LABOR REVIEW SET 1 1

INSULAR LIFE VS. NLRC RULING:

FACTS: 1. Independent Contractor
Insular Life Assurance Company and Basiao entered No er-ee relation in legal and generally accepted
into a contract by which Basiao was authorized to sense existed between the company and Basiao. It
solicit within the Philippines applications for was drawn from the terms of the contract they had
insurance policies. He would receive compensation in entered into, which either expressly or by necessary
the form of commissions. The contract also contained implication, made Basiao the master of his own time
provisions governing the relations of the parties, the and selling methods, left to his judgment the time,
duties of the Agent, the acts prohibited to him and the place and means of soliciting insurance, set no
modes of termination of the agreement. accomplishment quotas and compensated him on the
basis of the result obtained.
According to the contract, Basiao is an agent and is
free to exercise his own judgment as to time, place He was not bound to observe any schedule of
and means of soliciting insurance. Nothing therein working hours or report to any regular station; he
contained shall be construed to create the could seek and work on his prospects anywhere and
relationship of employee and employer between the anytime he chose to and was free to adopt the selling
agent and the company. methods he deemed most effective.
The company may terminate the contract at will, Distinguishing the status of an ee from that of an
without any previous notice to the agent. Either party independent contractor is control, that is, whether or
may terminate the contract by giving to the other not the party who engages the services of another has
notice in writing to that effect. the power to control the latter’s conduct in rendering
such service.
The parties entered into another contract-an Agency
Manager’s Contract but was later on terminated by Control Test
the Company. After vainly seeking a reconsideration,
Basiao sued the Company in a civil action and this In the case of Viana vs. Alejo Al-Lagadan, in
prompted the latter to terminate also his engagement determining the existence of er-ee relationship, the
under the 1st contract and to stop payment of his following elements are generally considered, namely:
commission. 1. The selection and engagement of the ee
Basiao thereafter filed a complaint against the 2. The payment of wages
company and its president. Without contesting the 3. The power of dismissal
termination of the 1st contract, the complaint sought 4. The power to control the ee’s conduct-
to recover commissions allegedly unpaid thereunder. although the latter is the most important
element.
The respondents disputed the Ministry’s jurisdiction
over Basiao’s claim, asserting that he was not the 2. NO. The NLRC has no jurisdiction over
Company’s employee, but an independent contractor Basiao.
and that the company had no obligation to him for
unpaid commissions under the terms and conditions Under the contract invoked by him, Basiao was not an
of his contract. ee of the company, but a commission agent, an
independent contractor whose claim for unpaid
Labor Arbiter- the agreement had established an er- commissions should have been litigated in an
ee relationship ordinary civil action. The labor arbiter erred in taking
cognizance of, and adjudicating the said claim, being
Appeal- affirmed by the NLRC without jurisdiction to do so, as did the respondent
Hence the present petition. NLRC in affirming the Arbiter’s decision.

ISSUE: G.R. No. 167622; June 29, 2010; GREGORIO V.

1. WON Basiao is an ee or an independent TONGKO, vs.THE MANUFACTURERS LIFE
contractor? INSURANCE CO. (PHILS.), INC. and RENATO A.
2. WON the Labor Arbiter has jurisdiction over VERGEL DE DIOS, Respondents. (long case)
Basiao?
 LABOR REVIEW SET 1 2

FACTS: - Subsequently, de Dios wrote Tongko another

letter, dated December 18, 2001,
- The contractual relationship between terminating Tongko’s services:Despite the
GregorioTongko and Manulife had two series of meetings and communications, both
basic phases. The first or initial phase began one-on-one meetings between yourself and
on July 1, 1977, under a Career Agent’s SVP Kevin O’Connor, some of them with me,
Agreement (Agreement) that provided: as well as group meetings with your Sales
Managers, all these efforts have failed in
It is understood and agreed that the Agent is helping you align your directions with
an independent contractor and nothing Management’s avowed agency growth policy.
contained herein shall be construed or On account thereof, Management is
interpreted as creating an employer- exercising its prerogative under Section
employee relationship between the Company 14 of your Agents Contract as we are now
and the Agent. xx Either of the parties hereto issuing this notice of termination of your
may likewise terminate his Agreement at any Agency Agreement with us effective fifteen
time without cause, by giving to the other days from the date of this letter.
party fifteen (15) days notice in writing.
- Tongko responded by filing an illegal
- The second phase started in 1983 when dismissal complaint with the
Tongko was named Unit Manager in NLRCArbitration Branch. He essentially
Manulife’s Sales Agency Organization. In alleged – despite the clear terms of the letter
1990, he became a Branch Manager. Six years terminating his Agency Agreement – that he
later (or in 1996), Tongko became a Regional was Manulife’s employee before he was
Sales Manager. illegally dismissed.
- Labor Arbiter = NO EER (Employment-
- In 2001, Manulife instituted manpower Employee relationship)
development programs at the regional sales NLRC = There is EER
management level. Respondent Renato Vergel CA = NO EER
de Dios wrote Tongko a letter dated SC (division) Nov. 7 2008) = There is EER.
November 6, 2001 on concerns that were Manulife filed MR (SC EN BANC). Hence, this
brought up during the October 18, 2001 petition.
Metro North Sales Managers Meeting. De Dios
wrote: ISSUE: WON THERE IS AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN GREGORIO TONGKO
The first step to transforming Manulife into a AND THE MANULIFE.
big league player has been very clear – to
increase the number of agents to at least RULING: NO. There is no employer-employee
1,000 strong for a start. This may seem relationship. (There were a lot of issues tackled in
diametrically opposed to the way Manulife this case about EER, pero I think mao lang ni ang
was run when you first joined the important )
organization. Since then, however, substantial
changes have taken place in the organization, We cannot consider the present case purely from a
as these have been influenced by labor law perspective, oblivious that the factual
developments both from within and without antecedents were set in the insurance industry so
the company.And that, Kevin O’Connor, SVP- that the Insurance Code primarily governs. Chapter
Agency, took to the floor to determine from IV, Title 1 of this Code is wholly devoted to
our senior agency leaders what more could be "Insurance Agents and Brokers" and specifically
done to bolster manpower development. At defines the agents and brokers relationship with the
earlier meetings, Kevin had presented insurance company and how they are governed by
information where evidently, your Region the Code and regulated by the Insurance Commission.
was the lowest performer (on a per
Manager basis) in terms of recruiting in The Insurance Code, of course, does not wholly
2000 and, as of today, continues to remain regulate the "agency" that it speaks of, as agency is a
one of the laggards in this area. civil law matter governed by the Civil Code. Thus, at
 LABOR REVIEW SET 1 3

the very least, three sets of laws – namely, the results and in the means and manner of achieving
Insurance Code, the Labor Code and the Civil Code this result. The principal in an agency relationship,
– have to be considered in looking at the present case. on the other hand, also has the prerogative to
Not to be forgotten, too, is the Agreement that the exercise control over the agent in undertaking the
parties adopted to govern their relationship for assigned task based on the parameters outlined in
purposes of selling the insurance the company offers. the pertinent laws.
To forget these other laws is to take a myopic view of
the present case and to add to the uncertainties that Under the general law on agency as applied to
now exist in considering the legal relationship insurance, an agency must be express in light of the
between the insurance company and its "agents." need for a license and for the designation by the
insurance company. In the present case, the
The main issue of whether an agency or an Agreement fully serves as grant of authority to
employment relationship exists depends on the Tongko as Manulife’s insurance agent. This
incidents of the relationship. The Labor Code concept agreement is supplemented by the company’s agency
of "control" has to be compared and distinguished practices and usages, duly accepted by the agent in
with the "control" that must necessarily exist in a carrying out the agency. By authority of the Insurance
principal-agent relationship. The principal cannot but Code, an insurance agency is for compensation, 19 a
also have his or her say in directing the course of the matter the Civil Code Rules on Agency presumes in
principal-agent relationship, especially in cases the absence of proof to the contrary. Other than the
where the company-representative relationship in compensation, the principal is bound to advance to,
the insurance industry is an agency. or to reimburse, the agent the agreed sums necessary
for the execution of the agency. By implication at
Thus, under the Insurance Code, the agent must, as a least under Article 1994 of the Civil Code, the
matter of qualification, be licensed and must also act principal can appoint two or more agents to carry out
within the parameters of the authority granted under the same assigned tasks, based necessarily on the
the license and under the contract with the principal. specific instructions and directives given to them.
Other than the need for a license, the agent is limited
in the way he offers and negotiates for the sale of the With particular relevance to the present case is the
company’s insurance products, in his collection provision that "In the execution of the agency, the
activities, and in the delivery of the insurance agent shall act in accordance with the instructions of
contract or policy. Rules regarding the desired the principal." This provision is pertinent for
results (e.g., the required volume to continue to purposes of the necessary control that the principal
qualify as a company agent, rules to check on the exercises over the agent in undertaking the assigned
parameters on the authority given to the agent, task, and is an area where the instructions can
and rules to ensure that industry, legal and intrude into the labor law concept of control so that
ethical rules are followed) are built-in elements minute consideration of the facts is necessary. A
of control specific to an insurance agency and related article is Article 1891 of the Civil Code which
should not and cannot be read as elements of binds the agent to render an account of his
control that attend an employment relationship transactions to the principal.
governed by the Labor Code.
In stark contrast with the Carungcong, the Grepalife,
On the other hand, the Civil Code defines an agent as and the second Insular Life cases, the only contract or
a "person [who] binds himself to render some service document extant and submitted as evidence in the
or to do something in representation or on behalf of present case is the Agreement – a pure agency
another, with the consent or authority of the agreement in the Civil Code context similar to the
latter."16 While this is a very broad definition that on original contract in the first Insular Life case and the
its face may even encompass an employment contract in the AFPMBAI case. And while Tongko was
relationship, the distinctions between agency and later on designated unit manager in 1983, Branch
employment are sufficiently established by law and Manager in 1990, and Regional Sales Manager in
jurisprudence. 1996, no formal contract regarding these
undertakings appears in the records of the case.
Generally, the determinative element is the Any such contract or agreement, had there been any,
control exercised over the one rendering service. could have at the very least provided the bases for
The employer controls the employee both in the
 LABOR REVIEW SET 1 4

properly ascertaining the juridical relationship alleged illegal dismissal and for the payment of
established between the parties. backwages, separation pay, actual damages and
attorney’s fees.
The primary evidence in the present case is the July 1,
1977 Agreement that governed and defined the Subsequently, respondent filed another
parties’ relations until the Agreement’s termination Complaint with the Regional Trial Court (RTC) of
in 2001. This Agreement stood for more than two Aparri, Cagayan, alleging that he contracted such
decades and, based on the records of the case, occupational disease by reason of the gross
was never modified or novated. It assumes negligence of petitioner to provide him with a safe,
primacy because it directly dealt with the nature of healthy and workable environment.
the parties’ relationship up to the very end;
moreover, both parties never disputed its In his Complaint, respondent alleged that as part of
authenticity or the accuracy of its terms. his job description, he conducts regular maintenance
check on petitioner’s facilities including its dye house
To the dissent, Tongko’s administrative functions as area, which is very hot and emits foul chemical odor
recruiter, trainer, or supervisor of other sales agents with no adequate safety measures introduced by
constituted a substantive alteration of Manulife’s petitioner. According to respondent, the air washer
authority over Tongko and the performance of his dampers and all roof exhaust vests are blown into
end of the relationship with Manulife. We could not open air, carrying dust thereto. Concerned,
deny though that Tongko remained, first and respondent recommended to management to place
foremost, an insurance agent, and that his additional roof insulation to minimize, if not, eradicate the
role as Branch Manager did not lessen his main and health hazards attendant in the work place. However,
dominant role as insurance agent; this role continued said recommendation was turned down by
to dominate the relations between Tongko and management due to high cost.
Manulife even after Tongko assumed his leadership
role among agents. This conclusion cannot be denied In reply, petitioner filed a Motion to Dismiss on the
because it proceeds from the undisputed fact that ground that the RTC has no jurisdiction over the
Tongko and Manulife never altered their July 1, 1977 subject matter of the complaint because the same
Agreement, a distinction the present case has with falls under the original and exclusive jurisdiction of
the contractual changes made in the second Insular the Labor Arbiter (LA) under Article 217(a)(4) of the
Life case. Tongko’s results-based commissions, too, Labor Code.
attest to the primacy he gave to his role as insurance
sales agent. ISSUE: Whether or not the RTC has jurisdiction over
the subject matter of respondent’s complaint praying
INDOPHIL TEXTILE MILLS VS. ENGR. SALVADOR for moral damages, exemplary damages,
ADVIENTO compensatory damages, anchored on petitioner’s
alleged gross negligence in failing to provide a safe
Petitioner Indophil Textile Mills, Inc. is a domestic and healthy working environment for respondent.
corporation engaged in the business of
manufacturing thread for weaving. Petitioner hired RULING: YES.
respondent Engr. Salvador Adviento as Civil Engineer
to maintain its facilities in Lambakin, Marilao, True, the maintenance of a safe and healthy
Bulacan. On August 7, 2002, respondent consulted a workplace is ordinarily a subject of labor cases. More,
physician due to recurring weakness and dizziness. the acts complained of appear to constitute matters
Few days later, he was diagnosed with Chronic Poly involving employee-employer relations since
Sinusitis, and thereafter, with moderate, severe and respondent used to be the Civil Engineer of
persistent Allergic Rhinitis. Accordingly, respondent petitioner. However, it should be stressed that
was advised by his doctor to totally avoid house dust respondent’s claim for damages is specifically
mite and textile dust as it will transmute into health grounded on petitioner’s gross negligence to provide
problems. a safe, healthy and workable environment for its
employees −a case of quasi-delict. This is easily
Distressed, respondent filed a complaint against ascertained from a plain and cursory reading of the
petitioner with the National Labor Relations Complaint, which enumerates the acts and/or
Commission (NLRC), San Fernando, Pampanga, for
 LABOR REVIEW SET 1 5

omissions of petitioner relative to the conditions in FACTS:

the workplace.
 Michael Alfante was a regularized computer
It is a basic tenet that jurisdiction over the subject technician for Phil. Journalists, Inc (PJI) for about 3
matter is determined upon the allegations made in years (2000-2003). He is married.
the complaint, irrespective of whether or not the  He was dismissed formally on 23 July 2003,
plaintiff is entitled to recover upon the claim asserted allegedly because his skills and knowledge of
therein, which is a matter resolved only after and as a current technology did not improve.
result of a trial. In this case, a perusal of the  Alfante filed a case of illegal dismissal against PJI.
complaint would reveal that the subject matter is one  However, the bulk of the case discusses Alfante’s
of claim for damages arising from quasi-delict, which claim that PJI did not grant him
is within the ambit of the regular court's jurisdiction. funeral/bereavement aid that he was entitled to
under the CBA. Apparently, Alfante tried to claim
In the case at bar, respondent alleges that due to the this after one of his parents died.
continued and prolonged exposure to textile dust  PIJ defenses:
seriously inimical to his health, he suffered work- - Alfante was not entitled to the funeral aid in
contracted disease which is now irreversible and the CBA because under the definition of the
incurable, and deprived him of job opportunities. SSS, the term legal dependent of a regular
Clearly, injury and damages were allegedly suffered employee:
by respondent, an element of quasi-delict. Secondly, For married ees: spouse + children
the previous contract of employment between For single ees: parents, siblings (18yo
petitioner and respondent cannot be used to counter below)
the element of "no pre-existing contractual relation"
since petitioner’s alleged gross negligence in Basically the SSS definition of legal
maintaining a hazardous work environment cannot dependent varies WON the regular
be considered a mere breach of such contract of employee is married.
employment, but falls squarely within the elements of
- While PIJ earlier approved 4 claims for
quasi-delict under Article 2176 of the Civil Code since
funeral aid in the past, these were merely
the negligence is direct, substantive and independent.
mistakes on their part on the definition of
Hence, we ruled in Yusen Air and Sea Services Phils.,
“legal dependent” If mistake, then they did not
Inc. v. Villamor that:
violation non-diminution of benefits rule under
Art 100 of the Labor Code.
When, as here, the cause of action is based on a quasi-
- PIJ insists that the CBA definition should use
delict or tort, which has no reasonable causal
the SSS definition (under RA 8282, SSS Law)
connection with any of the claims provided for in
because the CBA is silent on how “legal
Article 217, jurisdiction over the action is with the
dependent” should be defined.
regular courts.

Therefore, the RTC has jurisdiction over the subject ISSUE: WON the term ‘legal dependent,’ if not defined
matter of respondent's complaint praying for moral in the CBA, should adopt the definition of the SSS. NO.
damages, exemplary damages, compensatory
damages, anchored on petitioner's alleged gross If the CBA is silent as to how a term should be
negligence in failing to provide a safe and healthy defined, what definition should govern? The term
working environment for respondent. should be given meaning similarly set by
contemporary social legislation
CASE: Phil. Journalists Inc. v Journal Employees
Union
G.R. No. 192601 June 3, 2013 HELD:
PHILIPPINE JOURNALISTS, INC., Petitioner, vs. Ruling summary/ ultimate policy: The coverage of
JOURNAL EMPLOYEES UNION (JEU), FOR ITS the term legal dependent as used in a stipulation in a
UNION MEMBER, MICHAEL ALFANTE, Respondents. collective bargaining agreement (CBA) granting
funeral or bereavement benefit to a regular employee
for the death of a legal dependent, if the CBA is silent
about it, is to be construed as similar to the meaning
 LABOR REVIEW SET 1 6

that contemporaneous social legislations have set. member; (b) the unmarried and unemployed
This is because the terms of such social legislations legitimate, legitimated, illegitimate,
are deemed incorporated in or adopted by the CBA. acknowledged children as appearing in the
birth certificate; legally adopted or step-
children below 21 years of age; (c) children
REVIEW: Definition and force of a CBA who are 21 years old and order but suffering
from congenital disability, either physical or
A collective bargaining agreement (or CBA) mental, or any disability acquired that
refers to the negotiated contract between a legitimate renders them totally dependent on the
labor organization and the employer concerning member of our support; and (d) the parents
wages, hours of work and all other terms and who are 60 years old or older whose monthly
conditions of employment in a bargaining unit. As in income is below a certain threshold
all contracts, the parties in a CBA may establish such 3. PD 1146 + RA 8291 - dependent for support
stipulations, clauses, terms and conditions as they upon the member or pensioner; (b) the
may deem convenient provided these are not legitimate, legitimated, legally adopted child,
contrary to law, morals, good customs, public order including the illegitimate child, who is
or public policy. Thus, where the CBA is clear and unmarried, not gainfully employed, not over
unambiguous, it becomes the law between the parties the age of majority, or is over the age of
and compliance therewith is mandated by the majority but incapacitated and incapable of
express policy of the law. self-support due to a mental or physical
defect acquired prior to age of majority; and
Accordingly, the stipulations, clauses, terms
(c) the parents dependent upon the member
and conditions of the CBA, being the law between the
for support.
parties, must be complied with by them. The literal
meaning of the stipulations of the CBA, as with every
other contract, control if they are clear and leave no
doubt upon the intention of the contracting parties.
These definitions are incorporated in the CBA
because existing laws are deemed incorporated
into contracts
Social legislation defining ‘legal dependent;’ all
definitions do not distinguish between Considering that existing laws always form
married/single employees part of any contract, and are deemed incorporated in
each and every contract, the definition of legal
According to the ff. definitions, the civil status of the
dependents under the aforecited social legislations
employee as either married or single is not the
applies herein in the absence of a contrary or
controlling consideration in order that a person may
different definition mutually intended and adopted
qualify as the employee’s legal dependent. What is
by the parties in the CBA.
rather decidedly controlling is the fact that the
spouse, child, or parent is actually dependent for
support upon the employee.
Denying Alfante’s claim for funeral benefits =
diminution of benefits
1. SSS Law – a) the legal spouse entitled by law Pursuant to Article 100 of the Labor Code,
to receive support from the member; (b) the petitioner as the employer could not reduce,
legitimate, legitimated, or legally adopted, diminish, discontinue or eliminate any benefit and
and illegitimate child who is unmarried, not supplement being enjoyed by or granted to its
gainfully employed and has not reached 21 of employees. This prohibition against the diminution of
age, or, if over 21 years of age, is congenitally benefits is founded on the constitutional mandate to
or while still a minor has been permanently protect the rights of workers and to promote their
incapacitated and incapable of self-support, welfare and to afford labor full protection.
physically or mentally; and (c) the parent
who is receiving regular support from the
member. When is the giving of benefits considered a
2. RA 7875 (National Health Insurance Act) - practice, policy or tradition?
(a) the legitimate spouse who is not a
 LABOR REVIEW SET 1 7

The application of the prohibition against the  In a letter-memorandum dated

diminution of benefits presupposes that a company March 13, 2000, Reyes directed
practice, policy or tradition favorable to the respondents to report back for work and
employees has been clearly established; and that the to explain why they failed to assume their
payments made by the employer pursuant to the duties as utility/security personnel. A
practice, policy, or tradition have ripened into second letter-memorandum of the same
benefits enjoyed by them. tenor dated March 28, 2000 was also sent
to respondents. Respondents did not heed
To be considered as a practice, policy or both memoranda.
tradition, however, the giving of the benefits should
have been done over a long period of time, and must
Proceedings before the LA:
be shown to have been consistent and deliberate.
It is relevant to mention that we have not yet  In the preliminary conference set
settled on the specific minimum number of years as on February 21, 2000, respondents with
the length of time sufficient to ripen the practice, their counsel, Atty. Ronnie V. Delicana
policy or tradition into a benefit that the employer (Atty. Delicana), on one hand, and Reyes
cannot unilaterally withdraw. on the other, appeared before the Labor
Arbiter to explore the possibility of an
amicable settlement. It was agreed that
> SC upheld the CA decision ordering PIJ to pay the the parties would enter into a compromise
funeral benefits. agreement on March 7, 2000. However, on
February 29, 2000, respondents, who
were then represented by a different
counsel, Atty. Mariano R. Pefianco (Atty.
JULIES BAKESHOP AND/OR EDGAR REYES VS Pefianco), amended their complaints by
HENRY ARNAIZ, EDGAR NAPAL,⃰ and JONATHAN including in their causes of action illegal
TOLORES dismissal and a claim for reinstatement
G.R. No. 173882 and backwages.

Facts:  In his Decision dated August 25,

2000, the Labor Arbiter expressed dismay
 Reyes hired respondents as chief over respondents lack of good faith in
bakers of Julies Bakeshop, Antique. On negotiating a settlement. The Labor
January 26, 2000, respondents filed Arbiter denounced the way respondents
separate complaints against petitioners dealt with Atty. Delicana during their
for underpayment of wages, payment of discussions for a possible settlement since
premium pay for holiday and rest day, respondents themselves later on informed
service incentive leave pay, 13 th month the said tribunal that at the time of the
pay, cost of living allowance (COLA) and said discussions, they no longer
attorneys fees. These complaints were considered Atty. Delicana as their
later on consolidated. counsel. Despite this, the Labor Arbiter
still required the parties to submit their
 Subsequently, in a memorandum respective position papers. And as
dated February 16, 2000, Reyes respondents position paper was filed late
reassigned respondents as utility/security and no evidence was attached to prove the
personnel tasked to clean the outside allegations therein, the Labor Arbiter
vicinity of his bakeshops and to maintain resolved to dismiss the complaints,
peace and order in the area. Upon service
of the memo, respondents, however,  The NLRC overruled the Decision of the
refused to sign the same and likewise Labor Arbiter and held that the burden of
refused to perform their new assignments proof lies on herein petitioners as Reyes
by not reporting for work. admitted being the employer of
Tolores. Hence, petitioners not Tolores,
had the duty to advance proof. With
 LABOR REVIEW SET 1 8

respect to Arnaiz and Napal, the NLRC proceedings before the Labor Arbiter.
noted that since their alleged employer Thus, respondents complaints were
was not impleaded, said respondents dismissed except for their claims for
cases should be remanded to the Labor premium pay for holiday, and rest day,
Arbiter, and tried as new and separate service incentive leave pay, 13th month
cases. pay and COLA, which awards would stand
only if no payment therefor has yet been
 Respondents filed a MR. The NLRC found made.
merit in respondents MR. The NLRC  CA ruled that respondents were
further ruled that respondents demotion constructively dismissed since their
in rank from chief bakers to designation from chief bakers to
utility/security personnel is tantamount utility/security personnel is undoubtedly
to constructive dismissal which entitles a demotion in rank which involved “a
them to the reliefs available to illegally drastic change in the nature of work
dismissed employees. As for the money resulting to a demeaning and humiliating
claims, the NLRC granted respondents work condition.” Further, respondents
their salary differentials, premium pay for could not be held guilty of abandonment of
rest day, holiday pay, service incentive work as this was negated by their immediate
leave pay, 13th month pay and COLA. In filing of complaints to specifically ask for
awarding such monetary awards, reinstatement.
the NLRC ratiocinated that the employer
bears the burden of proving that the Issue: wheter or not the transfer/reassignment of
employees received their wages and respondents to another position without diminution
benefits. In this case, however, no proof of in pay and other privileges tantamount to
such payment was presented by the constructive dismissal?
petitioners.
Ruling: Yes. The transfer/reassignment of
 Petitioners sought to reconsider this respondents constitutes constructive dismissal.
ruling via a Motion for
Reconsideration, insisting that We have held that management is free to
respondents were not illegally dismissed regulate, according to its own discretion and
and that their reassignment or transfer as judgment, all aspects of employment, including
utility/security personnel was hiring, work assignments, working methods, time,
indispensable, made in good faith and in place and manner of work, processes to be followed,
the exercise of a valid management supervision of workers, working regulations, transfer
prerogative. of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers. The
 The NLRC, in its Resolution dated exercise of management prerogative, however, is not
December 18, 2003, again reconsidered absolute as it must be exercised in good faith and
its own ruling and held that respondents with due regard to the rights of labor.
were not dismissed, either actually or
constructively, but instead willfully In constructive dismissal cases, the
disobeyed the return to work order of employer has the burden of proving that the
their employer. The NLRC upheld transfer of an employee is for just or valid
petitioners prerogative to transfer ground, such as genuine business necessity. The
respondents if only to serve the greater employer must demonstrate that the transfer is
interest, safety and well-being of the not unreasonable, inconvenient, or prejudicial to
buying public by forestalling irregular the employee and that the transfer does not
acts of said employees. The NLRC then put involve a demotion in rank or a diminution in
the blame on respondents for disobeying salary and other benefits. “If the employer fails to
the lawful orders of their employer, overcome this burden of proof, the employee’s
noting that it was the same attitude transfer is tantamount to unlawful constructive
displayed by them in their dealings with dismissal.”
their counsel, Atty. Delicana, in the
 LABOR REVIEW SET 1 9

In this case, petitioners insist that the transfer manage the orderliness of the outside premises of the
of respondents was a measure of self-preservation bakeshop. Respondents were even prohibited from
and was prompted by a desire to protect the health of entering the bakeshop. The change in the nature of
the buying public, claiming that respondents should their work undeniably resulted to a demeaning and
be transferred to a position where they could not humiliating work condition.
sabotage the business pending resolution of their
cases. According to petitioners, the possibility that Respondents cannot be faulted for refusing to
respondents might introduce harmful substances to report for work as they were compelled to quit their
the bread while in the performance of their duties as job due to a demotion without any just cause.
chief bakers is not imaginary but real as borne out by Moreover, we have consistently held that a charge of
what Tolores did in one of the bakeshops in Culasi, abandonment is inconsistent with the filing of a
Antique where he was assigned as baker. complaint for constructive dismissal. Respondents’
demand to maintain their positions as chief bakers by
This postulation is not well-taken. On the filing a case and asking for the relief of reinstatement
contrary, petitioners failed to satisfy the burden of belies abandonment.
proving that the transfer was based on just or valid
ground. Petitioners’ bare assertions of imminent
threat from the respondents are mere accusations GJT Rebuilders vs. Ambos
which are not substantiated by any proof. This Court G.R. No. 174184 - January 28, 2015
is proscribed from making conclusions based on
mere presumptions or suppositions. An employee’s Facts:
fate cannot be justly hinged upon conjectures and
surmises. G.J.T. Rebuilders is a single proprietorship owned by
the Spouses Godofredo and Juliana Trillana (Trillana
The act attributed against Tolores does not spouses, employing Ricardo Ambos (Ricardo), Russell
even convince us as he was merely a suspected Ambos (Russell), and Benjamin Putian (Benjamin).
culprit in the alleged sabotage for which no
investigation took place to establish his guilt or G.J.T. Rebuilders rented space in the Far East Asia
culpability. Besides, Reyes still retained Tolores as an (FEA) Building, which served as the site of its
employee and chief baker when he could have machine shop. On September 8, 1996, a fire partially
dismissed him for cause if the allegations were destroyed the FEA Building.
indeed found true. In view of these, this Court finds
no compelling reason to justify the transfer of G.J.T. Rebuilders continued its business in the
respondents from chief bakers to utility/security condemned building. When the building owner
personnel. What appears to this Court is that finally refused to accommodate it, G.J.T. Rebuilders
respondents’ transfer was an act of retaliation on left its rented space and closed the machine shop on
the part of petitioners due to the former’s filing of December 15, 1997.
complaints against them, and thus, was clearly
made in bad faith. In fact, petitioner Reyes even Having lost their employment without receiving
admitted that he caused the reassignments due to the separation pay, Ricardo, Russell, and Benjamin filed a
pending complaints filed against him. Complaint for illegal dismissal before the Labor
Arbiter. They prayed for payment of allowance,
“[D]emotion involves a situation in which separation pay, and attorney’s fees.
an employee is relegated to a subordinate or less
important position constituting a reduction to a In their defense, G.J.T. Rebuilders and the Trillana
lower grade or rank, with a corresponding spouses argued that G.J.T. Rebuilders suffered serious
decrease in duties and responsibilities, and usually business losses and financial reverses, forcing it to
accompanied by a decrease in salary.“ close its machine shop. Therefore, Ricardo, Russell,
and Benjamin were not entitled to separation pay.
Although there was no diminution in pay,
there was undoubtedly a demotion in titular rank. Issue:
One cannot deny the disparity between the duties
and functions of a chief baker to that of a 1. WON GJT is liable to pay respondents their
utility/security personnel tasked to clean and separation pay.
 LABOR REVIEW SET 1 10

2. WON GJT is liable for damages in illegally labor. Although not discussed in this case, I think
dismissing the respondents. Ma’am/Sir will want us to emphasize that even when
the closing of business is a management prerogative,
Held: the state will still protect the employees by awarding
separation pay and damages.
1. Yes. The only time employers are not compelled to
pay separation pay is when they closed their MIGRANT PHILS VS CARO
establishments or undertaking due to serious
Case Digest: Begino v. ABS-CBN
business losses or financial reverses.
NELSON V. BEGINO, GENER DEL VALLE, MONINA A
The burden of proving serious business losses is with VILA-LLORIN AND MA. CRISTINA SUMAYAO,
the employer. The employer must show losses on the Petitioners, vs. ABS-CBN CORPORATION
basis of financial statements covering a sufficient (FORMERLY, ABS-CBN BROADCASTING
period of time. The period covered must be sufficient CORPORATION) AND AMALIA VILLAFUERTE,
for the National Labor Relations Commission and this Respondents.
court to appreciate the nature and vagaries of the
business.
G.R. No. 199166, 20 April 2015.
We find that G.J.T. Rebuilders failed to sufficiently
prove its alleged serious business losses.
PEREZ, J.:
The financial statement G.J.T. Rebuilders submitted in
evidence covers the fiscal years 1996 and 1997.
Based on the financial statement, G.J.T. Rebuilders
earned a net income of 61,157.00 in 1996 and Respondent ABS-CBN, through Respondent
incurred a net loss of 316,210.00 in 1997. Villafuerte, engaged the services of Petitioners as
cameramen, editors or reporters for TV Broadcasting.
We find the two-year period covered by the financial Petitioners signed regularly renewed Talent
statement insufficient for G.J.T. Rebuilders to have Contracts (3 months - 1 year) and Project Assignment
objectively perceived that the business would not Forms which detailed the duration, budget and daily
recover from the loss. technical requirements of a particular project.
Petitioners were tasked with coverage of news items
2. Yes. GJT Rebuilders must pay each of the for subsequent daily airings in Respondents’ TV
respondents nominal damages for failure to comply Patrol Bicol Program.
with the notice requirement under Article 283 of the
Labor Code.
The Talent Contract has an exclusivity clause and
Notice of the eventual closure of establishment is a provides that nothing therein shall be deemed or
"personal right of the employee to be personally construed to establish an employer-employee
informed of his [or her] proposed dismissal as well as relationship between the parties.
the reasons therefor." The reason for this
requirement is to "give the employee some time to
prepare for the eventual loss of his [or her] job." Petitioners filed against Respondents a complaint for
regularization before the NLRC's Arbitration branch.
The requirement "is not a mere technicality or
formality which the employer may dispense with."
Should employers fail to properly notify their
In support of their complaint, Petitioners claimed
employees, they shall be liable for nominal damages
that they worked under the direct control of
even if they validly closed their businesses.
Respondent Villafuerte - they were mandated to wear
company IDs, they were provided the necessary
equipment, they were informed about the news to be
PERSONAL NOTE: Since Constitutional provisions
covered the following day, and they were bound by
are our topic, I think that Ma’am/Sir might want as to
the company’s policy on attendance and punctuality.
connect this case with the policy on protection to
 LABOR REVIEW SET 1 11

As cameramen, editors and reporters, it appears that

Petitioners were subject to the control and
Respondents countered that, pursuant to their Talent supervision of Respondents which provided them
Contracts and Project Assignment Forms, Petitioners with the equipment essential for the discharge of
were hired as talents to act as reporters, editors their functions. The exclusivity clause and
and/or cameramen. Respondents further claimed prohibitions in their Talent Contract were likewise
they never imposed control as to how Petitioners indicative of Respondents' control over them,
discharged their duties. At most, they were briefed however obliquely worded.
regarding the general requirements of the project to
be executed.
Also,the presumption is that when the work done is
an integral part of the regular business of the
While the case was pending, Petitioners contracts employer and when the worker does not furnish an
were terminated, prompting the latter to file a second independent business or professional service, such
complaint for illegal dismissal. work is a regular employment of such employee and
not an independent contractor.

The Arbitration Branch ruled that Petitioners were #9

regular employees, and ordered Respondents to G.R. Nos. 196280 & 196286 April 2, 2014
reinstate the Petitioners.
UNIVERSIDAD DE STA. ISABEL, Petitioner,
vs.
The NLRC affirmed the ruling, but the CA overturned MARVIN-JULIAN L. SAMBAJON, JR., Respondent.
the decision.
Petition for review on certiorari under Rule 45.
Illegal dismissal. Probational or permanent
employee? Damages?
ISSUE: W/N Petitioners are regular employees of
Respondents.
The Facts

Universidad de Sta. Isabel (petitioner) is a school in

RULING: Yes. Naga City which hired Marvin-Julian L. Sambajon, Jr.
(respondent) as a full-time college faculty member
with the rank of Assistant Professor on probationary
Of the criteria to determine whether there is an status, effective November 1, 2002 up to March 30,
employer-employee relationship, the so-called 2003.
"control test" is generally regarded as the most
crucial and determinative indicator of the said After his probationary contract expired, Sambajon
relationship. remained a full-time faculty member of the
Department of Religious Education for the two
semesters of school-year (SY) 2003-2004 (June 1,
Under this test, an employer-employee relationship is 2003 to March 31, 2004); and two semesters of SY
said to exist where the person for whom the services 2004-2005 (June 2004 to March 31, 2005).
are performed reserves the right to control not only
the end result but also the manner and means In June 2003, Sambajon filed for salary increase. His
utilized to achieve the same. salary was increased starting October 1, 2004 and
was re-ranked to Associate Professor.

In October 15, 2004 Sambajon argued that his salary

Notwithstanding the nomenclature of their Talent
increase should be made effective as of June 2003
Contracts and/or Project Assignment Forms and the
and demanded the payment of his salary
terms and condition embodied therein, petitioners
differential. Unibersidad claims that teachers are not
are regular employees of ABS-CBN.
re-ranked during their probationary period and re-
ranking is done every 2 years, hence it is only by
 LABOR REVIEW SET 1 12

October 2004 that Sambajon would be completing 2 (3) Was Sambajon already a PERMANENT
years of service. EMPLOYEE?

On February 26, 2005, respondent received his letter (4) WHETHER Sambajon is ENTITLED TO
of termination stating that his full time probationary DAMAGES
appointment will not be renewed when it expires on
March 31, 2005.
Ruling:
On April 14, 2005, respondent filed a complaint for
illegal dismissal against the petitioner. (1) Section 4(d), Rule VI of the 2005 Revised Rules of
Procedure of the NLRC, which was in force at the time
Labor Arbiter: There was no just or authorized petitioner appealed the Labor Arbiter’s decision,
cause in the termination of respondent’s expressly provided that, on appeal, the NLRC shall
probationary employment. Consequently, petitioner limit itself only to the specific issues that were
was found liable for illegal dismissal,. elevated for review, to wit:
Article 279 of the Labor Code: Universidad
is directed to pay full backwages covering the Section 4. Requisites for perfection of appeal. x x x.
period/duration of the 1st semester of academic
year 2005-2006 and separation pay in lieu of xxxx
reinstatement computed at one (1) month’s pay
for every year of service. (d) Subject to the provisions of Article 218 of the
Labor Code, once the appeal is perfected in
accordance with these Rules, the Commission shall
Appeal on NLRC: affirmed the Labor Arbiter and limit itself to reviewing and deciding only the specific
holding that respondent had acquired a permanent issues that were elevated on appeal.
status pursuant to Sections 91, 92 and 93 of the
1992 Manual of Regulations for Private Schools, We have clarified that the clear import of the
in relation to Article 281 of the Labor Code as an aforementioned procedural rule is that the NLRC
only subsequent employment contract was signed shall, in cases of perfected appeals, limit itself to
designating Sambajon a “FULL-TIME FACULTY reviewing those issues which are raised on appeal. As
MEMBER” of the Religious Education Department a consequence thereof, any other issues which
from November 1, 2003 to March 31, 2004, which were not included in the appeal shall become
automatically terminates the previous probationary final and executory.
employment contract. Therefore, Sambajon acquired
permanent status.
(2) Yes, Sambajon was illegally dismissed.
The last paragraph of Article 281 of the Labor Code
provides that "an employee who is allowed to Notwithstanding the limited engagement of
work after a probationary period shall be probationary employees, they are entitled to
considered a regular employee." Based thereon, constitutional protection of security of tenure during
Sambajon acquired permanent status on the first day and before the end of the probationary period. The
of the first semester of SY 2003-2004. services of an employee who has been engaged on
probationary basis may be terminated for any of the
following: (a) a just or (b) an authorized cause; and
CA: sustained the conclusion of the NLRC. Plus (c) when he fails to qualify as a regular employee in
awarded reinstatement and backwages. accordance with reasonable standards prescribed by
the employer.
Issues: (1) whether the NLRC correctly resolved an
issue not raised in the appeal memorandum; and During the said 3-year probationary period, he
cannot be terminated except for just or
(2)WHETHER THE MARVIN JULIAN L. authorized causes, or if he fails to qualify in
SAMBAJON, JR. WAS ILLEGALLY DISMISSED accordance with reasonable standards prescribed by
petitioner for the acquisition of permanent status of
its teaching personnel.
 LABOR REVIEW SET 1 13

Unibersidad terminated the services of Sambajon Simply because the word "probationary" no longer
without just cause as it is clear that after five appears below the designation (Full-Time Faculty
semesters, his service is satisfactory. Therefore, Member), Sambajon had already become a
he is entitled to continue his three-year probationary permanent employee. Sambajon admitted of being
period, such that from March 31, 2005, his still under probationary period in his January 12,
probationary employment is deemed renewed for the 2005 letter to Unibersidad reiterating his demand for
following semester (1st semester of SY 2005-2006). salary differential, which letter was sent almost one
However, given the discordant relations that had year after he signed the February 26, 2004.
arisen from the parties’ dispute, it can be inferred
with certainty that petitioner had opted not to retain It bears stressing that full-time teaching primarily
respondent in its employ beyond the three-year refers to the extent of services rendered by the
period. teacher to the employer school and not to the
nature of his appointment. Its significance lies in
the rule that only full-time teaching personnel can
(3) NO. Sambajon was still a PROBATIONARY acquire regular or permanent status.
EMPLOYEE.
For the entire duration of this three-year period,
The law sets a maximum "trial period" during which the teacher remains under probation. Upon the
the employer may test the fitness and efficiency of expiration of his contract of employment, being
the employee. simply on probation, he cannot automatically
claim security of tenure and compel the employer
ART. 281. Probationary Employment.–Probationary to renew his employment contract. It is when the
employment shall not exceed six (6) months from yearly contract is renewed for the third time that
the date the employee started working, unless it is Section 93 of the Manual becomes operative, and
covered by an apprenticeship agreement stipulating a the teacher then is entitled to regular or
longer period. The services of an employee who has permanent employment status.
been engaged on a probationary basis may be
terminated for a just cause or when he fails to qualify The provisions of DOLE-DECS-CHED-TESDA Order
as a regular employee in accordance with reasonable No. 01, series of 1996, "Guidelines on Status of
standards made known by the employer to the Employment of Teachers and of Academic
employee at the time of his engagement. An employee Personnel in Private Educational Institutions" are
who is allowed to work after a probationary period herein reproduced:
shall be considered a regular employee.
2. Subject in all instances to compliance with the
However, since Sambajon is a teacher in a private concerned agency and school requirements, the
school, Section 92 of the 1992 Manual of probationary period for teaching or academic
Regulations for Private Schools must govern with personnel shall not be more than three (3)
respect to the period of probation: consecutive school years of satisfactory service for
those in the elementary and secondary levels; six (6)
Section 92. Probationary Period. – Subject in all consecutive regular semesters of satisfactory
instances to compliance with the Department and service for those in the tertiary and graduate levels,
school requirements, the probationary period for and nine (9) consecutive trimesters of satisfactory
academic personnel shall not be more than three service for those in the tertiary level where collegiate
(3) consecutive years of satisfactory service for those courses are offered on a trimester basis.
in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory Unless otherwise provided by contract, school
service for those in the tertiary level, and nine (9) academic personnel who are under probationary
consecutive trimesters of satisfactory service for employment cannot be dismissed during the
those in the tertiary level where collegiate applicable probationary period, unless dismissal
courses are offered on a trimester basis. Only is compelled by a just cause or causes.
Full-time teachers who have satisfactorily completed
their probationary period shall be considered regular 3. Teachers or academic personnel who have served
or permanent. the probationary period as provided for in the
 LABOR REVIEW SET 1 14

immediately preceding paragraph shall be made *The Conflict: Probationary Status and Fixed-
regular or permanent if allowed to work after such term Employment
probationary period. The educational institution,
however, may shorten the probationary period after Where the probationary status overlaps with a
taking into account the qualifications and fixed-term contract not specifically used for the
performance of the probationary teachers and fixed term it offers, Article 281 should assume
academic personnel. primacy and the fixed-period character of the
contract must give way. This conclusion is
Full-time teaching or academic personnel are immeasurably strengthened by the petitioners’
those meeting all the following requirements: and the AMACC’s hardly concealed expectation
that the employment on probation could lead to
3.1. Who possess at least the minimum academic permanent status, and that the contracts are
qualifications prescribed by the Department of renewable unless the petitioners fail to pass the
Education, Culture and Sports for Basic Education, school’s standards.
the Commission on Higher Education for Tertiary
Education, and the Technical Education and Skills
Development Authority for Technical and Vocational (4) Yes, Sambajon is entitled to DAMAGES
Education under their respective Manual of (backwages corresponding to his full monthly
Regulations governing said personnel; salaries for one semester (1st semester of SY 2005-
2006) and pro-rated 13th month pay).
3.2 Who are paid monthly or hourly, based on the
normal or regular teaching loads as provided for in The award of backwages as a consequence of the
the policies, rules and standards of the agency finding of illegal dismissal in favor of respondent
concerned; should be confined to the three-year probationary
period. Computing her monthly salary of F15,000.00
3.3 Whose regular working day of not more than for the next two school years (F15,000.00 x 10
eight (8) hours a day is devoted to the school; months x 2), respondent already having received her
full salaries for the year 2002-2003, she is entitled to
3.4 Who have no other remunerative occupation a total amount of F300,000.00. Moreover, respondent
elsewhere requiring regular hours of work that will is also entitled to receive her 13th month pay
conflict with the working hours in the school; and correspondent to the said two school years,
computed as yearly salary, divided by 12 months in a
3.5 Who are not teaching full-time in any other year, multiplied by 2, corresponding to the school
educational institution. years 2003-2004 and 2004-2005, or F150,000.00 I
12 months x 2 = F25,000.00. Thus, the NLRC was
All teaching or academic personnel who do not meet correct in awarding respondent the amount of
the foregoing qualifications are considered part time. F325,000.00 as backwages, inclusive of 13th month
pay for the school years 2003-2004 and 2004-2005,
4. Part-time teaching or academic personnel cannot and the amount of P3,750.00 as pro-rated 13th
acquire regular or permanent employment status. month pay.

5. Teaching or academic personnel who do not meet

the minimum academic qualifications shall not
acquire tenure or regular status. The school may
terminate their services when a qualified teacher ABBOTT LABORATORIES, PHILIPPINES, CECILLE
becomes available.35 A. TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T.
YABUT-MISA, TERESITA C. BERNARDO, AND
In this case, petitioner applied the maximum ALLAN G. ALMAZAR, Petitioners,
three-year probationary period – which means he vs.
had one more year to become a permanent PEARLIE ANN F. ALCARAZ
employee.
FACTS:
 LABOR REVIEW SET 1 15

Abbott Laboratories caused the publication in a HELD:

major broadsheet newspaper of its need for a
Regulatory Affairs Manager, indicating therein the job In holding that Alcaraz was illegally dismissed due to
description for as well as the duties and her status as a regular and not a probationary
responsibilities attendant to the aforesaid position employee, the Court finds that the NLRC committed a
w/c prompted Alcaraz to submit her application to grave abuse of discretion.
Abbott. In Abbott’s offer sheet, it was stated that
Alcaraz was to be employed on a probationary status. NLRC based its decision on the premise that Alcaraz’s
Thereafter, Alcaraz signed an employment contract receipt of her job description and Abbott’s Code of
which specifically stated that she was to be placed on Conduct and Performance Modules was not
probation for a period of six (6) months. equivalent to being actually informed of the
performance standards upon which she should
On the day Alcaraz accepted Abbott’s employment have been evaluated on. It, however, overlooked
offer, officer of the comopany sent her copies of the legal implication of the other attendant
Abbott’s organizational structure and her job circumstances as detailed herein which should have
description through e-mail. Alcaraz was made to warranted a contrary finding that Alcaraz was
undergo a pre-employment orientation where she indeed a probationary and not a regular
was informed about Abbott’s Code of Conduct and employee – more particularly the fact that she was
office policies on human resources and finance that well-aware of her duties and responsibilities and that
would be implemented. her failure to adequately perform the same would
lead to her non-regularization and eventually, her
Alcaraz was also required to undergo a training termination.
program as part of her orientation. He received
copies of Abbott’s Code of Conduct and Performance At this juncture, it bears exposition that while NLRC
Modules and the same was explained to her which decisions are, by their nature, final and executor and,
includes procedure for evaluating the performance of hence, not subject to appellate review, the Court is
probationary employees. She was further notified not precluded from considering other questions of
that Abbott had only one evaluation system for all of law aside from the CA’s finding on the NLRC’s grave
its employees. abuse of discretion. While the focal point of analysis
revolves on this issue, the Court may deal with
Alcaraz had previously worked for another ancillary issues – such as, in this case, the question of
pharmaceutical company and had admitted to have how a probationary employee is deemed to have
an "extensive training and background" to acquire been informed of the standards of his regularization –
the necessary skills for her job. if only to determine if the concepts and principles of
labor law were correctly applied or misapplied by the
Thereafter, Alcaraz was called to a meeting with her NLRC in its decision. In other words, the Court’s
immediate supervisor and the former HR director analysis of the NLRC’s interpretation of the
where she was informed that she failed to meet the environmental principles and concepts of labor law is
regularization standards for the position of not completely prohibited in – as it is complementary
Regulatory Affairs Manager. Thereafter, she was ask to – a Rule 45 review of labor cases.
to tender resignation, else they be forced to
terminate her services. Finally, if only to put to rest Alcaraz’s misgivings on
the manner in which this case was reviewed, it bears
Alcaraz filed a case for illegal dismissal against pointing out that no "factual appellate review" was
Abbott and its officers. The labor arbiter dismissed conducted by the Court in the Decision. Rather, the
her complaint for lack of merit but the NLRC reversed Court proceeded to interpret the relevant rules on
and set aside the same and ordered Abbott to probationary employment as applied to settled
reinstate Alcaraz which was affirmed by the CA. factual findings. Besides, even on the assumption that
a scrutiny of facts was undertaken, the Court is not
ISSUE: altogether barred from conducting the same.

1. WON the NLRC committed grave abuse of JUST IN CASE (FOR PURPOSES OF DISCUSSION)
discretion. YES
 LABOR REVIEW SET 1 16

This was explained in the case of Career Philippines ISSUE(S):

Shipmanagement, Inc. v. Serna wherein the Court
held as follows: (1) Whether or not Alcaraz was sufficiently
informed of the reasonable standards to
qualify her as a regular employee; and
Accordingly, we do not re-examine conflicting
(2) Whether or not Alcaraz was validly
evidence, re-evaluate the credibility of witnesses, or
terminated from her employment.
substitute the findings of fact of the NLRC, an
administrative body that has expertise in its
specialized field. Nor do we substitute our "own
judgment for that of the tribunal in determining HELD:
where the weight of evidence lies or what evidence is
(1) Yes, Alcaraz was sufficiently informed of the
credible." The factual findings of the NLRC, when
reasonable standards. The employer is made
affirmed by the CA, are generally conclusive on
to comply with two (2) requirements when
this Court.
dealing with a probationary employee: first,
the employer must communicate the
Nevertheless, there are exceptional cases where we,
regularization standards to the probationary
in the exercise of our discretionary appellate
employee; and second, the employer must
jurisdiction may be urged to look into factual issues
make such communication at the time of the
raised in a Rule 45 petition. For instance, when the
probationary employee’s engagement. If the
petitioner persuasively alleges that there is
employer fails to comply with either, the
insufficient or insubstantial evidence on record to
employee is deemed as a regular and not a
support the factual findings of the tribunal or court a
probationary employee.
quo, as Section 5, Rule 133 of the Rules of Court
states in express terms that in cases filed before
A punctilious (detailed) examination of the
administrative or quasi-judicial bodies, a fact may be
records reveals that Abbott had indeed
deemed established only if supported by substantial
complied with the above-stated
evidence.7 (Emphasis supplied)
requirements. This conclusion is largely
impelled by the fact that Abbott clearly
Alcaraz posits that, contrary to the Court’s Decision, conveyed to Alcaraz her duties and
one’s job description cannot by and of itself be responsibilities as Regulatory Affairs
treated as a standard for regularization as a standard Manager prior to, during the time of her
denotes a measure of quantity or quality. By way of engagement, and the incipient stages of her
example, Alcaraz cites the case of a probationary employment.
salesperson and asks how does such employee
achieve regular status if he does not know how much (2) A probationary employee, like a regular
he needs to sell to reach the same. employee, enjoys security of tenure. However,
in cases of probationary employment, aside
The argument is untenable. from just or authorized causes of termination,
an additional ground is provided under
It is not the probationary employee’s job description Article 295 of the Labor Code, i.e., the
but the adequate performance of his duties and probationary employee may also be
responsibilities which constitutes the inherent and terminated for failure to qualify as a regular
implied standard for regularization. To echo the employee in accordance with the reasonable
fundamental point of the Decision, if the probationary standards made known by the employer to
employee had been fully apprised by his employer of the employee at the time of the engagement.
these duties and responsibilities, then basic
knowledge and common sense dictate that he must A different procedure is applied when
adequately perform the same, else he fails to pass the terminating a probationary employee; the
probationary trial and may therefore be subject to usual two-notice rule does not
termination. govern. Section 2, Rule I, Book VI of the
Implementing Rules of the Labor Code states
FROM DIGEST: Baka lang makatulong oppero I that "if the termination is brought about by
haven’t read some sa fulltext.  the failure of an employee to meet the
standards of the employer in case of
 LABOR REVIEW SET 1 17

probationary employment, it shall be probationary contract merely expired and was not
sufficient that a written notice is served the renewed. They also claimed that the "three years"
employee, within a reasonable time from the mentioned in paragraph 75 of the 1970 Manual refer
effective date of termination." to "36 months," not three school years. And since
respondent served for only three school years of 10
As the records show, Alcaraz's dismissal was months each or 30 months, then he had not yet
effected through a letter which she received. served the "three years" or 36 months mentioned in
Stated therein were the reasons for her paragraph 75 of the 1970 Manual.
termination, i.e., that after proper evaluation,
Abbott determined that she failed to meet the Ruling of the Labor Arbiter
reasonable standards for her regularization
considering her lack of time and people The LA ruled that "three school years" means three
management and decision-making skills, years of 10 months, not 12 months. Considering that
which are necessary in the performance of respondent had already served for three consecutive
her functions as Regulatory Affairs Manager. school years, then he has already attained regular
Undeniably, this written notice sufficiently employment status. Thus, the non-renewal of his
meets the criteria set forth above, thereby contract for school year 1995-1996 constitutes illegal
legitimizing the cause and manner of dismissal.
Alcaraz’s dismissal as a probationary
employee under the parameters set by the The LA also found petitioners guilty of bad faith when
Labor Code. they treated ROJO’s termination merely as the
expiration of the third employment contract and
G.R. No. 170388 September 4, 2013 when they insisted that the school board actually
deliberated on the non-renewal of ROJO’s
COLEGIO DEL SANTISIMO ROSARIO AND SR. employment without submitting admissible proof of
ZENAIDA S. MOFADA, OP, PETITIONERS, his alleged regular performance evaluation.
vs.
EMMANUEL ROJO,* RESPONDENT. Ruling of the National Labor Relations
Commission
FACTS:
On appeal, the NLRC affirmed the LA’s Decision with
Colegio del Santisimo Rosario (CSR) hired ROJO as a modification. It held that after serving three school
high school teacher on probationary basis for the years, ROJO had attained the status of regular
school years 1992-1993, 1993-19947 and 1994-1995. employment especially because CSR did not make
known to ROJO the reasonable standards he should
On April 5, 1995, CSR, through Sr. Zenaida S. Mofada, meet. The NLRC also agreed with the LA that
OP (Mofada), decided not to renew respondent’s respondent’s termination was done in bad faith. It
services. held that ROJO is entitled to reinstatement, if viable;
or separation pay, if reinstatement was no longer
Thereafter, respondent filed a Complaint for illegal feasible, and backwage.
dismissal. He alleged that since he had served three
consecutive school years which is the maximum Ruling of the Court of Appeals
number of terms allowed for probationary
employment, he should be extended permanent CSR filed a Petition for Certiorari before the CA
employment. Citing paragraph 75 of the 1970 Manual alleging grave abuse of discretion on the part of the
of Regulations for Private Schools (1970 Manual), he NLRC in finding that respondent had attained the
asserted that "full- time teachers who have rendered status of a regular employee and was illegally
three (3) consecutive years of satisfactory services dismissed from employment.
shall be considered permanent."
In a Decision dated August 31, 2005, the CA denied
On the other hand, CSR, et.al argued that ROJO knew the Petition for lack of merit. Citing Cagayan Capitol
that his Teacher’s Contract for school year 1994- College v. National Labor Relations Commission, it
1995 with CSR would expire on March 31, 1995. held that respondent has satisfied all the
Accordingly, he was not dismissed but his
 LABOR REVIEW SET 1 18

requirements necessary to acquire permanent period of probation, by special rules found in the
employment and security of tenure viz: Manual of Regulations for Private Schools (the
Manual). With regard to the probationary period,
1. The teacher is a full-time teacher; Section 92 of the 1992 Manual provides:

2. The teacher must have rendered three (3) Section 92. Probationary Period. – Subject in all
consecutive years of service; and instances to compliance with the Department and
school requirements, the probationary period for
3. Such service must be satisfactory. academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in
According to the CA, respondent has attained the the elementary and secondary levels, six (6)
status of a regular employee after he was employed consecutive regular semesters of satisfactory service
for three consecutive school years as a full-time for those in the tertiary level, and nine (9)
teacher and had served CSR satisfactorily. Aside from consecutive trimesters of satisfactory service for
being a high school teacher, he was also the Prefect of those in the tertiary level where collegiate courses
Discipline, a task entailing much responsibility. The are offered on a trimester basis. (Emphasis supplied)
only reason given by Mofada for not renewing
respondent’s contract was the alleged expiration of In this case, petitioners’ teachers who were on
the contract, not any unsatisfactory service. Also, probationary employment were made to enter into a
there was no showing that CSR set performance contract effective for one school year. Thereafter, it
standards for the employment of respondent, which may be renewed for another school year, and the
could be the basis of his satisfactory or unsatisfactory probationary employment continues. At the end of
performance. Hence, there being no reasonable the second fixed period of probationary employment,
standards made known to him at the time of his the contract may again be renewed for the last time.
engagement, respondent was deemed a regular
employee and was, thus, declared illegally dismissed Such employment for fixed terms during the teachers’
when his contract was not renewed. probationary period is an accepted practice in the
teaching profession. In Magis Young Achievers’
CSR, et.al maintain that upon the expiration of the Learning Center v. Manalo, we noted that:
probationary period, both the school and the ROJO
were free to renew the contract or let it lapse. They The common practice is for the employer and the
insist that a teacher hired for three consecutive years teacher to enter into a contract, effective for one
as a probationary employee does not automatically school year. At the end of the school year, the
become a regular employee upon completion of his employer has the option not to renew the contract,
third year of probation. It is the positive act of the particularly considering the teacher’s performance. If
school – the hiring of the teacher who has just the contract is not renewed, the employment
completed three consecutive years of employment on relationship terminates. If the contract is renewed,
probation for the next school year – that makes the usually for another school year, the probationary
teacher a regular employee of the school. employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew
ISSUE: WON a basic education (elementary) teacher the contract. If renewed, this second renewal of the
hired for three (3) consecutive school years as a contract for another school year would then be the
probationary employee automatically and/or by law last year – since it would be the third school year – of
becomes a permanent employee upon completion of probationary employment. At the end of this third
his third year. year, the employer may now decide whether to
extend a permanent appointment to the employee,
HELD: IT is not automatic. However, the SC primarily on the basis of the employee having met
resolved this issue in this wise: the reasonable standards of competence and
efficiency set by the employer. For the entire
In Mercado v. AMA Computer College-Parañaque duration of this three-year period, the teacher
City, Inc., we had occasion to rule that cases dealing remains under probation. Upon the expiration of his
with employment on probationary status of teaching contract of employment, being simply on probation,
personnel are not governed solely by the Labor Code he cannot automatically claim security of tenure and
as the law is supplemented, with respect to the compel the employer to renew his employment
 LABOR REVIEW SET 1 19

contract. It is when the yearly contract is renewed for As such, "no vested right to a permanent
the third time that Section 93 of the Manual becomes appointment shall accrue until the employee has
operative, and the teacher then is entitled to regular completed the prerequisite three-year period
or permanent employment status. (Emphases necessary for the acquisition of a permanent
supplied) status. [However, it must be emphasized that]
mere rendition of service for three consecutive
However, this scheme "of fixed-term contract is a years does not automatically ripen into a
system that operates during the probationary period permanent appointment. It is also necessary that
and for this reason is subject to Article 281 of the the employee be a full-time teacher, and that the
Labor Code," which provides: services he rendered are satisfactory."

x x x The services of an employee who has been In Mercado, this Court, speaking through J. Brion,
engaged on a probationary basis may be terminated held that:
for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards The provision on employment on probationary status
made known by the employer to the employee at the under the Labor Code is a primary example of the fine
time of his engagement. An employee who is allowed balancing of interests between labor and
to work after a probationary period shall be management that the Code has institutionalized
considered a regular employee. [Emphasis supplied] pursuant to the underlying intent of the Constitution.

In Mercado, we held that "[u]nless this reconciliation On the one hand, employment on probationary status
is made, the requirements of [Article 281 on affords management the chance to fully scrutinize the
probationary status would be fully negated as the true worth of hired personnel before the full force of
school may freely choose not to renew contracts the security of tenure guarantee of the Constitution
simply because their terms have expired." This will comes into play. Based on the standards set at the
have an unsettling effect in the equilibrium vis-a-vis start of the probationary period, management is
the relations between labor and management that the given the widest opportunity during the probationary
Constitution and Labor Code have worked hard to period to reject hirees who fail to meet its own
establish. adopted but reasonable standards. These standards,
together with the just and authorized causes for
That teachers on probationary employment also termination of employment [which] the Labor Code
enjoy the protection afforded by Article 281 of expressly provides, are the grounds available to
the Labor Code is supported by Section 93 of the terminate the employment of a teacher on
1992 Manual which provides: probationary status. x x x

Sec. 93. Regular or Permanent Status. - Those who Labor, for its part, is given the protection during the
have served the probationary period shall be made probationary period of knowing the company
regular or permanent. Full-time teachers who have standards the new hires have to meet during the
satisfactorily completed their probationary period probationary period, and to be judged on the basis of
shall be considered regular or permanent. (Emphasis these standards, aside from the usual standards
supplied) applicable to employees after they achieve
permanent status. Under the terms of the Labor Code,
The above provision clearly provides that full- these standards should be made known to the
time teachers become regular or permanent teachers on probationary status at the start of their
employees once they have satisfactorily probationary period, or at the very least under the
completed the probationary period of three circumstances of the present case, at the start of the
school years. The use of the term satisfactorily semester or the trimester during which the
necessarily connotes the requirement for schools to probationary standards are to be applied. Of critical
set reasonable standards to be followed by teachers importance in invoking a failure to meet the
on probationary employment. For how else can one probationary standards, is that the school should
determine if probationary teachers have show – as a matter of due process – how these
satisfactorily completed the probationary period if standards have been applied. This is effectively the
standards therefor are not provided? second notice in a dismissal situation that the law
requires as a due process guarantee supporting the
 LABOR REVIEW SET 1 20

security of tenure provision, and is in furtherance, and regulate its relations with its teachers during
too, of the basic rule in employee dismissal that the their probationary period.39 (Emphasis supplied;
employer carries the burden of justifying a dismissal. italics in the original)
These rules ensure compliance with the limited
security of tenure guarantee the law extends to In the same case, this Court has definitively
probationary employees. pronounced that "in a situation where the
probationary status overlaps with a fixed-term
When fixed-term employment is brought into play contract not specifically used for the fixed term it
under the above probationary period rules, the offers, Article 281 should assume primacy and the
situation – as in the present case – may at first blush fixed-period character of the contract must give way."
look muddled as fixed-term employment is in itself a
valid employment mode under Philippine law and An example given of a fixed-term contract specifically
jurisprudence. The conflict, however, is more used for the fixed term it offers is a replacement
apparent than real when the respective nature of teacher or a reliever contracted for a period of one
fixed-term employment and of employment on year to temporarily take the place of a permanent
probationary status are closely examined. teacher who is on leave. The expiration of the
reliever’s fixed-term contract does not have
(NATURE OF FIXED TERM EMPLOYMENT VS. probationary status implications as he or she was
EMPLOYMENT ON PROBATIONARY STATUS) never employed on probationary basis. This is
because his or her employment is for a specific
The fixed-term character of employment essentially purpose with particular focus on the term. There
refers to the period agreed upon between the exists an intent to end his or her employment with
employer and the employee; employment exists only the school upon expiration of this term.
for the duration of the term and ends on its own
when the term expires. However, for teachers on probationary
employment, in which case a fixed term contract
In a sense, employment on probationary status also is not specifically used for the fixed term it offers,
refers to a period because of the technical meaning it is incumbent upon the school to have not only
"probation" carries in Philippine labor law – a set reasonable standards to be followed by said
maximum period of six months, or in the academe, a teachers in determining qualification for regular
period of three years for those engaged in teaching employment, the same must have also been
jobs. Their similarity ends there, however, because of communicated to the teachers at the start of the
the overriding meaning that being "on probation" probationary period, or at the very least, at the
connotes, i.e., a process of testing and observing the start of the period when they were to be applied.
character or abilities of a person who is new to a role These terms, in addition to those expressly provided
or job. by the Labor Code, would serve as the just cause for
the termination of the probationary contract. The
Understood in the above sense, the essentially specific details of this finding of just cause must be
protective character of probationary status for communicated to the affected teachers as a matter of
management can readily be appreciated. But this due process. Corollarily, should the teachers not have
same protective character gives rise to the been apprised of such reasonable standards at the
countervailing but equally protective rule that the time specified above, they shall be deemed regular
probationary period can only last for a specific employees.
maximum period and under reasonable, well-laid and
properly communicated standards. Otherwise stated, In Tamson’s Enterprises, Inc. v. Court of
within the period of the probation, any employer Appeals, we held that "[t]he law is clear that in all
move based on the probationary standards and cases of probationary employment, the employer
affecting the continuity of the employment must shall [convey] to the employee the standards under
strictly conform to the probationary rules. which he will qualify as a regular employee at the
time of his engagement. Where no standards are
x x x If we pierce the veil, so to speak, of the parties’ made known to the employee at that time, he shall be
so-called fixed-term employment contracts, what deemed a regular employee.
undeniably comes out at the core is a fixed-term
contract conveniently used by the school to define
 LABOR REVIEW SET 1 21

In this case, glaringly absent from petitioners’ or that he was informed thereof. Notably too, none of
evidence are the reasonable standards that ROJO the supposed performance evaluations were
was expected to meet that could have served as presented. These flaws violated respondent’s right to
proper guidelines for purposes of evaluating his due process. As such, his dismissal is, for all intents
performance. Nowhere in the Teacher’s Contract and purposes, illegal.
could such standards be found. Neither was it
mentioned that the same were ever conveyed to As a matter of due process, teachers on
him. Even assuming that ROJO failed to meet the probationary employment, just like all
standards set forth by CSR and made known to probationary employees, have the right to know
the former at the time he was engaged as a whether they have met the standards against
teacher on probationary status, still, the which their performance was evaluated. Should
termination was flawed for failure to give the they fail, they also have the right to know the
required notice to ROJO. This is because Book VI, reasons therefor.
Rule I, Section 2 of the IRR of the Labor Code
provides: It should be pointed out that absent any showing of
unsatisfactory performance on the part of
Section 2. Security of Tenure. – (a) In cases of regular respondent, it can be presumed that his performance
employment, the employer shall not terminate the was satisfactory, especially taking into consideration
services of an employee except for just or authorized the fact that even while he was still more than a year
causes as provided by law, and subject to the into his probationary employment, he was already
requirements of due process. designated Prefect of Discipline. In such capacity, he
was able to uncover the existence of a drug syndicate
(b) The foregoing shall also apply in cases of within the school and lessen the incidence of drug
probationary employment; provided, use therein. Yet despite respondent’s substantial
however, that in such cases, termination of contribution to the school, petitioners chose to
employment due to failure of the employee to disregard the same and instead terminated his
qualify in accordance with the standards of services; while most of those who were involved in
the employer made known to the former at drug activities within the school were punished with
the time of engagement may also be a ground a slap on the wrist as they were merely made to write
for termination of employment. letters promising that the incident will not happen
again.
xxxx
Mofada would also have us believe that respondent
(d) In all cases of termination of employment, chose to resign as he feared for his life, thus, the
the following standards of due process shall school’s decision not to renew his contract. However,
be substantially observed: no resignation letter was presented. Besides, this is
contrary to respondent’s act of immediately filing the
xxxx instant case against petitioners.

If the termination is brought about by the completion AMA vs Austria

of a contract or phase thereof, or by failure of an Facts: Petitioner AMA Computer College, Parañ aque
employee to meet the standards of the employer in (AMA) is an educational institution duly organized
the case of probationary employment, it shall be under the laws of the Philippines. The rest of the
sufficient that a written notice is served the petitioners are principal officers of AMA. Respondent
employee, within a reasonable time from the effective Rolando A. Austria4 (respondent) was hired by AMA
date of termination. (Emphasis supplied) on probationary employment as a college dean on
April 24, 2000.5 On August 22, 2000, respondent’s
Curiously, despite the absence of standards, SR. appointment as dean was confirmed by AMA’s
Mofada mentioned the existence of alleged Officer-in-Charge (OIC), Academic Affairs, in his
performance evaluations in respondent’s case. We Memorandum,6 which reads:
are, however, in a quandary as to what could have After a thorough evaluation of the performance of Mr.
been the basis of such evaluation, as no evidence Rolando Austria as Dean, we are happy to inform you
were adduced to show the reasonable standards with that he is hereby officially confirmed as Dean of AMA
which respondent’s performance was to be assessed
 LABOR REVIEW SET 1 22

College Parañ aque effective April 17, 2000 to contradictory between a definite period of
September 17, 2000. employment and the nature of the employee’s duties
In view of this, he will be entitled to a transportation First. The letter of appointment was clear.
allowance of One Thousand Five Hundred Sixty Pesos Respondent was confirmed as Dean of AMA College,
(P1,560.00). Parañ aque, effective from April 17, 2000 to
In the event that Mr. Austria gives up the Dean September 17, 2000. In numerous cases decided by
position or fails to meet the standards of the (sic) this Court, we had taken notice, that by way of
based on the evaluation of his immediate superior, he practice and tradition, the position of dean is
shall be considered for a faculty position and the normally an employment for a fixed term.36
appointee agrees that he shall lose the transportation Although it does not appear on record─ and neither
allowance he enjoys as Dean and be entitled to his was it alleged by any of the parties─ that respondent,
faculty rate. other than holding the position of dean, concurrently
Sometime in August 2000, respondent was charged occupied a teaching position, it can be deduced from
with violating AMA’s Employees’ Conduct and the last paragraph of said letter that the respondent
Discipline provided in its Orientation Handbook shall be considered for a faculty position in the event
(Handbook),7 as follows: he gives up his deanship or fails to meet AMA's
1) leaking of test questions; standards. Such provision reasonably serves the
2) failure to monitor general requirements vital to intention set forth in Brent School that the deanship
the operations of the company; and may be rotated among the other members of the
3) gross inefficiency. faculty.
Respondent file a complaint of illegal dismissal. Second. The fact that respondent did not sign the
Issue: letter of appointment is of no moment.
1. What is the nature of respondent's employment? The fact that respondent voluntarily accepted the
2. Was he lawfully dismissed? employment, assumed the position, and performed
Held: the functions of dean is clear indication that he
The instant case falls squarely within the aforesaid knowingly and voluntarily consented to the terms
exception. The Labor Arbiter held that, while and conditions of the appointment, including the
petitioners did not prove the existence of just causes fixed period of his deanship. Other than the
in order to warrant respondent's dismissal, the handwritten notes made in the letter of appointment,
latter's employment as dean ceased to exist upon no evidence was ever presented to show that
expiration of respondent's term of employment on respondent’s consent was vitiated, or that
September 17, 2000. In sum, the Labor Arbiter held respondent objected to the said appointment or to
that the nature of respondent's employment is one any of its conditions. Furthermore, in his status as
for a fixed term. On the other hand, the NLRC and the dean, there can be no valid inference that he was
CA both held that respondent is a regular employee shackled by any form of moral dominance exercised
because respondent had fully served the three (3)- by AMA and the rest of the petitioners.
month probationary period required in the Thus, the unanimous finding of the Labor Arbiter, the
Handbook, which the petitioners failed to deny or NLRC and the CA that respondent adequately refuted
contravene in the proceedings before the Labor all the charges against him assumes relevance only
Arbiter. insofar as respondent’s dismissal from the service
Prior to his dismissal, respondent held the position of was effected by petitioners before expiration of the
college dean. The letter of appointment states that he fixed period of employment. True, petitioners erred
was officially confirmed as Dean of AMA College, in dismissing the respondent, acting on the mistaken
Parañ aque, effective from April 17, 2000 to belief that respondent was liable for the charges
September 17, 2000. Petitioners submit that the leveled against him. But respondent also cannot claim
nature of respondent's employment as dean is one entitlement to any benefit flowing from such
with a fixed term. employment after September 17, 2000, because the
We held that Article 280 of the Labor Code does not employment, which is the source of the benefits, had,
proscribe or prohibit an employment contract with a by then, already ceased to exist.
fixed period. Even if the duties of the employee Finally, while this Court adheres to the principle of
consist of activities necessary or desirable in the social justice and protection to labor, the
usual business of the employer, the parties are free to constitutional policy to provide such protection to
agree on a fixed period of time for the performance of labor is not meant to be an instrument to oppress
such activities. There is nothing essentially employers. The commitment under the fundamental
 LABOR REVIEW SET 1 23

law is that the cause of labor does not prevent us  Regular employees by nature of work –
from sustaining the employer when the law is clearly Those who are engaged to perform activities
on its side. which are usually necessary or desirable in
the usual business or trade of the employer
(regardless of length of service); and
TIROL ET AL VS. NLRC

Goma vs. Pamplona Plantation • Regular employees by years of service –

Those who have rendered at least one year
of service, whether continuous or broken,
with respect to the activity in which they
are employed (regardless of nature of
Facts:Petitioner Goma claimed that he worked as a work).
carpenter at the Hacienda Pamplona since 1995; that
he worked from 7:30 a.m. to 12:00 noon and from
1:00 p.m. to 5:00 p.m. daily with a salary rate of If the a person has been performing the job for at
P90.00 a day paid weekly; and that he worked least a year, even if the performance is not
continuously until 1997 when he was not given any continuous or merely intermittent, the law deems the
work assignment. repeated and continuing need for its performance as
sufficient evidence of the necessity, if not
indispensability, of that activity to the business.
On a claim that he was a regular employee, petitioner
alleged to have been illegally dismissed when the
respondent refused without just cause to give him Petitioner was engaged to perform carpentry work.
work assignment. His services were needed for a period of 2 years until
such time that respondent decided not to give him
work assignment anymore. Owing to his length of
service, petitioner became a regular employee, by
Thus, he (Goma) prayed for backwages, salary
operation of law.
differential, service incentive leave pay, damages and
attorney’s fees.

The principal test used to determine whether

employees are PROJECT EMPLOYEES as
On the other hand, respondent denied having hired
distinguished from REGULAR EMPLOYEES, is
the petitioner as its regular employee. It instead
whether or not the employees were assigned to carry
argued that petitioner was hired by a certain Antoy
out a specific project or undertaking, the duration or
Cañ averal, the manager of the hacienda at the time it
scope of which was specified at the time the employees
was owned by Mr. Bower and leased by Manuel
were engaged for that project.
Gonzales, a jai-alai pelotari known as “Ybarra.”

In this case, apart from the respondent’s bare

Respondent added that it was not obliged to absorb
allegation that petitioner was a project employee, it
the employees of the former owner.
had not shown that petitioner was informed that he
would be assigned to a specific project or
undertaking. Neither was it established that he was
Issue: WON petitioner is a regular employee. informed of the duration and scope of such project or
undertaking at the time of his engagements

Held:
Article 280 of the Labor Code provides that there are Petition granted.
two kinds of REGULAR EMPLOYEES, namely:
15. GADIA VS SYKES ASIA
 LABOR REVIEW SET 1 24

Sykes Asia is a corporation engaged in Business (30) days prior to their respective dates of
Process Outsourcing (BPO) which provides support dismissal.22
to its international clients from various sectors (e.g.,
technology, telecommunications, retail services) by LA ruled in favor of respondents, and accordingly,
carrying on some of their operations, governed by dismissed petitioners' complaints for lack of merit. It
service contracts that it enters with them. found that petitioners are merely project-based
employees, as their respective employment contracts
Alltel Communications, Inc. (Alltel), a United States- indubitably provided for the duration and term of
based telecommunications firm, contracted Sykes their employment, as well as the specific project to
Asia's services to accommodate the needs and which they were assigned, i.e., the Alltel Project.25
demands of Alltel clients for its postpaid and prepaid Hence, the LA concluded that the cessation of the
services (Alltel Project). Thus, on different dates, Alltel Project naturally resulted in the termination of
Sykes Asia hired petitioners as customer service petitioners' employment in Sykes Asia.26
representatives, team leaders, and trainers for the Dissatisfied, petitioners appealed to the NLRC.
Alltel Project.
Contrary to the LA's finding, the NLRC found that
Services for the said project went on smoothly until petitioners could not be properly characterized as
Alltel sent (2) letters to Sykes Asia informing the project-based employees, ratiocinating that while it
latter that it was terminating all support services was made known to petitioners that their
provided by Sykes Asia related to the Alltel Project. employment would be co-terminus to the Alltel
Project, it was neither determined nor made known
In view of this development, Sykes Asia sent each of to petitioners, at the time of hiring, when the said
the petitioners end-of-life notices, informing them of project would end, be terminated, or be completed.32
their dismissal from employment due to the In this relation, the NLRC concluded that inasmuch as
termination of the Alltel Project. petitioners had been engaged to perform activities
which are necessary or desirable in respondents'
usual business or trade of BPO, petitioners should be
Aggrieved, petitioners filed separate complaints for deemed regular employees of Sykes Asia.33 This
illegal dismissal against respondents Sykes Asia, notwithstanding, and in view of the cessation of the
Chuck Sykes, the President and Chief Operating Alltel Project, the NLRC found petitioners'
Officer of Sykes Enterprise, Inc., and Mike Hinds and employment with Sykes Asia to be redundant; hence,
Michael Henderson, the President and Operations declared that they were legally dismissed from
Director, respectively, of Sykes Asia (respondents), service and were only entitled to receive their
praying for reinstatement, backwages, 13th month respective separation pay.34
pay, service incentive leave pay, night shift
differential, moral and exemplary damages, and Respondents moved for reconsideration, which was,
attorney's fees. In their complaints, petitioner alleged however, denied. Unconvinced, Sykes Asia37
that their dismissal from service was unjust as the elevated the case to the CA on certiorari.
same was effected without substantive and
procedural due process. CA annulled and set aside the ruling of the NLRC, and
accordingly, reinstated that of the LA.40 It held that a
In their defense, respondents averred that petitioners perusal of petitioners' respective employment
were not regular employees but merely project-based contracts readily shows that they were hired
employees, and as such, the termination of the Alltel exclusively for the Alltel Project and that it was
Project served as a valid ground for their dismissal. specifically stated therein that their employment
would be project-based.41 The CA further held that
In support of their position, respondents noted that petitioners' employment contracts need not state an
it was expressly indicated in petitioners' respective actual date as to when their employment would end,
employment contracts that their positions are opining that it is enough that such date is
"project-based" and thus, "co-terminus to the determinable.42
project."21 Respondents further maintained that they
complied with the requirements of procedural due Petitioners moved for reconsideration,43 which was,
process in dismissing petitioners by furnishing each however, denied, hence, this petition.
of them their notices of termination at least thirty
 LABOR REVIEW SET 1 25

ISSUE: Whether or not the CA correctly granted safeguard the rights of workers against the arbitrary
respondents' petition for certiorari, thereby setting use of the word "project" to prevent employees from
aside the NLRC's decision holding that petitioners attaining a regular status, employers claiming that
were regular employees and reinstating the LA ruling their workers are project[-based] employees should
that petitioners were merely project-based not only prove that the duration and scope of the
employees, and thus, validly dismissed from service. employment was specified at the time they were
engaged, but also, that there was indeed a project.
Article 294 of the Labor Code,48 as amended, 50(Emphases and underscoring supplied)
distinguishes a project-based employee from a
regular employee as follows: Verily, for an employee to be considered project-
based, the employer must show compliance with two
Art. 294. Regular and casual employment.—The (2) requisites, namely that: (a) the employee was
provisions of written agreement to the contrary assigned to carry out a specific project or
notwithstanding and regardless of the oral undertaking; and (b) the duration and scope of which
agreement of the parties, an employment shall be were specified at the time they were engaged for
deemed to be regular where the employee has been such project.
engaged to perform activities which are usually
necessary or desirable in the usual business or trade In this case, records reveal that Sykes Asia adequately
of the employer, except where the employment has informed petitioners of their employment status at
been fixed for a specific project or undertaking the the time of their engagement, as evidenced by the
completion or termination of which has been latter's employment contracts which similarly
determined at the time of the engagement of the provide that they were hired in connection with the
employee or where the work or services to be Alltel Project, and that their positions were "project-
performed is seasonal in nature and the employment based and as such is co-terminus to the project." In
is for the duration of the season. this light, the CA correctly ruled that petitioners were
indeed project-based employees, considering that:
In Omni Hauling Services, Inc. v. Bon,49 the Court (a) they were hired to carry out a specific
extensively discussed how to determine whether an undertaking, i.e., the Alltel Project; and (b) the
employee may be properly deemed project-based or duration and scope of such project were made known
regular, to wit: to them at the time of their engagement, i.e., "co-
terminus with the project."
A project employee is assigned to a project which
begins and ends at determined or determinable As regards the second requisite, the CA correctly
times.1â wphi1 Unlike regular employees who may stressed that "[t]he law and jurisprudence dictate
only be dismissed for just and/or authorized causes that ‘the duration of the undertaking begins and ends
under the Labor Code, the services of employees who at determined or determinable times'" while
are hired as "project[-based] employees" may be clarifying that "[t]he phrase ‘determinable times'
lawfully terminated at the completion of the project. simply means capable of being determined or
fixed."51 In this case, Sykes Asia substantially
According to jurisprudence, the principal test for complied with this requisite when it expressly
determining whether particular employees are indicated in petitioners' employment contracts that
properly characterised as "project[-based] their positions were "co-terminus with the project."
employees" as distinguished from "regular To the mind of the Court, this caveat sufficiently
employees," is whether or not the employees were apprised petitioners that their security of tenure with
assigned to carry out a "specific project or Sykes Asia would only last as long as the Alltel Project
undertaking," the duration (and scope) of which were was subsisting. In other words, when the Alltel
specified at the time they were engaged for that Project was terminated, petitioners no longer had
project. The project could either be (1) a particular any project to work on, and hence, Sykes Asia may
job or undertaking that is within the regular or usual validly terminate them from employment. Further,
business of the employer company, but which is the Court likewise notes the fact that Sykes Asia duly
distinct and separate, and identifiable as such, from submitted an Establishment Employment Report52
the other undertakings of the company; or (2) a and an Establishment Termination Report53 to the
particular job or undertaking that is not within the Department of Labor and Employment Makati-Pasay
regular business of the corporation. In order to Field Office regarding the cessation of the Alltel
 LABOR REVIEW SET 1 26

Project and the list of employees that would be It may entirely be testimonial. If only documentary
affected by such cessation. As correctly pointed out evidence would be required to demonstrate er-ee
by the CA, case law deems such submission as an relationship, no scheming employer would be
indication that the employment was indeed project- brought before the bar of justice. (Employers could
based.54 find a way to make it impossible to recover the
documentary evidence proving such relationship to
In sum, respondents have shown by substantial evade obligations as employer).
evidence that petitioners were merely project-based
employees, and as such, their services were lawfully The SC gave credence to the testimonies of
terminated upon the cessation of the Alltel Project. Lorenzo’s co-workers in their affidavit stating the
they started working in Hda. Cataywa in 1970.

HACIENDA VS. LORENZO Nature of Farm workers

GR. 17964, March 18, 2015
Farm workers generally fall under the
definition of seasonal employees. It was also
FACTS: consistently held that seasonal employees may be
considered as regular employees when they are
 Rosario Lorenzo is an employee of Hacienda called to work from time to time.They are in regular
Cataywa. employment because of the nature of the job, and not
because of the length of time they have worked.
 Lorenzo, who decided to retire, received a letter
from the SSS informing her that she cannot avail of Lorenzo not a casual worker
the retirement benefits on the ground that she has
only paid contributions for 16 months. This is 104 For employers to be exempted on the basis of
months short of the minimum requirement of 120 casual employment, the services must not merely be
months payment to be entitled to the benefit. irregular, temporary or intermittent, but it must also
be in connection with the business or occupation of
 Lorenzo filed a petition before the Social Security the employer.
Commission (SSC) alleging that she was employed as
laborer in Hacienda Cataywa in 1970 but was The SC said that it is erroneous for the
reported to the SSS only in 1978. petitioners to conclude that Lorenzo was a very
casual worker because the SSS form revealed that she
 She further alleged that SSS contributions were had 16 months of contributions. It does not, in any
deducted from her wages from 1970 to 1995 but not way prove that Lorenzo performed a job which is not
all were remitted by the employer to the SSS. in connection with the business or occupation of the
employer to be considered a casual employee.
 The SSC ruled for Lorenzo. The case was appealed
to the CA, which again ruled in favor of Lorenzo. It was revealed that lorenzo’s job includes
planting sugarcane point, fertilizing ,weeding, etc.
ISSUE: Whether or not Hacienda Cataywa is liable Thus, Lorenzo is considered a regular worker and not
for the non-remittance of Lorenzo’s a casual worker.
contributions?
Therefore, Hacienda Cataywa and other
RULING: YES. petitioners are liable for delinquent contributions. (If
asked, there is a penalty of 3% for the late remittance
Proof of the existence of the er-ee relationship of premium contributions).

It is argued by the petitioners that Lorenzo is

a casual and not a regular worker; that under the SSS TUNAY NA PAGKAKAISA NG MANGGAGAWA SA
Form R-1A, Lorenzo reported for work only in 1978 ASIA BREWERY - versus - ASIA BREWERY, INC.,
(and not in 1970).
FACTS:
The SC ruled that any competent and relevant
evidence to prove such relationship may be admitted.
 LABOR REVIEW SET 1 27

Respondent Asia Brewery, Inc. (ABI) entered into a while secretarial tasks such as receiving telephone
Collective Bargaining Agreement (CBA), with Bisig at calls and filing of office correspondence appear to
Lakas ng mga Manggagawa sa Asia-Independent have been commonly imposed as additional duties.
(BLMA-INDEPENDENT), the exclusive bargaining Respondent failed to indicate who among these
representative of ABIs rank-and-file employees. ABI numerous secretaries/clerks have access to
and BLMA-INDEPENDENT signed a renegotiated confidential data relating to management policies
CBA. that could give rise to potential conflict of interest
with their Union membership. Clearly, the rationale
Subsequently, a dispute arose when ABIs under our previous rulings for the exclusion of
management stopped deducting union dues from executive secretaries or division secretaries would
eighty-one (81) employees, believing that their have little or no significance considering the lack of
membership in BLMA-INDEPENDENT violated the or very limited access to confidential information of
CBA. Respondent insisted they fall under the these secretaries/clerks. It is not even farfetched that
Confidential and Executive Secretaries expressly the job category may exist only on paper since they
excluded by the CBA from the rank-and-file are all daily-paid workers. Quite understandably,
bargaining unit. BLMA-INDEPENDENT claimed that petitioner had earlier expressed the view that the
ABIs actions restrained the employees right to self- positions were just being reclassified as these
organization. employees actually discharged routine functions.

The Voluntary Arbitrator sustained the BLMA- We thus hold that the secretaries/clerks,
INDEPENDENT. On appeal, the CA reversed the numbering about forty (40), are rank-and-file
Voluntary Arbitrator. BLMA-INDEPENDENT filed a employees and not confidential employees.
motion for reconsideration. In the meantime, a
certification election was held wherein petitioner Confidential employees are defined as those who (1)
Tunay na Pagkakaisa ng Manggagawa sa Asia assist or act in a confidential capacity, (2) to persons
(TPMA) won. As the incumbent bargaining who formulate, determine, and effectuate
representative of ABIs rank-and-file employees management policies in the field of labor relations.
claiming interest in the outcome of the case, Not being confidential employees, the
petitioner filed with the CA an omnibus motion for secretaries/clerks and checkers are not disqualified
reconsideration of the decision and intervention, from membership in the Union of respondents rank-
with attached petition signed by the union officers. and-file employees. Petitioner argues that
Both motions were denied by the CA. respondents act of unilaterally stopping the
deduction of union dues from these employees
ISSUES: constitutes unfair labor practice as it restrained the
Whether or not the aforementioned employees fall workers exercise of their right to self-organization, as
under the category of Confidential and Executive provided in Article 248 (a) of the Labor Code.
Secretaries. NO.
Whether or not there is restraint to employees in the
exercise of their right to self-organization. YES. FUJI VS. ESPIRITU

RULING: G.R. No. 170054 January 21, 2013

GOYA, INC., Petitioner, vs. GOYA, INC. EMPLOYEES
As can be gleaned from the above listing, it is rather UNION-FFW, Respondent.
curious that there would be several
secretaries/clerks for just one (1) FACTS:
department/division performing tasks which are
mostly routine and clerical. Respondent insisted they Sometime in January 2004, petitioner Goya, Inc.
fall under the Confidential and Executive Secretaries (Company), a domestic corporation engaged in the
expressly excluded by the CBA from the rank-and-file manufacture, importation, and wholesale of top
bargaining unit. However, perusal of the job quality food products, hired contractual employees
descriptions of these secretaries/clerks reveals that from PESO Resources Development Corporation
their assigned duties and responsibilities involve (PESO) to perform temporary and occasional services
routine activities of recording and monitoring, and in its factory in Parang, Marikina City. This prompted
other paper works for their respective departments respondent Goya, Inc. Employees Union–FFW
(Union) to request for a grievance conference on the
 LABOR REVIEW SET 1 28

ground that the contractual workers do not belong to Issue: WON the Company is guilty of unfair labor acts
the categories of employees stipulated in the existing in engaging the services of PESO, in violation of the
Collective Bargaining Agreement (CBA).5 When the CBA. Yes.
matter remained unresolved, the grievance was
referred to the National Conciliation and Mediation Ruling:
Board (NCMB) for voluntary arbitration. A collective bargaining agreement is the law between
the parties: It is familiar and fundamental doctrine in
Company and the Union manifested before Voluntary labor law that the CBA is the law between the parties
Arbitrator (VA) Bienvenido E. Laguesma that and they are obliged to comply with its provisions.
amicable settlement was no longer possible; hence,
they agreed to submit for resolution the solitary issue We said so in Honda Phils., Inc. v. Samahan ng
of "[w]hether or not the Company is guilty of unfair Malayang Manggagawa sa Honda: A collective
labor acts in engaging the services of PESO, a third bargaining agreement or CBA refers to the negotiated
party service provider, under the existing CBA, laws, contract between a legitimate labor organization and
and jurisprudence. the employer concerning wages, hours of work and
all other terms and conditions of employment in a
The Union asserted that the hiring of contractual bargaining unit. As in all contracts, the parties in a
employees from PESO is not a management CBA may establish such stipulations, clauses, terms
prerogative and in gross violation of the CBA and conditions as they may deem convenient
tantamount to unfair labor practice (ULP). It noted provided these are not contrary to law, morals, good
that the contractual workers engaged have been customs, public order or public policy. Thus, where
assigned to work in positions previously handled by the CBA is clear and unambiguous, it becomes the law
regular workers and Union members, in effect between the parties and compliance therewith is
violating Section 4, Article I of the CBA. mandated by the express policy of the law. Moreover,
if the terms of a contract, as in a CBA, are clear and
The Union moreover advanced that sustaining the leave no doubt upon the intention of the contracting
Company's position would easily weaken and parties, the literal meaning of their stipulations shall
ultimately destroy the former with the latter's resort control. x x x.
to retrenchment and/or retirement of employees and
not filling up the vacant regular positions through the In this case, Section 4, Article I (on categories of
hiring of contractual workers from PESO, and that a employees) of the CBA between the Company and the
possible scenario could also be created by the Union must be read in conjunction with its Section 1,
Company wherein it could "import" workers from Article III (on union security). Both are
PESO during an actual strike. interconnected and must be given full force and
effect. Also, these provisions are clear and
Company argued that: (a) the law expressly allows unambiguous. The terms are explicit and the
contracting and subcontracting arrangements language of the CBA is not susceptible to any other
through Department of Labor and Employment interpretation. Hence, the literal meaning should
(DOLE) Order No. 18-02; (b) the engagement of prevail. As repeatedly held, the exercise of
contractual employees did not, in any way, prejudice management prerogative is not unlimited; it is
the Union, since not a single employee was subject to the limitations found in law, collective and
terminated and neither did it result in a reduction of bargaining agreement or the general principles of fair
working hours nor a reduction or splitting of the play and justice. Evidently, this case has one of the
bargaining unit; and (c) Section 4, Article I of the CBA restrictions- the presence of specific CBA provisions.
merely provides for the definition of the categories of
employees and does not put a limitation on the
Company's right to engage the services of job Note:
contractors or its management prerogative to
address temporary/occasional needs in its operation. Section 1, Article III (Union Security) of the CBA,
which states: Section 1. Condition of Employment. –
As a condition of continued employment in the
Company, all regular rank-and-file employees shall
remain members of the Union in good standing and
that new employees covered by the appropriate
 LABOR REVIEW SET 1 29

bargaining unit shall automatically become regular In December 1991, petitioners filed a complaint
employees of the Company and shall remain against P&G for regularization, service incentive
members of the Union in good standing as a condition leave pay and other benefits with damages. The
of continued employment. complaint was later amended to include the matter of
their subsequent dismissal.
CBA Section 4. Categories of Employees.– The parties
agree on the following categories of employees: (a) Labor Arbiter dismissed the complaint for lack of
Probationary Employee. – One hired to occupy a merit and ruled that there was no employer-
regular rank-and-file position in the Company and is employee relationship between petitioners and P&G.
serving a probationary period. If the probationary Affirmed by NLRC and CA.
employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be
required to undergo a probationary period of six (6) Petitioners insist that they are employees of P&G.
months, which period, in the sole judgment of They claim that they were recruited by the salesmen
management, may be shortened if the employee has of P&G and were engaged to undertake
already acquired the knowledge or skills required of merchandising chores for P&G long before the
the job. If the employee is hired from the casual pool existence of Promm-Gem and/or SAPS. They further
and has worked in the same position at any time claim that when the latter had its so-called re-
during the past two (2) years, the probationary alignment program, petitioners were instructed to fill
period shall be three (3) months. (b) Regular up application forms and report to the agencies
Employee. – An employee who has satisfactorily which P&G created.
completed his probationary period and automatically
granted regular employment status in the Company.
(c) Casual Employee, – One hired by the Company to Petitioners further assert that Promm-Gem and SAPS
perform occasional or seasonal work directly are labor-only contractors providing services of
connected with the regular operations of the manpower to their client. They claim that the
Company, or one hired for specific projects of limited contractors have neither substantial capital nor tools
duration not connected directly with the regular and equipment to undertake independent labor
operations of the Company. contracting. Petitioners insist that since they had
been engaged to perform activities which are
necessary or desirable in the usual business or trade
Alviado vs Procter and Gamble of P&G, then they are its regular employees.
G.R. No. 160506
March 9, 2010
P&G further argues that there is no employment
FACTS: relationship between it and petitioners. It was
Petitioners worked as merchandisers of P&G from Promm-Gem or SAPS that (1) selected petitioners
various dates, allegedly starting as early as 1982 or as and engaged their services; (2) paid their salaries; (3)
late as June 1991, to either May 5, 1992 or March 11, wielded the power of dismissal; and (4) had the
1993, power of control over their conduct of work.

They all individually signed employment contracts P&G also contends that the Labor Code neither
with either Promm-Gem or SAPS for periods of more defines nor limits which services or activities may be
or less five months at a time. They were assigned at validly outsourced.Thus, an employer can farm out
different outlets, supermarkets and stores where any of its activities to an independent contractor,
they handled all the products of P&G. They received regardless of whether such activity is peripheral or
their wages from Promm-Gem or SAPS. core in nature. It insists that the determination of
whether to engage the services of a job contractor or
SAPS and Promm-Gem imposed disciplinary to engage in direct hiring is within the ambit of
measures on erring merchandisers for reasons such management prerogative.
as habitual absenteeism, dishonesty or changing day-
off without prior notice.
ISSUE 1: WON Promm-Gem and SAPS are labor-only
contractors. Promm-Gemm is a legitimate
 LABOR REVIEW SET 1 30

independent contractor. SAPS is a labor-only relates to the work to be performed. These factors
contractor. negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02.
RULING 1:
ART. 106. Contractor or subcontractor. (Labor Code) The records also show that Promm-Gem supplied its
complainant-workers with the relevant materials,
Rule VIII-A, Book III of the Omnibus Rules such as markers, tapes, liners and cutters, necessary
Implementing the Labor Code, as amended by for them to perform their work. Promm-Gem also
Department Order No. 18-02,[24] distinguishes issued uniforms to them. It is also relevant to
between legitimate and labor-only contracting: mention that Promm-Gem already considered the
complainants working under it as its regular, not
merely contractual or project, employees. [32] This
circumstance negates the existence of element (ii) as
Clearly, the law and its implementing rules allow stated in Section 5 of DOLE Department Order No.
contracting arrangements for the performance of 18-02, which speaks of contractual employees. This,
specific jobs, works or services. Indeed, it is furthermore, negates on the part of Promm-Gem bad
management prerogative to farm out any of its faith and intent to circumvent labor laws which
activities, regardless of whether such activity is factors have often been tipping points that lead the
peripheral or core in nature. However, in order for Court to strike down the employment practice or
such outsourcing to be valid, it must be made to an agreement concerned as contrary to public policy,
independent contractor because the current labor morals, good customs or public order.[33]
rules expressly prohibit labor-only contracting.
Under the circumstances, Promm-Gem cannot be
To emphasize, there is labor-only contracting when considered as a labor-only contractor. We find that it
the contractor or sub-contractor merely recruits, is a legitimate independent contractor.
supplies or places workers to perform a job, work or
service for a principal[25] and any of the following
elements are present: On the other hand, the Articles of Incorporation of
SAPS shows that it has a paid-in capital of only
i) The contractor or subcontractor does not have P31,250.00. There is no other evidence presented to
substantial capital or investment which relates to the show how much its working capital and assets are.
job, work or service to be performed and the Furthermore, there is no showing of substantial
employees recruited, supplied or placed by such investment in tools, equipment or other assets.
contractor or subcontractor are performing activities
which are directly related to the main business of the Furthermore, the petitioners have been charged with
principal; or the merchandising and promotion of the products of
P&G, an activity that has already been considered by
ii) The contractor does not exercise the right to the Court as doubtlessly directly related to the
control over the performance of the work of the manufacturing business,[38] which is the principal
contractual employee. (Underscoring supplied) business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it
In the instant case, the financial statements[26] of recruited are performing activities which are directly
Promm-Gem show that it has authorized capital stock related to the principal business of P&G, we find that
of P1 million and a paid-in capital, or capital available the former is engaged in labor-only contracting.
for operations, of P500,000.00 as of 1990.[27] It also Where labor-only contracting exists, the Labor Code
has long term assets worth P432,895.28 and current itself establishes an employer-employee relationship
assets of P719,042.32. Promm-Gem has also proven between the employer and the employees of the
that it maintained its own warehouse and office space labor-only contractor.[39] The statute establishes
with a floor area of 870 square meters.[28] It also this relationship for a comprehensive purpose: to
had under its name three registered vehicles which prevent a circumvention of labor laws. The
were used for its promotional/merchandising contractor is considered merely an agent of the
business.[29] Promm-Gem also has other clients[30] principal employer and the latter is responsible to
aside from P&G.[31]Under the circumstances, we find the employees of the labor-only contractor as if such
that Promm-Gem has substantial investment which
 LABOR REVIEW SET 1 31

employees had been directly employed by the distinguished from an act done carelessly,
principal employer.[40] thoughtlessly, heedlessly or inadvertently.

Consequently, the following petitioners, having been

recruited and supplied by SAPS[41] -- which engaged All told, we find no valid cause for the dismissal of
in labor-only contracting -- are considered as the petitioners-employees of Promm-Gem.
employees of P&G.
While Promm-Gem had complied with the procedural
aspect of due process in terminating the employment
Other petitioners, having worked under, and been of petitioners-employees, i.e., giving two notices and
dismissed by Promm-Gem, are considered the in between such notices, an opportunity for the
employees of Promm-Gem, not of P&G. employees to answer and rebut the charges against
them, it failed to comply with the substantive aspect
of due process as the acts complained of neither
ISSUE2: WON petitioners were illegally dismissed. constitute serious misconduct nor breach of trust.
Yes. Hence, the dismissal is illegal.

RULING: With regard to the petitioners placed with P&G by

SAPS, they were given no written notice of dismissal.
In cases of regular employment, the employer shall The records show that upon receipt by SAPS of P&Gs
not terminate the services of an employee except for letter terminating their Merchandising Services
a just[43] or authorized[44] cause. Contact effective March 11, 1993, they in turn
verbally informed the concerned petitioners not to
In the instant case, the termination letters given by report for work anymore.
Promm-Gem to its employees uniformly specified the
cause of dismissal as grave misconduct and breach of Neither SAPS nor P&G dispute the existence of these
trust. circumstances. Parenthetically, unlike Promm-Gem
which dismissed its employees for grave misconduct
In order to constitute serious misconduct which will and breach of trust due to disloyalty, SAPS dismissed
warrant the dismissal of an employee under its employees upon the initiation of P&G. It is evident
paragraph (a) of Article 282 of the Labor Code, it is that SAPS does not carry on its own business because
not sufficient that the act or conduct complained of the termination of its contract with P&G
has violated some established rules or policies. It is automatically meant for it also the termination of its
equally important and required that the act or employees services. It is obvious from its act that
conduct must have been performed with wrongful SAPS had no other clients and had no intention of
intent. seeking other clients in order to further its
merchandising business. From all indications SAPS,
In the instant case, petitioners-employees of Promm- existed to cater solely to the need of P&G for the
Gem may have committed an error of judgment in supply of employees in the latters merchandising
claiming to be employees of P&G, but it cannot be concerns only. Under the circumstances prevailing in
said that they were motivated by any wrongful intent the instant case, we cannot consider SAPS as an
in doing so. As such, we find them guilty of only independent contractor.
simple misconduct for assailing the integrity of
Promm-Gem as a legitimate and independent Going back to the matter of dismissal, it must be
promotion firm. A misconduct which is not serious or emphasized that the onus probandi to prove the
grave, as that existing in the instant case, cannot be a lawfulness of the dismissal rests with the employer.
valid basis for dismissing an employee. [53] In termination cases, the burden of proof rests
upon the employer to show that the dismissal is for
Meanwhile, loss of trust and confidence, as a ground just and valid cause.[54] In the instant case, P&G
for dismissal, must be based on the willful breach of failed to discharge the burden of proving the legality
the trust reposed in the employee by his employer. and validity of the dismissals of those petitioners
Ordinary breach will not suffice. A breach of trust is who are considered its employees. Hence, the
willful if it is done intentionally, knowingly and dismissals necessarily were not justified and are
purposely, without justifiable excuse, as therefore illegal.
LABOR REVIEW SET 1 32