academy from 1954 until
she retired in 1976, or for 22 continuous years. In
1979, the Mother Superior invited her to go back as
a school teacher because the school needed
qualified and good teachers in Math and English.
Ariola accepted on the condition that she should be
considered a regular teacher. The condition was
accepted by the school. Thus, she signed a contract
with the school which was renewed yearly.
An issue arose with regard to the payment of
summer living allowance. Because of this, the
school management issued a board resolution
where it was resolved that any rehired retiree shall
notified that their contract will not be renewed for
the coming year.
After 4 years of continuous satisfactory service,
complainant was notified that her contract will not
be renewed. Aggrieved, she filed a complaint for
illegal dismissal. The LA and NLRC ruled in favor of
Ariola. Hence, this petition.
Issue: WON Ariola is a probationary employee.
Held: No.

12

After Ariola retired in 1976, she was rehired three


(3) years later and rendered four (4) more years of
satisfactory service to the petitioner in the school
years 1979-1980, 1980-1981, 1981-1982, and 19821983.

equal terms with no moral dominance whatever


being exercised by the former over the latter.

When she was rehired in 1979 she did not have to


undergo the 3-year probationary employment for
new teachers for her teaching competence had
already been tried and tested during her 22 years of
service to the school in 1954 to 1976. She reentered the service in 1979 as a regular or
permanent teacher. She could not be discharged
solely on account of the expiration of her fourth
annual contract. She could only be dismissed for
cause and with due process, as provided in Article
279 of the Labor Code.

Insofar as the private respondents who knowingly


and voluntarily agreed upon fixed periods of
employment are concerned, their services were
lawfully terminated by reason of the expiration of
the periods of their respective contracts. These are
Dangwa Bentrez, Apollo Ribaya, Sr., Ruperta Ribaya,
Virginia Boado, Cecilia Emocling, Jose Bentrez, Leila
Dominguez and Rose Ann Bermudez. Thus, public
respondent committed grave abuse of discretion in
affirming the decision of the Labor Arbiter ordering
the reinstatement and payment of full backwages
and other benefits and privileges.

PINES CITY EDUCATIONAL CENTER v. NLRC

With respect to private respondents Roland Picart


and Lucia Chan, both of whom did not sign any
contract fixing the periods of their employment nor
to have knowingly and voluntarily agreed upon fixed
periods of employment, petitioners had the burden
of proving that the termination of their services was
legal. As probationary employees, they are likewise
protected by the security of tenure provision of the
Constitution. Consequently, they
cannot
be
removed from their positions unless for cause.

Facts: PRs were all employed as teachers on


probationary basis by Pines City Educational Center.
All PRs, except for 2, signed contracts of
employment for a fixed duration. Due to the
expiration of their contracts and poor performance
as teachers, they were informed that their contract
will not be renewed.
Aggrieved, PRs filed a complaint for illegal dismissal.
The LA ruled in favor of PRs and ordered their
reinstatement. In support of his decision, he
explained that the contracts were vague and do not
include
specific
description
of
duties
and
assignments of PR. On appeal, the NLRC affirmed in
toto the LA decision. Hence, this petition.
Issue: WON the period stipulated in the contract is
valid
Held: Yes
The Court cited the case of Brent School, Inc. et al.
v. Zamora, et al., where the Court held that Art. 280
should have no application to instances where a
fixed period of employment was agreed upon
knowingly and voluntarily by the parties, without
any force, duress or improper pressure brought to
bear upon the employee and absent any other
circumstances vitiating his consent, or where it
satisfactorily appears that the employer or
employee dealt with each other on more or less

In the present case, however, the Court made a


distinction.

PHILIPPINE DAILY INQUIRER, INC. v. MAGTIBAY,


JR.
Facts: In 1995, PDI hired Magtibay, on contractual
basis, to assist, for a period of 5 months, the regular
phone operator. Before the expiration of his
contractual employment, he and PDI agreed to a 15day contract extension, under the same conditions
as the existing contract.
After the expiration of Magtibays contractual
employment, as extended, PDI announced the
creation and availability of a new position for a
second telephone operator who would undergo
probationary employment. Magtibay applied and
was accepted for this position.
A week before the end of the 6-month probationary
period, PDI officers handed Magtibay his termination
paper, on the ground of his alleged failure to meet

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Dean Abad 2nd sem AY 2012-2013

13

company
standards.
Aggrieved,
Magtibay
immediately filed a complaint for illegal dismissal
and damages before the Labor Arbiter, arguing that
he had become a regular employee by operation of
law, considering that he had been employed by and
had worked for PDI for a total period of ten months,
i.e., four months more than the maximum six-month
period provided for by law on probationary
employment, and that there was no basis for his
dismissal.

and regulations, else why establish them in the first


place. Probationary employees unwilling to abide by
such rules have no right to expect, much less
demand,
permanent
employment.
Finding
sufficient factual and legal basis, the Supreme Court
thus reversed and set aside the CA ruling and
declared as null and void the resolution of NLRC.
The earlier decision of the Labor Arbiter dismissing
Magtibays complaint was in effect reinstated.

The LA dismissed the complaint and ruled that


Magtibays previous contractual employment, as
later extended by 15 days, cannot be considered as
part of his subsequent probationary employment.
On appeal, the NLRC reversed the LA decision and
ruled that Magtibays probationary employment had
ripened into a regular one and thus, he was illegally
dismissed. This was upheld by the CA. Hence, this
petition.

WOODRIDGE SCHOOL v. PE BENITO

Issue: WON the dismissal is valid.


Held: Yes.
Granting PDIs petition, the Supreme Court held that
PDI was only exercising its statutory hiring
prerogative when it refused to hire Magtibay on a
permanent basis upon his failure to meet the level
of competency and professionalism PDI expects
from its employees. Establishing that Magtibay had
not yet achieved regular employee status as the sixmonth probationary period had not lapsed, the SC
ruled that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction
when it disregarded the substantial evidence
supporting PDIs dismissal of Magtibay noting that
the dismissed employee has not denied that he
went through an orientation where he was apprised
on the companys rules and regulations and
employment standards nor that he committed the
acts of violations cited by PDI. The SC thus held that
it was an error on the part of the CA to uphold the
NLRCs judgment, assailing the CAs suggestion that
Magtibay ought to have been made to understand
during his briefing and orientation that he is
expected to obey and comply with company rules
and regulations. The Court further held that
[c]ommon industry practice and ordinary human
experience do not support the CAs posture. All
employees, be they regular or probationary, are
expected to comply with company-imposed rules

Facts: Respondents were hired in June 1999 as


probationary employees by Woodridge School for a
period of 3 years. In February 2001, respondents
presented Woodridge with a Manifesto regarding
certain issues concerning the school.
A confrontation was held but not settlement was
arrived at. Thus, respondents filed a formal
complaint with DECS requesting the latter for a
formal investigation. During the pendency of the
case, the respondents also appeared on television
and spoke over the radio on the alleged NEAT/NSAT
anomaly.
Woodridge sent Memoranda to respondents placing
them under preventive suspension and requiring
them to explain in writing why they should not be
suspended. Woodridge thereafter issued Notices of
Termination to. Respondents on the ground that
they did not qualify as regular employee for their
failure to meet the performance standards made
known to them at the start of their probationary
period.
Respondents filed a complaint for illegal suspension,
which was later amended to include illegal
dismissal.
The LA dismissed the complaint and ruled that the
dismissal of the probationary employees was
justified (performance and serious misconduct). This
was affirmed by the NLRC. However, the CA
reversed and ruled that respondents did not fail to
qualify for permanent employment, as there was no
sufficient evidence to prove the same, and that the
dismissal was tainted with bad faith. Hence, this
petition.

Issue: WON the dismissal of the probationary


employees was valid.
Held: No.
A probationary employee enjoys security of tenure
in the sense that during his employment
probationary employment, he cannot be dismissed
except for cause or when he fails to qualify as a
regular employee in accordance with reasonable
standards made known to him at the time of
engagement. The probationary employees security
of tenure is limited to the period of probation.
In this case, the notices of termination sent by
petitioner to respondents stated that the latter
failed to qualify as regular employees. However,
nowhere in the notices did petitioner explain the
details of said failure to qualify and the standards
not met by respondents. We can only speculate
that this conclusion was based on the alleged acts
of respondents in uttering defamatory remarks
against the school and the school principal; failure
to report for work for two or three times; going to
class without wearing proper uniform; delay in the
submission of class records; and non-submission of
class syllabi.
Yet, other than bare allegations,
petitioner failed to substantiate the same by
documentary
evidence.
Considering
that
respondents were on probation for three years, and
they were subjected to yearly evaluation by the
students and by the school administrators (principal
and vice-principal), it is safe to assume that the
results thereof were definitely documented.
As
such, petitioner should have presented the
evaluation reports and other related documents to
support its claim, instead of relying solely on the
affidavits of their witnesses.
The unavoidable
inference, therefore, remains that the respondents
dismissal is invalid.
IV.

KINDS OF EMPLOYMENT

DE LEON v. NLRC
FACTS: Petitioner Moises de Leon was employed by
private respondent La Tondea Inc. (LTI) on
December 11, 1981, at the Maintenance Section of
its Engineering Department in Tondo, Manila. His
work consisted mainly of painting company building
and equipment, and other odd jobs relating to

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

maintenance. He was paid on a daily basis through


petty cash vouchers.
In the early part of January, 1983, after a service of
more than one (1) year, petitioner requested from
respondent company that he be included in the
payroll of regular workers, instead of being paid
through petty cash vouchers. In response, LTI
dismissed him. Having been refused reinstatement
despite repeated demands, petitioner filed a
complaint for illegal dismissal, reinstatement and
payment of backwages before the Office of the
Labor Arbiter of the then Ministry now Department
of Labor and Employment.
Petitioner alleged that he was dismissed following
his request to be treated as a regular employee;
that his work consisted of painting company
buildings and maintenance chores like cleaning and
operating company equipment, assisting Emiliano
Tanque Jr., a regular maintenance man; and that
weeks after his dismissal, he was re-hired by the
respondent company indirectly through the VitasMagsaysay Village Livelihood Council, a labor
agency of respondent company, and was made to
perform the tasks which he used to do. Emiliano
Tanque Jr. corroborated these averments of
petitioner in his affidavit.
On the other hand, private respondent claimed that
petitioner was not a regular employee but only a
casual worker hired allegedly only to paint a certain
building in the company premises, and that his work
as a painter terminated upon the completion of the
painting job.
Labor Arbiter ruled in favor of De Leon and ordered
his reinstatement with full backwages and other
benefits.
On appeal, however, the NLRC reversed the LA's
decision, reasoning that petitioner's job cannot be
considered as necessary or desirable in the usual
business or trade of the employer because,
"Painting the business or factory building is not a
part of the respondent's manufacturing or distilling
process of wines and liquors."
ISSUE: WON De Leon was a regular EE at the time
of dismissal; WON LTI is guilty of illegally dismissing
him.

14

HELD: Yes. An employment is deemed regular when


the activities performed by the employee are
usually necessary or desirable in the usual business
or trade of the employer. Not considered regular are
the so-called "project employment" the completion
or termination of which is more or less determinable
at the time of employment, such as those employed
in connection with a particular construction project
and seasonal employment which by its nature is
only desirable for a limited period of time. However,
any employee who has rendered at least one year of
service, whether continuous or intermittent, is
deemed regular with respect to the activity he
performed and while such activity actually exists.
The primary standard, therefore, of determining a
regular employment is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or trade
of the employer. The test is whether the former is
usually necessary or desirable in the usual business
or trade of the employer. The connection can be
determined by considering the nature of the work
performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if
the employee has been performing the job for at
least one year, even if the performance is not
continuous or merely intermittent, the law deems
the repeated and continuing need for its
performance as sufficient evidence of the necessity
if not indispensability of that activity to the
business. Hence, the employment is also considered
regular, but only with respect to such activity and
while such activity exists.
In the case at bar, the respondent company, which
is engaged in the business of manufacture and
distillery of wines and liquors, claims that petitioner
was contracted on a casual basis specifically to
paint a certain company building and that its
completion rendered petitioner's employment
terminated. This may have been true at the
beginning, and had it been shown that petitioner's
activity was exclusively limited to painting that
certain building, respondent company's theory of
casual employment would have been worthy of
consideration. However, during petitioner's period of
employment, the records reveal that the tasks
assigned to him included not only painting of
company buildings, equipment and tools but also

cleaning and oiling machines, even operating a


drilling machine, and other odd jobs assigned to him
when he had no painting job. A regular employee of
respondent company, Emiliano Tanque Jr., attested
in his affidavit that petitioner worked with him as a
maintenance man when there was no painting job.
It is not tenable to argue that the painting and
maintenance work of petitioner are not necessary in
respondent's business of manufacturing liquors and
wines, just as it cannot be said that only those who
are directly involved in the process of producing
wines and liquors may be considered as necessary
employees. Otherwise, there would have been no
need for the regular Maintenance Section of
respondent company's Engineering Department,
manned by regular employees.
Petition granted. LA order reinstated.
MAGSALIN,
ET
AL.
v.
NATIONAL
ORGANIZATION OF WORKING MEN, ET AL.
FACTS:
o
Coca-Cola Bottlers Phils engaged the services of
respondent workers as sales route helpers for
a limited period of 5months and after that, they
were employed on a day-to-day basis.
o
According to Coca-Cola, respondent workers
were hired to substitute for regular sales route
helpers whenever the latter would be
unavailable or when there would be an
unexpected shortage of manpower in any of its
work places or an unusually high volume of
work. The practice was for the workers to wait
every morning outside the gates of the sales
office of petitioner company. If thus hired, the
workers would then be paid their wages at the
end of the day. Respondent workers, when
hired, would go with route salesmen on board
delivery trucks and undertake the laborious task
of loading and unloading softdrink products of
Coca-Cola to its various delivery points.
o
Respondent
workers
asked
for
regular
appointments which the Coca-Cola refused. 23
of
the
temporary
workers
(herein
respondents) filed with the NLRC a complaint for
the regularization of their employment with
Coca-Cola. The complaint was later amended
and the complainants totaled fifty-eight (58)
workers. Claiming that Coca-Cola meanwhile

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Dean Abad 2nd sem AY 2012-2013

terminated their services, respondent workers


filed a notice of strike and a complaint for illegal
dismissal and unfair labor practice with the
NLRC.
The parties agreed to submit the controversy,
including the issue raised in the complaint for
regularization of employment, for voluntary
arbitration.
The
voluntary
arbitrator
dismissed
the
complaint on the thesis that respondents (then
complainants) were not regular employees of
Coca-Cola.
Upon appeal, the CA reversed the ruling and
declared the workers as regular employees of
Coca-Cola Bottlers Phils., Inc. and their
dismissal from employment as illegal. MR
denied.

ISSUE: WON the nature of work of respondents is


necessary and desirable in the usual business or
trade of Coca-Cola hence they can be considered
regular employees

15

HELD: YES
o
The basic law on the case is Article 280 1 of the
Labor Code. Even while the language of law
might have been more definitive, the clarity of
its spirit and intent, i.e., to ensure a regular

Art. 280.Regular and Casual Employment. The


provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment is
for the duration of the season.An employment shall be
deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee
who has rendered at least one year of service, whether
such service is continuous or broken, shall be
considered a regular employee with respect to the
activity in which he is employed and his employment
shall continue while such activity exists

workers security of tenure, however, can hardly


be doubted.
In determining whether an employment
should be considered regular or nonregular, the applicable test is the
reasonable
connection
between
the
particular activity performed by the
employee in relation to the usual business
or trade of the employer. The standard,
supplied by the law itself, is whether the work
undertaken is necessary or desirable in the
usual business or trade of the employer, a fact
that can be assessed by looking into the nature
of the services rendered and its relation to the
general scheme under which the business or
trade is pursued in the usual course. It is
distinguished from a specific undertaking that is
divorced from the normal activities required in
carrying on the particular business or trade.
But, although the work to be performed is
only for a specific project or seasonal,
where a person thus engaged has been
performing the job for at least one year,
even if the performance is not continuous
or is merely intermittent, the law deems
the repeated and continuing need for its
performance as being sufficient to indicate
the necessity or desirability of that
activity to the business or trade of the
employer. The employment of such person is
also then deemed to be regular with respect to
such activity and while such activity exists.
If, as so argued by petitioner company, only
those whose work are directly involved in the
production of softdrinks may be held performing
functions necessary and desirable in its usual
business or trade, there would have then been
no need for it to even maintain regular truck
sales route helpers. The nature of the work
performed must be viewed from a
perspective of the business or trade in its
entirety and not on a confined scope.
The repeated rehiring of respondent workers
and the continuing need for their services
clearly attest to the necessity or desirability of
their services in the regular conduct of the
business or trade of petitioner company. The
Court of Appeals has found each of respondents
to have worked for at least one year with
petitioner company.

While this Court, in Brent School, Inc. vs.


Zamora, has upheld the legality of a fixed-term
employment, it has done so, however, with a
stern admonition that where from the
circumstances it is apparent that the period has
been imposed to preclude the acquisition of
tenurial security by the employee, then it
should be struck down as being contrary to law,
morals, good customs, public order and public
policy.
The pernicious practice of having employees,
workers and laborers, engaged for a fixed
period of few months, short of the normal sixmonth probationary period of employment, and,
thereafter, to be hired on a day-to-day basis,
mocks the law.
The fact that respondent
workers have agreed to be employed on such
basis and to forego the protection given to them
on their security of tenure, demonstrate nothing
more
than
the
serious
problem
of
impoverishment of so many of our people and
the resulting unevenness between labor and
capital. A contract of employment is impressed
with public interest.
The provisions of
applicable statutes are deemed written into the
contract, and the parties are not at liberty to
insulate themselves and their relationships from
the impact of labor laws and regulations by
simply contracting with each other.
Re
Release, Waiver and Quitclaim
executed by thirty-six (36) of the original
complainants: During the pendency of the
appeal
with
the
CA,
36
complainants
individually executed voluntarily a release,
waiver and quitclaim and received from
petitioner company the amount of fifteen
thousand (P15,000.00) pesos each.
The
amount accords with the disposition of the case
by the voluntary arbitrator. The receipt of the
amount awarded by the voluntary arbitrator, as
well as the execution of a release, waiver and
quitclaim, is, in effect, an acceptance of said
decision. There is nothing on record which
could indicate that the execution thereof by
thirty-six (36) of the respondent workers has
been attended by fraud or deceit. Where the
person making the waiver has done so
voluntarily, with a full understanding thereof,
and the consideration for the quitclaim is
credible and reasonable, the transaction must
be recognized as being a valid and binding

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Dean Abad 2nd sem AY 2012-2013

undertaking.
Dire necessity is not an
acceptable ground for annulling the release,
when it is not shown that the employee has
been forced to execute it.

16

Brent School filed a MR. The Regional Director


denied the motion and forwarded the case to the
Secretary of Labor for review. The latter affirmed
the Regional Director. Brent appealed to the Office
of the President. Again it was dismissed.

BRENT SCHOOL v. ZAMORA

Brent appealed the case to SC.

FACTS: Doroteo R. Alegre was engaged as athletic


director by Brent School with a yearly compensation
of P20,000.00. The contract fixed a specific term for
its existence, five (5) years, i.e., from July 1971 to
July 1976. Subsequent agreements in March 1973,
August 1973, and September 1974 reiterated the
same terms and conditions, including the expiry
date, as those contained in the original contract of
July 18, 1971.

ISSUE:
WON the provisions of the Labor Code,
have
anathematized/prohibited
"fixed
period
employment" or employment for a term.

Three months before the expiration of the stipulated


period, Alegre was given a copy of the report filed
by Brent School with the Department of Labor
advising of the termination of his services effective
on July 16, 1976 due to "completion of contract,
expiration of the definite period of employment."
And a month later, Alegre accepted the amount of
P3,177.71, and signed a receipt therefor containing
the phrase, "in full payment of services for the
period May 16, to July 17, 1976 as full payment of
contract."
Alegre protested the announced termination of his
employment arguing that although his contract did
stipulate that it would terminate on July 17, 1976,
since his services were necessary and desirable in
the usual business of his employer, and his
employment had lasted for five years, he had
acquired the status of a regular employee and could
not be removed except for valid cause.
The Regional Director considered Brent School's
report as an application for clearance to terminate
employment (not a report of termination), and
refused to give such clearance and instead required
the reinstatement of Alegre on the basis that "the
ground relied upon by the respondent (Brent) in
terminating the services of the complainant (Alegre)
. . . (as) not sanctioned by P.D. 442," and prohibited
by Circular No. 8, series of 1969, of the Bureau of
Private Schools.

HELD: No
The employment contract between Brent School and
Alegre was executed on July 18, 1971, at a time
when the Labor Code (P.D. 442) had not yet been
promulgated (LC took effect in 1974). At that time,
there was no doubt as to the validity of term
employment. It was recognized by the Termination
Pay Law. It also enumerated just causes for
terminating an employment without a definite
period, either by the employer or by the employee
without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which
governed employment without a fixed period, and
also acknowledged the propriety of employment
with a fixed period.
The Civil Code (1950) does not prohibit term-or
fixed-period employment.
It is plain then that when the employment contract
was signed between Brent School and Alegre in
1971, it was perfectly legitimate for them to include
in it a stipulation fixing the duration thereof
Stipulations for a term were explicitly recognized as
valid by SC. Biboso v. Victorias Milling Co., Inc.,
.involved teachers in a private school as regards
whom, the following pronouncement was made:
What is decisive is that petitioners (teachers) were
well aware an the time that their tenure was for a
limited duration. Upon its termination, both parties
to the employment relationship were free to renew
it or to let it lapse.
The status of legitimacy continued to be enjoyed by
fixed-period employment contracts under the Labor
Code which contained explicit references to fixed
period employment, or employment with a fixed or

definite period. Nevertheless, obscuration of the


principle of licitness of term employment began to
take place. Article 272 (formerly Article 321) was
amended to eliminate altogether reference to
employment without a definite period. It now
pertinently reads: "An employer may terminate an
employment for any of the following just causes: . . .
" BP 130 thus completed the elimination of every
reference in the Labor Code, express or implied, to
employment with a fixed or definite period or term.
Is it then the legislative intention to outlaw
stipulations in employment contracts laying down a
definite period therefor?
On the one hand, there is the gradual and
progressive elimination of references to term or
fixed-period employment in the Labor Code, Art
280* ..Regular and Casual Employment.
There is, on the other hand, the Civil Code, which
has always recognized, and continues to recognize,
the validity of contracts and obligations with a fixed
or definite period, and imposes no restraints on the
freedom of the parties to fix the duration of a
contract. Under the Civil Code, therefore, fixed-term
employment contracts are not limited to those by
nature seasonal or for specific projects with predetermined dates of completion (as compared to
Labor Code); they also include those to which the
parties by free choice have assigned a specific date
of termination.
Some familiar examples where fixed term is an
essential and natural appurtenance: overseas
employment contracts; appointments to the
positions of dean, assistant dean, college secretary,
principal, and other administrative offices in
educational institutions, which are by practice or
tradition rotated among the faculty members, and
where fixed terms are a necessity, without which no
reasonable rotation would be possible. Similarly,
Policy, Instructions No. 8 of the Minister of Labor
implicitly recognize that certain company officials
may be elected for what would amount to fixed
periods, at the expiration of which they would have
to stand down, in providing that these officials," . . .
may lose their jobs as president, vice-president, etc.
because the stockholders or the board of directors
for one reason or another did not re-elect them."

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Where from the circumstances it is apparent that


periods have been imposed to preclude acquisition
of tenurial security by the employee, they should be
struck down or disregarded as contrary to public
policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise,
where the reason for the law does not exist, e.g.,
where it is indeed the employee himself who insists
upon a period or where the nature of the
engagement is such that, without being seasonal or
for a specific project, a definite date of termination
is a sine qua non, would an agreement fixing a
period be essentially evil or illicit, therefore
anathema? Would such an agreement come within
the scope of Article 280 which admittedly was
enacted "to prevent the circumvention of the right
of the employee to be secured in . . . (his)
employment?"
Outlawing the whole concept of term employment
and subverting to boot the principle of freedom of
contract to remedy the evil of employer's using it as
a means to prevent their employees from obtaining
security of tenure is like cutting off the nose to spite
the face or, more relevantly, curing a headache by
lopping off the head.
Since the entire purpose behind the development of
legislation culminating in the present Article 280 of
the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the
clause in said article indiscriminately and
completely ruling out all written or oral agreements
conflicting with the concept of regular employment
as defined therein should be construed to refer to
the substantive evil that the Code itself has singled
out: agreements entered into precisely to
circumvent security of tenure. It should have no
application to instances where a fixed period of
employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress
or improper pressure being brought to bear upon
the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with
each other on more or less equal terms with no
moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its
purview, the law would be made to apply to
purposes other than those explicitly stated by its

17

framers; it thus becomes pointless and arbitrary,


unjust in its effects and apt to lead to absurd and
unintended consequences.
Such interpretation puts the seal on Bibiso upon the
effect of the expiry of an agreed period of
employment as still good rulea rule reaffirmed in
the recent case of Escudero vs. Office of the
President. Paraphrasing Escudero, respondent
Alegre's employment was terminated upon the
expiration of his last contract with Brent School on
July 16, 1976 without the necessity of any notice.
The advance written advice given the Department
of Labor with copy to said petitioner was a mere
reminder of the impending expiration of his
contract, not a letter of termination, nor an
application for clearance to terminate which needed
the approval of the Department of Labor to make
the termination of his services effective. In any
case, such clearance should properly have been
given, not denied.
Decision REVERSED and SET ASIDE. Alegre's
contract of employment having lawfully terminated
with and by reason of the expiration of the agreed
term of period thereof, he is declared not entitled to
reinstatement.
SARMIENTO, J., concurring and dissenting:
I am agreed that the Labor Code has not foresaken
"term employments", held valid in Biboso V.
Victorias Milling Company, Inc. But, I can not liken
employment contracts to ordinary civil contracts in
which the relationship is established by stipulations
agreed upon.
PAKISTAN INTERNATIONAL AIRLINES CORP. v.
OPLE
FACTS: Pakistan International Airlines Corp (PIA) is
a foreign corp licensed to do business in the PH. It
executed 2 separate contracts of employment with
Farrales and Mamasig (F&M). The contract, which
took effect Jan 9, 1979, contained the following
paragraphs:
5.
PENALTY

DURATION

OF

EMPLOYMENT

AND

This agreement is for a period of


three (3) years, but can be extended
by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as
herein provided, PIA reserves the
right to terminate this agreement at
any time by giving the EMPLOYEE
notice in writing in advance one month
before the intended termination or in
lieu thereof, by paying the EMPLOYEE
wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and
governed under and by the laws of
Pakistan, and only the Courts of Karachi,
Pakistan shall have the jurisdiction to
consider any matter arising out of or
under this agreement.
F&M commenced training in Pakistan, and thereafter
performed their jobs as flight attendants, with base
station in Manila and flying assignments to the
Middle East and Europe. On Aug 2, 1980, or 1 year
and 4 months PRIOR to the expiration of the
contract, F&M received notices of termination
effective September 1, 1980. They filed complaint
for illegal dismissal. PIA claims (but did not submit
evidence) that F&M were habitual absentees, and
that they bring back sizeable quantities of personal
effects from abroad.
MOLE Regional Director ordered reinstatement of
F&M, or in the alternative payment of their salaries
for the remainder of their fixed 3 year term, PLUS
the payment to Mamasig of amount equivalent to
round-trip ticket Manila-USA-Manila (?!?), and
payment of bonus equivalent to 1 month salary.
Appeal to Deputy Minister was denied.
ISSUES/HELD: Procedural
1.) Was the termination dispute under the
jurisdiction of the Regional Director OR the NLRC?
RD
2.) Was PIA deprived of due process? No deprivation
of due process.
Substantive

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1.) Were the terms of the employment contract


(pars. 5 & 6) valid? NO.
2.) Does par. 10 of the employment contract apply
to this case? NO.
RATIO:
Procedural
1.) At the time the complaint was filed and the
Orders of the RD and Deputy Minister were
rendered, the RD had jurisdiction over the case.
Art. 278, as then worded, required prior
clearance from the DOLE with respect to
termination of employment of employees with
at least 1 year service.
2.) The IRR of the Labor Code, as then worded,
provided that dismissal without prior clearance
shall be conclusively presumed to be a
termination without just cause. Thus, the RD did
not even have to ask for a position paper or
evidence from PIA. Still, the RD asked PIA to
submit a position paper AND evidence to
support its claims. Still, PIA did not submit
evidence. Hence, no deprivation of due process.
Substantive
1.) Pars. 5 & 6 must be read together, and when so
read, the fixed period of 3 years in par. 5 is
effectively neutralized by par. 6. Par. 6, which
gives PIA the right to terminate the
agreement at any time, took back from the
employee the fixed 3 year period by rendering
such period a facultative one at the option of
the employer. For the reason that the effect of
pars. 5 & 6 is to render the employment of F&M
at the pleasure of the PIA, the Court considers
that pars. 5 & 6 were intended to prevent any
security of tenure from accruing in favor of F&M
even during the limited period of 3 years,
and thus to escape completely the thrust of Art.
280 and 281 of the Labor Code (now Arts. 279 &
280, respectively).
2.) Par. 10 cannot be invoked to prevent the
application of PH labor laws and regulations to
the subject matter of this case, i.e. the
employer-employee
relationship.
This
relationship is much affected with public
interest that the otherwise applicable PH laws
and regulations cannot be rendered illusory by
the parties agreeing upon some other law to
govern their relationship.

18

On the matter of venue the contract was


executed here and performed here, at least
partially. Respondents are PH citizens, while
PIA, although a foreign corp, is licensed to
do business here, and hence a resident of
PH. The respondents were based in PH in
between flights to Middle East and Europe.
Thus, PH courts and admin agencies are the
proper forum for resolution of contractual
disputes, and par. 10 cannot oust PH courts
and agencies of jurisdiction. MOREOVER,
PIA did not allege the existence of foreign
law applicable, hence the doctrine of
processual presumption applies.

DISPOSITION: Petition for certiorari DISMISSED.


Order of RD and Deputy Minister AFFIRMED, except
that F&M entitled to 3 years backwages without
deduction or qualification (?!?!?), and should
reinstatement not be feasible, separation pay
equivalent to 1 month per year of service actually
rendered and for the three (3) years putative
service by private respondents (?!?!?)
ALU-TUCP v. NLRC
FACTS: Petitioners plead that they had been
employed by respondent National Steel Corporation
(NSC) in connection with its Five Year Expansion
Program (FAYEP I & II) for more than six years when
they were separated from NSC's service.
Petitioners argue that they are "regular" employees
of NSC because: (i) their jobs are "necessary,
desirable and work-related to private respondent's
main business, steel-making; and (ii) they have
rendered service for six (6) or more years to private
respondent NSC.
Labor Arbiter declared petitioners "regular project
employees who shall continue their employment as
such for as long as such [project] activity exists.
NLRC affirmed the Labor Arbiter's holding that
petitioners were project employees since they were
hired to perform work in a specific undertaking
the Five Years Expansion Program, the completion of
which had been determined at the time of their
engagement and which operation was not directly
related to the business of steel manufacturing.

ISSUE: Whether or not petitioners are properly


characterized as "project employees" rather than
"regular employees" of NSC.
HELD: The petitioners are project employees.
o
As is evident from the provisions of Article 280
of the Labor Code, the principal test for
determining whether particular employees are
properly characterized as "project employees"
as distinguished from "regular employees," is
whether or not the "project employees" were
assigned to carry out a "specific project or
undertaking," the duration (and scope) of
which were specified at the time the
employees were engaged for that project.
o
In the realm of business and industry, we note
that "project" could refer to one or the other of
at least two (2) distinguishable types of
activities.
1) a project could refer to a particular job or
undertaking that is within the regular or
usual business of the employer company,
but which is distinct and separate, and
identifiable as such, from the other
undertakings of the company. Such job or
undertaking begins and ends at determined
or determinable times.
the typical example of this first type of
project is a particular construction job
or project of a construction company.
2) a particular job or undertaking that is not
within the regular business of the
corporation. Such a job or undertaking must
also be identifiably separate and distinct
from the ordinary or regular business
operations of the employer. The job or
undertaking also begins and ends at
determined or determinable times.
the case at bar presents what
appears as a typical example of
this kind of "project."
o
NSC undertook the Five Year Expansion Program
I and II with the ultimate end in view of
expanding the volume and increasing the kinds
of products that it may offer for sale to the
public. The Five Year Expansion Program had a
number of component projects.
o
Instead of contracting out to an outside or
independent
contractor
the
tasks
of
constructing the buildings with related civil and

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Dean Abad 2nd sem AY 2012-2013

electrical works x x x, NSC opted to execute and


carry out its Five Year Expansion Projects "in
house." The carrying out of the Five Year
Expansion Program constitutes a distinct
undertaking identifiable from the ordinary
business and activity of NSC. Each component
project begins and ends at specified times,
which had already been determined by the time
petitioners were engaged.
In other words, the employment of each
"project worker" is dependent and coterminous
with
the
completion
or
termination of the specific activity or
undertaking [for which] he was hired which
has been pre-determined at the time of
engagement. Since, there is no showing that
petitioners were engaged to perform workrelated activities to the business of respondent,
which is steel-making, there is no logical and
legal sense of applying to them the proviso
under the second paragraph of Article 280 of
the Labor Code, as amended.
The present case therefore strictly falls
under
the
definition
of
"project
employees" on paragraph one of Article
280 of the Labor Code, as amended.
Moreover, it has been held that the length of
service of a project employee is not the
controlling test of employment tenure but
whether or not "the employment has been
fixed for a specific project or undertaking
the completion or termination of which
has been determined at the time of the
engagement of the employee".
Re petitioners claim that their service to NSC of
more than six (6) years should qualify them as
regular employees: The simple fact that the
employment of petitioners as project
employees had gone beyond one (1) year,
does not detract from, or legally dissolve,
their status as project employees. The
second paragraph of Article 280 of the
Labor Code, quoted above, providing that
an employee who has served for at least
one (1) year, shall be considered a regular
employee, relates to casual employees,
not to project employees.

19

FACTS: Petitioner was hired as a laborer, and later


as a skilled welder, at D.M. Consunji, Inc., a
construction firm, on November 5, 1974. On March
23, 1986 his employment was terminated on the
ground that the project he had been assigned to
was already completed.

Petitioner filed a complaint for Illegal Dismissal with


the LA. The LA consolidated his complaint with 3
other illegal dismissal complaints involving 13 other
employees against DM Consunji.

DM Consunjis theory was that complainants were


all project employees hired on a project-to-project
basis. It pointed to the gaps in complainants'
employment histories to show that they were hired
on an "off-and-on" basis.

Labor Arbiter Fernando V. Cinco found that the


employees worked continuously in various projects
ranging from five (5) to twenty (20) years and
belonged to a work pool, hence, were illegally
dismissed.

NLRC reversed the LA. Due to lack of evidence to


prove
the
continuous
employment
of
the
complainants and based on the different project
contracts presented by DM Consunji as evidence, it
ruled that the employees were project employees,
hence, validly dismissed.

RICARDO FERNANDEZ v. NLRC


ISSUES:

1.

WON the dismissal was valid. YES

2.

Whether the petitioner was a regular/nonproject employee or a project employee.


PROJECT EMPLOYEE.

3.

WON petitioner was a member of a work pool


from which a construction company draws its
project employees. NO

HELD:
The petition should be dismissed on procedural
grounds as the petitioner only filed for certiorari
after almost one year from receipt of the assailed
decision. Nonetheless, the petition would still be
denied even if ruled upon on the merits.

RATIO:
1. Petitioner is covered by Policy Instruction No.
20, according to which, there are two types of
employees in the construction industry: 1)
Project & 2) Non-project Employees. Project
employees are those employed in connection
with a particular construction project. Nonproject employees are those employed by a
construction company without reference to a
particular project. Project employees are not
entitled to termination pay if they are
terminated as a result of the completion of the
project.
DM Consunji was able to present material
documents which showed the ff:
the specific dates of hiring,
the duration of hiring,
the dates of petitioners lay-offs
the lay-off reports
the termination reports submitted to the
MOLE.
The documents showed a month to a few
months gaps between the hiring of

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Dean Abad 2nd sem AY 2012-2013

20

petitioner in numerous projects. Hence,


petitioner has not continuously but only
intermittently worked with DM Consunji.
2.

Petitioner claims that based on Article 280 of


the Labor Code (provided that, any employee
who has rendered at least one year of service
whether such service is continuous or broken,
shall be considered a regular employee) he
should be considered a regular employee.
Citing Mercado v. NLRC, the SC ruled that the
said proviso in Art 280 only talks about
"casual" employees who have rendered at
least one year of service regardless of the
fact that such service may be continuous
or broken. It is not applicable to "project"
employees. The proviso relates to employment
where the employee is engaged to perform
activities that are usually necessary or desirable
in the usual business or trade of the employer.
Project employment is specifically exempted
therefrom.

3.

Petitioner also argued that according to Policy


Instruction No. 20 issued by Blas Ople,
members of a work pool from which a
construction company draws its project
employees are non-project employees, and the
completion of each project will not mean
severance of employer-employee relationship. 2
SC held that petitioner did not belong to a
workpool. To qualify as member of a work
pool under Policy Instruction No. 20, it
must be proven that petitioner was always
available on call of DM Consunji and that
he was not free to offer his services to

2 Members of a work pool from which a construction


company draws its project employees, if considered
employees of the construction company while in the
work pool, are non-project employees or employees for
an indefinite period. If they are employed in a particular
project, the completion of the project or of any phase
thereof will not mean severance of employer-employee
relationship.

other employees. However petitioner was not


able to show any evidence to this effect.
4.

The Court also looked at the fact that DM


Consunji submitted lay-off reports and the
termination reports to MOLE everytime a
project was completed, in compliance with
Policy Instruction No. 20. According to theCourt,
it was this factor that made this case different
from cases where the project employees were
deemed regular employees. The faithful and
regular effort of private respondent in reporting
every completion of its project and submitting
the lay-off list of its employees proved project
employment.

HACIENDA
FATIMA,
INC.
v.
NATIONAL
FEDERATION OF SUGARCANE WORKERS
Facts:
Employer: Hacienda Fatima
Employee: NFSW
NFSW was certified as the collective bargaining
representative in the certification elections.
However Hacienda Fatima refused to sit down with
the union for the purpose of entering into a CBA
contending that the result is still
on appeal.
Subsequently, members of NFSW were not given
work for more than 1mo prompting them to stage a
strike which was settled upon the signing of a MOA
which stipulated among others that the parties
would meet initially on 11Jan1991 to be concluded
within 30d, that management would provide work to
and prioritize those who were part of Haciendas
workforce prior to the strike.
However, despite this MOA management refused to
bargain with NFSW alleging that they failed to load
15 wagons and thereafter employed all means, such
as using private guards, to prevent the organizers of
NFSW from entering the premises. They were also
subsequently
not
given
work
assignments
prompting NFSW to stage another strike on Jan1992.

Another MOA was signed by the parties due to the


efforts of DOLE which included provisions on how to
determine those who are part of the workforce of
the Hacienda prior to the 1st strike (ie payroll,
voluntary arbitration), indicated who are definitely
part of (therefore should be reinstated) and not part
of the workforce prior to the strike.
Despite this 2nd MOA, the Hacienda still refused to
bargain prompting the union to stage the 3 rd strike.
Meanwhile, the Hacienda accused the workers of
'refusing to work and being choosy in the kind of
work they have to perform.
LA: IFO Hacienda Fatima
NLRC: Reversed LA finding that the record is replete
with complainants' persistence and dogged
determination in going back to work. Hacienda
Fatima is guilty of ULP
CA: Affirmed NLRC holding that while the work of
NFSW was seasonal in nature, they were considered
to be merely on leave during the off-season and
were therefore still employed by Hacienda they
enjoyed security of tenure.
Issue: WoN CA erred in holding that NFSW,
admittedly
seasonal
workers,
were
regular
employees, contrary to the clear provisions of
Article 280 of the Labor Code.
Held: NO. SC affirmed CA decision holding that
NFSW are regular employees and that Hacienda
Fatima in refusing to bargain with NFSW committed
ULP.
RATIO
o
Requisites for seasonal employees to not be
classified as regular employees
workers perform work or services that are
seasonal in nature; AND
they must have been employed only for the
duration of one season.
o
Test of determining WoN an employee is a
regular employee [Amorsolo v NLRC]
Primary
standard:
Reasonable
connection between the particular activity
performed by the EE in relation to the usual
trade or business of the ER.
If the EE has been performing the job for at
least 1yr, even if the performance is not
continuous and merely intermittent,

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21

the law deems repeated and continuing


need for its performance as sufficient
evidence
of
the
necessity
if
not
indispensability of that activity to the
business.
Seasonal workers who are called to work from
time to time and are temporarily laid off during
off-season are not separated from service in
said period, but merely considered on leave
until re-employed. [Amorsolo v NLRC]

Subsequently, after failing to return to work after


the expiration of his leave of absence, Millares was
dropped from the roster of crew members effective
September 1, 1989.

On ULP:
Refusal to bargain, to their acts of economic
inducements resulting in the promotion of those
who withdrew from the union, the use of armed
guards to prevent the organizers to come in, and
the dismissal of union officials and members is a
clear interference in the right of the workers to selforganization => ULP!

In 1989, Lagda likewise filed a leave of absence and


applied to avail of the optional early retirement plan
in view of his twenty years continuous service in the
company.

Disposition: Petition is DENIED and the assailed


Decision Affirmed.
MILLARES, ET AL. v. NLRC, ET AL.
FACTS:
Douglas
Millares
was
employed
by
ESSO
International through its local manning agency,
Trans-Global, in 1968 as a machinist. In 1975, he
was promoted as Chief Engineer which position he
occupied until he opted to retire in 1989.
In 1989, petitioner Millares filed a leave of absence
and applied for optional retirement plan under the
Consecutive Enlistment Incentive Plan (CEIP)
considering that he had already rendered more than
twenty years of continuous service.
Esso International denied Millares request for
optional retirement on the following grounds, to wit:
(1) he was employed on a contractual basis; (2) his
contract of enlistment (COE) did not provide for
retirement before the age of sixty years; and (3) he
did not comply with the requirement for claiming
benefits under the CEIP, i.e., to submit a written
advice to the company of his intention to terminate
his employment within thirty days from his last
disembarkation date.

On the other hand, petitioner Lagda was employed


by Esso International as wiper/oiler in 1969. He was
promoted as Chief Engineer in 1980, a position he
continued to occupy until his last COE expired in
1989.

Trans-global similarly denied Lagdas request for


availment of the optional early retirement scheme
on the same grounds upon which Millares request
was denied.
Unable to return for contractual sea service after his
leave of absence expire, Lagda was also dropped
from the roster of crew members effective
September 1, 1989.
Millares and Lagda filed a complaint-affidavit for
illegal
dismissal
and
non-payment
of employee benefits against private respondents
Esso International and Trans-Global before the
POEA.
The POEA rendered a decision dismissing the
complaint for lack of merit. On appeal, NLRC
affirmed the decision of the POEA dismissing the
complaint.
NLRC rationcinated that Millares and Lagda, as
seamen and overseas contract workers are not
covered by the term regular employment as
defined under Article 280 of the Labor Code. The
POEA, which is tasked with protecting the rights of
the Filipino workers for overseas employment to fair
and equitable recruitment and employment
practices and to ensure their welfare, prescribes a
standard employment contract for seamen on board
ocean-going vessels for a fixed period but in no case
to exceed twelve months.
ISSUE: WON seafarers are considered regular
employees under Article 280 of the Labor Code.

HELD: YES
It is for the mutual interest of both the seafarer and
the employer why the employment status must be
contractual only or for a certain period of time.
Quoting Brent School Inc. v. Zamora, 1990,
and Pablo Coyoca v. NLRC, 1995, the Supreme Court
ruled that seafarers are considered contractual
employees. They cannot be considered as regular
employees under Article 280 of the Labor Code.
Their employment is governed by the contracts they
sign every time they are rehired and their
employment is terminated when the contract
expires. Their employment is contractually fixed for
a certain period of time. They fall under the
exception of Article 280 whose employment has
been fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of engagement of the
employee or where the work or services to be
performed is seasonal in nature and the
employment is for the duration of the season.
As ruled in Brent case, there are certain forms of
employment which also require the performance of
usual and desirable functions and which exceed one
year but do not necessarily attain regular
employment status under Article 280. Overseas
workers including seafarers fall under this type of
employment which are governed by the mutual
agreements of the parties.
And as stated in the Coyoca case, Filipino seamen
are governed by the Rules and Regulations of the
POEA.
The
Standard
Employment
Contract
governing the employment of All Filipino seamen on
Board Ocean-Going Vessels of the POEA, particularly
in Part I, Sec. C specifically provides that the
contract of seamen shall be for a fixed period. And
in no case should the contract of seamen be longer
than 12 months.
Moreover, the Court held that it is an accepted
maritime industry practice that employment of
seafarers are for a fixed period only. Constrained by
the nature of their employment which is quite
peculiar and unique in itself, it is for the mutual
interest of both the seafarer and the employer why
the employment status must be contractual only or
for a certain period of time. Seafarers spend most of

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Dean Abad 2nd sem AY 2012-2013

their time at sea and understandably, they cannot


stay for a long and an indefinite period of time at
sea. Limited access to shore society during the
employment will have an adverse impact on the
seafarer. The national, cultural and lingual diversity
among the crew during the COE is a reality that
necessitates the limitation of its period.
PUREFOODS CORPORATION v. NLRC
FACTS: Rodolfo Cordova and 905 other workers
were hired by Pure Foods Corporation to work for a
fixed period of five months at its tuna cannery plant
in Tambler, General Santos City. After the expiration
of their respective contracts of employment in June
and July 1991, their services were terminated. They
were required to execute a Release and Quitclaim
stating that they had no claim whatsoever against
Pure Foods Corporation.
This notwithstanding, the 906 workers filed a
complaint for illegal dismissal. The Labor Arbiter
dismissed the complaint on the ground that the 906
workers were mere contractual workers, and not
regular employees; hence, do not enjoy security of
tenure. It was also ruled that their reinstatement
would result in the reemployment of more than
10,000 former contractual employees of Pure Foods.
Initially the NLRC affirmed the Labor Arbiter but
then reversed itself on motion for reconsideration. It
declared the 906 workers as regular employees of
Pure Foods. The NLRC declared that the contract of
employment for five months was a clandestine
scheme employed to stifle the workers right to
security of tenure and should therefore be struck
down and disregarded for being contrary to law,
public policy, and morals. Hence, the appeal to the
Supreme Court.
ISSUES:
1. WON the 906 workers are regular or mere
contractual employees of Pure Foods;
2. WON the 906 workers are barred from claiming
illegal dismissal by their execution of a Release
and Quitclaim?
HELD:
1st Issue: Regular Employees

22

Article 280 of the Labor Code provides for two (2)


kinds of regular employees: (1) those who are
engaged to perform activities which are necessary
or desirable in the usual business or trade of the
employer; and (2) those casual employees who
have rendered at least one year of service, whether
continuous or broken, with respect to the activity in
which they are employed.
In this case, the activities by the 906 workers
consisted in the receiving, skinning, loining,
packing, and casing-up of tuna fish which were then
exported by the petitioner. Indisputably, they were
performing activities which were necessary and
desirable in petitioners business or trade.
Such workers could not have been regarded as
having been hired for a specific project or
undertaking.
The term specific project or
undertaking under Article 280 of the Labor Code
contemplates an activity which is not commonly or
habitually performed or such type of work which is
not done on a daily basis but only for a specific
duration of time or until completion. In this case, the
fact that Pure Foods repeatedly and continuously
hired workers to do the same kind of work as that
performed by those whose contracts had expired
negates its contention that such workers were hired
for a specific project or undertaking only.
The five (5) month contracts were but a scheme to
prevent the acquisition of tenurial security by the
workers, and, therefore, should be struck down or
disregarded as contrary to public policy and morals.
Pure Foods did not deny that
(1) that the main bulk of its workforce consisted of
its so-called casual employees;
(2) that the company hired casual every month for
the duration of five months, after which their
services were terminated and they were replaced by
other casual employees on the same five-month
duration; and
(3) that these casual employees were actually
doing work that were necessary and desirable in
Pure Foods usual business.
Such scheme was clearly designed to prevent
casual employees from acquiring the status of
regular
employees
and
resulted
in
the
circumvention of the employees right to security of
tenure and to other benefits like minimum wage,

cost-of-living allowance, sick leave, holiday pay, and


13th month pay. Pure Foods likewise saved itself
from the trouble or burden of establishing a just
cause for terminating employees by the simple
expedient of refusing to renew the employment
contracts.
2nd Issue: NO
The execution by the private respondents of a
Release and Quitclaim did not preclude them from
questioning the termination of their services.
Generally, quitclaims by laborers are frowned upon
as contrary to public policy and are held to be
ineffective to bar recovery for the full measure of
the workers rights. The reason for the rule is that
the employer and the employee do not stand on the
same footing. Notably, the private respondents lost
no time in filing a complaint for illegal dismissal.
This act is hardly expected from employees who
voluntarily and freely consented to their dismissal.
HANJIN
HEAVY
INDUSTRIES
CONSTRUCTION CO., LTD. v. IBAEZ

AND

FACTS:
o
HANJIN is a foreign company engaged in the
construction business in the Philippines while
petitioners Hak Kon Kim and Jhunie Adajar were
employed as Project Director and Supervisor,
respectively, by HANJIN.
o
On 11 April 2002, respondents and 4 other coworkers filed a complaint before the NLRC for
illegal dismissal with prayer for reinstatement
and full backwages.
o
Allegations of respondents:
1. HANJIN hired them for various positions,
the tasks of which were usual and
necessary or desirable in the usual
business or trade of HANJIN. (employed
in 1992, 1994, 1995, 1996 and 2000)
2. They were employed as members of a
work pool from which HANJIN draws the
workers to be dispatched to its various
construction projects until they were
dismissed on 15 April 2002.
3. At the time of their dismissal, HANJIN
had several construction projects that
were still in progress, such as MRT II
and III, and continued to hire

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

employees to fill the positions they


vacated.
On the other hand, petitioners maintained that
respondents were hired as project employees
for the construction of the LRT/MRT Line 2
Package 2 and 3 Project.
o
Allegations of petitioners:
1. Contracts
of
employment
were
executed in which it was clearly
stipulated that the respondents were to
be hired as project employees for a
period of 3 months, but the contracts
shall be considered automatically
renewed in the absence of any Notice
of Termination to the respondents and
that the agreement automatically
terminates at the completion of the
project or any particular phase thereof.
However, petitioners failed to furnish
the Labor Arbiter a copy of said
contracts of employment.
2. Respondents were duly informed of
HANJIN's policies, rules and regulations,
as well as the terms of their contracts.
3. Prior
to
respondents
dismissal,
respondents were informed of the
company's intention to reduce its
manpower due to the completion of the
LRT/MRT Line 2 Package 2 and 3
Project. Respondents were among the
project employees who were thereafter
laid off, as shown in the Establishment
Termination Report filed by HANJIN
before the DOLE Regional Office in
Cainta, Rizal on 11 April 2002.
4. In accordance with the usual practice of
the construction industry, a completion
bonus was paid to the respondents, as
evidenced by payroll records for the
period April 420 2002, with the words
"completion bonus" written at the lower
left corner of each page.
5. Respondents
executed
Quitclaims,
which
also
contained
Clearance
Certificates
confirming
that
the
employees concerned were cleared of
all accountabilities at the close of the
working hours on 15 April 2002.
o
The Labor Arbiter (LA) ruled in favor of
respondents and declared that they were
regular employees who had been dismissed

23

o
o

without just and valid causes and without


due process. It ruled that HANJIN's
allegation that respondents were project
employees was negated by its failure to
present proof thereof. It also noted that a
termination report should be presented
after the completion of every project or a
phase thereof and not just the completion
of one of these projects. The Labor Arbiter
further construed the number of years that
respondents rendered their services for
HANJIN as an indication that respondents
were regular, not project, employees.
Petitioners filed an appeal before the NLRC,
wherein petitioners discarded their claim
that respondents signed employment
contracts but still contended that the
absence of respondents' contracts of
employment does not vest the latter with
regular status.
The NLRC reversed the LAs Decision and
declared that the respondents were project
employees who were legally terminated
from employment.
On appeal, the Court of Appeals reversed
the NLRC Decision and ruled that
respondents were regular employees.
Hence, this petition.

ISSUE: WON
employees.

the

respondents

are

regular

HELD: Yes, respondents are regular employees of


petitioner company.
o
The principal test for determining whether
particular employees are properly characterized
as "project employees" as distinguished from
"regular employees" is whether or not the
project employees were assigned to carry
out a "specific project or undertaking,"
the duration and scope of which were
specified at the time the employees were
engaged for that project.
o
In this case, petitioners did not have an
agreement
with
respondents
that
their
employment was for a specific project or
undertaking. The respondents were also not
informed of the nature of their work at the time
of hiring.
o
The Court noted that during the proceedings
before the Labor Arbiter, the petitioners failed

to
produce
respondents'
contracts
of
employment and that in their appeal before the
NLRC until the case reached the SC, petitioners
claimed that due to a lapse in management
procedure, no such employment contracts were
executed.
Petitioners alleged that the absence of a written
contract does not remove respondents from the
ambit of being project employees.
o
The SC ruled that such a contract is
evidence that respondents were informed of
the duration and scope of their work and
their status as project employees and in
cases where no other evidence was offered,
the absence of an employment contract
puts into serious question whether the
employees were properly informed at the
onset of their employment status as project
employees. Thus, absent any other proof
that the project employees were informed
of their status as such, it will be presumed
that they are regular employees in
accordance
with
Clause
3.3(a)
of
Department Order No. 19, Series of 1993.
Petitioners allege that the Termination Report
HANJIN filed before the DOLE Regional Office
complied with the indicators of project
employment as prescribed under Department
Order No. 19, Series of 1993.
o
The Court noted that petitioners failed to
offer evidence to refute or controvert the
respondents' claim that they were assigned
to various construction projects. Had
respondents'
allegations
been
false,
petitioners could simply present as
evidence documents and records in their
custody to disprove the same. Petitioners,
instead, chose to remain vague as to the
circumstances surrounding the hiring of the
respondents.
o
The Court also noted that a lone
Termination Report filed by petitioners only
upon the termination of the respondents'
final project, and after their previous
continuous employment for other projects,
is not only unconvincing, but even
suspicious. If respondents were actually
project employees, petitioners should have
filed as many Termination Reports as there
were construction projects actually finished
and for which respondents were employed.

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

Petitioners insist that the payment to the


respondents of a completion bonus indicates
that respondents were project employees,
which were supported by payroll records for the
period April 4-20 2002, with the words
"completion bonus" written at the lower left
corner of each page. The amount paid to each
employee was equivalent to his fifteen-day
salary. Respondents, however, deny receiving
any such amount.
Assuming that petitioners actually paid
respondents
a
completion
bonus,
petitioners failed to present evidence
showing that they undertook to pay
respondents such a bonus upon the
completion of the project, as provided
under Section 2.2(f) of Department Order
No. 19, Series of 1993. Petitioners did not
even allege how the "completion bonus"
was to be computed or the conditions that
must be fulfilled before it was to be given. A
completion bonus, if paid as a mere
afterthought, cannot be used to determine
whether or not the employment was regular
or merely for a project. Otherwise, an
employer may defeat the workers' security
of tenure by paying them a completion
bonus at any time it is inclined to unjustly
dismiss them.
After examining the payroll documents
submitted by petitioners, the Court found
that the payments termed as "completion
bonus" are not the completion bonus paid
in connection with the termination of the
project. First of all, the period from 4 April
2002 to 20 April 2002 bears no relevance to
a completion bonus since a completion
bonus is paid in connection with the
completion of the project, and is not based
on a fifteen-day period. Secondly, the
amount paid to each employee as his
completion bonus was uniformly equivalent
to his fifteen-day wages, as opposed to the
industry practice where the completion
bonus is at least the employee's one-half
month salary for every twelve months of
service.
Finally, the Quitclaims which the respondents signed
cannot bar them from demanding what is legally
due them as regular employees for the same do not
o

24

appear to have
consideration.

been

made

CASERES v. UNIVERSAL
MINING CORPORATION

for

ROBINA

valuable

SUGAR

FACTS: Universal Robina Sugar Milling Corporation


(URSUMCO) is a corporation engaged in the cane
sugar milling business.
Pedy Caseres started
working for respondent in 1989, while Andito Pael in
1993. At the start of their respective employments,
they were made to sign a Contract of Employment
for Specific Project or Undertaking. Caseres and
Paels contracts were renewed from time to time,
until May 1999 when they were informed that their
contracts will not be renewed anymore. Petitioners
filed a complaint for illegal dismissal, regularization,
incentive leave pay, 13th month pay, damages and
attorneys fees. The Labor Arbiter, the NLRC, and
the Court of Appeals dismissed the case in favour of
URSUMCO, so Caseres and Pael filed a Petition for
Review on Certiorari under Rule 45 of the Supreme
Court.

ISSUE:
WON
Caseres
and
Pael
are
seasonal/project/term employees and not regular
employees of URSUMCO.
HELD: No.
o
Article 280 of the Labor Code provides for three
kinds of employees: (a) regular employees or
those who have been engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of the
employer; (b) project employees or those
whose employment has been fixed for a
specific project or undertaking, the completion
or termination of which has been determined at
the time of the engagement of the employee or
where the work or services to be performed is
seasonal in nature and the employment is for
the duration of the season; and (c) casual
employees or those who are neither regular nor
project employees.
o
The principal test for determining whether an
employee is a project employee or a regular
employee is whether the employment has been
fixed for a specific project or undertaking, the
completion or termination of which has been

determined at the time of the engagement of


the employee. A project employee is one whose
employment has been fixed for a specific
project or undertaking, the completion or
termination of which has been determined at
the time of the engagement of the employee or
where the work or service to be performed is
seasonal in nature and the employment is for
the duration of the season. A true project
employee should be assigned to a project which
begins and ends at determined or determinable
times, and be informed thereof at the time of
hiring.
The fact that Caseres and Pael were constantly
re-hired does not ipso facto establish that they
became regular employees. Their respective
contracts with URSUMCO show that there were
intervals in their employment. In Caseres's
case, while his employment lasted from August
1989 to May 1999, the duration of his
employment ranged from one day to several
months at a time, and such successive
employments were not continuous.
With regard to Pael, his employment never
lasted for more than a month at a time. These
support the conclusion that they were indeed
project employees, and since their work
depended on the availability of such contracts
or projects, necessarily the employment of
URSUMCOs work force was not permanent but
co-terminous with the projects to which they
were assigned and from whose payrolls they
were paid.
Moreover, even if Caseres and Pael were
repeatedly and successively re-hired, still it did
not qualify them as regular employees, as
length of service is not the controlling
determinant of the employment tenure of a
project employee, but whether the employment
has been fixed for a specific project or
undertaking,
its
completion
has
been
determined at the time of the engagement of
the employee.
Further, the proviso in Article 280, stating that
an employee who has rendered service for at
least one (1) year shall be considered a regular
employee, pertains to casual employees and
not
to
project
employees.
Accordingly,
petitioners cannot complain of illegal dismissal
inasmuch as the completion of the contract or
phase thereof for which they have been

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

engaged
automatically
employment.

25

terminates

their

for personnel, and/or overstaffing, this


contract maybe pre-terminated by the
EMPLOYER upon giving of three (3)
days notice to the employee.

PRICE v. INNODATA, PHILS., INC.


FACTS:
o
Respondent Innodata Philippines, Inc./Innodata
Corporation (INNODATA) was a domestic
corporation engaged in the data encoding and
data
conversion
business.
It
employed
encoders, indexers, formatters, programmers,
quality/quantity staff, and others, to maintain its
business and accomplish the job orders of its
clients.
o
Petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera were employed as
formatters by INNODATA. The parties executed
an employment contract denominated as a
Contract of Employment for a Fixed Period,
stipulating that the contract shall be for a
period of one year, to wit:

6.2 In the event period stipulated in


item 1.2 occurs first vis--vis the
completion of the project, this contract
shall automatically terminate.
o
o
o

TERM/DURATION
The
EMPLOYER
hereby
employs,
engages and hires the EMPLOYEE and
the EMPLOYEE hereby accepts such
appointment as FORMATTER effective
FEB. 16, 1999 to FEB. 16, 2000 a period
of ONE YEAR.

xxxx
TERMINATION
6.1 In the event that EMPLOYER shall
discontinue operating its business, this
CONTRACT shall also ipso facto
terminate on the last day of the month
on which the EMPLOYER ceases
operations with the same force and
effect as is such last day of the month
were originally set as the termination
date of this Contract. Further should
the Company have no more need for
the EMPLOYEEs services on account of
completion of the project, lack of work
(sic) business losses, introduction of
new
production
processes
and
techniques, which will negate the need

On 16 February 2000, the HRAD Manager of


INNODATA wrote petitioners informing them of
their last day of work.
According
to
INNODATA,
petitioners
employment already ceased due to the end of
their contract.
On 22 May 2000, petitioners filed a Complaint
for illegal dismissal and damages against
respondents. Petitioners claimed that they
should be considered regular employees since
their positions as formatters were necessary
and desirable to the usual business of
INNODATA as an encoding, conversion and data
processing company and that they could not be
considered project employees considering that
their employment was not coterminous with any
project or undertaking, the termination of which
was predetermined.
Respondents asserted that petitioners were not
illegally dismissed, for their employment was
terminated due to the expiration of their terms
of employment.
Petitioners contracts of
employment with INNODATA were for a limited
period only, commencing on 6 September 1999
and ending on 16 February 2000.
Labor Arbiter: they were illegally dismissed. As
formatters, petitioners occupied jobs that were
necessary, desirable, and indispensable to the
data processing and encoding business of
INNODATA. By the very nature of their work as
formatters, petitioners should be considered
regular employees of INNODATA, who were
entitled to security of tenure.
NLRC: There was no illegal dismissal. Petitioners
were not regular employees, but were fixedterm employees as stipulated in their respective
contracts of employment. The NLRC observed
that the petitioners freely and voluntarily
entered into the fixed-term employment
contracts with INNODATA. Hence, INNODATA
was not guilty of illegal dismissal when it

terminated petitioners employment upon the


expiration of their contracts on 16 February
2000.
The Court of Appeals promulgated its Decision
sustaining the ruling of the NLRC that
petitioners
were
not
illegally
dismissed. Petitioners admitted entering into
contracts of employment with INNODATA for a
term of only one year and for a project called
Earthweb. In
fixed-term
contracts,
the
stipulated period of employment is governing
and not the nature thereof.

ISSUE: Whether or not petitioners were illegally


dismissed by respondents YES
1. There were no valid fixed-term contracts and
petitioners were regular employees of the
INNODATA who could not be dismissed except for
just or authorized cause.
The employment status of a person is defined
and prescribed by law and not by what the
parties say it should be. Equally important to
consider is that a contract of employment is
impressed with public interest such that labor
contracts must yield to the common good.
Thus, provisions of applicable statutes are
deemed written into the contract, and the
parties are not at liberty to insulate
themselves and their relationships from the
impact of labor laws and regulations by simply
contracting with each other.
Based on the afore-quoted provision (Article
280 of the Labor Code), the following
employees are accorded regular status: (1)
those who are engaged to perform activities
which are necessary or desirable in the usual
business or trade of the employer, regardless
of the length of their employment; and (2)
those who were initially hired as casual
employees, but have rendered at least one
year of service, whether continuous or
broken, with respect to the activity in which
they are employed.
Undoubtedly, petitioners belong to the first type of
regular employees (1) those who are engaged to
perform activities which are necessary or desirable

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

in the usual business or trade of the employer,


regardless of the length of their employment;
Test to determine whether an employment
should be considered regular or non-regular
the reasonable connection between the particular
activity performed by the employee in relation to
the usual business or trade of the employer.
In the case at bar, petitioners were employed by
INNODATA on 17 February 1999 as formatters.
Undeniably, the work performed by petitioners was
necessary or desirable in the business or trade of
INNODATA.
However, it is also true that while certain forms of
employment require the performance of usual or
desirable functions and exceed one year, these do
not necessarily result in regular employment under
Article 280 of the Labor Code.
Under the Civil Code, fixed-term employment
contracts are not limited, as they are under the
present Labor Code, to those by nature
seasonal
or
for
specific
projects
with
predetermined dates of completion; they also
include those to which the parties by free
choice have assigned a specific date of
termination.
Seasonal employment and employment for a
particular project are instances of employment in
which a period, where not expressly set down, is
necessarily implied.
2. The contracts of employment entered into by
petitioners with INNDOATA were NOT valid fixedterm
employment
contracts
which
were
automatically terminated at the expiry of the period
stipulated therein, i.e., 16 February 2000.
A fixed-term employment is valid only under certain
circumstances (Brent case):
Some familiar examples may be cited of
employment contracts which may be neither for
seasonal work nor for specific projects, but to which
a fixed term is an essential and natural
appurtenance: overseas employment contracts, for
one, to which, whatever the nature of the
engagement, the concept of regular employment
with all that it implies does not appear ever to have

26

been applied, Article 280 of the Labor Code


notwithstanding; also appointments to the positions
of dean, assistant dean, college secretary, principal,
and other administrative offices in educational
institutions, which are by practice or tradition
rotated among the faculty members, and where
fixed terms are a necessity without which no
reasonable rotation would be possible. Similarly,
despite the provisions of Article 280, Policy
Instructions No. 8 of the Minister of Labor implicitly
recognize that certain company officials may be
elected for what would amount to fixed periods, at
the expiration of which they would have to stand
down, in providing that these officials, "x x may lose
their jobs as president, executive vice-president or
vice president, etc. because the stockholders or the
board of directors for one reason or another did not
reelect them."

and insufficiencies should be resolved in favor of


labor. It is a well-entrenched doctrine that in illegal
dismissal cases, the employer has the burden of
proof. This burden was not discharged in the
present case.
AURORA LAND PROJECTS CORP. v. NLRC

FACTS:
o

Private respondent Honorio Dagui was hired by


Doa Aurora Suntay Tanjangco in 1953 to take
charge of the maintenance and repair of the
Tanjangco apartments and residential buildings.
He was to perform carpentry, plumbing,
electrical and masonry work. Upon the death of
Doa Aurora Tanjangco in 1982, her daughter,
petitioner Teresita Tanjangco Quazon, took over
the administration of all the Tanjangco
properties.

On June 8, 1991, private respondent Dagui


received the shock of his life when Mrs. Quazon
suddenly told him: "Wala ka nang trabaho mula
ngayon," on the alleged ground that his work
was unsatisfactory. On August 29, 1991, private
respondent, who was then already sixty-two
(62) years old, filed a complaint for illegal
dismissal with the Labor Arbiter.

On May 25, 1992, LA Ricardo C. Nora rendered


judgment in favor of Dagui and ordering Aurora
to pay him P195K as separation pay.

Aurora Land Projects Corporation and Teresita T.


Quazon appealed to the National Labor
Relations
Commission.
The
Commission
affirmed, with modification, the Labor Arbiter's
decision. The NLRC lowered the amount to P88K
and deleted the attoryneys fees. Hence this
petition.

3. Petitioners were NOT project employees whose


employment ceased at the end of a specific project
or undertaking.
In Philex Mining Corp. v. National Labor
Relations Commission, the Court defined project
employees as those workers hired (1) for a specific
project or undertaking, and wherein (2) the
completion or termination of such project has been
determined at the time of the engagement of the
employee.
Contracts with INNODATA, however, failed to reveal
any mention therein of what specific project or
undertaking petitioners were hired for. Although the
contracts made general references to a project,
such project was neither named nor described at all
therein. The one-year period for which petitioners
were hired was simply fixed in the employment
contracts without reference or connection to the
period required for the completion of a project.
More importantly, there is also a dearth of evidence
that such project or undertaking had already been
completed or terminated to justify the dismissal of
petitioners. In fact, petitioners alleged - and
respondents failed to dispute that petitioners did
not work on just one project, but continuously
worked for a series of projects for various clients of
INNODATA.
In
Magcalas
v.
National
Labor
Relations
Commission all doubts, uncertainties, ambiguities

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Dean Abad 2nd sem AY 2012-2013

There is job contracting permissible


under the Code if the following conditions
are met:

ISSUES/HELD:
1.

Whether or not private respondent Honorio


Dagui was an employee of petitioners.
Yes, he was an employee.
a.

2.

27

Sub-issue: Was he a regular,


casual or project employee?
Regular.

And if he were, whether or not he was


illegally dismissed. He was illegally
dismissed.

RATIO:
1st Issue: ER-EE Relationship
Petitioners claim: Dagui served therein only as a job
contractor. Dagui had control and supervision of
whoever he would take to perform a contracted job.
On occasion, Dagui was hired only as a "tubero" or
plumber as the need arises in order to unclog
sewerage pipes. Every time his services were
needed, he was paid accordingly. It was understood
that his job was limited to the specific undertaking
of unclogging the pipes. In effect, petitioners would
like us to believe that private respondent Dagui was
an independent contractor, particularly a job
contractor, and not an employee of Aurora Plaza.
We are not persuaded.

Section 8, Rule VIII, Book III of the


Implementing Rules and Regulations of the Labor
Code provides in part:

(2) The contractor has substantial capital


or investment in the form of tools,
equipment, machineries, work premises,
and other materials which are necessary in
the conduct of his business.

Honorio Dagui earns a measly sum of P180.00 a


day. Ostensibly, and by no stretch of the imagination
can Dagui qualify as a job contractor. No proof was
adduced by the petitioners to show that Dagui was
merely a job contractor, and it is absurd to expect
that private respondent, with such humble
resources, would have substantial capital or
investment in the form of tools, equipment, and
machineries, with which to conduct the business of
supplying Aurora Plaza with manpower and services
for the exclusive purpose of maintaining the
apartment houses owned by the petitioners herein.
The bare allegation of petitioners, without more,
that private respondent Dagui is a job contractor
has been disbelieved by the Labor Arbiter and the
public respondent NLRC. Dagui, by the findings of
both tribunals, was an employee of the petitioners.
We are not inclined to set aside these findings. The
issue whether or not an employer-employee
relationship exists in a given case is essentially a
question of fact. As a rule, repetitious though it has
become to state, this Court does not review
supposed errors in the decision of the NLRC which
raise factual issues, because factual findings of
agencies exercising quasi-judicial functions [like
public respondent NLRC] are accorded not only
respect but even finality, aside from the
consideration that this Court is essentially not a trier
of facts.

Jurisprudence is firmly settled that whenever the


existence of an employment relationship is in
dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control
the employee's conduct. It is the so-called "control
test," and that is, whether the employer controls or
has reserved the right to control the employee not
only as to the result of the work to be done but also
as to the means and methods by which the same is
to be accomplished, which constitute the most
important index of the existence of the employeremployee relationship. Stated otherwise, an
employer-employee relationship exists where the
person for whom the services are performed
reserves the right to control not only the end to be
achieved but also the means to be used in reaching
such end.

All these elements are present in the case at bar.


Private respondent was hired in 1953 by Doa
Aurora Suntay Tanjangco (mother of Teresita
Tanjangco-Quazon), who was then the one in charge
of the administration of the Tanjangco's various
apartments and other properties. He was employed
as a stay-in worker performing carpentry, plumbing,
electrical and necessary work (sic) needed in the
repairs of Tanjangco's properties. Upon the demise
of Doa Aurora in 1982, petitioner Teresita
Tanjangco-Quazon took over the administration of
these properties and continued to employ the
private respondent, until his unceremonious
dismissal on June 8, 1991. Dagui was not
compensated in terms of profits for his labor or
services like an independent contractor. Rather, he
was paid on a daily wage basis at the rate of
P180.00.
Employees
are
those
who
are
compensated for their labor or services by wages
rather than by profits. Clearly, Dagui fits under this
classification. Doa Aurora and later her daughter
petitioner Teresita Quazon evidently had the power

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Dean Abad 2nd sem AY 2012-2013

of dismissal for cause over the private respondent.


Finally, the records unmistakably show that the
most important requisite of control is likewise extant
in this case. It should be borne in mind that the
power of control refers merely to the existence of
the power and not to the actual exercise thereof. It
is not essential for the employer to actually
supervise the performance of duties of the
employee; it is enough that the former has a right to
wield the power. The establishment of petitioners is
engaged in the leasing of residential and apartment
buildings. Naturally, private respondent's work
therein as a maintenance man had to be performed
within the premises of herein petitioners. In fact,
petitioners do not dispute the fact that Dagui
reports for work from 7:00 o'clock in the morning
until 4:00 o'clock in the afternoon. It is not farfetched to expect, therefore, that Dagui had to
observe the instructions and specifications given by
then Doa Aurora and later by Mrs. Teresita Quazon
as to how his work had to be performed.
Parenthetically, since the job of a maintenance crew
is necessarily done within company premises, it can
be inferred that both Doa Aurora and Mrs. Quazon
could easily exercise control on private respondent
whenever they please.

TOPICAL Sub-Issue: Regular, Casual or Project


EE?
As can be gleaned from Art. 280 of the Labor Code,
there are two kinds of regular employees, namely:
(1) those who are engaged to perform activities
which are usually necessary or desirable in the
usual business or trade of the employer; and (2)
those who have rendered at least one year of
service, whether continuous or broken, with respect
to the activity in which they are employed.

28

The jobs assigned to private respondent as


maintenance man, carpenter, plumber, electrician
and mason were directly related to the business of
petitioners as lessors of residential and apartment
buildings. Moreover, such a continuing need for his
services by herein petitioners is sufficient evidence
of the necessity and indispensability of his services
to petitioners' business or trade. Private respondent
Dagui should likewise be considered a regular
employee by the mere fact that he rendered service
for the Tanjangcos for more than one year, that is,
beginning 1953 until 1982, under Doa Aurora; and
then from 1982 up to June 8, 1991 under the
petitioners, for a total of twenty-nine (29) and nine
(9)
years
respectively.
Owing
to
private
respondent's length of service, he became a regular
employee, by operation of law, one year after he
was employed in 1953 and subsequently in 1982.

Baguio Country Club Corp., v. NLRC: it is more in


consonance with the intent and spirit of the law to
rule that the status of regular employment attaches
to the casual employee on the day immediately
after the end of his first year of service. To rule
otherwise is to impose a burden on the employee
which is not sanctioned by law. Thus, the law does
not provide the qualification that the employee
must first be issued a regular appointment or must
first be formally declared as such before he can
acquire a regular status.

each project, as required by Policy Instruction No.


20, which provides:

Project employees are not entitled to


termination pay if they are terminated as a
result of the completion of the project or any
phase thereof in which they are employed,
regardless of the number of project in which
they have been employed by a particular
construction
company.
Moreover,
the
company is not required to obtain a clearance
from the Secretary of Labor in connection
with such termination. What is required of the
company is a report to the nearest Public
Employment Office for statistical purposes.

Throughout the duration of private respondent's


employment as maintenance man, there should
have been filed as many reports of termination as
there were projects actually finished, if it were true
that private respondent was only a project worker.
Failure of the petitioners to comply with this simple,
but nonetheless compulsory, requirement is proof
that Dagui is not a project employee.

2nd Issue: Illegal Termination

Petitioners claim: Dagui is just a project employee.


The circumstances of this case in light of settled
case law do not, at all, support this averment.
Consonant with a string of cases beginning with
Ochoco v. NLRC if truly, private respondent was
employed as a "project employee," petitioners
should have submitted a report of termination to the
nearest public employment office everytime his
employment is terminated due to completion of

Jurisprudence abound as to the rule that the twin


requirements of due process, substantive and
procedural, must be complied with, before a valid
dismissal exists. Without which the dismissal
becomes void. The twin requirements of notice and
hearing constitute the essential elements of due
process. This simply means that the employer shall
afford the worker ample opportunity to be beard
and to defend himself with the assistance of his
representative, if he so desires.

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Pepsi Cola Bottling Co. v. NLRC:


The law requires that the employer must
furnish the worker sought to be dismissed
with two written notices before termination of
employee can be legally effected: (1) notice
which apprises the employee of the particular
acts or omissions for which his dismissal is
sought; and (2) the subsequent notice which
informs the employee of the employer's
decision to dismiss him. Failure to comply
with the requirements taints the dismissal
with illegality. This procedure is mandatory; in
the absence of which, any judgment reached
by management is void and inexistent.

These mandatory requirements were undeniably


absent in the case at bar. Petitioner Quazon
dismissed private respondent on June 8, 1991,
without giving him any written notice informing the
worker herein of the cause for his termination.
Neither was there any hearing conducted in order to
give Dagui the opportunity to be heard and defend
himself. He was simply told: "Wala ka nang trabaho
mula
ngayon,"
allegedly
because
of
poor
workmanship on a previous job. The undignified
manner by which private respondent's services were
terminated smacks of absolute denial of the
employee's right to due process and betrays
petitioner Quazon's utter lack of respect for labor.
Such an attitude indeed deserves condemnation.

The Court, however, is bewildered why only an


award for separation pay in lieu of reinstatement
was made by both the Labor Arbiter and the NLRC.
No backwages were awarded. It must be
remembered that backwages and reinstatement are

29

two reliefs that should be given to an illegally


dismissed employee. They are separate and distinct
from each other. In the event that reinstatement is
no longer possible, as in this case, 33 separation pay
is awarded to the employee. The award of
separation pay is in lieu of reinstatement and not of
backwages. In other words, an illegally dismissed
employee is entitled to (1) either reinstatement, if
viable, or separation pay if reinstatement is no
longer viable, and (2) backwages. Payment of
backwages is specifically designed to restore an
employee's income that was lost because of his
unjust dismissal. On the other hand, payment of
separation pay is intended to provide the employee
money during the period in which he will be looking
for another employment. Considering, however,
that the termination of private respondent Dagui
was made on June 8, 1991 or after the effectivity of
the amendatory provision of Republic Act No. 6715
on March 21, 1989, private respondent's backwages
should be computed on the basis of said law.

It is true that private respondent did not appeal the


award of the Labor Arbiter awarding separation pay
sans backwages. While as a general rule, a party
who has not appealed is not entitled to affirmative
relief other than the ones granted in the decision of
the court below, law and jurisprudence authorize a
tribunal to consider errors, although unassigned, if
they involve (1) errors affecting the lower court's
jurisdiction over the subject matter, (2) plain errors
not specified, and (3) clerical errors. In this case, the
failure of the Labor Arbiter and the public
respondent NLRC to award backwages to the private
respondent, who is legally entitled thereto having
been illegally dismissed, amounts to a "plain error"
which we may rectify in this petition, although
private respondent Dagui did not bring any appeal
regarding the matter, in the interest of substantial
justice. The Supreme Court is clothed with ample
authority to review matters, even if they are not
assigned as errors on appeal, if it finds that their

consideration is necessary in arriving at a just


decision of the case. Rules of procedure are mere
tools designed to facilitate the attainment of justice.
Their strict and rigid application, which would result
in technicalities that tend to frustrate rather than
promote substantial justice, must always be
avoided. Thus, substantive rights like the award of
backwages resulting from illegal dismissal must not
be prejudiced by a rigid and technical application of
the rules.

Petitioner Quazons claim: It should only be the


corporation which should pay the monetary awards.
We disagree.

Maglutac v. National Labor Relations Commission,


Chua v. National Labor Relations Commission and
A.C. Ransom Labor Union-CCLU v. National Labor
Relations Commission: the highest and most
ranking officer of the corporation, which in this case
is petitioner Teresita Quazon as manager of Aurora
Land Projects Corporation, can be held jointly and
severally liable with the corporation for the payment
of the unpaid money claims of its employees who
were illegally dismissed. In this case, not only was
Teresita Quazon the most ranking officer of Aurora
Plaza at the time of the termination of the private
respondent, but worse, she had a direct hand in the
private respondent's illegal dismissal. A corporate
officer is not personally liable for the money claims
of discharged corporate employees unless he acted
with evident malice and bad faith in terminating
their employment. 45 Here, the failure of petitioner
Quazon to observe the mandatory requirements of
due process in terminating the services of Dagui
evinced malice and bad faith on her part, thus
making her liable.

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Dean Abad 2nd sem AY 2012-2013

Finally, petitioners aver that, assuming that private


respondent can be considered an employee of
Aurora Plaza, petitioners cannot be held liable for
separation pay for the duration of his employment
with Doa Aurora Tanjangco from 1953 up to 1982.
If petitioners should be held liable as employers,
their liability for separation pay should only be
counted from the time Dagui was rehired by the
petitioners in 1982 as a maintenance man. We
agree. Petitioners' liability for separation pay ought
to be reckoned from 1982 when petitioner Teresita
Quazon, as manager of Aurora Plaza, continued to
employ private respondent. From 1953 up to the
death of Doa Aurora sometime in 1982, private
respondent's claim for separation pay should have
been filed in the testate or intestate proceedings of
Doa Aurora. This is because the demand for
separation pay covered by the years 1953-1982 is
actually a money claim against the estate of Doa
Aurora, which claim did not survive the death of the
old woman. Thus, it must be filed against her estate
in accordance with Section 5, Rule 86 of the Revised
Rules of Court.

DISPOSITIVE: the instant petition is partly


GRANTED and the Resolution of the public
respondent National Labor Relations Commission
dated March 16, 1994 is hereby MODIFIED in that
the award of separation pay against the petitioners
shall be reckoned from the date private respondent
was re-employed by the petitioners in 1982, until
June 8, 1991. In addition to separation pay, full
backwages are likewise awarded to private
respondent, inclusive of allowances, and other
benefits.

COCOMANGAS HOTEL BEACH RESORT V. VISCA


FACTS: Respondents allege that they are regular
employees tasked with the maintenance and repair
of the resort facilities; on May 8, 1999, Maria Nida

30

Iigo-Taala, the Front Desk Officer/Sales Manager,


informed them not to report for work since the
ongoing constructions and repairs would be
temporarily suspended because they caused
irritation and annoyance to the resort's guests; as
instructed, they did not report for work the
succeeding days;
John Munro, husband of petitioner Susan Munro,
subsequently visited respondent foreman Visca and
informed him that the work suspension was due to
budgetary constraints; when respondent Visca later
discovered that four new workers were hired to do
respondents' tasks, he confronted petitioner Munro
who explained that respondents' resumption of work
was not possible due to budgetary constraints;
when not less than ten workers were subsequently
hired by petitioners to do repairs in two cottages of
the resort and two workers were retained after the
completion without respondents being allowed to
resume work, they filed their individual complaints
for illegal dismissal.
LA- Visca was an independent contractor; no illegal
dismissal
NLRC- reversed LA, regular employees
NLRC MR reverse, project employees
CA- regular employees

HELD/ RATIO: In the present case, respondents


cannot be classified as project employees, since
they worked continuously for petitioners from three
to twelve years without any mention of a "project"
to which they were specifically assigned. While they
had designations as "foreman," "carpenter" and
"mason," they performed work other than carpentry
or masonry. They were tasked with the maintenance
and repair of the furniture, motor boats, cottages,
and windbreakers and other resort facilities. There is
likewise no evidence of the project employment
contracts covering respondents' alleged periods of
employment. More importantly, there is no evidence
that petitioners reported the termination of
respondents' supposed project employment to the
DOLE as project employees. Department Order No.
19, as well as the old Policy Instructions No. 20,

requires employers to submit a report of an


employees termination to the nearest public
employment office every time his employment is
terminated due to a completion of a project.
Petitioners' failure to file termination reports is an
indication that the respondents were not project
employees but regular employees.

This Court has held that an employment ceases to


be coterminous with specific projects when the
employee is continuously rehired due to the
demands of employers business and re-engaged for
many more projects without interruption.

The Court is not persuaded by petitioners'


submission that respondents' services are not
necessary or desirable to the usual trade or
business of the resort. The repeated and continuing
need for their services is sufficient evidence of the
necessity, if not indispensability, of their services to
petitioners' resort business.

In Maraguinot, Jr. v. National Labor Relations


Commission, the Court ruled that "once a project or
work pool employee has been: (1) continuously, as
opposed to intermittently, rehired by the same
employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and
indispensable to the usual business or trade of the
employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence."

That respondents were regular employees is further


bolstered by the following evidence: (a) the SSS

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Quarterly Summary of Contribution Payments listing


respondents as employees of petitioners; (b) the
Service Record Certificates stating that respondents
were employees of petitioners for periods ranging
from three to twelve years and all have given "very
satisfactory
performance"; (c)
petty
cash
vouchers43showing payment of respondents' salaries
and holiday and overtime pays.

V.MANAGEMENT PREROGATIVES
SAN MIGUEL BREWERY SALES FORCE UNION
(PTGWO) v. OPLE

FACTS: On 17 April 1978, a CBA was entered into


by the petitioner Union and private respondent San
Miguel Corporation (SMC). Art. IV, Sec. 1 of the CBA
provides: Employees within the appropriate
bargaining unit shall be entitled to a basic monthly
compensation plus commission based on their
respective sales.

On September 1979, SMC introduced a marketing


scheme called the Complementary Distribution
System (CDS), whereby its beer produces were
offered for sale directly to wholesalers through
SMCs sales offices.

31

SMC meanwhile offered to compensate salesmen


who would be adversely affected by the new
scheme.

The Minister of Labor dismissed the petition.


Contrary to the unions assertion, the new scheme
did not discourage union organization but was
rather part of SMCs overall plan to improve
efficiency and economy and at the same time gain
profit to the highest. While it may introduce change
to the current set up, such change is too
insignificant to be a violation of the right to selforganize. The Union failed to consider that corollary
to the CDS is SMCs effort to compensate whatever
loss the workers may suffer because of the new plan
over and above what is provided in the CBA this is
an indication that management is devoid of any
anti-union hues.

The notice of strike was thus dismissed, however


SMC was ordered to pay an additional 3 months
back adjustment commissions over and above the
commissions under the CDS.

ISSUE: WON the CDS violates the CBA.


The union filed a complaint for unfair labor practice
with a notice of strike. They contend that the CDS is
contrary to the current scheme where Route
Salesmen were assigned territories to sell their beer
and wholesalers thus bought from the salesmen, not
from SMC. Thus CDS violates Art. IV, Sec. 1 of the
CBA because it would reduce the take home pay of
the salesmen and the truck helpers would be
unfairly competing with them.

HELD: NO. It is a valid exercise of management


prerogative.
Except as limited by special laws, an employer is
free to regulate, according to his own discretion and
judgment, all aspects of employment, including

hiring, work assignments, working methods, time,


place and manner of work, tools to be
used, processes to be followed, supervision of
workers, working regulations, transfer of employees,
work supervision, lay-off of workers and the
discipline, dismissal and recall of work.

Every business enterprise endeavors to increase its


profits. In the process, it may adopt or devise means
designed towards that goal. Even as the law is
solicitous of the welfare of the employees, it must
also protect the right of an employer to exercise
what are clearly management prerogatives. The free
will of management to conduct its own business
affairs to achieve its purpose cannot be denied.

So long as a company's management prerogatives


are exercised in good faith for the advancement of
the employer's interest and not for the purpose of
defeating or circumventing the rights of the
employees under special laws or under valid
agreements, this Court will uphold them.

San Miguel Corporation's offer to compensate the


members of its sales force who will be adversely
affected by the implementation of the CDS by
paying them a so-called "back adjustment
commission" to make up for the commissions they
might lose as a result of the CDS proves the
company's good faith and lack of intention to bust
their union.

FARROL v. CA
FACTS:

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

o
o

o
o

Wenifrado Farrol was the station cashier of RCPI


Cotabato City Station.
There was a P50K cash shortage in the branchs
Peragram Petty Cash Funds. Farrol was required
to explain the cash shortage. He paid to P25K to
RCPI
He was then required to explain why he should
not be dismissed. Petitioner wrote to the Field
Auditor stating that the missing funds were
used for the payment of the retirement benefits
earlier referred by the Branch Manager and that
he already paid P25k. After he made 2 more
payments of the cash shortage, he was placed
under preventive suspensions. He still made 2
payments of the balance.
RCPI then sent Farrol a letter informing him of
the termination of his services for alleging that
part of the cash shortage was used for payment
of salaries and retirement benefits, disregard of
policies
involving
statistical
reports,
malversation/misappropriation (which is a
ground for dismissal), and loss of trust and
confidence.
Unaware of the termination letter, he requested
his
reinstatement
since
his
preventive
suspension had expired. Ferrol even manifested
his willingness to settle the case. RCPI informed
him that his employment had already been
terminated. The conflict was sent to the
grievance committee. Two years later, it was
submitted for voluntary arbitration.
VA ruled in favor of Farrol. RCPI filed a petition
for certiorari before the CA which reversed VA
decision. CA also dismissed MFR.
Farrol now filed a petition for review on
certiorari on the ground that his dismissal was
illegal because he was not afforded due process
and that he cannot be held liable for the loss of
trust and confidence reposed in him.

ISSUE: WON he was illegally terminated


HELD: YES
BOP resides on the employer to prove that there
was valid cause for dismissal, and that he was
afforded the opportunity to be heard and defend
himself.
For the 1st
notice, RCPI required petitioner to
explain why he failed to account for the shortage.
The 2nd notice was that informing Farrol of his

32

termination. it does not clearly cite the reasons for


dismissal, nor were there facts and circumstances in
support thereof.

Even assuming there was a breach of trust and


confidence, there was no evidence that Farrol was a
managerial employee. The term trust and
confidence is restricted to managerial employees.
RCPI alleges that under its rules, petitioners
infraction is punishable by dismissal. However,
employers rules cannot preclude the state from
inquiring whether strict and rigid application or
interpretation would be too harsh to the employee.
Farrol has no previous record in his 24 long years of
service. This is Farrols 1st offense, to which the
Court holds that dismissal is too harsh and grossly
disproportionate.

On discipline of employees:
Although the employer has the prerogative to
discipline or dismiss its employee, such prerogative
cannot be exercised wantonly, but must be
controlled by substantive due process and tempered
by the fundamental policy of protection to labor
enshrined in the Constitution.
Infractions committed by an employee should merit
only the corresponding sanction demanded by the
circumstances. The penalty must be commensurate
with the act, conduct or omission imputed to the
employee and imposed in connection with
employers disciplinary authority.
Disposition CA is REVERSED and SET ASIDE and
new one entered REINSTATING the decision of the
Voluntary Arbitrator subject to the MODIFICATION
that petitioners separation pay be recomputed to
include the period within which backwages are due.
For this purpose, this case is REMANDED to the
Voluntary Arbitrator for proper computation of
backwages, separation pay, 13th month pay, sick
leave conversion and vacation leave conversion.
PHIL. TELEGRAPH AND TELEPHONE CORP. v.
LAPLANA
FACTS:
o
Alicia Laplana was cashier of Baguio City Br.
Office of PT&T.

o
o

o
o

In March 1984, PT&T Treasurer directed Laplana


to transfer to companys Laoag City branch,
BUT Laplana refused such reassignment (kasi
permanent residence na daw nya ang Baguio,
transferring to Laoag will entail additional
expenses, she will be away from her family
which might affect her efficiency daw, and since
shes been working with PT&T Baguio for 6
years na, she has developed well working
relationships with her co-employees there), and
instead suggested that qualified clerks of
Baguio be trained for that purpose
PT&T Treasurer reiterated order of reassignment
to assume the same position of branch cashier
there, and that Laplana turn over documents,
receipts in her custody to Rose Caysido, the
new cashier for Baguio branch. Laplana still
didnt want to, reiterating her reasons. She then
got a telegram from Treasurer ordering her to
report to Manila for new job assignment,
otherwise it will be considered abandonment of
her job -> disciplinary action. Laplana replied
saying I LOVE WORKING FOR YOUR COMPANY,
HOWEVER I AM SORRY I CANNOT ACCEPT YOUR
JOB OFFER IN MANILA. THANK YOU AND
RETRENCH ME INSTEAD.
She was terminated by retrenchment, given
separation pay and 13th month pay plus
Laplana signed quitclaim.
THEN, she filed with LA a complaint: she was
forced terminated, no ground for retrenchment
and that act of transferring was arbitrary and
without purpose, only to harass and force her to
resign. RESPONDENTS DEFENSES: it was valid
exercise of management prerogative, she was
terminated because she said explicitly that she
would rather be terminated than be transferred,
increased sales in Laoag.
LA: favored Laplana, illegal dismissal; ordered
reinstatement; transfer motivated by bad faith.
NLRC: affirmed LA

ISSUE: WON the termination was legal and proper.


HELD: Yes
o
Except as otherwise limited by special laws,
employer is free to regulate according to his
own discretion and judgment, all aspects of
employment including hiring, work assignments
, working methods, time, place and manner of
work- management prerogative

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Even as the law is solicitous of the employees


welfare, it cannot ignore the right of the
employer to exercise what are clearly and
obviously management prerogatives; basta
such exercise of management prerogative is not
motivated by BAD FAITH and without grave
abuse of discretion. It cannot be a transfer that
is unnecessary, inconvenient and prejudicial to
employee.
In this case, Laplana had, to all intents and
purposes resigned from her position, she
unequivocally asked for it, and got separation
pay
No showing that PT&T was transferring her to
penalize her or discriminate against her. Here,
transfer order was a sound business judgment.

33

ZAFRA v. COURT OF APPEALS


FACTS: Petitioners Zafra and Ecarma was hired by
PLDT as Operations Analsyt and Junior Operations
analyst respectively, and assigned in Cebu. They
were chosen to attend a software training program
in Germany in preparation for "Alcatel 1000 S12."
Upon their return they were transferred to Manila,
an action they protested to. Petitioners tried to
appeal to PLDT management but to no avail, so they
were forced to resign. Hence, the complain for
constructive dismissal and non-payment of benefits
under the CBA. In its defense, PLDT averred that
petitioners agreed to accept any assignment within
PDT in the application for employment and in the
undertaking they executed prior to their training in
Germany. The Labor arbiter ruled in favor of
buttoners but the CA reversed.

ISSUE: WON the transfer of Petitioners was a valid


exercise of management prerogative.
HELD: NO
o
The fact that petitioners, in their application for
employment, agreed to be transferred or
assigned to any branch should not be taken in
isolation, but rather in conjunction with the
established company practice in PLDT. In a
series of Inter Office Memoranda, it was shown
that the standard operating procedure in PLDT
is to inform personnel regarding the nature and
location of their future assignments after
training abroad. Such procedure had already

ripened into company practice that could no


longer
be
peremptorily
withdrawn,
discontinued, or eliminated by the employer. In
the case at bar, no notice was given.
The
appellate
courts
justification
that
petitioners transfer was a management
prerogative did not quite square with the
preceding evidence on record, which are not
disputed. To say that petitioners were not
constructively dismissed inasmuch as the
transfer was effected without demotion in rank
or diminution of salary benefits is, to our mind,
inaccurate. It is well to remember that
constructive dismissal does not always involve
forthright dismissal or diminution in rank,
compensation, benefits, and privileges. For an
act of clear discrimination, insensibility, or
disdain by an employer may become so
unbearable on the part of the employee that it
could foreclose any choice by him except to
forego his continued employment
The
insensibility of private respondents is at once
deducible from the foregoing circumstances.
Despite their knowledge that the lone
operations and maintenance center of the 33
ALCATEL 1000 S12 Exchanges would be
homed in Sampaloc PLDT officials neglected
to disclose this vital piece of information to
petitioners before they acceded to be trained
abroad. On arriving home, they did not give
complaining workers any other option but
placed them in an either/or straightjacket, that
appeared too oppressive for those concerned.
Needless to say, had they known about their
pre-planned reassignments, petitioners could
have declined the foreign training intended for
personnel assigned to the Manila office. The
lure of a foreign trip is fleeting while a
reassignment from Cebu to Manila entails major
and permanent readjustments for petitioners
and their families.
We are not unaware that the transfer of an
employee ordinarily lies within the ambit of
management prerogatives. However, a transfer
amounts to constructive dismissal when the
transfer is unreasonable, inconvenient, or
prejudicial to the employee, and involves a
demotion in rank or diminution of salaries,
benefits, and other privileges. In the present
case,
petitioners
were
unceremoniously
transferred,
necessitating
their
families

relocation from Cebu to Manila. This act of


management appears to be arbitrary without
the usual notice that should have been done
even prior to their training abroad. From the
employees viewpoint, such action affecting
their families are burdensome, economically
and emotionally. It is no exaggeration to say
that their forced transfer is not only
unreasonable, inconvenient, and prejudicial, but
to our mind, also in defiance of basic due
process and fair play in employment relations.
AURELIO v. NLRC

FACTS: Jean Aurelio was clinical instructor of the


College of Nursing of Northwestern College (NWC)
since 1917 before she was appointed Dean in 1979.
In 1981, she became College Administrator/VicePresident for Administration and was later promoted
to Executive Vice-President.

The Board of Directors of NWC, elected annually,


manages NWC. Individual respondents had their
annual meeting at their principal office in Laoag and
elected officers. Since then, they have had effective
control of the management and regularly exercised
their corporate powers. When Respondents took
over the management of NWC, there was
reorganization. The realignment of positions was
done to minimize expenditures in response to a
preliminary audit revealing financial distress of the
college. This caused the abolishment of positions
including Jeans causing: (a) husband removed as
Auditor, (b) Jeans office was stripped of its facilities
(aircon and ref), (c) Jean was asked to justify the
continued use of the conference room used for team
teaching; the librarian of the College of Nursing was
removed and assigned as secretary of the Chairman
of Academic Matters and all the facilities of the
College of Nursing were taken over by the individual
respondents, (d) Jeans salary was reduced from
P7,500.00 to P5,000.00 then to P2,500.00 a month,

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(e) While petitioner was absent because of


influenza, respondents assigned her office room to
the Chairman on Management and Planning; the
Nursing conference room was assigned as the
lounge room of the members of the Board of
Directors.

Jean wrote a letter to inform President of an


indefinite leave for the following reasons: (a)
demotion without prior notice coupled with
innuendos by some people close to management
giving rise to speculations that besmirched her
reputation and character, (b) Stripping off of her
offices
facilities
without
prior
notice,
(c)
managements lack of support over facilities
improvement, (d) reduction of salary, (d) anguish
and embarrassment when management turned
conference room as lounging room. This letter was
also sent to the DECS Secretary who referred it to
the DECS Director of Region I.

An investigation was ordered and the suspension of


operation of the College of Nursing was
recommended.
The
Regional
Director,
after
investigation, confirmed the truth of the allegations
in the letter. When the petitioner was going to
resume to work, NWC refused. With these, a case
for illegal dismissal was filed. Based on
investigations, it was found that she did not contest
the reorganization because: (a) NWC violation of
Admin. Manual for Private Schools, (b) NWC failure
to meet obligations with creditors, (c) redundancy of
former positions. Further, it was uncovered that Jean
committed irregularities such as: (a) receiving P25
from students for library maintenance without
issuing receipt, (b) not remitting/liquidating money
from Related Learning Experience fee paid by
students, (c) drawing salaries from teaching even if
she did not have teaching load. The Labor Arbiter
dismissed the complaint for loss of trust and

34

confidence in a managerial position. It further held


that the BOD has the authority to reorganize and
streamline operations of the college to minimize
expenditures. This was affirmed by the NLRC,
however awarding separation pay due to nonobservance of due process in termination
(constructive dismissal).

ISSUE/HELD:
dismissal - NO

WON

there

was

constructive

With regard her application for an indefinite leave of


absence, this was not approved by the college
authorities. But she nonetheless stopped reporting
from work. Rules on termination of employment of
managerial positions are not the same as ordinary
employees.Employers, generally, are allowed a
wider latitude of discretion in terminating the
employment of managerial personnel or those of
similar rank performing functions which by their
nature require the employer's trust and confidence,
than in the case of ordinary rank-and-file
employees. Under Art. 282 (c) of the Labor Code,
loss of trust and confidence is a valid ground for
dismissing
an
employee.
Termination
of
employment on this ground does not require proof
beyond reasonable doubt. All that is needed is for
the employer to establish sufficient basis for the
dismissal of the employee. The Court also gave
credence to the allegation that she was not afforded
due process; however the amount awarded should
have been less in accordance with the Wenphil
doctrine.

Jeans assumption to EVP was without authority


from the BOD. She cannot claim that she was
dismissed from the position of Administrator and
Vice-President for Administration because her

continuous occupation of the positions is at the


discretion or pleasure of the Board of Directors.

On Management Prerogative

The management of NWC rests on its Board of


Directors including the selection of members of the
faculty who may be allowed to assume other
positions in the college aside from that of teacher or
instructor. In 1988, when the then new Board of
Directors abolished the additional positions held by
the petitioner, it was merely exercising its right
vested in the Articles of Incorporation.

The Board abolished the positions not because the


petitioner was the occupant thereof but because the
positions had become redundant with functions
overlapping those of the President of the college.
The Board realized that the college was violating the
Administrative Manual for Private School which
requires that all collegiate departments should have
a full-time head.

It is not denied that the BOD has the power to


reorganize as implied or incidental to its power to
conduct the regular business affairs of the
corporation. Management is at liberty, absent any
malice on its part, to abolish positions which it
deems no longer necessary. When Jean was stripped
by the Board of her positions as Executive Vice
President and Vice President for Administration, with
a corresponding reduction in salary, the Board did
not act in a capricious, whimsical, and arbitrary
manner, thus negating malice and bad faith.

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35

LEONARDO v. NLRC
FACTS:
Petitioners:
Aurelio Fuerte employed by Reynaldos Marketing
Corp as muffler specialist, receiving P45 per day and
when he was promoted as supervisor, it was
increased to P122/day plus weekly supervisors
allowance of P600. He was informed that he would
be transferred to Sucat plant due to his failure to
meet sales quota and his supervisors allowance
was withdrawn. He protested his transfer and filed a
complaint for illegal termination.
Danilo Leonardo hired as auto-aircon mechanic
with salary of P35/day and increased to P90/day
when he became regular. He claims to have
received a monthly allowance of P2,500 as share in
the profits of auto-aircon division. He was informed
that his services were no longer needed and he also
filed complaint for illegal termination.
LA: ruled in favor of employees and employer was
ordered to reinstate petitioners
NLRC: modified decision; affirmed reinstatement of
Fuerte but without backwages but dismissed
Leonardos complaint for lack of merit
Employers argument: Fuerte was never terminated
but he was demoted for failure to meet his quota for
a certain number of consecutive months. This
company policy is intended to foster competition
among employees.
Leonardo abandoned his post following an
investigation where he was asked to explain an
incident
of
alleged
sideline
work.
Upon
questioning, Leonardo gave contradictory excuses
and he stopped reporting for work but filed his
complaint ten months after his alleged termination.
ISSUE: WON
dismissed.

the

employees

were

who fails to meet his sales quota for 3 consecutive


months shall be stripped of supervisors designation
and allowance. In this case, company went beyond
3 months before withdrawing Fuertes allowance.
An employer acts well within its rights in
transferring an employee as it sees fit provided that
there is no demotion in rank or diminution in pay.
Constructive dismissal is defined as an involuntary
resignation resorted to when continued employment
becomes impossible, unreasonable, or unlikely;
when there is a demotion in rank or diminution in
pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the
employee.
Employer demoted Fuerte for cause. The right to
demote an employee falls within the category of
management prerogatives. An employer is entitled
to impose productivity standards for its workers,
and in fact, non-compliance may be visited with a
penalty even more severe than demotion. 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
work goals or work quotas, either by failing to
complete the same within the allotted reasonable
period, or by producing unsatisfactory results. This
management prerogative of requiring standards
may be availed of so long as they are exercised in
good faith for the advancement of the employers
interest.
In the case of Leonard, evidence shows that he
abandoned his work and after he left, he got
employed with Dennis Motors Corp as aircon
mechanic. For abandonment to constitute a valid
cause for termination of employment, there must be
a deliberate unjustified refusal of the employee to
resume his employment. This refusal must be
clearly shown, mere absence is not sufficient, it
must be accompanied by overt acts unerringly
pointing to the facts that the employee simply does
not want to work anymore.

illegally

HELD: NO
Fuertes failure to meet his quota is supported by
reports showing that his performance was below
par. It was the companys policy that an employer

Held: complaints for dismissal are dismissed for lack


of merit
ALMODIEL v. NLRC

FACTS:
Farle P. Almodiel is a certified public accountant who
was hired as Cost Accounting Manager of
respondent Raytheon Philippines, Inc. Before said
employment, he was the accounts executive of
Integrated Microelectronics, Inc. for several years.

On August 17, 1988, he recommended and


submitted
a
Cost
Accounting/Finance
Reorganization, affecting the whole finance group
but the same was disapproved by the Controller.
However, he was assured by the Controller that
should his position or department which was
apparently a one-man department with no staff
becomes untenable or unable to deliver the needed
service due to manpower constraint, he would be
given a three (3) year advance notice.

In the meantime, the standard cost accounting


system was installed and used at the Raytheon
plants and subsidiaries worldwide, including the
Philippines. As a consequence, the services of a
Cost Accounting Manager allegedly entailed only the
submission of periodic reports that would use
computerized forms prescribed and designed by the
international head office of the Raytheon Company
in California, USA.

On January 27, 1989, petitioner was summoned by


his immediate boss and was told of the abolition of
his position on the ground of redundancy. He
pleaded with management to defer its action or
transfer him to another department, but he was told
that the decision of management was final and that
the same has been conveyed to the Department of
Labor and Employment.

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Dean Abad 2nd sem AY 2012-2013

36

Labor Arbiter: complainant's termination on the


ground of redundancy is highly irregular and without
legal and factual basis.

NLRC: reversed the decision and directed Raytheon


to pay petitioner separation pay.

Hence, the instant petition.


From this decision, petitioner filed the instant
petition averring that The public respondent
committed grave abuse of discretion.

2. Petitioner claims that the functions of his position


were
absorbed
by
the
Payroll/Mis/Finance
Department under the management of Danny Ang
Tan Chai, a resident alien without any working
permit. Petitioner argues that the corollary functions
appertaining to cost accounting were dispersed to
other units in the Finance Department. He also
claims that he should have been the Manager
because he is more qualified than Ang Tan Chai.

Raytheon insists that petitioner's functions as Cost


Accounting Manager had not been absorbed by Ang
Tan Chai.

ISSUES/ HELD:
1.

Whether
the
termination
employment is valid? Yes.

2.

(TOPICAL) Whether bad faith, malice and


irregularity crept in the abolition of petitioner's
position of Cost Accounting Manager on the
ground of redundancy? NO.

3.

Whether there was unlawful discrimination


when Raytheon caused corollary functions
appertaining to cost accounting to be absorbed
by Danny Ang Tan Chai, a resident alien without
a working permit? None.

RATIO:

1. Petitioner was duly advised, one (1) month


before, of the termination of his employment on the
ground of redundancy in a written notice by his
immediate superior. He was issued a check for
P54,863.00 representing separation pay.

of

Almodiels
Even conceding that the functions of petitioner's
position were merely transferred, no malice or bad
faith can be imputed from said act. Redundancy
exists where the services of an employee are in
excess of what is reasonably demanded by the
actual requirements of the enterprise. The
characterization of an employee's services as no
longer necessary or sustainable, and therefore,
properly terminable, was an exercise of business
judgment on the part of the employer. The wisdom
or soundness of such characterization or decision
was not subject to discretionary review on the part
of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and
malicious action is not shown.

An employer has no legal obligation to keep more


employees than are necessary for the operation of
its business. Petitioner does not dispute the fact
that a cost accounting system was installed and
used at Raytheon subsidiaries and plants worldwide;
and that the functions of his position involve the
submission
of
periodic
reports
utilizing
computerized forms designed and prescribed by the
head office with the installation of said accounting
system. Petitioner attempts to controvert these
realities by alleging that some of the functions of his
position were still indispensable and were actually
dispersed to another department. What these
indispensable functions that were dispersed, he
failed however, to specify and point out.

Considering further that petitioner herein held a


position which was definitely managerial in
character, Raytheon had a broad latitude of
discretion in abolishing his position. An employer
has a much wider discretion in terminating
employment relationship of managerial personnel
compared to rank and file employees. Officers in
such key positions perform not only functions which
by nature require the employer's full trust and
confidence but also functions that spell the success
or failure of an enterprise.

3. Article 40 of the Labor Code which requires


employment permit refers to non-resident aliens.
Since Ang Tan Chai is a resident alien, he does not
fall within the ambit of the provision.

On the issue that Almodiel is more qualified, it


should be noted that Ang Tan Chai was promoted to
the position during the middle part of 1988 or
before the abolition of petitioner's position in early

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Dean Abad 2nd sem AY 2012-2013

1989. An objection founded on the ground that one


has better credentials over the appointee is frowned
upon so long as the latter possesses the minimum
qualifications for the position. In the case at bar,
since petitioner does not allege that Ang Tan Chai
does not qualify for the position, the Court cannot
substitute its discretion and judgment for that which
is clearly and exclusively management prerogative.

PRODUCERS BANK OF THE PHILIPPINES v.


NLRC
FACTS: Prefatorily, at the time the instant
controversy started, petitioner was placed by the
then Central Bank of the Philippines (now Bangko
Sentral ng Pilipinas) under a conservator for the
purpose of protecting its assets. It appears that
when the union sought the implementation of
Section 1, Article XI of the CBA regarding the
retirement plan and Section 4, Article X thereof,
pertaining to uniform allowance, the acting
conservator of the petitioner expressed her
objection to such plan, resulting in an impasse
between the petitioner bank and the private
respondent union. The deadlock continued for at
least six months when the union, to resolve the
issue, decided to file a case against the petitioner
for unfair labor practice and for flagrant violation of
the CBA provisions.
ISSUE: The petitioner asserts since the employees
have retired, as a consequence of which no
employee-employer relationship exists anymore
between it and the employees, the union no longer
had the personality to file the complaint for them.
HELD: Petitioner's contention in untenable.
Retirement results from a voluntary agreement
between the employer and the employee whereby
the latter after reaching a certain age agrees to
sever his employment with the former. [Soberano v.
Secretary of Labor, 99 SCRA 549 (1980)] The very
essence of retirement is the termination of the
employer-employee relationship.
Hence, the retirement of an employee does not, in
itself, affect his employment status especially when

37

it involves all rights and benefits due to him, since


these must be protected as though there had been
no interruption of service. It must be borne in mind
that the retirement scheme was part of the
employment package and the benefits to be derived
therefrom constituted, as it were, a continuing
consideration for services rendered, as well as an
effective inducement for remaining with the
corporation. It is intended to help the employee
enjoy the remaining years of his life, releasing him
from the burden of worrying for his financial
support, and are a form of reward for his loyalty.
[Laginlin v. WCC, 159 SCRA 91 (1988)]
When the retired employees were requesting that
their retirement benefits be granted, they were not
pleading for generosity but were merely demanding
that their rights, as embodied in the CBA, be
recognized. Thus, when an employee has retired but
his benefits under the law or the CBA have not yet
been given, he still retains, for the purpose of
prosecuting his claims, the status of an employee
entitled to the protection of the Labor Code, one of
which is the protection of the labor union.
INTERPHIL LABORATORIES EMPLOYEES UNIONFFW v. INTERPHIL LABORATORIES, INC.
FACTS:
o
Interphil Laboratories Employees Union-FFW is
the sole and exclusive bargaining agent of the
rank-and
file
employees
of
Interphil
Laboratories, Inc., a company engaged in the
business of manufacturing and packaging
pharmaceutical products.
o
They had a Collective Bargaining Agreement
(CBA) effective from August 1, 1990 to July 31,
1993.
o
Prior to the expiration of the CBA, Allesandro
Salazar,
the
vice-president
of
the
HR
Department and Nestor Ocampo, the union
president and Hernando Clemente, a union
director had a meeting. The representatives of
the union were asking to make the new CBA
effective for 2 years.
o
Salazar informed them that it was still
premature to discuss the new CBA.
o
The following day, all the rank-and-file
employees refused to follow their regular two-

o
o
o
o
o

shift work schedule 6:00am to 6:00pm and from


6:00pm to 6:00am.
At 2:00 pm and 2:00 am respectively, the
employees stopped working without sealing the
containers and securing the raw materials they
were working on.
Enrico Gonzales, a union director, told Salazar
that the employees would only return to their
normal work schedule if the company would
agree to their demands as to the effectivity and
duration of the new CBA.
In addition, the employees started to engage in
a work slowdown campaign during the time
they were working thus substantially delaying
the production of the company.
Respondent company filed with the NLRC to
declare illegal the petitioner unions overtime
boycott and work slowdown which amounted to
illegal strike.
The respondent company filed with the NCMB
an urgent request for mediation.
However the parties failed to arrive at an
agreement.
Petitioner union then filed with NCMB a notice of
strike citing unfair labor practice allegedly
committed by respondent company.
In the interim, the case before NLRC continued.
The labor arbiter then found that the overtime
boycott and the work slowdown as illegal strike.
Petitioner union contended that according to
the provisions of their CBA on working hours
clearly state that the normal working hours
were from 7:30 am to 4:30pm. The labor arbiter
should not have admitted other evidence than
that stated in the CBA.ISSUE

ISSUE: WON the working hours of the petitioner is


only from 7:30 am to 4:30 pm.
HELD: NO. The parties in the CBA stipulated that:
the schedule of shift work shall be maintained;
however the company may change the prevailing
work time at its discretion, should change be
necessary in the operations of the Company. All
employees shall observe such rules as have been
laid down by the company for the purpose of
effecting control over working hours. It is evident
from the foregoing provisions that the working hours
may be changed, at the discretion of the company,
should such change be necessary for its operations

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Dean Abad 2nd sem AY 2012-2013

and that the employees shall observe such rules as


have been laid down by the company. The company
had to adopt a continuous 24-hour work daily
schedule by reason of the nature of its business and
the demands of its clients. It was established that
the employees adhered to the said work schedule
since 1988. The employees are deemed to have
waived the eight-hour schedule since they followed,
without any question or complain, the two shift
schedule while their CBA was still in force and even
prior thereto. As the employees assented by
practice to this arrangement, they cannot now be
heard to claim that the overtime boycott is justified
because they were not obliged to work beyond eight
hours.
PHILIPPINE AIRLINES, INC. v. NLRC
FACTS: On March 15, 1985, PAL completely revised
its 1966 Code of Discipline. The Code was circulated
among the employees and was immediately
implemented, and some employees were subjected
to the disciplinary measures.
The Philippine Airlines Employees Association
(PALEA) filed a complaint before the NLRC
contending
that
PAL,
by
its
unilateral
implementation of the Code, was guilty of unfair
labor practice, specifically Paragraphs E and G of Art
249 and Art 253 of the Labor Code. PALEA alleged
that copies of the Code had been circulated in
limited numbers; that being penal in nature the
Code must conform with the requirements of
sufficient publication, and that the Code was
arbitrary, oppressive, and prejudicial to the rights of
the employees. It prayed that implementation of the
Code be held in abeyance; that PAL should discuss
the substance of the Code with PALEA; that
employees dismissed under the Code reinstated and
their cases subjected to further hearing; and that
PAL be declared guilty of unfair labor practice and
be ordered to pay damages.
PAL filed a MTD, asserting its prerogative as an
employer to prescribe rules and regulations
regarding employees' conduct in carrying out their
duties and functions, and alleging that it had not
violated the CBA or any provision of the Labor Code.

38

ISSUE: WON the formulation of a Code of Discipline


among employees is a shared responsibility of the
employer and the employees
HELD: YES. Employees have a right to participate in
the deliberation of matters which may affect their
rights and the formulation of policies relative
thereto and one such matter is the formulation of a
code of discipline.
It was only on March 2, 1989, with the approval of
RA 6715, amending Art 211 of the Labor Code, that
the law explicitly considered it a State policy "to
ensure the participation of workers in decision and
policy-making processes affecting their rights,
duties and welfare." However, even in the absence
of said clear provision of law, the exercise of
management prerogatives was never considered
boundless. Thus, in Cruz vs. Medina, it was held that
management's prerogatives must be without abuse
of discretion. In San Miguel Brewery Sales Force
Union vs. Ople, we upheld the company's right to
implement a new system of distributing its products,
but gave the following caveat: So long as a
company's management prerogatives are exercised
in good faith for the advancement the employer's
interest and not for the purpose of defeating or
circumventing the rights of the employee, under
special laws or under valid agreements, this Court
will uphold them. All this points to the conclusion
that the exercise of managerial prerogatives is not
unlimited. It is circumscribed by limitations found in
law, a CBA, or the general principles of fair play and
justice. Moreover, it must be duly established that
the prerogative being invoked is clearly a
managerial one. Verily, a line must be drawn
between management prerogatives regarding
business operations per se and those which affect
the rights of the employees. In treating the latter,
management should see to it that its employees are
at least properly informed of its decisions or modes
of action. PAL asserts that all its employees have
been furnished copies of the Code, the LA and the
NLRC found to the contrary, which finding, is
entitled to great respect.
PALEA recognizes the right of the Company to
determine matters of management policy and
Company operations and to direct its manpower.
Management of the Company includes the right to
organize, plan, direct and control operations, to hire,

assign employees to work, transfer employees from


one department to another, to promote, demote,
discipline, suspend or discharge employees for just
cause; to lay-off employees for valid and legal
causes, to introduce new or improved methods or
facilities or to change existing methods or facilities
and the right to make and enforce Company rules
and regulations to carry out the functions of
management. The exercise by management of its
prerogative shall be done in a just, reasonable,
humane and/or lawful manner. Such provision in the
CBA may not be interpreted as cession of
employees' rights to participate in the deliberation
of matters which may affect their rights and the
formulation of policies relative thereto. And one
such matter is the formulation of a code of
discipline. Industrial peace cannot be achieved if the
employees are denied their just participation in the
discussion of matters affecting their rights.
STAR PAPER CORP. v. SIMBOL
FACTS
o
Star Paper Corporation is a corporation engaged
in trading principally of paper products.
o
Ronaldo Simbol, Wilfreda Comia and Lorna
Estrella were all regular employees of the
company
o
Simbol met Alma Dayrit, also an employee of
the company, whom he married on June27,
1998. Prior to their marriage, Ongsitco, the
Manager of the Personnel and Administration
Department, advised the couple that should
they get married, one of them should resign
because of a company policy promulgated in
1995. Simbol then resigned before they got
married. A similar occurrence happened to
Comia and she also resigned before her
marriage to Howard Comia sometime 2000.
o
Estrella met Luisito Zuniga, also a co-worker, a
married man, and got her pregnant. The
company allegedly could have terminated her
services due to immorality but she opted to
resign sometime 1999. The three respondents,
Simbol, Comia, and Estrella, on separate
instances signed a Release and Confirmation
agreement.
o
Simbol and Comia allege that they did notresign
voluntarily and that they were only compelled
to resign because of an illegal company policy.

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o
o

Estrella alleges that she had a relationship with


Zuniga who misrepresented himself a married
but separated man. After she got pregnant, she
found out that he was not separated. She
severed her relationship with him to avoid
dismissal due to company policy. Sometime
November1999, she got into an accident
which necessitated her to recuperate for
21days. When she returned to work December
1999, she was denied entry into the office. She
was directed to proceed to the personnel office
where she was handed a memo which stated
that she was being dismissed for immoral
conduct.
She refused to sign the memo because she was
on leave for 21 days and wasnt given chance to
explain. When she finally submitted her
explanation, she was nonetheless dismissed by
the company. Due to her urgent need for
money, she submitted a letter of resignation in
exchange for her 13Th month pay.
The respondents filed a complaint for unfair
labor
practices,
constructive
dismissal,
separation pay and attorneys fees.
The Labor Arbiter dismissed the complain tfor
lack of merit, The NLRC affirmed the decision,
The
CA
reversed
the
NLRCfinding the
dismissal illegal and ordering the reinstatement
of the respondents with backwages.

ISSUE: WON respondents were illegally dismissed.


HELD: Yes, the dismissal is illegal
The contention of petitioners that Estrella was
pressured to resign because she got impregnated by
a married man and she could not stand being
looked upon or talked about as immoral is
incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have
gone back to work at all. Nor would she have filed a
suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary
resignation,
the employee is
compelled
by
personal reason(s) to dissociate himself from
employment. It is done with the intention of
relinquishing an office, accompanied by the act of
abandonment.
Thus, it is illogical for Estrella to resign and then
filea complaint for illegal dismissal. Given the lack of

39

sufficient evidence on the part of petitioners that


the resignation was voluntary, Estrellas dismissal is
declared illegal.
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO,
ET AL. v. GLAXO WELLCOME PHILS.
FACTS: Tecson was hired by Glaxo as a medical
representative on Oct. 24, 1995. Contract of
employment signed by Tecson stipulates, among
others, that he agrees to study and abide by the
existing company rules; to disclose to management
any existing future relationship by consanguinity or
affinity with co-employees or employees with
competing
drug
companies
and
should
management find that such relationship poses a
prossible conflict of interest, to resign from the
company. Company's Code of Employee Conduct
provides
the
same
with
stipulation
that
management may transfer the employee to another
department in a non-counterchecking position or
preparation for employment outside of the company
after 6 months.
Tecson was initially assigned to market Glaxo's
products in the Camarines Sur-Camarines Norte
area and entered into a romantic relationship with
Betsy, an employee of Astra, Glaxo's competition.
Before getting married, Tecson's District Manager
reminded him several times of the conflict of
interest but marriage took place in Sept. 1998. In
Jan. 1999, Tecson's superiors informed him of
conflict of intrest. Tecson asked for time to comply
with the condition (that either he or Betsy resign
from their respective positions). Unable to comply
with condition, Glaxo transferred Tecson to the
Butuan-Surigao City-Agusan del Sur sales area. After
his request against transfer was denied, Tecson
brought the matter to Glaxo's Grievance Committee
and while pending, he continued to act as medical
representative in the Camarines Sur-Camarines
Norte sales area. On Nov. 15, 2000, the National
Conciliation and Mediation Board ruled that Glaxo's
policy was valid...
ISSUE: WON the policy of a pharmaceutical
company prohibiting its employees from marrying
employees of any competitor company is valid
RULING:

On Equal Protection
Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies, and
other confidential programs and information from
competitors. The prohibition against pesonal or
marital relationships with employees of competitor
companies upon Glaxo's employees is reasonable
under the circumstances because relationships of
that nature might compromise the interests of the
company. That Glaxo possesses the right to protect
its economic interest cannot be denied.
It is the settled principle that the commands of the
equal protection clause are addressed only to the
state or those acting under color of its authority.
Corollarily, it has been held in a long array of US
Supreme Court decisions that the equal protection
clause erects to shield against merely privately
conduct, however, discriminatory or wrongful.
The company actually enforced the policy after
repeated requests to the employee to comply with
the policy. Indeed the application of the policy was
made in an impartial and even-handed manner, with
due regard for the lot of the employee.
On Constructive Dismissal
Constructive dismissal is defined as a quitting, an
involuntary resignation resorted to when continued
employment becomes impossible, unreasonable or
unlikely; when there is demotion in rank, or
diminution in pay; or when a clear discrimination,
insensibility, or disdain by an employer becomes
unbearable to the employee. None of these
conditions are present in the instant case.
HELD:
The
challenged
policy
has
been
implemented
by
Glaxo
impartially
and
disinterestedly for a long period of time. In the case
at bar, the record shows that Glaxo gave Tecson
several chances to eliminate the conflict of interest
brought about by his relationship with Betsy, but he
never availed of any of them.
YRASUEGUI v. PHILIPPINE AIRLINES, INC.
Quick facts: An international flight steward was
dismissed for his failure to adhere to the weight

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

standards of the airline company. It sounds


discriminatory but the Court found that it was not.
FACTS: On various dates, Petitioner was at 209
pounds, 217 pounds and 212 pounds, well beyond
the ideal weight being 166 pounds, as mandated
by the Cabin and Crew Administration Manual of
PAL. When found to be overweight, he was asked
to go on leave in order to address this. He was
unable to comply and in one instance, he even
gained weight instead by 49 pounds beyond the
limit. He was restricted to ground duty as a result.
He made a written commitment to reduce his
weight.
He remained overweight despite periods given to
him in order to comply. He failed to report for weight
checks and was formally warned that a repeated
refusal to report for weight check would be dealt
with accordingly.
In 1992, he was finally served a Notice of
Administrative Charge for violation of company
standards on weight requirements and given 10
days to answer. In his answer, he did not deny being
overweight. He claimed that his violation had been
condoned by PAL and that PAL had discriminated
against him considering that there were cabin crew
members who are similarly situated.
In 1993, petitioner was formally informed by PAL
that due to his inability to attain his ideal weight,
and considering the utmost leniency extended to
him which spanned a period covering a total of
almost five (5) years, his services were considered
terminated effective immediately. He filed a
complaint for illegal dismissal against PAL. The
Labor Arbiter ruled in his favor but this was
overturned by the Court of Appeals. Hence, his
recourse to the Supreme Court.
He argued that (1) his dismissal does not fall under
282(e) of the Labor Code; (2) continuing adherence
to the weight standards of the company is not a
bona fide occupational qualification; and (3) he was
discriminated against because other overweight
employees were promoted instead of being
disciplined.
HELD: The Court found that obesity of petitioner is
a ground for dismissal under Article 282(e) of the

40

Labor Code. It found that the weight standards of


PAL constitute a continuing qualification of an
employee in order to keep the job. And an
employee may be dismissed the moment he is
unable to comply with his ideal weight as prescribed
by the weight standards. Hence a dismissal of the
employee falls under Article 282(e) [1] of the Labor
Code. It did not give credence to Petitioners claim
that obesity is a physical abnormality and/or
illness, citing Nadura v. Benguet Consolidated, Inc.
The Supreme Court did not find the case applicable
as it was not decided under the Labor Code.
Moreover, there was no issue of flight safety in the
aforecited case. In Nadura the dismissal was due to
illness in contrast to the instant case where
petitioner was dismissed for his failure to meet the
weight standards of his employer. Another issue in
Nadura is whether or not the dismissed employee is
entitled to separation pay and damages. Here, the
issue is the propriety of the dismissal. Fifth, in
Nadura, the employee was not accorded due
process. Here, petitioner was accorded utmost
leniency, having been given more than four (4)
years to comply with the weight standards.
The Court found that the evidence on record
militates against petitioners claims that obesity is a
disease. He was able to reduce weight given the
proper attitude, determination, and self-discipline.
He even admitted during a hearing that he could
bring down his weight. The Court opined that his
fluctuating weight indicates absence of willpower
rather than an illness.
The Court also did not give weight (no pun
intended) to petitioners citation of Bonnie Cook v.
State of Rhode Island, Department of Mental Health,
Retardation and Hospitals, decided by the United
States Court of Appeals (First Circuit). In that case, it
was held that morbid obesity is a disability under
the Act cited therein and that respondent
discriminated against her based on perceived
disability. Evidence was introduced to show morbid
obesity is a physiological disorder.
The Supreme Court found that petitioner is not
morbidly obese. In the Cook case, the plaintiff was
100 pounds overweight. Petitioner was only less
than 50 pounds over his ideal weight at his
heaviest. One is tempted to thus ask if the Court

would have decided in his favor if he had weighed


more.
The Court held that the obesity of petitioner, in the
context of his work as flight attendant, becomes an
analogous cause under Article 282(e) of the Labor
Code that justifies his dismissal from the service.
His obesity may not be intentional but it is
voluntary. This element runs through all just
causes under Article 282.
Petitioner likewise argued that there should be a
statute constituting a bona fide occupational
qualification (BFOQ) where an exception allows
an employer to engage in an otherwise unlawful
form of prohibited discrimination if necessary to the
normal operation of a business or enterprise.
Petitioner claims that since there was no such
statute, there is no justification for his dismissal.
The court stated that there is no merit to the
argument that BFOQ cannot be applied if it has no
supporting statute. The weight standards of PAL are
reasonable. PAL being a common carrier is bound
to observe extraordinary diligence for the safety of
the passengers it transports. The weight standards
of PAL show its effort to comply with these exacting
obligations. PAL has committed itself to safely
transport its passengers. In order to achieve this, it
must necessarily rely on its employees, most
particularly the cabin flight deck crew who are on
board the aircraft.
Flight safety was given primary importance by the
court, stating that: It cannot be gainsaid that cabin
attendants must maintain agility at all times in
order to inspire passenger confidence on their
ability to care for the passengers when something
goes wrong. It is not farfetched to say that airline
companies, just like all common carriers, thrive due
to public confidence on their safety records. People,
especially the riding public, expect no less than that
airline companies transport their passengers to their
respective destinations safely and soundly.
Cabin crew do not only serve meals or attend to
passengers whims. Their most important activity
is to care for the safety of passengers and the
evacuation of the aircraft when an emergency
occurs. Passenger safety goes to the core of the job
of a cabin attendant. Truly, airlines need cabin

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

attendants who have the necessary strength to


open emergency doors, the agility to attend to
passengers in cramped working conditions, and the
stamina to withstand grueling flight schedules. And
the body weight and size of a cabin attendant are
important factors to consider in case of emergency.
Aircrafts have constricted cabin space, and narrow
aisles and exit doors. Airline companies cannot be
compelled to reconfigure the aircraft just for
overweight cabin attendants.
He was also found to be in estoppel since the weight
standards were made known to him prior to his
employment. He never questioned the authority of
PAL when he was asked to trim down his weight.
The Court even lapsed into Latin and Filipino: Bona
fides exigit ut quod convenit fiat. Good faith
demands that what is agreed upon shall be done.
Kung ang tao ay tapat kanyang tutuparin ang
napagkasunduan.
His allegation that he was discriminated against was
not given credence. Except for pointing out the
names of the supposed overweight cabin
attendants, he failed to indicate their respective
ideal weights; weights over their ideal weights; the
periods they were allowed to fly despite their being
overweight; the particular flights assigned to them;
the discriminating treatment they got from PAL; and
other relevant data that could have adequately
established a case of discriminatory treatment by
PAL.
Nevertheless the Court granted him separation pay
even if normally, a legally dismissed employee is
not entitled to separation pay. But it may be
awarded as an act social justice, or based on
equity, if the dismissal is not for serious
misconduct and does not reflect on the moral
character of the employee. He was thus given
separation pay equivalent to one-half (1/2) months
pay for every year of service.
It is with some irony that the scales of justice did
not tip in favor of the petitioner here. However, this
did involve a special case, where the nature of an
employees duties with respect to flight safety was
given emphasis by the Court. Not every job would
be the same and mere obesity should not be a
ground for dismissal. But health issues should be

41

enough to compel an employee to lose weight not


out of fear for his job but for fear for his life.
BISIG NG MANGGAGAWA SA TRYCO v. NLRC
FACTS: Tryco Pharma Corp. is a manufacturer of
veterinary medicines. Tryco and BMT (rank-in-file
union) signed separate MOA, providing for a
compressed workweek. The MOA was entered into
pursuant to DO No. 21, Series of 1990, Guidelines
on the Implementation of Compressed Workweek.
As provided in the MOA, 8:00 a.m. to 6:12 p.m.,
from Monday to Friday, shall be considered as the
regular working hours, and no overtime pay shall be
due and payable to the employee for work rendered
during those hours. However, should an employee
be permitted or required to work beyond 6:12 p.m.,
such employee shall be entitled to overtime pay.
Tryco informed the BWC of the DOLE of the
implementation of a compressed workweek in the
company. Meantime, Tryco received a Letter from
the Bureau of Animal Industry of the Department of
Agriculture reminding it that its production should
be conducted in San Rafael, Bulacan, not in its main
office in Caloocan City. The concerned employees
were directed to report at the companys plant site.
BMT opposed the transfer of its members to San
Rafael, Bulacan, contending that it constitutes unfair
labor practice. In protest, BMT declared a strike,
claiming that the transfer was inconvenient and
amounts to ULP.
ISSUE: Absent any evidence that the Bureau of
Animal Industry conspired with Tryco, the allegation
is not only highly irresponsible but is grossly unfair
to the government agency concerned.
The transfer of its production activities to San
Rafael, Bulacan, regardless of whether it was made
pursuant to the letter of the Bureau of Animal
Industry, was within the scope of its inherent right
to control and manage its enterprise effectively.
Managements prerogative of transferring and
reassigning employees from one area of operation
to another in order to meet the requirements of the
business is, therefore, generally not constitutive of
constructive dismissal. Indisputably, in the instant
case, the transfer orders do not entail a demotion in

rank or diminution of salaries, benefits and other


privileges of the petitioners.
Mere incidental inconvenience is not sufficient to
warrant a claim of constructive dismissal. Personal
inconvenience or hardship that will be caused to the
employee by reason of the transfer is not a valid
reason to disobey an order of transfer. Moreover,
the adoption of a compressed workweek scheme in
the company will help temper any inconvenience
that will be caused the petitioners by their transfer
to a farther workplace.
The transfer orders do not amount to ULP. Contrary
to BMTs claim, mere transfer of its members will
not paralyze and render the union ineffective. The
union was not deprived of the membership of the
petitioners whose work assignments were only
transferred to another location. There was no
showing or any indication that the transfer orders
were motivated by an intention to interfere with the
petitioners right to organize.
The MOA is enforceable and binding against the
petitioners (esp. waiver of overtime). Where it is
shown that the person making the waiver did so
voluntarily, with full understanding of what he was
doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be
recognized as valid and binding undertaking.
Notably, the MOA complied with the following
conditions set by the DOLE, under D.O. No. 21.

Labor Law Review Digests


Dean Abad 2nd sem AY 2012-2013

LABOR RELATIONS

42

VI.

RIGHT TO SELF-ORGANIZATION

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