THIRD DIVISION

[G.R. No. 149440. January 28, 2003]

HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS

and
CRISTINE
SEGURA, petitioners,
vs. NATIONAL
FEDERATION
OF
SUGARCANE
WORKERS-FOOD AND
GENERAL TRADE, respondents.
DECISION
PANGANIBAN, J.:

Although the employers have shown that respondents performed work that was
seasonal in nature, they failed to prove that the latter worked only for the duration of one
particular season. In fact, petitioners do not deny that these workers have served them
for several years already. Hence, they are regular -- not seasonal -- employees.
The Case
Before the Court is a Petition for Review under Rule 45 of the Rules of Court,
seeking to set aside the February 20, 2001 Decision of the Court of Appeals (CA) in
CA-GR SP No. 51033. The dispositive part of the Decision reads:
[1]

WHEREFORE, premises considered, the instant special civil action for certiorari is
hereby DENIED.
[2]

[3]

On the other hand, the National Labor Relations Commission (NLRC) Decision,
upheld by the CA, disposed in this wise:

WHEREFORE, premises considered, the decision of the Labor Arbiter is

hereby SET ASIDE and VACATED and a new one entered declaring complainants to
have been illegally dismissed. Respondents are hereby ORDERED to reinstate
complainants except Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva
to their previous position and to pay full backwages from September 1991 until
reinstated. Respondents being guilty of unfair labor practice are further ordered to pay
complainant union the sum of P10,000.00 as moral damages and P5,000.00 as
exemplary damages.
[4]

The Facts
The facts are summarized in the NLRC Decision as follows:

Contrary to the findings of the Labor Arbiter that complainants [herein respondents]
refused to work and/or were choosy in the kind of jobs they wanted to perform, the
records is replete with complainants persistence and dogged determination in going
back to work.
Indeed, it would appear that respondents did not look with favor workers having
organized themselves into a union. Thus, when complainant union was certified as the
collective bargaining representative in the certification elections, respondents under
the pretext that the result was on appeal, refused to sit down with the union for the
purpose of entering into a collective bargaining agreement. Moreover, the workers
including complainants herein were not given work for more than one month. In
protest, complainants staged a strike which was however settled upon the signing of a
Memorandum of Agreement which stipulated among others that:
a) The parties will initially meet for CBA negotiations on the 11th day of January
1991 and will endeavor to conclude the same within thirty (30) days.
b) The management will give priority to the women workers who are members of the
union in case work relative x x x or amount[ing] to gahit and [dipol] arises.
c) Ariston Eruela Jr. will be given back his normal work load which is six (6) days in
a week.
d) The management will provide fifteen (15) wagons for the workers and that existing
workforce prior to the actual strike will be given priority. However, in case the said
workforce would not be enough, the management can hire additional workers to
supplement them.
e) The management will not anymore allow the scabs, numbering about eighteen (18)
workers[,] to work in the hacienda; and
f) The union will immediately lift the picket upon signing of this agreement.
However, alleging that complainants failed to load the fifteen wagons, respondents
reneged on its commitment to sit down and bargain collectively. Instead, respondent
employed all means including the use of private armed guards to prevent the
organizers from entering the premises.

Moreover, starting September 1991, respondents did not any more give work
assignments to the complainants forcing the union to stage a strike on January 2,
1992. But due to the conciliation efforts by the DOLE, another Memorandum of
Agreement was signed by the complainants and respondents which provides:
Whereas the union staged a strike against management on January 2, 1992 grounded
on the dismissal of the union officials and members;
Whereas parties to the present dispute agree to settle the case amicably once and for
all;
Now therefore, in the interest of both labor and management, parties herein agree as
follows:
1. That the list of the names of affected union members hereto attached and made part
of this agreement shall be referred to the Hacienda payroll of 1990 and determine
whether or not this concerned Union members are hacienda workers;
2. That in addition to the payroll of 1990 as reference, herein parties will use as guide
the subjects of a Memorandum of Agreement entered into by and between the parties
last January 4, 1990;
3. That herein parties can use other employment references in support of their
respective claims whether or not any or all of the listed 36 union members are
employees or hacienda workers or not as the case may be;
4. That in case conflict or disagreement arises in the determination of the status of the
particular hacienda workers subject of this agreement herein parties further agree to
submit the same to voluntary arbitration;
5. To effect the above, a Committee to be chaired by Rose Mengaling is hereby
created to be composed of three representatives each and is given five working days
starting Jan. 23, 1992 to resolve the status of the subject 36 hacienda workers. (Union
representatives: Bernardo Torres, Martin Alas-as, Ariston Arulea Jr.)
Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation
Meeting showed as follows:
The meeting started at 10:00 A.M. A list of employees was submitted by Atty. Tayko
based on who received their 13th month pay. The following are deemed not considered
employees:

1. Luisa Rombo
2. Ramona Rombo
3. Bobong Abrega
4. Boboy Silva
The name Orencio Rombo shall be verified in the 1990 payroll.
The following employees shall be reinstated immediately upon availability of work:
1. Jose Dagle 7. Alejandro Tejares
2. Rico Dagle 8. Gaudioso Rombo
3. Ricardo Dagle 9. Martin Alas-as Jr.
4. Jesus Silva 10. Cresensio Abrega
5. Fernando Silva 11. Ariston Eruela Sr.
6. Ernesto Tejares 12. Ariston Eruela Jr.
When respondents again reneged on its commitment, complainants filed the present
complaint.
But for all their persistence, the risk they had to undergo in conducting a strike in the
face of overwhelming odds, complainants in an ironic twist of fate now find
themselves being accused of refusing to work and being choosy in the kind of work
they have to perform. (Citations omitted)
[5]

Ruling of the Court of Appeals

The CA affirmed that while the work of respondents was seasonal in nature, they
were considered to be merely on leave during the off-season and were therefore still
employed by petitioners. Moreover, the workers enjoyed security of tenure. Any
infringement upon this right was deemed by the CA to be tantamount to illegal
dismissal.
The appellate court found neither rhyme nor reason in petitioners argument that it
was the workers themselves who refused to or were choosy in their work. As found by

the NLRC, the record of this case is replete with complainants persistence and dogged
determination in going back to work.
[6]

The CA likewise concurred with the NLRCs finding that petitioners were guilty of
unfair labor practice.
Hence this Petition.

[7]

Issues
Petitioners raise the following issues for the Courts consideration:
A. Whether or not the Court of Appeals erred in holding that respondents, admittedly
seasonal workers, were regular employees, contrary to the clear provisions of Article
280 of the Labor Code, which categorically state that seasonal employees are not
covered by the definition of regular employees under paragraph 1, nor covered
under paragraph 2 which refers exclusively to casual employees who have served
for at least one year.
B. Whether or not the Court of Appeals erred in rejecting the ruling in Mercado, xxx,
and relying instead on rulings which are not directly applicable to the case at bench,
viz, Philippine Tobacco,Bacolod-Murcia, and Gaco, xxx.
C. Whether or not the Court of Appeals committed grave abuse of discretion in
upholding the NLRCs conclusion that private respondents were illegally dismissed,
that petitioner[s were] guilty of unfair labor practice, and that the union be awarded
moral and exemplary damages.[8]

Consistent with the discussion in petitioners Memorandum, we shall take up Items A

and B as the first issue and Item C as the second.
The Courts Ruling
The Petition has no merit.
First Issue:
Regular Employment
At the outset, we must stress that only errors of law are generally reviewed by this
Court in petitions for review on certiorari of CA decisions. Questions of fact are not
entertained. The Court is not a trier of facts and, in labor cases, this doctrine applies
with greater force. Factual questions are for labor tribunals to resolve. In the present
case, these have already been threshed out by the NLRC. Its findings were affirmed by
the appellate court.
[9]

[10]

[11]

[12]

Contrary to petitioners contention, the CA did not err when it held that respondents
were regular employees.
Article 280 of the Labor Code, as amended, states:

Art. 280. Regular and Casual Employment. - The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in natureand 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 exist. (Italics supplied)
For respondents to be excluded from those classified as regular employees, it is not
enough that they perform work or services that are seasonal in nature. They must have
also been employed only for the duration of one season. The evidence proves the
existence of the first, but not of the second, condition. The fact that respondents -- with
the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva -repeatedly worked as sugarcane workers for petitioners for several years is not denied
by the latter. Evidently, petitioners employed respondents for more than one
season. Therefore, the general rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission, the Court issued this
clarification:
[13]

[T]he test of whether or not an employee is a regular employee has been laid down
in De Leon v. NLRC, in which this Court held:
The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual trade or business of the employer. The test is whether the former is usually
necessary or desirable in the usual trade or business 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 a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that

activity to the business. Hence, the employment is considered regular, but only with
respect to such activity and while such activity exists.
xxxxxxxxx

x x x [T]he fact that [respondents] do not work continuously for one whole year but
only for the duration of the x x x season does not detract from considering them in
regular employment since in a litany of cases this Court has already settled that
seasonal workers who are called to work from time to time and are temporarily laid
off during off-season are not separated from service in said period, but merely
considered on leave until re-employed.
[14]

The CA did not err when it ruled that Mercado v. NLRC was not applicable to the
case at bar. In the earlier case, the workers were required to perform phases of
agricultural work for a definite period of time, after which their services would be
available to any other farm owner. They were not hired regularly and repeatedly for the
same phase/s of agricultural work, but on and off for any single phase thereof. On the
other hand, herein respondents, having performed the same tasks for petitioners every
season for several years, are considered the latters regular employees for their
respective tasks. Petitioners eventual refusal to use their services -- even if they were
ready, able and willing to perform their usual duties whenever these were available -and hiring of other workers to perform the tasks originally assigned to respondents
amounted to illegal dismissal of the latter.
[15]

The Court finds no reason to disturb the CAs dismissal of what petitioners claim
was their valid exercise of a management prerogative. The sudden changes in work
assignments reeked of bad faith. These changes were implemented immediately after
respondents had organized themselves into a union and started demanding collective
bargaining. Those who were union members were effectively deprived of their
jobs. Petitioners move actually amounted to unjustified dismissal of respondents, in
violation of the Labor Code.
Where there is no showing of clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is
on the employer to prove that the termination was for a valid and authorized cause. In
the case at bar, petitioners failed to prove any such cause for the dismissal of
respondents who, as discussed above, are regular employees.
[16]

Second Issue:
Unfair Labor Practice
The NLRC also found herein petitioners guilty of unfair labor practice. It ruled as
follows:

Indeed, from respondents refusal to bargain, to their acts of economic inducements

resulting in the promotion of those who withdrew from the union, the use of armed
guards to prevent the organizers to come in, and the dismissal of union officials and
members, one cannot but conclude that respondents did not want a union in their
haciendaa clear interference in the right of the workers to self-organization.
[17]

We uphold the CAs affirmation of the above findings. Indeed, factual findings of
labor officials, who are deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect but even finality. Their
findings are binding on the Supreme Court. Verily, their conclusions are accorded
great weight upon appeal, especially when supported by substantial evidence.
Consequently, the Court is not duty-bound to delve into the accuracy of their factual
findings, in the absence of a clear showing that these were arbitrary and bereft of any
rational basis.
[18]

[19]

[20]

The finding of unfair labor practice done in bad faith carries with it the sanction of
moral and exemplary damages.
[21]

WHEREFORE,
the
Petition
is
hereby DENIED and
Decision AFFIRMED. Costs against petitioners.

the

assailed

SO ORDERED.
Puno, J., (Chairman), Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.

THIRD DIVISION

[G.R. No. 100333. March 13, 1997]

HILARIO MAGCALAS, PROSPERO MARINDA, CELSO GAMALO,

EPIFANIO OMEGA, VIRGILIO CAMPOS, ANTONIO LLAGAS,
BERNARD BENDANILLO, SHALDY AUTENCIO, CIRIACO REYES,
JUANITO DE LEON, EDMUNDO GUZMAN, ALFREDO SANTOS,
BENEDICTO DAGCUTAN, NORBIE LOPENA, ISMAEL ALONZO,
ELMER
BALETA,
GENITO
DALMERO,
and
CESAR
LEDESMA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and KOPPEL, INC., respondents.
DECISION
PANGANIBAN, J.:

May regular employment be restricted to a definite or fixed term? Upon the

expiration of such term, may the employment be deemed terminated upon payment of
separation pay? The respondent NLRC answered these questions in the affirmative but
the labor arbiter held otherwise -- that such termination constituted illegal dismissal,
thereby entitling the petitioners to reinstatement, backwages and attorney's fees.
This divergence of position between the NLRC and the labor arbiter will now be
ruled upon by this Court as it resolves this petition for certiorari challenging the
Decision and Resolution of public respondent promulgated on April 5, 1991, and May
13, 1991, respectively. The Decision of public respondent reversed that of the labor
arbiter while the Resolution denied the motion for reconsideration. The dispositive
portion of the impugned Decision reads:
[1]

[2]

[3]

[4]

"WHEREFORE, premises considered, the appealed decision is hereby set

aside, and a new judgment is entered, ordering the respondent to pay
separation pay to herein complainants, as explained above."
On the other hand, the dispositive portion of the reversed decision of the labor
arbiter reads:
[5]

[6]

"WHEREFORE, in view of all the foregoing considerations, judgment is

hereby rendered, ordering the respondent to reinstate all the individual
complainants named in the above entitled case to their former positions
without loss of seniority rights and privileges, and to pay them backwages
from the time of their dismissal/termination to their actual reinstatement, plus

attorney's fee equivalent to Ten Percent (10%) of the total monetary award; the
claim for legal interest is dismissed for lack of merit."
The Facts
The facts are set out in the decision of the labor arbiter, as follows:

[7]

"In their basic complaint and counter position paper, the complainants alleged
(inter alia) that they were all regular employees of the respondent company,
having rendered continuous services in various capacities, ranging from
leadman, tinsmith, tradeshelper to general clerk; that the respondent has been
engaged in the business of installing air conditioning (should be airconditioning) and refrigeration equipment in its different projects and jobsites
where the complainants have been assigned; that the complainants have
worked for a number of years, the minimum of which was one and a half years
and the maximum (was) eight years under several supervisors; that on August
30, 1988, they were dismissed (en masse) without prior notice and
investigation, and that their dismissals were effected for no other cause than
their persistent demands for payment of money claims (as) mandated by law.
On the other hand, the respondents interposed the defense of contract/project
employment and averred the following statement of facts in support thereof:
'The respondent company is engaged in the business of manufacturing
and installation of air(-) conditioning and refrigeration equipments (sic).
The manufacturing aspect of its operation is handled by its regular
employees, while the installation aspect, by reason of its intermittence,
is carried out by its project or contract employees.
The installation of the air(-)conditioning equipment at the Asian
Development Bank Building and (the) Interbank building was awarded
to the respondent herein. The complainants herein were among the
contract employees hired by the respondent to install the air(-)
conditioning equipment at the Asian Development Bank and Interbank
projects. Their specific assignments were as follows:
Name Position Project
1. HILARIO MAGCALAS Leadman Asian Dev. Bank
2. PROSPERO MARINDA Tinsmith Asian Dev. Bank
3. VIRGILIO CAMPOS Tradeshelper "
4. ANTONIO LLAGAS " "

5. BERNARD BENDANILLO " "

6. ISMAEL ALONZO " "
7. SHALDY AUTENCIO " "
8. CIRIACO REYES " Interbank
9. CELSO GAMALO " "
10. EPIFANIO OMEGA " "
11. EDMUNDO GUZMAN " "
12. ALFREDO SANTOS " "
13. JUANITO DE LEON " "
14. BENEDICTO DAGCUTAN " "
15. ELMER BALETA " "
16. GENITO DALMERO " "
17. CESAR LEDESMA Tinsmith "
18. NOR(B)IE LOPENA General Clerk "
The aforesaid employees were engaged to work on (sic) the
installation projects until August 31, 1988, when their task was
expected to be completed. This is evidenced by their respective
employment contracts, copies of which are hereto attached as
ANNEXES 1 to 18.
With the completion of their task on August 31, 1988 in their
respective installation projects, the employment of the complainants
(ipso facto) expired as they had no more work to do. They now claim
that they were illegally dismissed.'
Reply by the respondent and rejoinder by the complainants were subsequently
filed, after which the case was considered as submitted for decision based on
the pleadings and evidences (sic) on record."
As earlier stated, public respondent reversed the decision of the labor arbiter
favorable to herein petitioners. Hence, this petition for certiorari.
The Issues
Petitioners raise and argue the following issues in their Memorandum:

[8]

"(a) whether (p)etitioners (were) regular workers under the contemplation of

Art. 280 of the Labor Code; and,
(b) whether (p)etitioners' termination and/or cessation of their employments on
August 30th, (sic) 1988 were justified under the contemplation of Art. 279 of
the Labor Code as amended."

Petitioners contend that they were regular employees because "(t)he job of
installing an(d)/or repairing its manufactured units and equipments (sic) to its different
customers are not merely adjunct but are necessary activities of (p)rivate (r)espondent's
daily business operations." They maintain that their employment is regular because of
"the nature of the activities (they) performed," regardless of the stipulation in their job
contracts. Petitioners argue that the phrase "specific project or undertaking" in Article
280 of the Labor Code means "special type of venture or undertaking" that is not
"usually necessary or desirable in the employer's business operation and
activities." Petitioners add that doubts as to their employment status must be resolved
in their favor.
[9]

[10]

[11]

[12]

The Solicitor General ("Sol. Gen."), invoking the case of Orbos vs. Civil Service
Commission, sided with petitioners. He argues that "(t)o say that petitioners (were)
regular employees and yet subject to a definite or fixed term is incongruous,
inconsistent, or illogical. x x x Indeed, a worker is either regular or casual; (i)f he is
employed only for a specific project or undertaking, then he is considered a casual
employee and may be dismissed at the time of the completion of the project." Besides,
the "(r)ecords cannot deny that petitioners worked continuously, without a single day of
interruption, in not just one, but on the various jobsites assigned to them. Some of them
have even worked continuously for eight (8) years, without any stoppage." Even
admitting that petitioners were project employees, the Sol. Gen. states that "no iota of
proof was ever presented by private respondent to refute petitioners' claim that the ADB
and Interbank projects were still in operation when they were terminated or, vice-versa,
to support its claim that these projects were already terminated."
[13]

[14]

[15]

[16]

On the other hand, private respondent contends that certiorari is not proper in this
case. "The findings and conclusions of fact and law of the respondent NLRC are
supported by substantial evidence and were not arrived at arbitrarily." It adds that
"petitioners were project or contract workers who were hired whenever private
respondent was able to obtain sub-contracts for the installation of air(-) conditioning and
ventilation system or refrigeration equipment in construction or building projects x x
x. They were last hired in the Asian Development Bank and Interbank air(-)conditioning
and ventilation system projects which were completely turned over in August 1989 and
(on) November 13, 1989, respectively. (Please see Annexes '2' and '3' hereof).
[17]

[18]

Because of the position taken by the Sol. Gen., public respondent filed its own
Comment. It argues that "the factual findings of respondent Commission (were) based
on substantial evidence and supported by the clear letter of the law as well as pertinent
jurisprudence on the matter." Thus, public respondent contends that the petition
should be dismissed and the challenged judgment should be upheld as a proper
exercise of the powers conferred upon it by law.
[19]

[20]

Public respondent ruled against petitioners thus:

[21]

"A cursory reading of the Collective Bargaining Agreement between the

respondent company and the Koppel Employees Association shows that it
recognized Contract Employees as one of the three categories of employees in
the Company. Article IV, Section 1, of the said Collective Bargaining

Agreement defines a 'Contract Employee' as 'one hired on individual

employment contract basis to perform work on specific projects or as
indicated in his contract of employment. The duration of such employment is
determined by and indicated in his contract of employment.' (Record, page 49)
Article 280 of the Labor Code provides:
'Art. 280. 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 of which has been determined at
the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for
the duration of the season.' (Underscoring supplied)
The above provision is intended for all industries except the construction
industry. Policy Instruction No. 20 was precisely promulgated for the reason
that the problems of regularity of employment in the construction industry has
continued to plague it. The policy implements the exception to Article 280 of
the Labor Code. (Magante v. NLRC, 185 SCRA 21 )
Complainant herein were engaged by the respondent to handle the installation
of air(-)conditioning and refrigeration equipments (sic) in the construction
projects at the Asian Development Bank and Interbank buildings. As the
nature and character of their work is necessary or desirable of (sic) the usual
business of the respondent, which is to manufacture and install
air(-)conditioning and refrigeration equipments (sic) in buildings,
complainants' jobs can be categorized as regular workers (should be work) but
subject to a definite or fixed term. But their services were not terminated at the
end of the project or contract. As the ADB and Interbank projects have been
completed, their lay-off has resulted in the termination of their employment
for lack of work; hence, they are entitled to separation pay equivalent to one
month pay or one-half month pay for every year of service, whichever is
greater, and a fraction of six months or more to be considered as one year.
The Court's Ruling
We find for petitioners.

First Issue: Are Petitioners Regular Workers?

In certiorari proceedings under Rule 65, this Court does not, as a rule, evaluate the
sufficiency of evidence upon which the labor arbiter and public respondent based their
determinations. The inquiry is limited essentially to whether or not said public
respondent acted without or in excess of its jurisdiction or with grave abuse of
discretion. However, where the findings of the NLRC are contrary to those of the
tribunal below, the Court -- in the exercise of its equity jurisdiction -- may wade into and
reevaluate such findings, as in the present instance.
[22]

[23]

In this case, Public Respondent NLRC did not sufficiently indicate the evidentiary
basis for its reversal of the labor arbiter's decision. After citing provisions in the
collective bargaining agreement (CBA) concerning contract workers and Policy
Instruction No. 20, public respondent correctly stated that petitioners were performing
work necessary or desirable in the usual business of private respondent. From this
undisputed fact, the NLRC jumped to strange and strained inferences. First, it held that
the employment of the petitioners was subject to fixed terms. It then leapt to the nonsequitur conclusion that petitioners were project employees. Going further, it held that
they were entitled to separation pay, overlooking that under the very law it invoked,
"project employees are not entitled to termination pay." This convolution of facts and
law cannot reverse the decision of the labor arbiter which is grounded on documentary
evidence submitted by the parties.
[24]

Indeed, an examination of the assailed Decision reveals that public respondent

failed to back up its conclusions with substantial evidence, or that which a reasonable
mind may accept as adequate to justify a conclusion. This quantum of evidence is
required to establish a fact in cases before administrative and quasi-judicial bodies.
[25]

Thus, a mere provision in the CBA recognizing contract employment does not
sufficiently establish that petitioners were ipso facto contractual or project employees. In
the same vein, the invocation of Policy No. 20 governing the employment of project
employees in the construction industry does not, by itself, automatically classify private
respondent as part of the construction industry and entitle it to dismiss petitioners at the
end of each project. These facts cannot be presumed; they must be supported by
substantial evidence.
On the other hand, private respondent did not even allege, much less did it seek to
prove, that petitioners had been hired on a project-to-project basis during the entire
length of their employment. Rather, it merely sought to establish that petitioners had
been hired to install the air-conditioning equipment at Asian Development Bank and
Interbank and that they were legally dismissed upon the conclusion of these projects.
Private respondent did not even traverse, and public respondent did not controvert,
the labor arbiter's finding that petitioners were continuously employed without
interruption, from the date of their hiring up to the date of their dismissal, in spite of the
alleged completion of the so-called projects in which they had been hired. The
undisputed finding of the labor arbiter on this continuous employment of petitioners is
worth quoting:
[26]

[27]

"(T)he record discloses that the complainants worked not only in one special
project, either at the Asian Development Bank or the Interbank building, as the
evidence of the respondent tends to prove, but also variably in other
projects/jobsites contracted by Koppel Incorporated: such as the PNB on
Roxas Boulevard, Manila; MIA now NAIA; PICC; and San Miguel Complex
on Ortigas Avenue, Pasig, Metro Manila. Some of them, after their tour of
duty on these different job-sites, were reassigned to the respondent's plant at
Koppel Compound, Para()aque, Metro Manila, as shown by the individual
complainants(') affidavits attached to their position paper. A close examination
of the record further reveals that the 'special projects' at the Asian
Development Bank and Interbank to which the complainants were last
assigned by the respondent were still in operation before their alleged
termination from employment. Under these factual milieu, we believe that
they had been engaged to work and perform activities which were necessary
and desirable in the air(-)conditioning and refrigeration installation/repair
business of the respondent employer, especially where, as in this case, the very
nature of such trade indicates that it can hardly fall under the exception of
Policy Instruction No. 20 which applies only to the construction industry. For
this reason, and considering that the facts narrated in the complainants(')
sworn statements were neither disputed nor refuted by contrary evidence by
the respondent, it becomes apparent and increasing(ly) clear that indeed they
would and ought to be classified as regular employees. x x x" (Underscoring
supplied.)
Petitioners were hired on different dates. Some of them worked for eight (8) years,
while others for only one and a half (1) years. Private respondent, on the other hand,
insisted that petitioners were hired on per project basis. Private respondent, however,
did not present any evidence to show the termination of the employment contracts at
the end of each project. Only before public respondent and in this petition did private
respondent allege, through a photocopy of an affidavit of Mr. Jose Lecaros, the
General Manager of Koppel, Inc., that the Asian Development Bank and the Interbank
projects had been completed. This affidavit as well as the other annexes cannot be
given weight in this petition because this Court is not a trier of facts. In any case, private
respondent had not proved, by the said affidavit, that the termination of each project had
invariably resulted in the dismissal of its alleged project employees.
[28]

[29]

Regular employees cannot at the same time be project employees. Article 280 of
the Labor Code states that regular employees are those whose work is necessary or
desirable to the usual business of the employer. The two exceptions following the
general description of regular employees refer to either project or seasonal
employees. It has been ruled in the case of ALU-TUCP vs. National Labor Relations
Commission that:
[30]

"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 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 (should be distinct) 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." (Underscoring supplied).
The employment of seasonal employees, on the other hand, legally ends upon
completion of the project or the season, thus:
[31]

"Clearly, therefore, petitioners being project employees, or to use the correct

term, seasonal employees, their employment legally ends upon completion of
the project or the season. The termination of their employment cannot and
should not constitute an illegal dismissal."
In terms of terminating employment, this Court has already distinguished project
from regular employees, to wit:
[32]

"The basic issue is thus whether or not petitioners are properly characterized
as 'project employees' rather than 'regular employees' of NSC. This issue
relates, of course, to an important consequence:the services of project
employees are co-terminous with the project and may be terminated upon the
end or completion of the project for which they were hired. Regular
employees, in contrast, are legally entitled to remain in the service of their
employer until that service is terminated by one or another of the recognized
modes of termination of service under the Labor Code."
[33]

[34]

The overwhelming fact of petitioners' continuous employment as found by the labor

arbiter ineludibly shows that the petitioners were regular employees. On the other hand,
we find that substantial evidence, applicable laws and jurisprudence do not support the
ruling in the assailed Decision that petitioners were project employees. The Court here
reiterates the rule that all doubts, uncertainties, ambiguities and insufficiencies should
be resolved in favor of labor. It is a well-entrenched doctrine that in illegal dismissal
cases, the employer has the burden of proof. This burden was not discharged in the
present case.
Second Issue: Is Ground for Dismissal Valid?

As regular employees, petitioners' employment cannot be terminated at the whim of

the employer. For a dismissal of an employee to be valid, two requisites must be
met: (1) the employee is afforded due process, meaning, he is given notice of the cause
of his dismissal and an adequate opportunity to be heard and to defend himself; and (2)
the dismissal is for a valid cause as indicated in Article 282 of the Labor Code. The
services of petitioners were purportedly terminated at the end of the ADB and Interbank
projects, but this could not have been a valid cause for, as discussed above, they were
regular and not project employees. Thus, the Court does not hesitate to conclude that
petitioners were illegally dismissed.
[35]

[36]

As a consequence of their illegal termination, petitioners are entitled to

reinstatement and backwages in accordance with the Labor Code. The backwages
however are to be computed only for three years from August 30, 1988, the date of their
dismissal, without deduction or qualification. Where the illegal dismissal transpired
before the effectivity of RA 6715, or before March 21, 1989, the award of backwages in
favor of the dismissed employees is limited to three (3) years without deduction or
qualification.
[37]

[38]

WHEREFORE, premises considered, the petition is GRANTED. The assailed

Decision and Resolution are REVERSED and SET ASIDE and the decision of the labor
arbiter isREINSTATED, with backwages to be computed as above discussed. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

THIRD DIVISION

[G.R. No. 117043. January 14, 1998]

FELIX VILLA, ALIBANGBANG, IRENEO; ALIBANGBANG, EFREN;

ABELLANOSA ELDIE; AGARAO, SOFRONIO; ALIFANTA, JOSE;
ALQUIZA, LORENZO; ALVIOLA, HERMOQUITO; AMONDINA,
NOE; ANGOT, ISIDRO; ANDRADA, CATALINO; ARUTA,
ROBERTO; AVILES, ZALDY; APAON, CESAR; ARTAJO, EDWIN;
ALCOPRA, ANTONIO, JR.; BALASE, PABLITO; BANCALE,
NEMESIO, BARICOG, GAUDENCIO; BACULIO, CIPRIANO;
BATION,
DOMINGO;
BAYER,
FELYBERT;
BENELAYO,
JOVENCIO; BERIGONDO, MARIANO; BEGORNIA, ELIZAR;
BUTASLAC, APOLINAR; BONCALES, DIOLLE; BASTATAS,
ROSENDO; BLASABAS, BONIFACIO; BALDESCO, OLYMPIO;
BARICUATRO,
DELFIN;
BARBON,
BEN;
BENDONG,
BERNARDO; BUTON, ROQUE; CAHAYAG, RODRIGO; CAHAYAG,
REMEGIO; CALDERON, DANILO; CANOY, ERLITO; CABUS,
ZENAS; CAPIN, JUANITO; CIMENI, ALBERTO; CELOSIA,
MONTANO; CANILLO, TITO; COLOYAN, CARLOS; CUTAD,
ALIPIO;
CAPOTE,
LIBRENDO;
COLALJO,
EDGARDO;
CABILUNA, ELIAS; CABILI, ARTHURO; COMA, ROGELIO;
CASAS, RODRIGO; COLLAMAR, ROSALIM; CABALLERO,
ORLANDO; CARCELLAR, ANTONIO; DEGOMA, DEOCADIO;
DAGUISONAN, ROMEO; DE LA CRUZ, VICENTE; DELIMA,
SEGUNDO; EDAYAN, ROSITO; ELMEDULAN, RUDY; FLORES,
RELENDIO; FLORES, CRESENCIANO; FLORES, GREGORIO;
FLORES, ROMUALDO; FUENTES, RODULFO; FORMENTERA,
ELEUTERIO; GALUPO, ELMER; GARBAN, FLORENCIO;
GUZMAN, REYNALDO; GORDO, CEFERINO; GENON, ESTEBAN;
GADIA,
NERIO;
HERNANDO,
BERNARDINO;
JAPITAN,
DANIEL;JUMAWAN, ROLANDO; LAGLARIO, ELPIDIO; LAURINO,
GENEROSO; LAPUZ, TEODOLO; LILA, NORBERTO; LLABAN,
BONIFACIO; LUMEN, ROMEO;LISUNDRA, JOSE; MACAPAS,
ELIZALDE; MANLIGUEZ, SAMSON; MANCIO, ROBERTO;
MALINAO, CARLITO; MALAYA, SIMPLICIO; MANUGAS,
NARCISO; MASIADA, EFREN; NARCISO, ELIAS; NUEVA,

JUSTINIANO; OBIDO, ANELOMIO; OLIVEROS, FRANCISCO;

OCAY, FIDEL; OLADO, JONATHAN; ONG, CARLITO; PAHUYO,
HENRY; PAYPA, EDUARDO; PEREW-PEREW, ANTONIO;
PERMITES, BOBBY; PACAA, CRISTITUTO; PONGON, RUBEN;
PATOY, MANUEL; POGALES, ROBERTO; PARAGAMAC,
MIGUEL; PARDILLO, ENGRACIO; PARAN, BENITO; RELLEN,
RONNIE; RENTUZA, ALFREDO; REBUTAZO, INOCENCIO;
RUEDAS, SIEGFREDO; ROBLE, ERLITO; RAMIREZ, CESAR;
RAMAYRAT, ROBERTO; RAZO, WILLIE; RIVA, LEOPOLDITO;
REYSOMA,
BENNY;
SANCHEZ,
ROMULO;
SANCHEZ,MANUELITO; SARDUAL, CAYETANO; SIQUELLO,
EDRIE; SALIG, MAGDALINO; SIENES, GILBERT; SARA,
NICANOR; SIACOR, LUCIO; SIMPROTA, CRISPIN; TABEROS,
VIRGILIO; TARDO, ALEX; TAMPOG, ALEJANDRE; TAMPARONG,
FRANCISCO; TAMPARONG, PRIMO; TINOY, JESUS; UMBAY,
NOEL; UMBAY, RONILO; VACALARES, ALVIN; VELUS, CRISPIN;
VERANO, MANOLO; VILLARINO, FLORENCIO; VERGARA,
JOSE; VILLAPLAZA, MARCELO; GALORIO, RUBEN; DAYGAM,
RUDENCIO; GELLICA, APOLLO; SARUSAL, FELIX; CAPUYAN,
RUPERTO; VILLAMOR, PEDRITO; ALLAS, AQULINO, JR.;
GARBAN, DIOSCORO; DELIMA, DIOSDADO; OBIDO, ELISER (All
members of NSCWA with Felix Villa as president, representing
Petitioners), petitioners, vs. NATIONAL
LABOR
RELATIONS
COMMISSION,
Fifth
Division
and
NATIONAL
STEEL
CORPORATION, respondents.
DECISION
ROMERO, J.:

This petition for certiorari seeks a ruling on the issue of whether or not workers
contracted as project employees may be considered as regular employees on account
of their performance of duties inherent in the business of the employer.
Respondent National Steel Corporation (NSC), one of the biggest modern steel
mills in Southeast Asia, produces hot rolled products, cold rolled products, tinplates and
billets. These products are in turn transformed by downstream industries into truss
assemblies, farm implements, pipe structures, shipbuilding and repairing materials,
automotive structures and machine parts, GI roof sheets or galvanized iron, drums,
nails, fasteners and wires.
[1]

The NSC embarked on a Five-Year Expansion Program (FYEP) the first phase of
which consisted of the following projects with the corresponding timetable:

A. Major Projects
1. Billet Shop . . . . . . . . . . . . . 1983-1985
2. 5-Stand Tandem Mill,
Pickling line Revamp,
Batch Annealing
Furnaces and other
Cold Mill Peripherals
Projects . . . . . . . . . . . . . 1984-1988
3. Hot Mill Revamp . . . . . . . . . . . . . 1984-1987
B. Major Preparatory, Support
and Post-Implementation
Activities . . . . . . . . . . . . . 1982-1988
1. Site Development
2. Engineering and Planning
3. Relocation/upgrading of
Offices, drainages,
fences and other facilities
4. Administrative, clerical
warehousing and logistics
support.
5. Other support activities.
The second phase of the FYEP was set for 1987 to 1993.

[2]

One of the major projects of the NSC was the billet steelmaking plant. According to
the NSCs brochure, the plants product is the steel billet, a semi-finished form of steel
used as raw materials by steel rerolling mills producing steel bars and wire rods. To
produce the billets, the plant would initially use 100% scrap as its raw materials.
Eventually, NSC would build a Direct Reduced Iron (DRI) plant in line with its expansion
program and integration program. Upon the availability of DRI, the raw materials feed
mix will eventually be 20 per cent scrap and 80 per cent DRI.
[3]

In line with its program to use 100% scrap, the NSC ventured into a shipbreaking
operation. Under this operation, ships/vessels at sea would be cut up into large chunks
and brought to land to be cut further into smaller sizes. However, due to scarcity of
vessels/ships for salvaging, the higher costs of operation and the unsuitability of raw
materials, this experimental project was stopped after four or five ships had been
chopped. When the project was completely phased out in November 1986, the laborers
hired for said project were terminated.
[4]

Prior to the phasing out of the project, the NSC had been beset by labor problems.
On May 2, 1986 the National Steel Corporation Employees Association-Southern
Philippines Federation of Labor (NSCEA-SPFL) filed a notice of strike. It charged the
NSC with unfair labor practices consisting of (a) wage discrimination, (b) interference
with the employees right to self-organization, (c) nonregularization of contractual
employees, (d) illegal termination of employees, (e) nonpayment of wage/benefit
differentials, and (f) nonrecognition of NSCEA-SPFL as the sole bargaining
representative of the company. The then Ministry of Labor and Employment exercising
jurisdiction over the case, issued a return-to-work order dated June 17, 1986. In due
course, on August 4, 1986, then Labor Minister Augusto S. Sanchez rendered a
decision that held, in part, as follows:
[5]

[6]

We have carefully examined the voluminous documents presented by

NSCEA-SPFL and we find nothing therein to support the unions contention
that as to the nature of employment, its members should be regularized.
Masons, carpenters, laborers, electricians and painters cannot, by the nature
of their job, be considered as regular employees of the company under Article
281. The cutters, riggers and those assigned at the other divisions are, as
clearly indicated in annexes `C to `C-70 of the unions Position Paper,
contractual employees. The short periods by which the contractual employees
were hired as shown in the mentioned Annexes clearly indicate the intent of
the company to hire them on a per project basis. We are not unmindful that
some of these employees were hired to work on several projects. This does
not make them regular employees. Applying the law, however, contractual
employees who have rendered at least one (1) year of service, whether
continuous or project shall be considered as regular contractual employee
with respect to the activity where such contractual employee has been
assigned. For security of tenure, these contractual employees cannot be
removed nor terminated without just cause so long as the particular activity to

which he has been assigned to work still exists. There is nothing in the record
which will show that a contractual employee has worked for a period of one
(1) year, continuous or broken, on a particular single project. Note may be
taken of the fact that some employees have been assigned to different
projects or undertakings but Article 281 nonetheless does recognize them as
regular contractual employees. To finally settle this issue and in view of the
incompleteness of the documents presented before us, the company is
hereby directed to submit to this Office the entire pertinent records in its
possession for the sole purpose of determining the regular contractual
employees, if any, using as basis Article 281 of the New Labor Code regarding
their length of service. (Italics and underlining supplied.)
[7]

Accordingly, Minister Sanchez disposed of the case as follows:

VIEWED IN THE LIGHT OF THE FOREGOING, judgment is hereby rendered:

(1) finding the expiration of the contracts of contractual employees prior to
May 13, 1986 to be in consonance with the law;
(2) directing the Company to submit the entire pertinent record in its
possession to determine who are regular contractual employees within
forty eight (48) hours from receipt hereof;
(3) directing the parties to await, before resorting to any concerted activity,
the resolution of the NASEWA vs. SIMLA case pending before the
NATIONAL LABOR RELATIONS COMMISSION;
(4) ordering the Company subject to existing policies and CBA limitations,
to give priority and preference to its contractual employees in the hiring
of new personnel for project works, such as shipbreaking, masonry,
plumbing, etc. and in present and future vacancies in its regular
workforce; and finally
(5)requesting the Company to grant to its present contractual employees a
wage increase of 15% of their basic salary effective July 1, 1986.
[8]

The denial of their motion for reconsideration of that decision prompted the workers
to file with this Court a petition for certiorari docketed as G.R. No. 76948 (National Steel
Corporation Employees Association-Southern Philippines Federation of Labor (NSCEASPFL) v. Minister of Labor). On November 14, 1988, this Court issued a Resolution
stating as follows:

G.R. No. 76948 (National Steel Corporation Employees Association Southern

Philippines Federation of Labor (NSCEA-SPFL) v. Minister of Labor, et al.).The Court considered the petition, the comments thereon of the public and
private respondents, the petitioners reply, and the rejoinder thereto of the
public and private respondents.
After deliberating on the issues raised and the arguments invoked by the
parties in their respective pleadings, the Court AFFIRMED the order of the
public respondent dated June 17, 1986, assuming jurisdiction of the labor
dispute, upon a showing that the petitioner (sic) was engaged in a pioneer
enterprise affected with public interest and involving its 5,000 employees and
their dependents, and more so since both parties had manifested their
concurrence with the intervention of the Department of Labor in settlement of
the said dispute.
It appearing, however, that there are a number of factual questions that have
to be threshed out, such as whether or not the petitioner has defied the returnto-work order or the private respondent has locked out the returning workers
and especially, whether or not the contractual workers have become regular
employees because of their length of service and the nature of the work they
perform, and considering particularly that in the challenged Decision of August
4, 1986, the Secretary of Labor `directed the Company to submit the entire
pertinent records to determine who are regular contractual employees,
indicating that his own determination of this question in the said Order was at
best only preliminary and not based on a comprehensive study of the said
`entire pertinent records, the Court Resolved to SET ASIDE the said Order of
August 4, 1986, and to REMAND the case to the National Labor Relations
Commission for a formal hearing on the factual issues raised in the petition,
including the status of the employees, with a view to the eventual resolution of
such issues and the settlement of all the aspects of the dispute between the
petitioner and the private respondent.
[9]

The NLRC accordingly heard the case as regards the factual issues pointed out by
this Court. Because it took quite a while before the NLRC could decide the case,
members of the National Steel Corporation Workers Association (NSCWA) staged a
hunger strike. On March 26, 1992, the Fifth Division of the NLRC in Cagayan de Oro
City promulgated a Decision with the following findings of fact:
[10]

[11]

After a careful and painstaking review and examination of the voluminous

records of this case, We have come up with the well discerned view that the
greater majority of the individual complainants in this case are `contractual or
`casual employees. By the very nature of their employment or job, they cannot

be considered as regular employees of respondent company by virtue of

Article 280 (formerly 281) of the Labor Code, as amended, excepting the few
who are either made to work or perform functions along or side by side with
the regular employees, such as those assigned at the Billeting Mill or
production line departments, or made to perform ground maintenance jobs as
well as those performing administrative and finance support services who may
seemingly deserve to be regularized. (x x x .)
It is well established by the evidence on record that at the time of the strike in
May 1986, the expansion program (FYEP) of respondent company was in full
blast. This therefore accounted for approximately 1,750 casual or contractual
workers at the time which at present had dwindled to about one-third (1/3) of
its original size. Practically, all these workers, at one time or another worked
with respondent company. As evidently shown by the documents and
evidence on record, the expansion program of the company consists of
numerous projects, which by themselves and taken independently of each
other, are validly and legally sustainable as separate projects. (See Vols. 26
and 27, List of Contractual Workers, supra).
This Commission during the ocular inspection at the company plant premises
on February 21, 1992 was able to ascertain additional material facts. Thus,
carpentry works are, remarkedly (sic) different from masonry and which
activities are component phases in the expansion program in the construction
of new buildings for new or additional machineries (sic), offices and other
structures. Upon completion of particular civil works, these are followed by
machine installations, requiring technicians and engineers and the
employment of electricians to install the electrical facilities. As administrative
support services, checkers, timekeepers and consulting engineers are
likewise hired during the mechanical installation stage. Additional temporary
personnel are hired for the dry-run operations of the machines. The latter are
usually given preference in recruitment of regular personnel.
Thus, by the very nature of the various activities involved, every undertaking is
divided into phases or projects, the completion of each could be said to be
independent from the other, although interrelated. Admittedly, the temporary
skilled personnel initially hired are also given priority in the hiring of new
employees or as replacements for vacated positions. Ostensibly, this is an
exclusive management prerogative we cannot question.
Significantly, the Commission has sent advance notice of its plant visitation to
the parties, through their respective counsels, with an open-ended invitation
for them to join the plant tour. This message was relayed in advance through

the Sub-Regional Arbitration Branch XII, Iligan City, for transmittal to the
parties concerned. Atty. Gregorio Pizarro of SPFL asked to be excused in view
of a prior engagement. He, however, sent word that he will catch up with the
inspecting team if he has time. Atty. Isaac Ll. Dandasan was promptly present
at the Sub-Arbitration Branch XII Office. But for unknown reasons, he did not
join the inspecting party. Preparatory to the physical overview of the plant
premises, the inspecting team was first briefed by key personnel of NSC on
the various phases of the steel making operations.
The Commission through interviews and interactions with well-informed
sources during the plant visitation gathered more insights on the operations of
respondent NSC. There are those among the casual workers hired by
respondent who were/are made to perform functions which are seemingly
regular. Respondent, however, argued in its pleadings that these casuals
performed services only for the expansion program or as substitute for those
who are absent or on official leave or as additional hands to cope up with an
abrupt or predetermined business peak.
[12]

The NLRC found that the shipbreaking operation was phased out in November
1986 prior to the termination of the first phase of the FYEP in 1987. It concluded that
such operation was only a development project. It also found that in compliance with the
directive of the August 4, 1986 decision of Minister Sanchez to give priority to
contractual employees in hiring new personnel for project works, the NSC re-engaged
the services of most casual workers. To the NLRC, the employers choice of persons to
hire is a management prerogative that is beyond its competence to question.
[13]

Opining that the majority of the complainant workers are regular contractual
employees pursuant to Art. 280 of the Labor Code, the NLRC said:

The test in determining regularity or employment is the nature of the functions

performed which should be `usually necessary or desirable in the usual
business or trade of the employer. Even if the services rendered are
necessary or desirable but they do not pertain to the usual business or trade
of the employer, activity still falls short of being considered regular
employment under the law. It therefore follows that the activity performed is a
casual one. In order for an employment to be categorized as `regular, the law
distinctively requires that the functions and services performed should be
`common and constant and an every day activity. Stated otherwise, the law
mandates that the functions to be carried out must be `customary to the trade
or business of the employer.
This rule is, however, subject to exemptions. Where an employment or activity
despite being usually necessary or desirable has been fixed for a specific

project or undertaking the completion of which has been `pre-determined at

the time of engagement or where the services to be performed is seasonal in
nature, the same is still considered `casual or `temporary in nature.
(Underscoring supplied.)
[14]

The NLRC further held that casual or temporary employees are not entitled to
benefits enjoyed by regular employees other than the `parity on the security of tenure
clause, in that the traditional peculiarities and contrast between the two (2) groups of
employees are inherently preserved. However, the NLRC deferred resolution on the
issue of who among the workers concerned may qualify or deserve to be regularized in
view of the nature of their functions, to provide the parties ample opportunity to be heard
in appropriate proceedings. It disposed of the case as follows:

WHEREFORE, PREMISES CONSIDERED, Judgment is Hereby decreed, in

addition to the foregoing dispositions, adopting and sustaining the findings
and conclusions of former Minister of Labor and Employment August S.
Sanchez in his August 4, 1986 decision for being substantially supported by
the facts and evidence as well as the applicable law and jurisprudence on the
matter, subject to modification consistent with this disposition.
ACCORDINGLY, the following orders and directives are issued, to wit:
(1) That the termination of the employment contract of the contractual
workers prior to May 13, 1986 concerted action of workers is held valid
and legal;
(2) That the employment status of the greater majority of the casual and
temporary workers, who have been hired or rehired for specific project
works or phases thereof are considered regular for the duration of the
period or project they were hired or engaged and the cessation of the
activities to which they have been engaged automatically terminates
employer-employee relations;
(3) That the right of all workers whether contractual or regular to form or
set up a labor association or organization being a Constitutional
mandate is hereby declared recognized; and that their right to join,
assist or affiliate with any labor organization or association of their
choice is likewise recognized subject to existing rules, policies and the
CBA stipulations in the particular bargaining unit or units they are
presently or may be employed in the future, as the case may be;
(4) That the final and ultimate determination on who among the contractual
workers may or may not qualify or deserve to be regularized or

extended regular employment status will be the subject of further

proceedings pursuant to the foregoing resolution;
(5) That with respect to the casual or contractual workers who were laid off
prior to the May 13, 1986 strike and have not been rehired or
reemployed, they are hereby granted financial assistance and
respondent corporation is hereby directed to pay the same, equivalent
to five (5) months salary each, based on their latest salary as of the time
of their separation;
(6) That respondent National Steel Corporation, through its management
and corporate officers, is strongly urged to grant the wage increase of
15% percent as demanded in the Order of August 4, 1986 of then Labor
Minister Augusto S. Sanchez; and
(7) That respondent National Steel Corporation is further ordered and
directed, subject to existing policies or CBA limitations, to give priority
and preference to its contractual workers, with first priority to those who
may be regularized, if any, in the hiring of new personnel, both for
project works or existing regular positions and in the filling up of present
and future vacancies in the regular work force.
The Honorable Labor Arbiters Alex A. Muyco and Henry F. Te are hereby
deputized to jointly and/or alternately conduct post-arbitration proceedings for
purposes of carrying out the foregoing directives. The Fiscal Examiner of this
Commission or, in her default, that of the Arbitration Branch is directed to
compute the monetary awards in favor of the beneficiaries as herein decreed.
SO ORDERED.
The National Steel Corporation Workers Association (NSCWA), a break-away group
from the NSCEA-SPFL composed of 204 workers, filed a motion for reconsideration of
the NLRC Decision, assailing the same for its incompleteness and failure to resolve
the case with finality. Atty. Rex Fernandez filed this motion on April 6, 1992
simultaneously with a notification of revocation of the power of Atty. Dandasan as
counsel of the group of 204 workers. Atty. Dandasan, counsel of record, filed another
motion for reconsideration in behalf of the 204 complainant-workers except ten (10) of
them who had revoked his authority as counsel.
[15]

[16]

On July 6, 1992, the NLRC issued a Resolution denying the motions for
reconsideration thus:

WHEREFORE, premises considered, the following orders are issued:

1. The motions for reconsideration filed by counsels Fernandez and

Dandasan are Denied for lack of merit;
2. The comment/manifestation of Atty. Dandasan is noted and the same is
threshed out during the continuance of the hearing on the remaining
issue of regularization;
3. Complainants Fe Fabillar, Marielyd Armecin, Elizabeth Jungao and
Elma Dy, are directed through counsel Antonio Amarga, to file a verified
manifestation with the Commission, copy furnished the petitioner and
respondent and, with proof of service thereof, for their comments
preparatory to the disposition of said incidents;
4. The comment/manifestation of petitioner, through counsel, is noted with
qualification;
5. Paragraph 5 of the dispositive orders of the March 26, 1992 decision of
the Commission is clarified and the same shall refer to those hired
under the FYEP program of respondent NSC, laid off prior to May 13,
1986 and not rehired thereafter;
6. The manifestation of respondent NSC that it has already complied with
paragraphs 6 and 7 of the dispositive orders of the March 26, 1986
decision is both noted and considered as proof of compliance thereof;
and
7. The contractuals to be considered for regularization shall basically be
based on the tentative list drawn up by the Commission but not
necessarily limited thereto and subject to the guidelines specified on
paragraph 2 of the order of March 27, 1992 which was promulgated on
March 31, 1992.
Let the continuance of the hearing on the remaining unresolved issue be
immediately scheduled by the Hearing Officers deputized for the purpose. No
further motion for reconsideration on this resolution will be entertained.
SO ORDERED.

[17]

Thereafter, Atty. Fernandez filed a motion praying for the inclusion of 204
complainant-workers who were members of the NSCWA, the group which broke away
from the NSCEA-SPFL, in the list of employees whose employment status should be
determined. These workers alleged that their contract of employment do(es) not tell
the real story about their employment because, such contract, having been prepared by
[18]

the management, is actually a contract of adhesion which should be construed against

the management. Pressed by financial necessities, these workers agreed to these
contracts even though some of them specified employment for only five or six months.
They asserted that the brochure handed out by the management belied the latters
contention that shipbreaking was only a developmental project. That project was
phased out for no other reason than mismanagement or shortsightedness of its
conceivers.
[19]

The NSCWA also filed a motion to declare the 204 complainant-workers as regular
employees. It asserted that, except for the packers, those workers were employed at
the billet steelmaking plant under different positions and departments. These
departments, however, were the general plant facilities, the steel fabrication shop, the
shipbreaking operations and the raw material operations which were all engaged in the
common and constant and everyday activities in the customary trade or business of the
NSC.
[20]

The post arbitration proceedings were marred by apparent efforts of both parties to
becloud the issue of regularization of employees. According to the NLRC, the NSCWA
tried to have its members claims decided separately and ahead of those of other
workers. Counsel of NSCWA, Atty. Fernandez, also sought the inhibition of
Commissioner Musib M. Buat who, in truth, had already given way to Commissioner
Leon G. Gonzaga, Jr. with respect to the study of the case and preparation of the
pertinent resolution. Other incidental matters cropped up like the motion for inhibition
filed by Labor Arbiter Alex A. Muyco. In the end, only the NSCWA and the NSC filed
their respective memoranda. Atty. Gregorio A. Pizarro, counsel of the NSCEA-SPFL,
and Atty. Isaac Dandasan, counsel of 72 of the 204 splinter group NSCEA, did not
submit memoranda.
[21]

On April 14, 1994, the NLRC rendered a Resolution ruling that the project
employees are not regular employees within the purview of Art. 280 of the Labor Code.
Focusing on the shipbreaking operation which petitioners contend was a customary
activity of the NSC, the NLRC found that:

x x x the shipbreaking operation, although not part of the major programs

designated under FYEP I and FYEP II (Vol. 39, p. 154, TSN, supra), was
envisioned to be a component of the billet shop, a totally new installation.
Respondent NSC then ventured into shipbreaking in a developmental way
(Vol. 39, pp. 20-23, TSN, supra), hired inexperienced labor under a contract
(Vol. 39, p. 80, TSN, supra). And finding that after chopping 4 or 5 ships, there
were no more supply of ships, respondent had to put a stop to its shipbreaking
operations, and instead, bought hot breakative iron (HBI) from Malaysia (Vol.
39, pp. 81, 84-85, TSN, supra) and scrap materials from the local scrap
dealers, to be used by or be fed to the billet shop (Vol. 39, pp. 26-27, TSN,
supra).

The shipbreaking operation being a developmental program (Vol. 28, p. 24,

supra), had long been phased out due to non-viability. Since the employees
assigned therein are project employees (Mercado vs. NLRC, 201 SCRA 332),
those dismissed are therefore not entitled to reinstatement (Phil. Jai Alai and
Amusement Corp. vs. Calve, 126 SCRA 299). To require at this juncture, the
reactivation or reopening of the shipbreaking program or experiment, would
result to ignorance, grave abuse of discretion and/or interference in
management business, judgment and prerogatives.
[22]

The NLRC noted that, considering the immensity of the operations of the NSC, it
was understandable that project employees would work alongside regular employees.
However, such a situation did not imply that a contract worker hired under the FYEP or
peakload or as a temporary replacement of a regular employee who is on leave of
absence, would be converted into a regular employee. Hence, the NLRC resolved as
follows:
[23]

WHEREFORE, the decision dated March 26, 1992 is Affirmed with

modifications consistent with the foregoing discussions.
It is henceforth decreed, that:
1. The claim for regularization by complainants whose names appear in
Tables `A, `C and `E, are dismissed for being moot and academic;
2. Complainants listed in Table `B are directed to pursue the appropriate
remedies in the already decided cases entitled `NASEWA vs. SIMLA
and NSC;
3. The consolidated pending appealed cases of the original complainants
listed in Table `F which involve different and/or new causes of action,
are excluded from this disposition, for same shall be resolved
separately; and
4. The remaining majority of complainants as appearing in Tables `D and
`G are considered and declared as contractual, seasonal and/or project
employees and shall be granted separation pay or financial assistance
as may be applicable consistent with the finding on pages 14 and 15 of
the herein Resolution.
SO ORDERED.

[24]

The NSCEA-SPFL, including the NSCWA, filed through Atty. Fernandez, a motion
for the reconsideration of the April 14, 1994 Resolution. Shorn of allegations on who is

to be blamed for the delay in the resolution of the case, the movant workers mainly
averred that the NLRC merely accepted the allegations of the NSC. These allegations,
however, are belied by the contents of its brochure and the actual plant lay-out showing
that the workers were made to work in line departments and not in the expansion
program projects. Obviously referring to the provision of Art. 280 of the Labor Code, the
movants asserted that the word notwithstanding in the phrase of said provision of law
stating that (t)he provisions of written agreements to the contrary notwithstanding and
regardless of the oral agreement of the parties, implies that the contracts they had
entered into were not valid.
[25]

That motion for reconsideration was supplemented by another pleading. Citing Beta
Electric Corporation v. NLRC, the movants alleged that repeated renewal of
contracts, such as in this case where renewal would be made even before the
expiration of the last contract, circumvents the law and therefore is not determinative of
whether or not a worker is a regular worker.
[26]

[27]

On August 5, 1994, the NLRC issued a Resolution denying the motion for
reconsideration. Reiterating its finding that the shipbreaking operation was a
developmental project that had long been phased out due to non-viability, the NLRC
said:

Records show that respondent NSC undertook major projects, special

projects and other major preparatory support and post implementation
activities designated as FYEP I (1982 to 1988) and FYEP II (1989 to 1994).
These expansion programs involved area or land operation, construction of
buildings, installation of equipment, dry-run of machineries and acceptance.
With the participation and support of the different department of respondent
NSC, contractual or project workers were hired, in addition to the fifteen (15)
other private contractors. Since complainants services are needed only when
there are tasks to be performed, complainants therefore cannot be considered
regular employees but may be categorized as `regular contractual employees.
The hiring of complainants on contract or project basis, although interpreted
by them to be in circumvention of the law, is valid and legal. It is an
undisputed fact that more than 2,000 contract workers were employed when
FYEP I started. As the projects were completed, respondent NSC therefore,
had all the reasons to reduce its contractual workforce. It would be unwise
and unjust if government will require respondent NSC to employ and pay
complainants wages even if there are no major/special project works to be
done. Neither could We impose upon respondent NSC to continue with the
planned FYEP III, so complainants can be given the much needed jobs, for
that would also be tantamount to encroachment on management prerogatives.

Consequently, on September 23, 1994, the petitioners, led by Felix Villa, filed the
instant petition for certiorari through Atty. Fernandez. They offer for resolution the
following issues:

WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed

grave abuse of discretion when it ignored the brochure of the Billet Steel Plant
issued by the private respondent in finding that those of the petitioners who
were working under the shipbreaking project were not regular employees as
the shipbreaking was a developmental project.
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed
grave abuse of discretion when it found petitioners not regular employees
contrary to the basic guidelines which the Honorable Public Respondents set?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed
grave abuse of discretion when IT did not comply with the order of this
Honorable Court to pass upon the question of whether or not the petitioners
has (sic) defied the return-to-work order or the private respondent has locked
out the returning workers?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed
grave abuse of discretion when it included in the list of complainants in the
SIMLA case one IRENEO ALIBANGBANG in Table `B of the April 14, 1994
resolution?
WHETHER OR NOT THE HONORABLE PUBLIC RESPONDENT committed
grave abuse of discretion when it considered MOOT and ACADEMIC the
claims of those who died during the proceedings?
WHETHER OR NOT PETITIONERS herein are regular employees of private
respondent and should be reinstated with backwages?
[28]

We resolve to deny the petition.

The 52-page petition discusses not only said issues but also individual cases of
petitioners representing a particular job, to drive home the point that they are regular
employees of the NSC. A good number of pages of the petition are devoted to the
travails of representatives of winch operators, riggers, cable splicers, packers, utility
men, laborers, carpenters, electricians, scrap cutters, masons, painters, millwrights or
plant mechanics, welder-fabricators, pipe-fitters, erectors and steelmen.
Petitioners assert that the contract each of them executed with the NSC does not
mean anything. The contracts were prepared by the management which, no doubt,
stands on a higher footing than the petitioners whose need for employment comes from
vital and even desperate necessity. Under the forceful intimidation of urgent need, an

individual worker could not have agreed to the contract freely and voluntarily; that there
was actually a vice of consent. That these contracts have no import whatsoever is
shown by the fact that petitioners who were rehired after May 13, 1986 were given gate
passes instead of contracts. Moreover, the job designation in a contract was not
reflective of the actual work an employee was doing. Add to this is the fact that the
employment of most of the petitioners was terminated through a memorandum of a
certain Ferraren who, after calling their attention to a cutting off of oxygen supply
incident, promised them reemployment after twenty days. That promise was never
realized.
[29]

[30]

In truth, petitioners would have the Court look into the factual issue of whether or
not project employees were utilized by the NSC in its mainstream business of producing
steel products. This is obviously outside the ambit of this Courts jurisdiction. This Court
relies on the factual findings of labor administrative tribunals like the NLRC which have
acquired expertise because their jurisdiction is confined to specific matters. Findings of
such tribunals, if supported by substantial evidence, are generally accorded not only
respect but, at times, finality. That general rule, however, admits of an exception where
it is clear that a palpable and demonstrable mistake, that needs rectification, has been
committed by the quasi-administrative tribunal.
[31]

[32]

In its Decision and Resolutions, the NLRC adamantly held that petitioners were
contractual project employees who are not entitled to regularization under Art. 280 of
the Labor Code.NLRCs factual finding that petitioners are project employees must be
dealt with in the light of pertinent provisions of law and jurisprudential pronouncements
on project employees.
The Labor Code provides for project employees under Art. 280 on casual and
regular employees as follows:

ART. 280. Regular and Casual Employees. The provision of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists.
(Italics supplied.)

This provision of law conceives of three kinds of employees: (a) regular employees
or those who have been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; (b) project employees or those
whose employment has been fixed for a specific project or undertaking the completion
or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season, and (c) casual employees or those who
are neither regular nor project employees.
Under this law, the nature of the employment is determined by the factors set by
law, regardless of any contract expressing otherwise. The supremacy of the law over
contracts is explained by the fact that labor contracts are not ordinary contracts; these
are imbued with public interest and therefore are subject to the police power of the
State. Thus, the Civil Code provides:
[33]

ART. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
must yield to the common good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.
Contracts for project employment are valid under the law. By entering into such a
contract, an employee is deemed to understand that his employment is coterminous
with the project. He may not expect to be employed continuously beyond the completion
of the project. It is of judicial notice that project employees engaged for manual services
or those for special skills like those of carpenters or masons, are, as a rule, unschooled.
However, this fact alone is not a valid reason for bestowing special treatment on them or
for invalidating a contract of employment. Project employment contracts are not
lopsided agreements in favor of only one party thereto. The employers interest is
equally important as that of the employees for theirs is the interest that propels
economic activity. While it may be true that it is the employer who drafts project
employment contracts with its business interest as overriding consideration, such
contracts do not, of necessity, prejudice the employee. Neither is the employee left
helpless by a prejudicial employment contract. After all, under the law, the interest of the
worker is paramount.
A project employment terminates as soon as the project is completed. Thus, an
employer is allowed by law to reduce the work force into a number suited for the
remaining work to be done upon the completion or proximate accomplishment of the
project. However, the law requires that, upon completion of the project, the employer
must present proof of termination of the services of the project employees at the nearest
public employment office. This is specially provided for as regards construction workers
obviously to obviate indiscriminate termination of employment in derogation of the
workers right to security of tenure. After the termination of the project, an employer may
wind up its operations only to complete the project. In such a case, the remaining
employees do not necessarily lose their status as project employees. However, if the
employees services are extended long after the supposed project had been completed,
[34]

the employees are removed from the scope of project employees and they shall be
considered regular employees.
[35]

The fact that the NSC hired project employees for its FYEP I and II has been
deliberated upon by this Court in ALU-TUCP v. NLRC The individual petitioners
involved in that case were engineers, assistant engineers, a chainman, a utility man, a
warehouseman, a survey aide, a surveying party head and a machine operator. The
NLRC ruled that they were project employees under the NSCs FYEP I and II who could
not enjoy the same benefits accorded to regular employees. The Court distinguished in
that case project employees from regular employees as follows:
[36]

[37]

The basic issue is thus whether or not petitioners are properly characterized
as `project employees rather than `regular employees of NSC. This issue
relates, of course, to an important consequence: the services of project
employees are co-terminous with the project and may be terminated upon the
end or completion of the project for which they were hired. Regular
employees, in contrast, are legally entitled to remain in the service of their
employer until that service is terminated by one or another of the recognized
modes of termination of service under the Labor Code."
[38]

The Court then distinguished two kinds of projects which a business or industry may
undertake. First, 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. The example
given is a construction company that may undertake two or more projects at the same
time in different places. Second, a project may refer to 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. Classifying the NSCs project as of the second type, the Court
said:

NSC undertook the ambitious Five Year Expansion Program I and II with the
ultimate end in view of expanding the volume and increasing the kinds of
products that it may offer for sale to the public. The Five Year Expansion
Program had a number of component projects: e.g., (a) the setting up of a
`Cold Rolling Mill Expansion Project; (b) the establishment of a `Billet
Steelmaking Plant (BSP); (c) the acquisition and installation of a `Five Stand
TDM; and (d) the `Cold Mill Peripherals Project. Instead of contracting out to
an outside or independent contractor the tasks of constructing the buildings
with related civil and electrical works that would house the new machinery and
equipment, the installation of the newly acquired mill or plant machinery and
equipment and the commissioning of such machinery and equipment, NSC
opted to execute and carry out its Five Year Expansion Projects `in house, as

it were, by administration. The carrying out of the Five Year Expansion

Program (or more precisely, each of its component projects) constitutes a
distinct undertaking identifiable from the ordinary business and activity of
NSC. Each component project, of course, begins and ends at specified times,
which had already been determined by the time petitioners were engaged. We
also note that NSC did the work here involved the construction of buildings
and civil and electrical works, installation of machinery and equipment and the
commissioning of such machinery only for itself. Private respondent NSC
was not in the business of constructing buildings and installing plant
machinery for the general business community, i.e., for unrelated, third
party, corporations. NSC did not hold itself out to the public as a
construction company or as an engineering corporation.
The issue raised in this petition had already been settled in the recent case of
Palomares v. NLRC, involving the same respondent and its workers engaged in FYEP
I and II, wherein the Court stated thus:
[39]

The fact that petitioners were required to render services necessary or

desirable in the operation of NSCs business for a specified duration did not in
any way impair the validity of their contracts of employment which stipulated a
fixed duration therefor.
Extant in the record are the findings of the NLRC that the petitioners in this case
were utilized in operations other than billet making or other components of the FYEP I
and II, such as shipbreaking. We are constrained to rule that while it is true that they
performed other activities which were necessary or desirable in the usual business of
the NSC and that the duration of their employment was for a period of more than one
year, these factors did not make them regular employees in contemplation of Article 280
of the Labor Code, as amended. Thus, the fact that petitioners worked for NSC under
different project employment contracts for several years cannot be made a basis to
consider them as regular employees, for they remain project employees regardless of
the number of projects in which they have worked. Length of service is not the
controlling determinant of the employment tenure of a project employee. In the case of
Mercado, Sr. v. NLRC, this Court ruled that the proviso in the second paragraph of
Article 280, providing that an employee who has served for at least one year, shall be
considered a regular employees, relates only to casual employees and not to project
employees.
[40]

[41]

WHEREFORE, the instant petition is DISMISSED. The decision and resolution of

the National Labor Relations Commission dated April 14, 1994 and August 5, 1994,
respectively are AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.

Mitsubishi Motors Phil. Corp. v. Chrysler Phils. Labor Union Mariwasa Manufacturing Inc v. Leogardo

SECOND DIVISION

MITSUBISHI
MOTORSPHILIPPINES CORPORATIO
N,
Petitioner,

G.R. No. 148738

Present:
PUNO, J., Chairman,
QUISUMBING,
MARTINEZ,*
CALLEJO, SR., and
TINGA, JJ.

- versus -

CHRYSLER PHILIPPINESLABOR
UNION and
NELSON PARAS,
Respondents.

Promulgated:
June 29, 2004

X--------------------------------------------------X
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision [1] of the Court of Appeals
in CA-GR SP No. 46030 and the Resolution denying the motion for
reconsideration filed by petitioner Mitsubishi Motors Philippines Corporation.

The Antecedents
Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation
engaged in the assembly and distribution of Mitsubishi motor vehicles. Chrysler
Philippines Labor Union (CPLU) is a legitimate labor organization and the duly
certified bargaining agent of the hourly-paid regular rank and file employees of
MMPC. Nelson Paras was a member of CPLU. His wife, Cecille Paras, was the
President of the Chrysler Philippines Salaried Employees Union (CPSU).
Nelson Paras was first employed by MMPC as a shuttle bus driver on March
19, 1976. He resigned on June 16, 1982. He applied for and was hired as a diesel
mechanic and heavy equipment operator in Saudi Arabia from 1982 to 1993. When
he returned to the Philippines, he was re-hired as a welder-fabricator at the MMPC
tooling shop from October 3, 1994 to October 31, 1994.[2] On October 29, 1994, his
contract was renewed from November 1, 1994 up to March 3, 1995.[3]
Sometime in May of 1996, Paras was re-hired on a probationary basis as a
manufacturing trainee at the Plant Engineering Maintenance Department. He and
the new and re-hired employees were given an orientation on May 15, 1996 [4] by
Emma P. Aninipot, respecting the companys history, corporate philosophy,
organizational structure, and company rules and regulations, including the
company standards for regularization, code of conduct and company-provided
benefits.[5]
Paras started reporting for work on May 27, 1996. He was assigned at the
paint ovens, air make-up and conveyors. As part of the MMPCs policy, Paras was
evaluated by his immediate supervisors Lito R. Lacambacal [6] and Wilfredo J.

Lopez[7] after six (6) months, and received an average rating. Later, Lacambacal
informed Paras that based on his performance rating, he would be regularized.[8]
However, the Department and Division Managers, A.C. Velando and H.T.
Victoria,[9] including Mr. Dante Ong,[10] reviewed the performance evaluation made
on Paras.They unanimously agreed, along with Paras immediate supervisors, that
the performance of Paras was unsatisfactory.[11] As a consequence, Paras was not
considered for regularization. On November 26, 1996, he received a Notice of
Termination dated November 25, 1996, informing him that his services were
terminated effective the said date since he failed to meet the required company
standards for regularization.[12]
Utilizing the grievance machinery in the collective bargaining agreement,
the CPLU demanded the settlement of the dispute which arose from Paras
termination.[13] The dispute was thereafter submitted for voluntary arbitration, as
the parties were unable to agree on a mutually acceptable solution. CPLU posited
that Paras was dismissed on his one hundred eighty third (183 rd) day of
employment, or three (3) days after the expiration of the probationary period of six
(6) months. It was contended that Paras was already a regular employee on the date
of the termination of his probationary employment.
According to CPLU and Paras, the latters dismissal was an offshoot of the
heated argument during the CBA negotiations between MMPC Labor Relations
Manager, Atty. Carlos S. Cao, on the one hand, and Cecille Paras, the President of
the Chrysler Philippines Salaried Employees Union (CPSU) and Paras wife, on the
other.
On November 3, 1997, the Voluntary Arbitrator (VA) rendered a decision
finding the dismissal of Paras valid for his failure to pass the probationary
standards of MMPC.The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered
finding the termination of Mr. Paras was valid for cause his failure to pass the
probationary period.[14]

The VA declared that hiring an employee on a probationary basis to

determine his or her fitness for regular employment was in accord with the
MMPCs exercise of its management prerogative. The VA pointed out that MMPC
had complied with the requirement of apprising Paras of the standards of
performance evaluation and regularization at the inception of his probationary
employment. The VA agreed with the MMPC that the termination of Paras
employment was effected prior to the expiration of the six-month probationary
period. As to Paras contention that he was already a regular employee before he
was dismissed in 1994 considering that he had an accumulated service of eleven
(11) months, the VA ruled that Paras delay in filing a complaint for regularization
only in 1996, for services rendered in October 1994 to March 1995, militated
against him. The VA stated that Paras dismissal was based on the unsatisfactory
performance rating given to him by his direct supervisors Lito Lacambacal and
Wilfredo Lopez. The VA also found that the alleged heated argument between Atty.
Carlos S. Cao, the Labor Relations Manager of MMPC, and Cecille Paras, the
President of CPSU, was irrelevant in the termination of Paras services.[15]
The Case Before the Court of Appeals
Aggrieved, Paras and CPLU filed a petition for review under Rule 43 of the
Rules of Court before the Court of Appeals, docketed as C.A.-G.R. SP No.
46030. They assigned the following errors:

I
THE VOLUNTARY ARBITRATOR COMMITTED A SERIOUS ERROR OF
LAW IN FAILING TO HOLD THAT THE NOTICE OF TERMINATION WAS
SERVED UPON PETITIONER NELSON PARAS AFTER HE HAS ALREADY
BECOME A REGULAR EMPLOYEE, HIS PERIOD FOR PROBATION
HAVING EXPIRED.
II
THE VOLUNTARY ARBITRATOR SERIOUSLY ERRED AND GRAVELY
ABUSED HIS DISCRETION IN HOLDING THAT PETITIONER NELSON
PARAS SUPPOSED DELAY IN FILING THE ILLEGAL DISMISSAL CASE
WORKED AGAINST HIM.
III
THE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED SERIOUS ERRORS OF FACT AND LAW
IN NOT HOLDING THAT THE PERFORMANCE OF NELSON PARAS WAS
SATISFACTORY AND THAT HIS DISMISSAL WAS POLITICALLY
MOTIVATED.[16]

Therein, Paras and CPLU asserted that pursuant to Article 13 of the New Civil
Code, the period of May 27, 1996 to November 26, 1996 consisted of one hundred
eighty-three (183) days. They asserted that the maximum of the probationary
period is six (6) months, which is equivalent to 180 days; as such, Paras, who
continued to be employed even after the 180 th day, had become a regular employee
as provided for in Article 282 of the Labor Code. They averred that as a regular
employee, Paras employment could be terminated only for just or authorized
causes as provided for under the Labor Code, and after due notice. They posited
that in the Letter of Termination dated November 25, 1996, the ground for Paras
termination was not among those sanctioned by the Labor Code; hence, his
dismissal was illegal.

Paras and CPLU also stressed that he had already been in the employ of MMPC
from October 3, 1994 to March 3, 1995 as a welder-fabricator in the production of
jigs and fixtures, a function necessary and desirable to the usual business of
MMPC. Such period, in addition to the six-month probationary period, amounted
to eleven (11) months of service, which is sufficient for him to be considered as a
regular employee.
Paras and CPLU averred that the filing of an illegal dismissal complaint only after
his termination in 1996 did not make Paras claim for regularization specious, since
an illegally dismissed employee, like him, has four (4) years within which to file a
complaint.[17]
They emphasized that Paras performance evaluation was changed to unsatisfactory
as an off-shoot of the arguments between the latters wife, the President of the
CPSU, and Atty. Carlos S. Cao, one of MMPCs negotiators, over the provisions in
the CBA.[18]
The MMPC, for its part, averred that under Article 13 of the New Civil Code,
Paras probationary employment which commenced on May 27, 1996 would expire
on November 27, 1996. Since he received the notice of termination of his
employment on November 25, 1996, the same should be considered to have been
served within the six-month probationary period.
The MMPC asserted that the VA acted correctly in not considering the fivemonth period of Paras contractual employment as a welder-fabricator to qualify

him for regularization. It argued that his rating showed that his immediate
supervisors, in tandem with his department head, found his performance
unsatisfactory. Thus, his failure to meet a satisfactory performance rating justified
the termination of his probationary employment.
For its part, the Office of the Solicitor General (OSG), in representation of
Voluntary

Arbitrator

Danilo

Lorredo,

agreed

that

Paras

and CPLUs allegation, that the notice of termination was served on Paras 183rd day,
was erroneous. The OSG opined that the six-month probationary period was to
expire on November 27, 1996 and since Paras was served such notice on
November 25, 1996, his employment was deemed terminated within the six-month
probationary period. It posited that the failure of Paras to get a satisfactory
performance rating justified the termination of his probationary employment, and
that the inclusion of his five-month contractual employment as welder-fabricator
did not qualify him for regular employment.
Finally, the OSG contended that the appointment of a probationary employee
to a regular status is voluntary and discretionary on the part of the employer.
In a Decision promulgated on September 13, 2000, the CA reversed the
ruling of the Voluntary Arbitrator, the dispositive portion of which is herein quoted:
WHEREFORE, the petition is GRANTED. The Decision of public
respondent, dated November 3, 1997, is REVERSED and SET ASIDE. In lieu
thereof, judgment is hereby entered declaring Mitsubishi Motors Phils.
Corporations dismissal of Nelson Paras as ILLEGAL and ORDERING the former
to reinstate Paras to his former position without loss of seniority rights and other
privileges. Conformably with the latest pronouncement of the Supreme Court on
backwages, supra, Mitsubishi Motors Phils. Corporation is further ORDERED to

pay Paras full backwages (without qualifications or deductions), inclusive of

allowances, and his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual
reinstatement. Petitioners claims for attorneys fees, moral and exemplary damages
are, nevertheless, DENIED for lack of sufficient basis. No costs.[19]

The CA agreed with Paras and CPLUs interpretation that six (6) months is
equivalent to one hundred eighty (180 days) and that computed from May 27,
1996,

such

period

expired

on

November

23,

1996. Thus,

when Paras received the letter of termination on November 26, 1996, the same was
served on the 183rd day or after the expiration of the six-month probationary
period. The CA stated that since he was allowed to work beyond the probationary
period, Paras became a regular employee. Hence, his dismissal must be based on
the just and authorized causes under the Labor Code, and in accordance with the
two-notice requirement provided for in the implementing rules. The appellate court
concluded that for MMPCs failure to show that Paras was duly notified of the
cause of his dismissal, the latter was illegally dismissed; hence, his actual
reinstatement without loss of seniority rights and the payment of backwages up to
the time of his reinstatement were in order.
Dissatisfied, the MMPC filed a motion for reconsideration of the decision,
alleging that the CA erred in holding that the six-month probationary period which
commenced on May 27, 1996, expired on November 23, 1996.

The MMPC contended that the reinstatement of Paras to his former position
had become moot and academic because it had retrenched approximately seven
hundred (700) employees as a result of its financial losses in 1997. It posited that
the payment of full backwages should only be computed up to February 1998, the
date when MMPC effected the first phase of its retrenchment program.
The CA denied the motion in a Resolution dated June 18, 2001.[20]

The Present Petition

Undaunted, the MMPC, now the petitioner, filed this instant petition,
alleging as follows:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE 3 NOVEMBER 1997 DECISION OF THE HONORABLE
VA DANILO LORREDO, AND IN FINDING THAT RESPONDENT PARAS
(WAS) ILLEGALLY DISMISSED AND ORDERING HIS REINSTATEMENT.
B.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ORDERING
THE REINSTATEMENT OF PARAS WITH FULL BACKWAGES DESPITE
THE CHANGE IN THE FINANCIAL CIRCUMSTANCES OF THE COMPANY.
C.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT THE SIX-MONTH PROBATIONARY PERIOD OF PARAS WHICH
STARTED ON 27 MAY 1996 HAD EXPIRED 23 NOVEMBER 1996.[21]

The petitioner asserts that the CA erred in ruling that respondent Paras was
already a regular employee when he was served the notice of termination. Citing

Article 13 of the New Civil Code, the petitioner argued that the six-month
probationary period should be computed as follows:
May 27-31 = 4 days
Jun(e) 1-30 = 1 month (30 days)
July 1-31 = 1 month (30 days)
Aug(.) 1-31 = 1 month (30 days)
Sept(.) 1-30 = 1 month (30 days)
Oct(.) 1-31 = 1 month (30 days)
Nov(.) 1-26 = 26 days[22]

Hence, according to the petitioner, when the termination letter was served on
November

26,

1996,

Paras

was

still

probationary

employee.

Considering that he did not qualify for regularization, his services were legally
terminated. As such, the CA erred in ordering his reinstatement and the payment of
his backwages.
According to the petitioner, even assuming that respondent Paras was a
regular employee when he was dismissed, his reinstatement had already become
moot and academic because of the retrenchment program effected as a result of the
business losses it had suffered in the year 1997. Respondent Paras, who was
employed only in May 27, 1996, would have been included in the first batch of
employees retrenched in February of 1998, in accordance with the last in first out
policy embedded in the CBA. Thepetitioner further contends that Paras backwages
should be computed only up to February of 1998.

In their comment on the petition, the respondents argue that the CA was
correct in concluding that the termination letter was served on respondent Paras
one hundred eighty third (183rd) day of employment with the petitioner, asserting
that six (6) months is equivalent to one hundred eighty (180) days. Since
respondent Paras was employed on May 27, 1996, the 180 th day fell on November
23, 1996. Thus, respondent Paras was already a regular employee when the
termination letter was served on him. Consequently, his dismissal should be based
on the just or authorized causes provided for by the Labor Code, and after proper
notice.

The respondents, likewise, contend that the petitioner cannot raise new and
unsubstantiated allegations in its petition at bar.

The Issues
The issues for resolution are the following: (a) whether or not respondent
Paras was already a regular employee on November 26, 1996; (b) whether or not
he was legally dismissed; (c) if so, whether or not his reinstatement had been
rendered moot and academic; and, (d) whether or not his backwages should be
computed only up to February of 1998.

The Courts Ruling

The petition is partially granted.

At the outset, we must stress that only errors of law are generally reviewed

by this Court in petitions for review on certiorari of CA decisions. [23] Questions of

fact are not entertained.[24] This Court is not a trier of facts and, in labor cases, this

doctrine applies with greater force. Factual questions are for labor tribunals to

resolve.[25] The findings of fact of quasi-judicial bodies like the National Labor

Relations Commission (NLRC), are accorded with respect, even finality, if

supported

by

substantial

evidence.

Particularly when passed upon and upheld by the Court of Appeals, such findings

are binding and conclusive upon the Supreme Court and will not normally be

disturbed.[26]

However, when the findings of the NLRC and the Court of Appeals are

inconsistent with each other, there is a need to review the records to determine

which of them should be preferred as more conformable to the evidentiary facts.

[27]

Considering that the CAs findings of fact clash with those of the Voluntary

Arbitrator, this Court is compelled to go over the records of the case, as well as the

submissions of the parties.[28]

Regularization of
Employment

Indeed, an employer, in the exercise of its management prerogative, may

hire an employee on a probationary basis in order to determine his fitness to
perform work.[29]Under Article 281 of the Labor Code, the employer must inform
the employee of the standards for which his employment may be considered for
regularization. Such probationary period, unless covered by an apprenticeship
agreement, shall not exceed six (6) months from the date the employee started
working. The employees services may be terminated for just cause or for his failure

to qualify as a regular employee based on reasonable standards made known to

him.[30]

Respondent Paras was employed as a management trainee on a probationary basis.

During the orientation conducted on May 15, 1996, he was apprised of the
standards upon which his regularization would be based. He reported for work on
May

27,

1996. As

per

the

companys

policy,

the

probationary period was from three (3) months to a maximum of six (6) months.
Applying Article 13 of the Civil Code, [31] the probationary period of six (6)
months consists of one hundred eighty (180) days. [32] This is in conformity with
paragraph one, Article 13 of the Civil Code, which provides that the months which
are not designated by their names shall be understood as consisting of thirty (30)
days each. The number of months in the probationary period, six (6), should then
be multiplied by the number of days within a month, thirty (30); hence, the period
of one hundred eighty (180) days.
As clearly provided for in the last paragraph of Article 13, in computing a
period, the first day shall be excluded and the last day included. Thus, the one
hundred eighty (180) days commenced on May 27, 1996, and ended on November
23, 1996. The termination letter dated November 25, 1996 was served on
respondent Paras only at 3:00 a.m. of

November 26, 1996. He was, by then, already a regular employee of the petitioner
under Article 281 of the Labor Code.
The Legality of
The Dismissal

An employee cannot be dismissed except for just or authorized cause as found

in the Labor Code and after due process. [33] The following grounds would justify
the dismissal of an employee:
(a)

Serious misconduct or willful disobedience by the employee of the lawful

orders of the employer or representative in connection with his work;

(b)

Gross and habitual neglect by the employee of his duties;

(c)

Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

(d)

Commission of a crime or offense by the employee against the person of his

employer or of any immediate member of his family or his duly authorized
representative; and

(e)

Other causes analogous to the foregoing.[34]

The basis for which respondent Paras services were terminated was his
alleged unsatisfactory rating arising from poor performance. It is a settled doctrine
that the employer has the burden of proving the lawfulness of his employees
dismissal. The validity of the charge must be clearly established in a manner
consistent with due process.[35]

Under Article 282 of the Labor Code, an unsatisfactory rating can be a just
cause for dismissal only if it amounts to gross and habitual neglect of duties. Gross
negligence has been defined to be the want or absence of even slight care or
diligence as to amount to a reckless disregard of the safety of person or property. It
evinces a thoughtless disregard of consequences without exerting any effort to
avoid them.[36] A careful perusal of the records of this case does not show that
respondent Paras was grossly negligent in the performance of his duties.
The company policy provides the following rule in performance evaluation:
The performance rating sheet must be accomplished by the immediate supervisor,
then reviewed by the Department Head, and concurred by the Division Head. The
Personnel Manager likewise must note all submitted performance sheets.
Once the rating sheet has gone through this standard procedure, the immediate
supervisor shall discuss the results of the performance rating with the
employee. The discussion/conference may be done in the presence of the
Department Head. This is to emphasize the point that the employee is given due
importance especially in matters pertaining to his development as a person and
employee.[37]

In the present case, the immediate supervisor of respondent Paras gave him an
average performance rating and found him fit for regularization.[38] Thereafter, his
immediate supervisor and the department head reviewed the said rating, which was
duly noted by the personnel manager. However, in a complete turn around, the
petitioner made it appear that after the performance evaluation of respondent Paras
was reviewed by the department and division heads, it was unanimously agreed
that

the

respondents performance rating was unsatisfactory, making him unfit for

regularization.
There is no showing that respondent Paras was informed of the basis for the volte
face of

the

management

group

tasked

to

review

his

performance rating. His immediate supervisor even told him that he had garnered a
satisfactory rating and was qualified for regularization, only to later receive a letter
notifying him that his employment was being terminated.
Considering that respondent Paras was not dismissed for a just or authorized
cause, his dismissal from employment was illegal. Furthermore, the petitioners
failure to inform him of any charges against him deprived him of due process.
Clearly, the termination of his employment based on his alleged unsatisfactory
performance rating was effected merely to cover up and deodorize the illegality of
his dismissal.
Reinstatement and
Backwages

The normal consequences of illegal dismissal are reinstatement without loss

of seniority rights and the payment of backwages computed from the time the
employees compensation was withheld from him. [39] Since respondent Paras
dismissal

from

employment

is

illegal,

he

is

entitled

to

reinstatement and to be paid backwages from the time of his dismissal up to the
time of his actual reinstatement.

The petitioner asserts that assuming respondent Paras was illegally

dismissed, his reinstatement had become moot and academic because of its
retrenchment program which was effected beginning February 1998. The petitioner
posits that even if respondent Paras had become a regular employee by November
26, 1996, he would have been included in the first phase of its retrenchment
program, pursuant to the last in first out policy embedded in the CBA. Hence, the
petitioner concludes, the payment of backwages should be computed up to
February of 1998.
The respondents, for their part, aver that the petitioner is proscribed from
alleging new circumstances and allegations of fact, particularly on financial
reverses, before the Court of Appeals and the Voluntary Arbitrator.
We do not agree with the respondents.
A cursory examination of the records shows that the petitioner could not
raise its retrenchment program as an issue before the VA, because it was
implemented only in February 1998, when the case was already in the
CA. However, we note that the petitioner did not raise the same in its comment to
the petition. The petitioner asserted the matter only in its October 20, 2000 motion
for reconsideration of the decision of the CA, where it alleged that the
retrenchment program was effected to arrest the continuing business losses
resulting from the financial reverses it experienced in 1997.

Nevertheless, it is not denied that because of the petitioners losses, it

retrenched seven hundred (700) employees. Business reverses or losses are
recognized by law as an authorized cause for termination of employment. Still, it is
an essential requirement that alleged losses in business operations must be proven
convincingly. Otherwise, such ground for termination would be susceptible to
abuse by scheming employers, who might be merely feigning business losses or
reverses in their business ventures to ease out employees. [40] Retrenchment is an
authorized cause for termination of employment which the law accords an
employer who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees. The purpose of
retrenchment is to save a financially ailing business establishment from eventually
collapsing.[41]
In this case, the petitioner submitted in the CA its financial statements for
1996, 1997 and 1998[42] as well as its application for retrenchment. In its
Statements of Income and Unappropriated Retained Earning, it was shown that in
1996, the parent company of the petitioner had a net income of P467,744,285. In
1997, it had a net loss ofP29,253,511.[43] In 1998, its net loss, after effecting
retrenchment and closing several plants, was arrested and dropped to P8,156,585.
[44]

This shows that even after the retrenchment, the petitioner MMPC still suffered

net losses.

In 1996, the petitioners current assets amounted to P5,381,743,576; it

increased to P8,033,932,745[45] in 1997, while in 1998, it was reduced
to P5,053,874,359.[46] This shows that the petitioners assets acquired in 1997
diminished in 1998. The figures for Current Liabilities are consistent with the
movement of current assets for 1997 and 1998.
In 1996, the petitioner incurred current liabilities of P1,966,445,401 which
increased to P5,088,990,117[47] in 1997 and decreased to P2,880,259,811[48] in
1998. To reduce its losses, the petitioner had to dispose of some of its current
assets to cover the increased liability incurred in 1997, and had to resort to
borrowings in 1998. The continuity of losses which started in 1997 is further
illustrated in the figures on retained earnings for 1996, 1997 and 1998. In 1996,
retained

earnings

stood

at P1,838,098,175,[49] which

decreased

to P994,942,628[50] in 1997 and further decreased to P592,614,548[51] in 1998.

The petitioners losses in 1997 and 1998 are not insignificant. It is beyond
cavil then, that the serious and actual business reverses suffered by the petitioner
justified its resort to retrenchment of seven hundred (700) of its employees.
The records show that the petitioner informed the Department of Labor and
Employment of its plight and intention to retrench employees as a result of the
shutdown of its plants.[52] The termination of the five hundred thirty-one (531)
affected employees were made effective a month from receipt of the termination
letter mailed on February 25, 1998.[53]

In accordance with the CBA between MMPC and CPLU, employees who
were recently hired were the ones retrenched. Considering that respondent Paras
had just been regularized on November 24, 1996, he would have been included
among those who had been retrenched had he not been dismissed.
The unfavorable financial conditions of the petitioner may not justify
reinstatement. However, it is not a sufficient ground to deny backwages to
respondent Paras who was illegally dismissed. [54] Considering that notices of
retrenchment were mailed on February 25, 1998 and made effective one month
therefrom, respondent Paras should be paid full backwages from the date of his
illegal dismissal up to March 25, 1998. Pursuant to Article 283 of the Labor Code,
he should be paid separation pay equivalent to one (1) month salary, or to at least
one-half month pay for every year of service, whichever is higher, a fraction of at
least six months to be considered as one (1) year.[55]
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY
GRANTED. The September 13, 2000 Decision of the Court of Appeals in CAGR
SP No. 46030 is hereby AFFIRMED WITH MODIFICATIONS. The petitioner
is ORDERED to pay respondent Nelson Paras separation pay equivalent to one (1)
month, or to at least one-half (1/2) month pay for every year of service, whichever
is higher, a fraction of at least six (6) months to be considered as one year; and to
pay

full backwages, computed fromthe time of his dismissal up to March

25,

1998. That portion of the decision of the Court of Appeals directing the
reinstatement of the respondent Paras is DELETED.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74246 January 26, 1989
MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor and
Employment judgment, and JOAQUIN A. DEQUILA, respondents.
Cruz, Agabin, Atienza & Alday for petitioners.
The Solicitor General of public respondent.
Norberto M. Alensuela, Sr. for private respondent.

NARVASA, J.:
There is no dispute about the facts in this case, and the only question for the Court is whether or not,
Article 282 of the Labor Code notwithstanding, probationary employment may validly be extended
beyond the prescribed six-month period by agreement of the employer and the employee.
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner Mariwasa
Manufacturing, Inc. (hereafter, Mariwasa only) as a general utility worker on January 10, 1979. Upon
the expiration of the probationary period of six months, Dequila was informed by his employer that
his work had proved unsatisfactory and had failed to meet the required standards. To give him a
chance to improve his performance and qualify for regular employment, instead of dispensing with
his service then and there, with his written consent Mariwasa extended his probation period for
another three months from July 10 to October 9, 1979. His performance, however, did not improve
and on that account Mariwasa terminated his employment at the end of the extended period. 1
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its Vice-President for
Administration, Angel T. Dazo, a complaint for illegal dismissal and violation of Presidential Decrees
Nos. 928 and 1389. 2 His complaint was dismissed after hearing by Director Francisco L. Estrella,
Director of the Ministry's National Capital Region, who ruled that the termination of Dequila's employment
was in the circumstances justified and rejected his money claims for insufficiency of evidence. 3 On
appeal to the Office of the Minister, however, said disposition was reversed. Respondent Deputy Minister
Vicente Leogardo, Jr. held that Dequila was already a regular employee at the time of his dismissal,
therefore, could not have been lawfully dismissed for failure to meet company standards as a
probationary worker. He was ordered reinstated to his former position without loss of seniority and with full
back wages from the date of his dismissal until actually reinstated. 4 This last order appears later to have
been amended so as to direct payment of Dequila's back wages from the date of his dismissal to
December 20, 1982 only. 5

Mariwasa and Dazo, now petitioners, thereafter be sought this Court to review Hon. Leogardo's
decision oncertiorari and prohibition, urging its reversal for having been rendered with grave abuse
of discretion and/or without or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all underscore the fact that
the threshold issue here is, as first above stated, the legal one of whether employer and employee
may by agreement extend the probationary period of employment beyond the six months prescribed
in Art. 282 of the Labor Code, which provides that:
Art. 282. Probationary Employment. Probationary employment shall not exceed
six (6) 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 probationary period shall be
considered a regular employee.'
The Court agrees with the Solicitor General, who takes the same position as the petitioners, that
such an extension may lawfully be covenanted, notwithstanding the seemingly restrictive language
of the cited provision.Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating longer probationary
periods as constituting lawful exceptions to the statutory prescription limiting such periods to six months,
when it upheld as valid an employment contract between an employer and two of its employees that
provided for an eigthteen-month probation period. This Court there held:
'It is petitioners' submission that probationary employment cannot exceed six (6)
months, the only exception being apprenticeship and learnership agreements as
provided in the Labor Code; that the Policy Instruction of the Minister of Labor and
Employment nor any agreement of the parties could prevail over this mandatory
requirement of the law; that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-guaranteed security of tenure
of workers; and that the law does not allow any discretion on the part of the Minister
of Labor and Employment to extend the probationary period for a longer period
except in the aforecited instances. Finally, petitioners maintain that since they are
regular employees, they can only be removed or dismissed for any of the just and
valid causes enumerated under Article 283. of the Labor Code.
We reject petitioners' contentions. They have no basis in law.
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 inclusive, 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.

xxx
We therefore, hold and rule that the probationary employment of petitioners set to
eighteen (18) months is legal and valid and that the Regional Director and the
Deputy Minister of Labor and Employment committed no abuse of discretion in ruling
accordingly.
The single difference between Buiser and the present case: that in the former involved an eighteenmonth probationary period stipulated in the original contract of employment, whereas the latter refers
to an extension agreed upon at or prior to the expiration of the statutory six-month period, is hardly
such as to warrant or even suggest a different ruling here. In both cases the parties' agreements in
fact resulted in extensions of the period prescribed by law. That in this case the inability of the
probationer to make the grade became apparent only at or about the end of the six-month period,
hence an extension could not have been pre-arranged as was done inBuiser assumes no adverse
significance, given the lack, as pointed out by the Solicitor General, of any indication that the
extension to which Dequila gave his agreement was a mere stratagem of petitioners to avoid the
legal consequences of a probationary period satisfactorily completed.
For aught that appears of record, the 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 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.
Having reached the foregoing conclusions, the Court finds it unnecessary to consider and pass upon
the additional issue raised in the Supplemental Petition 8 that the back wages adjudged in favor of
private respondent Dequila were erroneously computed.
WHEREFORE, the petition is granted. The orders of the public respondent complained of are
reversed and set aside. Private respondent's complaint against petitioners for illegal dismissal and
violation of Presidential Decrees 928 and 1389 is dismissed for lack of merit, without pronouncement
as to costs.
SO ORDERED.