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LABOR AND THE CONSTITUTION

Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the Humanization of laws and the equalization of social and economic force by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. (Calalang vs. Williams [G.R. No. L-47800, 02 December 1940])

The State is bound under the Constitution to afford full protection to labor and when conflicting interests of labor and capital are to be weighed on the scales of social justice the heavier influence of the latter should be counterbalanced with the sympathy and compassion the law accords the less privileged workingman. This is only fair if the worker is to be given the opportunity and the right to assert and defend his cause not as a subordinate but as part of management with which he can negotiate on even plane. Thus labor is not a mere employee of capital but its active and equal partner. (Fuente vs. NLRC [G.R. No. 110017, 02 January 1997])

The cause of social justice is not served by upholding the interest of petitioners in disregard of the right of private respondents. Social justice ceases to be an effective instrument for the "equalization of the social and economic forces" by the State when it is used to shield wrongdoing. While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer, Justicia remini regarda est (Justice is to be denied to none). (Jamer vs. NLRC [G.R. No. 112630, 05 September 1997])

It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it "recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investment." The Constitution bids the State to "afford full protection to labor." But it is equally true that "the law, in protecting the right's of the laborer, authorizes neither oppression nor self-destruction of the employer." And it is oppression to compel the employer to continue in employment one who is guilty or to force the employer to remain in operation when it is not economically in his interest to do so. (Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

EMPLOYER-EMPLOYEE RELATIONSHIP

Importance of the existence of an employment relation

A basic factor underlying the exercise of rights under the Labor Code is status of employment. The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmen's compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein. (La Suerte vs. Director [123 SCRA 679])

Tests for the existence of Employer-Employee Relationship – South West Disaster Control

In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct-although the latter is the most important element. (35 Am. Jur. 445).

[T]o determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employer-employee relationship exist where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching the end. (LVN vs. Philippine Musicians Guild [G.R. No. 12582] citing United Insurance Company, 108, NLRB No. 115.)

[T]he relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. We have applied by analogy the abovestated doctrine to the relationships between bus owner/operator and bus conductor, auto-calesa owner/operator and driver, and recently between taxi owners/operators and taxi drivers. Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually necessary or desirable in the usual business or trade of their employer. (Jardin vs. NLRC [G.R. No. 119268, 23 February 2000])

The case of Pajarillo vs. SSS, invoked by the public respondent as authority for the ruling that a "joint fishing venture" existed between private respondent and petitioners is not applicable in the instant case. There is neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo do not exist in the instant case. The conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the

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control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private respondent. While performing the fishing operations, petitioners received instructions via a single-side band radio from private respondent's operations manager who called the patron/pilot in the morning. They are told to report their activities, their position, and the number of tubes of fish-catch in one day. Clearly thus, the conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew members. (Ruga vs. NLRC [G.R. No. L-72654-61, 22 January 1990])

The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship between petitioners and private respondent. While it is true that the receipt of a percentage of net profits constitutes only prima facie evidence that the recipient is a partner in the business, the evidence in the case at bar controverts an employer-employee relationship between the parties. In the first place, private respondent had a voice in management of the affairs of the sales force. Secondly, petitioner Tocao’s admissions militate against an employer-employee relationship. She admitted that, like her who owned Geminesse Enterprise, private respondent only received commissions and transportation and representation allowances and not a fixed salary. If indeed petitioner Tocano was private respondent’s employer, it is difficult to believe that they shall receive the same income in the business. In a partnership, each partner must share in the profits and losses of the venture, except that the industrial partner shall not be liable for losses. As an industrial partner, private respondent had the right to demand for a formal accounting of the business and to receive her share in the profit. (Tocao vs. CA [G.R. No. 127405, 04 October 2000])

The barbershop claims it had no control over its barbers. The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the performance of duties of the employee. It is enough that the employer has the right to exercise the power. As to the “control test,” the following facts indubitably reveal that the respondent company wielded control over the work performance of petitioners; in that (1) they worked in the barber shop owned and operated by the respondents; (2) that they were required to report daily and observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time working at the New Looks Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worker with respondent’s since the early 1960’s; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any or all of them for just and vald cause. Petitioners were unarguably performing work necessary and desiriable in the business of respondent company. (Corporal vs. NLRC [G.R. No. 129315, 02 October 2000])

Labor Only Contractor vis-à-vis an Independent Contractor

In LEGITIMATE JOB CONTRACTING, no employer-employee relationship exists between the employees of the job contractor and the principal employer. Even then, the principal employer becomes jointly and severally liable with the job contractor for the payment of the employees' wages whenever the contractor fails to pay the same. In such case, the law creates an employer-employee relationship between the principal employer and the job contractor's employees for a limited purpose, that is, to ensure that the employees are paid their wages. Other than the payment of wages, the principal employer is not responsible for any claim made by the employees.

On the other hand, in LABOR-ONLY CONTRACTING, an employer-employee relationship is created by law between the principal employer and the employees of the labor-only contractor. In this case, the labor-only contractor is considered merely an agent of the principal employer. The principal employer is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees. (PCI Automation vs. NLRC [GR No. 115920, 1996]

Basis of Liability

The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only" contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer, who is deemed "responsible to the workers to the same extent as if the latter were directly employed by him." On the other hand, Article 107 deals with "job contracting." In the latter situation, while the contractor himself is the direct employer of the employees, the employer is deemed, by operation of law, as an indirect employer.

In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with Article 106. A contrary interpretation would render the provisions of Article 107 meaningless considering that everytime an employer engages a contractor, the latter is always acting in the interest of the former, whether directly or indirectly, in relation to his employees.

It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No. 50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor is considered as a mere agent of an employer. In contrast, in "job contracting," no employer-employee relationship exists between the owner and the employees of his contractor. The owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's employees.(Baguio vs. NLRC [G.R. No. 79004, 04 October 1991])

Requisites for allowable job contracting: (I ARM Free Capital)

1. INDEPENDENT business.2. according to his own ACCOUNT.3. Under his own RESPONSIBILITY.4. According to his own METHOD of conducting business.5. Free from the control of the principal except as to the result. 6. Sufficient Capital or investment in the form of tools, equipment, materials, work premises (TEM Work).

More importantly, the petitioners, individually or collectively, did not have substantial capital or investment in the form of tools, equipment, work premises and other materials which is necessary in the conduct of the business of the respondent company. What the petitioners owned were only combs, scissors, razors, nail cutters, nail polishers, nippers – nothing else. By no standard can these be considered substantial capital necessary to operate a barbershop. (Corporal vs. NLRC [G.R. No. 129315, 02 October 2000])

Substantial Capital or Investment – The Neri and Fuji Xerox cases

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[I]n the case of Neri vs. NLRC, we held that in order to be considered as a job contractor it is enough that a contractor has substantial capital. In other words, once substantial capital established it is no longer necessary for the contractor to show evidence that it has investment in the form of tools, equipment, machineries, work premises, among others. The rational for this is that Article 106 of the Labor Code does not require that the contractor possess both substantial capital and investment in the form of tools, equipment, machineries, work premises, among others. The decision of the Court in Neri, thus, states:

Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, and work premises, among others; because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.

However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court considered not only the fact that it had substantial capitalization. The Court noted that BCC carried on an independent business and undertook the performance of its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof. The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for its principal. Thus, the Court ruled that BCC was an independent contractor.

The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox Corporation vs. NLRC. In the said case, petitioner Fuji Xerox implored the Court to apply the Neri doctrine to its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly capitalized venture registered with the Securities and Exchange Commission, the Department of Labor and Employment, and the Social Security System with assets exceeding P5,000,000.00 possessing at least 29 typewriters, office equipment and service vehicles, and its own pool of employees with 25 clerks assigned to its clients on a temporary basis. Despite the evidence presented by Fuji Xerox the Court refused to apply the Neri case and explained:

Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case, the Court had already found that BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.

(Vinoya vs. NLRC [G.R. No. 126586, 02 February 2000])

Liability of indirect employer for unpaid salaries/wages

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractor's employees. This liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor.

Withal, fairness likewise dictates that the indirect employer should not, however, be held liable for wage differentials incurred while the complainants were assigned to other companies. Under these cited provisions of the Labor Code, should the contractor fail to pay the wages of its employees in accordance with law, the indirect employer, is jointly and severally liable with the contractor, but such responsibility should be understood to be limited to the extent of the work performed under the contract, in the same manner and extent that he is liable to the employees directly employed by him. This liability of petitioner covers the payment of the workers' performance of any work, task, job or project. So long as the work, task, job or project has been performed for indirect employer's benefit or on its behalf, the liability accrues for such period even if, later on, the employees are eventually transferred or reassigned elsewhere.

We repeat: The indirect employer's liability to the contractor's employees extends only to the period during which they were working for the petitioner, and the fact that they were reassigned to another principal necessarily ends such responsibility. The principal is made liable to his indirect employees, because it can protect itself from irresponsible contractors by withholding such sums and paying them directly to the employees or by requiring a bond from the contractor or subcontractor for this purpose.(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])

Liability of indirect employer for unpaid backwages and separation pay

Similarly, the solidary liability for payment of back wages and separation pay is limited, under Article 106, "to the extent of the work performed under the contract"; under Article 107, to "the performance of any work, task, job or project"; and under Article 109, to "the extent of their civil liability under this Chapter [on payment of wages]."

These provisions cannot apply to the indirect employer, considering that the complainants were no longer working for or assigned to it when they were illegally dismissed. Furthermore, an order to pay back wages and separation pay is invested with a punitive character, such that an indirect employer should not be made liable without a finding that it had committed or conspired in the illegal dismissal.

The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the workers' right to such wage is derived from law. The proposition that payment of back wages and separation pay should be covered by Article 109, which holds an indirect employer solidarily responsible with his contractor or subcontractor for "any violation of any provision of this Code," would have been tenable if there were proof there was none in this case that the principal/employer had conspired with the contractor in the acts giving rise to the illegal dismissal.(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])

Liability of indirect employer for statutory wage increases[T]he liability of the petitioner to reimburse the respondent only arises if and when contractor actually pays its

employees the increases granted by Wage Order Nos. 5 and 6. Payment, which means not only the delivery of money but also the performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary debtors to seek reimbursement for the share which corresponds to each of the debtors. (Lapanday Agricultural Development Corp. vs. CA [G.R. No. 112139, 31 January 2000])

Jurisdiction of labor courts

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[W]here the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolution of the dispute requires expertise, neither in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears. (SMC vs. NLRC [G.R. No. 80774, 161 SCRA 719])

[P]etitioner seeks protection under the civil laws and claims no benefits under the labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. (Singapore Airlines vs. Paño [G.R. No. 47739])

Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce and execute the commission's decision in NLRC Case No. 0165 (Illegal Dismissal and ULP) against Green Mountain Farm, Roberto Ongpin and Almus Alabe.

Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complainant was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and ULP. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts.

Precedents abound confirming the rule that said courts have no labor jurisdiction to act on labor cases or various incidents arising therefrom, including the execution of decisions, awards or orders. Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official concerned under the Department of Labor and Employment. To hold otherwise is to sanction split jurisdiction which is obnoxious to the orderly administration of justice.

Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself to the jurisdiction of the Commission acting through the Labor Arbiter. It failed to perceive the fact that what it is really controverting is the decision of the Labor arbiter and not the act of the deputy sheriff in executing said order issued as a consequence of said decision rendered.

Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is terminated. Whatever irregularities attended the issuance and execution of the alias writ of execution should be referred to the same administrative tribunal which rendered the decision. This is because any court which issued a writ of execution has the inherent power, for the advancement of justice, to correct errors of its ministerial officers and to control its own processes.

(Deltaventures Resources, Inc. vs. Cabato [G.R. No. 118216, 09 March 2000])

Labor Dispute

"Labor dispute" includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee. [Article 212 (l) of the Labor Code]

While it is SMC's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among others, the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and employee.

That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further, the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE.

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues. (SMC Employee Union-PTGWO vs. Hon. Bersamira [G.R. No. 87700, 1990])

MANAGEMENT PREROGATIVES

An owner of a business enterprise is given considerable leeway in managing his business because it is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes certain rights as inherent in the management of business enterprises. These rights are collectively called management prerogatives or acts by which one directing a business is able to control the variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as the freedom to administer the affairs of a business enterprise such that the costs of running it would be below the expected earnings or receipts. In short, the ELBOW ROOM IN THE QUEST FOR PROFITS." (Chu vs. NLRC [G.R. No. 106107, 02 June 1994])

It is noteworthy to state that an employer is free to manage and regulate, according to his own discretion and judgment, all phases of employment, which includes hiring, work assignments, working methods, time, place and manner of work, supervision of workers, working regulations, transfer of employees, lay-off of workers, and the discipline,

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dismissal and recall of work. While the law recognizes and safeguards this right of an employer to exercise what are clearly management prerogatives, such right should not be abused and used as a tool of oppression against labor. The company's prerogatives must be EXERCISED IN GOOD FAITH and with due regard to the rights of labor. A priori, they are not absolute prerogatives but are SUBJECT TO LEGAL LIMITS, COLLECTIVE BARGAINING AGREEMENTS and the GENERAL PRINCIPLES OF FAIR PLAY AND JUSTICE.

The power to dismiss an employee is a recognized prerogative that is inherent in the employer's right to freely manage and regulate his business. Corollarily, an employer cannot rationally be expected to retain the employment of a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules and appreciation of the dignity and responsibility of his office, has so plainly and completely been bared. He may not be compelled to continue to employ such person whose continuance in the service will patently be inimical to his employer's interest. The right of the company to dismiss an employee is a measure of self-protection. Such right, however, is subject to regulation by the State, basically in the exercise of its paramount police power. Thus, the dismissal of employees must be made within the parameters of the law and pursuant to the basic tenets of equity, justice and fairplay. It must not be done arbitrarily and without just cause. (Philippine-Singapore Transit vs. NLRC [GR No. 95449, August 1997])

Reorganization

The free will of management to conduct its own business affairs to achieve its purpose cannot be denied (Abbot Laboratories v. NLRC, G.R. No. 76959, October 12, 1987, 154 SCRA 713). Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. Hence, management is not precluded from undertaking a reorganization within the company or entering into mergers with other companies to meet the demands of the enterprise. In such cases, the company has the prerogative to abolish managerial and confidential positions or create new ones as the necessity for them requires. (Yap vs. Ichong [G.R. No. L-51314, 21 June 1990])

Obedience to Company Rules and Regulations

This Court fails to see, however, how these objections and accusations justify the deliberate and obdurate refusal of the sales representatives to obey the management's simple requirement for submission by all Premise Sales Representatives (PSRs) of individual reports or memoranda requiring reflecting target revenues which is all that GTE basically required and which it addressed to the employees concerned no less than six (6) times. The Court fails to see how the existence of objections made by the union justify the studied disregard, or wilful disobedience by the sales representatives of direct orders of their superior officers to submit reports. Surely, compliance with their superiors' directives could not have foreclosed their demands for the revocation or revision of the new sales policies or rules; there was nothing to prevent them from submitting the requisite reports with the reservation to seek such revocation or revision.

To sanction disregard or disobedience by employees of a rule or order laid down by management, on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise irregular for one reason or another, would be disastrous to the discipline and order that it is in the interest of both the employer and his employees to preserve and maintain in the working establishment and without which no meaningful operation and progress is possible. Deliberate disregard or disobedience of rules, defiance of management authority cannot be countenanced. This is not to say that the employees have no remedy against rules or orders they regard as unjust or illegal. They may object thereto, ask to negotiate thereon, bring proceedings for redress against the employer before the Ministry of Labor. But until and Unless the rules or orders are declared to be illegal or improper by competent authority, the employees ignore or disobey them at their peril. It is impermissible to reverse the process: suspend enforcement of the orders or rules until their legality or propriety shall have been subject of negotiation, conciliation, or arbitration. (GTE Directories vs. Sanchez [G.R. No. 76219, 27 May 1991])

TransfersThe situation here presented is of an employer transferring an employee to another office in the exercise of what it

took to be sound business judgment and in accordance with pre-determined and established office policy and practice, and of the latter having what was believed to be legitimate reasons for declining that transfer, rooted in considerations of personal convenience and difficulties for the family. Under these circumstances, the solution proposed by the employee herself, of her voluntary termination of her employment and the delivery to her of corresponding separation pay, would appear to be the most equitable. Certainly, the Court cannot accept the proposition that when an employee opposes his employer's decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee's wishes that should be made to prevail. In adopting that proposition by way of resolving the controversy, the respondent NLRC gravely abused its discretion. (PT & T vs. Laplana [G.R. No. 76645, 23 July 1991])

[T]he Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment provided that there is no demotion in rank or a diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's right to control and manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what are clearly and obviously management prerogatives. The freedom of management to conduct its business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. HAVING THE RIGHT SHOULD NOT BE CONFUSED WITH THE MANNER IN WHICH THAT RIGHT MUST BE EXERCISED. Thus it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The reassignment of Halili and Magno to Manila is legally indefensible on several grounds. Firstly, it was grossly inconvenient to private respondents. They are working students. When they received the transfer memorandum directing their relocation to Manila within seven days from notice, classes had already started. The move from Tarlac to Manila at such time would mean a disruption of their studies. Secondly, there appears to be no genuine business urgency that necessitated their transfer. As well pointed out by private respondents' counsel, the fabrication of aluminum handles for ice boxes does not require special dexterity. Many workers could be contracted right in Manila to perform that particular line of work. (Yuco Chemicals vs. Minster of Labor [G.R. No. L-75656, 1991])

Waiver of Management Prerogatives Possible; CBA provision to the contrary

Section 2, Article II of the CBA expressly provides that:

Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole and exclusive right and power, among other things, to direct the operations and the working force of its business in all respects; to be the sole judge in determining the capacity or fitness of an employee for the position or job to which he has been assigned; to schedule the hours of work, shifts and work schedules; to require work

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to be done in excess of eight hours or Sundays or holidays as the exigencies of the service may require; to plan, schedule, direct, curtail and control factory operations and schedules of production; to introduce and install new or improved methods or facilities; to designate the work and the employees to perform it; to select and hire new employees; to train new employees and improve the skill and ability of employees from one job to another or form one shift to another; to classify or reclassify employees; and to make such changes in the duties of its employees as the COMPANY may see fit or convenient for the proper conduct of its business.

Verily and wisely, management retained the prerogative, whenever exigencies of the service so require, to change the working hours of its employees. And as long as such prerogative is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold such exercise (Union Carbide Labor Union vs. Union Carbide [215 SCRA 554])

Imposition of Penalty; A commensurate penalty for an offense

[W]hile Clarete may be guilty of violation of company rules, we find the penalty of dismissal imposed upon him by respondent Caltex too harsh and unreasonable. As enunciated in Radio Communications of the Philippines, Inc. v. National Labor Relations Commission, supra, "such a penalty (of dismissal) must be commensurate with the act, conduct or omission imputed to the employee and imposed in connection with the employer's disciplinary authority" (at p. 667). Even when there exist some rules agreed upon between the employer and employee on the subject of dismissal, we have ruled in Gelmart Industries Phils., Inc. v. National Labor Relations Commission, 176 SCRA 295 (1989), that the same cannot preclude the State from inquiring on whether its rigid application would work too harshly on the employee. (Caltex Refinery vs. NLRC [ G.R. No. 102993, 14 July 1995])

Application of; With minor infractions, first violations and length of service.

Mary Johnston Hospital v. NLRC, where the employee had a heated argument with the department head, the Court held that since the incident was her first offense during her seventeen (17) years of employment the penalty of termination was not commensurate with the act committed.

Manila Electric Company v. NLRC, where the employee was declared guilty of breach of trust and violation of company rules the penalty of dismissal was not meted to him considering his twenty (20) years of service without any previous derogatory record and his two (2) commendations for honesty from the company.

Dolores v. NLRC, where the employee absented herself without permission from her superior, the Court ruled that the penalty of dismissal was too severe considering her twenty-one (21) years of service with the company and it appearing that it was her first offense.

Philippine Telegraph and Telephone Corporation v. NLRC, where the employee was adjudged guilty of tampering a receipt, the Court ruled that the imposition of the supreme penalty of dismissal would certainly be very harsh and disproportionate to the infraction committed, especially after noting that it was his first offense after seven (7) long years of satisfactory service.

Radio Communications of the Philippines, Inc. v. NLRC, where the employee was found guilty of misappropriating company funds and withholding messages for transmission, the Court ruled that in view of the employee's continuous service of ten (10) years with the company the penalty of dismissal for the minor infractions would be unduly harsh and grossly disproportionate.

Bonotan v. NLRC, where the employee shouted at the operations manager, the Court ruled that since the employee has been with the company for twenty-six (26) years and nowhere in the records did it appear that she committed any previous violation of company rules and regulations, dismissal from work would be too severe a penalty under the circumstances.

Tanduay Distillery Labor Union v. NLRC, where the employees were found guilty of eating while at work, the Court ruled that inasmuch as they had served the company without any record of violation or infraction of company rules and regulations prior to the incident for periods ranging from 16 to 26 years, respectively, the dismissal meted out on them was too harsh a penalty.

EMPLOYEE CLASSIFICATION AND/OR STATUS

Regular, Casual and Seasonal employees

Regular and casual employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. (Article 280 of the Labor Code)

[A]n employment shall be deemed regular if the employee performs activities usually necessary or desirable in the usual business and trade of the employer OR if the employee has rendered at least one (1) year of service, whether the service be continuous or broken. Ferrochrome Phils. vs. NLRC, 236 SCRA 315 G.R. 105538 [5 September 1994]

The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. THE TEST IS WHETHER THE FORMER IS USUALLY NECESSARY OR DESIRABLE IN THE USUAL BUSINESS OR TRADE OF THE EMPLOYER. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. ALSO, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but ONLY WITH RESPECT TO SUCH ACTIVITY AND WHILE SUCH ACTIVITY EXISTS. (De Leon vs. NLRC [G.R. No. 70705, 21 August 1989])

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[T]he second paragraph of Article 280 relates only to casual employees and is not applicable to those who fall within the definition of said Article's first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole. No such intent is observable in Article 280 of the Labor Code.

The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as regular employees those "casual" employees who have rendered at least one year of service regardless of the fact that such service may be continuous or broken. (Mercado, Sr. vs. NLRC [G.R. No. 79869, 05 September 1991])

In the case at bar, while it may appear that the work of the petitioner is seasonal, inasmuch as petitioners have served the company for many years, a number for over 20 years, performing services which are necessary and indispensable to LUTORCO’s business, serve as badges of regular employment. Moreover, the fact that petitioners do not work continuously for one whole year but only for the duration of the tobacco season does not detract from considering them in regular employment since in a litany of cases this Court has already settled that seasonal employees who are called to work from time to time and are temporarily laid off during off-season are not separated from service in said period, but merely considered on leave until re-employed.

Private respondent’s reliance on the case of Mercado vs. NLRC is misplaced considering that since in said case of Mercado, although respondent company therein consistently availed of the services of the petitioners therein from year to year, it was clear that petitioners therein were not in respondent company’s regular employ. Petitioners therein performed different phases of agricultural work in a given year. However, during that period, they were free to contract services to work for other farm owners, as in fact they did. Thus, the Court ruled in that case that their employment would naturally end upon completion of each project or phase of farm work for which they have been contracted.

All the foregoing considered, the public respondent NLRC in the case at bar erred in its total affirmance of the dismissal of the consolidated complaint, for separation pay, against private respondents LUTORCO and See Lin Chan considering that petitioners are regular seasonal employees entitled to the benefits of Article 283 of the Labor Code which applies to closure or cessation of an establishment or undertaking, whether it be a complete or partial cessation of business operation. (Abasolo vs. NLRC [G.R. No. 118475, 29 November 2000])

Probationary Employees

Probationary employment. - Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. (Article 281 of the Labor Code)

[A] probationary employee, as understood under Article 282 of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. The word "PROBATIONARY", as used to describe the period of employment, IMPLIES THE PURPOSE OF THE TERM OR PERIOD, BUT NOT ITS LENGTH.

Being in the nature of a "trial period" the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment.

It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently.

xxx xxx xxxAs the law now stands, Article 281 of the Labor Code gives ample authority to the employer to terminate a

probationary employee for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. There is nothing under Article 281 of the Labor Code that would preclude the employer from extending a regular or a permanent appointment to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of the probationary period. Conversely, if the purpose sought by the employer is neither attained nor attainable within the said period, Article 281 does not likewise preclude the employer from terminating the probationary employment on justifiable causes as in the instant case. (International Catholic Migration vs. NLRC [G.R. 72222, 30 January 1989])

This is by no means to assert that the security of tenure protection of the constitution does not apply to probationary employees. The Labor code has wisely provided for such a case thus: "The termination of employment of probationary employees and those employed with a fixed period shall be subject to such regulations as the Secretary of Labor may prescribe to prevent the circumvention of the right of the employees to be secured in their employment as provided herein." There is no question here, as noted in the assailed order of Presidential Executive Assistant Clave, that petitioners did not enjoy a permanent status. During such period they could remain in their positions and any circumvention of their of the rights, in accordance with the statutory statutory scheme, subject to inquiry and therafter correction by the Department of Labor. Thus there was the safeguard as to the duration of their employment being respected. To that extent, their tenure was secure. The moment, however, the period expired in accordance with contracts freely entered into, they could no longer invoke the constitutional protection. (Biboso vs. Victorias Milling [G.R. No. L-44360, 31 March 1977])

[T]he extension of Dequila's probation was ex gratia, an act of liberality on the part of his employer affording him a second chance to make good after having initially failed to prove his worth as an employee. Such an act cannot now unjustly be turned against said employer's account to compel it to keep on its payroll one who could not perform according to its work standards. The law, surely, was never meant to produce such an inequitable result.

By voluntarily agreeing (the extension was with Dequila's written consent) to an extension of the probationary period, Dequila in effect waived any benefit attaching to the completion of said period if he still failed to make the grade during the period of extension. The Court finds nothing in the law which by any fair interpretation prohibits such a waiver. And no public policy protecting the employee and the security of his tenure is served by prescribing voluntary agreements which, by reasonably extending the period of probation, actually improve and further a probationary employee's prospects of demonstrating his fitness for regular employment. (Mariwasa vs. Leodegario [G.R. No. 74246, 26 January 1989])

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Generally, the probationary period of employment is limited to six (6) months. The exception to this general rule is when the parties to an employment contract may agree otherwise, such as when the same is established by company policy or when the same is required by the nature of work to be performed by the employee. In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of probationary employment, such as in the present case where the probationary period was set for eighteen (18) months, i.e. from May 1980 to October 1981, especially where the employee must learn a particular kind of work such as selling, or when the job requires certain qualifications, skills, experience or training.

Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts on the period of probationary employment. It states as follows:

Probationary Employment has been the subject of misunderstanding in some quarter. Some people believe six (6) months is the probationary period in all cases. On the other hand employs who have already served the probationary period are sometimes required to serve again on probation.

Under the Labor Code, six (6) months is the general probationary period but the probationary period is actually the period needed to determine fitness for the job. This period, for lack of a better measurement is deemed to be the period needed to learn the job.

The purpose of this policy is to protect the worker at the same time enable the employer to make a meaningful employee selection. This purpose should be kept in mind in enforcing this provision of the Code. This issuance shall take effect immediately.

In the case at bar, it is shown that private respondent Company needs at least eighteen (18) months to determine the character and selling capabilities of the petitioners as sales representatives. The Company is engaged in advertisement and publication in the Yellow Pages of the PLDT Telephone Directories. Publication of solicited ads are only made a year after the sale has been made and only then win the company be able to evaluate the efficiency, conduct, and selling ability of its sales representatives, the evaluation being based on the published ads. Moreover, an eighteen month probationary period is recognized by the Labor Union in the private respondent company, which is Article V of the Collective Bargaining Agreement,...

xxx xxx xxxAnd as indicated earlier, the very contracts of employment signed and acquiesced to by the petitioners specifically

indicate that "the company hereby employs the employee as telephone sales representative on a probationary status for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. This stipulation is not contrary to law, morals and public policy. (Ver Buiser vs. GTE Directories [G.R. No. L-63316, 1984])

Managerial employees and supervisory employees

"Managerial employee" is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of this Book. [Article 212 (m), of the Labor Code]

The grave abuse of discretion committed by public respondent is at once apparent. Art. 212, par. (m), of the Labor Code is explicit. A managerial employee is (a) one who is vested with powers or prerogatives to lay down and execute management policies, or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees; or (b) one who is vested with both powers or prerogatives. A supervisory employee is different from a managerial employee in the sense that the supervisory employee, in the interest of the employer, effectively recommends such managerial actions, if the exercise of such managerial authority is not routinary in nature but requires the use of independent judgment.

Ranged against these definitions and after a thorough examination of the evidence submitted by both parties, we arrive at a contrary conclusion. Branch Managers, Cashiers and Controllers of respondent Bank are not managerial employees but supervisory employees. The finding of public respondent that bank policies are laid down and/or executed through the collective action of these employees is simply erroneous. His discussion on the division of their duties and responsibilities does not logically lead to the conclusion that they are managerial employees, as the term is defined in Art. 212, par. (m). (NATU-RPB vs. Torres (G.R. No. 93468, 20 December 1994])

[A] thorough dissection of the job description of the concerned supervisory employees and section heads show that they are not actually managerial but only supervisory employees since they do not lay down company policies. PICOP’s contention that the subject section heads and unit managers exercise the authority to hire and fire is ambiguous and quite misleading for the reason that any authority they my exercise is not supreme but merely advisory in character. Theirs is not a final determination of the company policies inasmuch as any action taken by them on matters relating to hiring, promotion, transfer, suspension and termination of employees is still subject to confirmation and approval of their respective superior. Thus, where such power, which is in effect recommendatory in character, is subject to evaluation, review and final action by the department heads and other higher executives of the company, the same, although present, is not effective and not an exercise of independent judgment as required by law. (PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])

FIRST-LINE MANAGERS The lowest level in an organization at which individuals are responsible for the work of others is called first-line or first-level management. First-line managers direct operating employees only; they do not supervise other managers. Examples of first-line managers are the "foreman" or production supervisor in a manufacturing plant, the technical supervisor in a research department, and the clerical supervisor in a large office. First-level managers are often called supervisors.

MIDDLE MANAGERS The term middle management can refer to more than one level in an organization. Middle managers direct the activities of other managers and sometimes also those of operating employees. Middle managers' principal responsibilities are to direct the activities that implement their organizations' policies and to balance the demands of their superiors with the capacities of their subordinates. A plant manager in an electronics firm is an example of a middle manager.

TOP MANAGERS Composed of a comparatively small group of executives, top management is responsible for the overall management of the organization. It establishes operating policies and guides the organization's interactions with its environment. Typical titles of top managers are "chief executive officer," "president," and "senior vice-president." Actual titles vary from one organization to another and are not always a reliable guide to membership in the highest management classification.

As can be seen from this description, a distinction exists between those who have the authority to devise, implement and control strategic and operational policies (top and middle managers) and those whose task is simply to ensure that such policies are carried out by the rank-and-file employees of an organization (first-level managers/supervisors). What

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distinguishes them from the rank-and-file employees is that they act in the interest of the employer in supervising such rank-and-file employees.

"Managerial employees" may therefore be said to fall into two distinct categories: the "managers" per se, who compose the former group described above, and the "supervisors" who form the latter group. Whether they belong to the first or the second category, managers, vis-a-vis employers, are, likewise, employees.

xxx xxx xxxEarlier in this opinion, reference was made to the distinction between managers per se (top managers and middle

managers) and supervisors (first-line managers). That distinction is evident in the work of the route managers which sets them apart from supervisors in general. Unlike supervisors who basically merely direct operating employees in line with set tasks assigned to them, route managers are responsible for the success of the company's main line of business through management of their respective sales teams. Such management necessarily involves the planning, direction, operation and evaluation of their individual teams and areas which the work of supervisors does not entail.

(United Pepsi Cola Supervisory Union vs. Laguesma [288 SCRA 15, 1998])

[A] thorough dissection of the job description of the concerned supervisory employees and section heads indisputably show that they are not actually managerial but supervisory employees since they do not lay down company policies. PICOP’s contention that the subject section heads and unit managers exercise the authority to hire and fire is ambiguous and misleading for the reason that any authority they exercise is not supreme but merely advisory in character. Theirs is not a final determination of the company policies inasmuch as any action taken by them on matters relative to hiring, promotion, transfer, suspension and termination of employees is still subject to the confirmation and approval by their respective supervisor. Thus, where power, which is in effect recommendatory in character, is subject to evaluation, review and final action by department heads and other higher executives of the company, the same, although present, is not effective and not an exercise of independent judgment as required by law. (PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])

Term employment

The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, THE DECISIVE DETERMINANT IN TERM EMPLOYMENT SHOULD NOT BE THE ACTIVITIES THAT THE EMPLOYEE IS CALLED UPON TO PERFORM, BUT THE DAY CERTAIN AGREED UPON BY THE PARTIES FOR THE COMMENCEMENT AND TERMINATION OF THEIR EMPLOYMENT RELATIONSHIP, A DAY CERTAIN BEING UNDERSTOOD TO BE "THAT WHICH MUST NECESSARILY COME, ALTHOUGH IT MAY NOT BE KNOWN WHEN." Seasonal employment and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied.

xxx xxx xxxThere can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods

have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"

As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head.

xxx xxx xxxAccordingly, and since the entire purpose behind the development of legislation culminating in the present Article

280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. (Brent School vs. Zamora (G.R. No. L-48494, 05 February 1990])

The private respondent's intention is obvious. It is remarkable that neither the NLRC nor the Solicitor General recognized it. There is no question that the purpose behind these individual contracts was to evade the application of the labor laws by making it appear that the drivers of the trucking company were not its regular employees.

Under these arrangements, the private respondent hoped to be able to terminate the services of the drivers without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements, which, significantly, were uniformly limited to a six-month period. No cause had to be established because such renewal was subject to the discretion of the parties. In fact, the private respondent did not even have to wait for the expiration of the contract as it was there provided that it could be "earlier terminated at the option of either party."

By this clever scheme, the private respondent could also prevent the drivers from becoming regular employees and thus be entitled to security of tenure and other benefits, such as a minimum wage, cost-of-living allowances, vacation and sick leaves, holiday pay, and other statutory requirements. The private respondent argues that there was nothing wrong with the affidavit because all the affiant acknowledged therein was full payment of the amount due him under the agreement. Viewed in this light, such acknowledgment was indeed not necessary at all because this was already

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embodied in the vouchers signed by the payee-driver. But the affidavit, for all its seeming innocuousness, imported more than that. What was insidious about the document was the waiver the affiant was unwarily making of the statutory rights due him as an employee of the trucking company.

xxx xxx xxxThe Court looks with stern disapproval at the contract entered into by the private respondent with the petitioner (and

who knows with how many other drivers). The agreement was a clear attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary private transactions. They were not, to be sure. The agreement was in reality a contract of employment into which were read the provisions of the Labor Code and the social justice policy mandated by the Constitution. It was a deceitful agreement cloaked in the habiliments of legality to conceal the selfish desire of the employer to reap undeserved profits at the expense of its employees. The fact that the drivers are on the whole practically unlettered only makes the imposition more censurable and the avarice more execrable.(Cielo vs. NLRC [G.R. No. 78693, 28 January 1991])

[T]he two guidelines, by which fixed contracts of employments can be said NOT to circumvent security of tenure, are either:

1. The fixed period of employment was KNOWINGLY AND VOLUNTARILY AGREED UPON by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or:

2. It satisfactorily appears that the employer and employee DEALT WITH EACH OTHER ON MORE OR LESS EQUAL TERMS with no moral dominance whatever being exercised by the former on the latter.

(PNOC vs. NLRC [G.R. No. 97747, 31 March 1993])

It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade.

Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. (Pakistan Air Lines vs. Ople [G.R. No. 61594, 28 September 1990])

Project employees

…[W]here the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. (1st paragraph of Article 280 of the Labor Code)

A project employee has been defined to be one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee, . . . . (Mercado, Sr. vs. NLRC [G.R. No. 79869, 05 September 1991])

In the realm of business and industry, we note that "project" could refer to one or the other of at least two (2) distinguishable types of activities. FIRSTLY, a project could refer to a particular job or undertaking that is WITHIN THE REGULAR OR USUAL BUSINESS OF THE EMPLOYER company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this first type of project is a particular construction job or project of a construction company. A construction company ordinarily carries out two or more discrete identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as "project employees," and their services may be lawfully terminated at completion of the project.

The term "project" could also refer to, SECONDLY, a particular job or undertaking that is NOT WITHIN THE REGULAR BUSINESS OF THE CORPORATION. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. The case at bar presents what appears to our mind as a typical example of this kind of "project." (ALU-TUCP vs. NLRC [G.R. No. 109902, 02 August 1994])

As an electrical contractor, the private respondent depends for its business on the contracts it is able to obtain from real estate developers and builders of buildings. Since its work depends on the availability of such contracts or "projects," necessarily the duration of the employment of its work force is not permanent but co-terminus with the projects to which they are assigned and from whose payrolls they are paid. It would be extremely burdensome for their employer who, like them, depends on the availability of projects, if it would have to carry them as permanent employees and pay them wages even if there are no projects for them to work on. We hold, therefore, that the NLRC did not abuse its discretion in finding, based on substantial evidence in the records, that the petitioners are only project workers of the private respondent. (Cartagenas vs. Romago Electric [G.R. No. 82973, 1989])

Petitioner relies on Policy Instruction No. 20 which was issued by then Secretary Ople to stabilize employer-employee relations in the construction industry to support his contention that workers in the construction industry may now be considered regular employees after their long years of service with private respondent. The pertinent provision of Policy Instruction No. 20 reads:

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