G.R. No.

159350, March 09, 2016

ALUMAMAY O. JAMIAS, JENNIFER C. MATUGUINAS AND JENNIFER F.
CRUZ,* PETITIONERS, VS. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION), HON. COMMISSIONERS: RAUL T.
AQUINO, VICTORIANO R. CALAYCAY AND ANGELITA A. GACUTAN;
HON. LABOR ARBITER VICENTE R. LAYAWEN; INNODATA
PHILIPPINES, INC., INNODATA PROCESSING CORPORATION,
(INNODATA CORPORATION), AND TODD SOLOMON, RESPONDENTS.
DECISION
BERSAMIN, J.:
The petitioners appeal the adverse judgment promulgated on July 31,
2002,[1] whereby the Court of Appeals (CA) upheld the ruling of the National
Labor Relations Commission (NLRC) declaring them as project employees
hired for a fixed period.
Antecedents
Respondent Innodata Philippines, Inc. (Innodata), a domestic corporation
engaged in the business of data processing and conversion for foreign
clients,[2] hired the following individuals on various dates and under the
following terms, to wit:
Name
Position
Duration of Contract
August 7, 1995 to August
Alumamay Jamias
Manual Editor
7, 1996[3]
August 7, 1995 to August
Marietha V. Delos Santos
Manual Editor
7, 1996[4]
August 16, 1995 to
Lilian R. Guamil
Manual Editor
August 16, 1996[5]
August 7, 1995 to August
Rina C. Duque
Manual Editor
7, 1996[6]
August 23, 1995 to
Marilen Agabayani
Manual Editor
August 23, 1996[7]
September 1, 1995 to
Alvin V. Patnon
Production Personnel
September 1, 1996[8]
September 18, 1995 to
Analyn I. Beter
Type Reader
September 18, 1996[9]
September 18, 1995 to
Jerry O. Soldevilla
Production Personnel
September 18, 1996[10]
Ma. Concepcion A. Dela
September 18, 1995 to
Production Personnel
Cruz
September 18, 1996[11]
November 20, 1995 to
Jennifer Cruz
Data Encoder
November 20, 1996[12]
November 20, 1995 to
Jennifer Matuguinas
Data Encoder
November 20, 1996[13]

After their respective contracts expired, the aforenamed individuals filed a

complaint for illegal dismissal claiming that Innodata had made it appear
that they had been hired as project employees in order to prevent them
from becoming regular employees.[14]
Decision of the Labor Arbiter
On September 8, 1998, Labor Arbiter (LA) Vicente Layawen rendered his
decision dismissing the complaint for lack of merit. [15] He found and held
that the petitioners had knowingly signed their respective contracts in
which the durations of their engagements were clearly stated; and that
their fixed term contracts, being exceptions to Article 280 of the Labor
Code, precluded their claiming regularization.
Ruling of the National Labor Relations Commission
On appeal, the NLRC affirmed the decision of LA Layawen, [16] opining that
Article 280 of the Labor Code did not prohibit employment contracts with
fixed periods provided the contracts had been voluntarily entered into by
the parties, viz.:
[I]t is distinctly provided that complainants were hired for a definite period
of one year incidental upon the needs of the respondent by reason of the
seasonal increase in the volume of its business. Consequently, following
the rulings in Pantranco North Express, Inc. vs. NLRC, et al., G.R. No.
106654, December 16, 1994, the decisive determinant in term of
employment should not be the activities that the employee is called upon
to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day
certain being understood to be "that which must necessarily come,
although it may not be known when." Further, Article 280 of the Labor
Code does not prescribe or prohibit an employment contract with a fixed
period provided, the same is entered into by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and
absent any other circumstance vitiating consent. It does not necessarily
follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties
are forbidden from agreeing on a period of time for the performance of
such activities. There is thus nothing essentially contradictory between a
definite period of employment and the nature of the employee's duties. x x
x[17]
Judgment of the CA
As earlier mentioned, the CA upheld the NLRC. It observed that the
desirability and necessity of the functions being discharged by the
petitioners did not make them regular employees; that Innodata and the
employees could still validly enter into their contracts of employment for a
fixed period provided they had agreed upon the same at the time of the
employees' engagement;[18] that Innodata's operations were contingent on
job orders or undertakings for its foreign clients; and that the availability of
contracts from foreign clients, and the duration of the employments could
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not be treated as permanent, but coterminous with the projects. [19]

The petitioners moved for reconsideration,[20] but the CA denied their
motion on August 8, 2003.[21] Hence, this appeal by only three of the
original complainants, namely petitioners Alumamay Jamias, Jennifer
Matuguinas and Jennifer Cruz.
Issues
The petitioners anchor their appeal on the following:
I
THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION AS
IT CANNOT REVERSE OR ALTER THE SUPREME COURT DECISION
THE SUPREME COURT HAS RULED THAT THE NATURE OF EMPLOYMENT AT
RESPONDENTS IS REGULAR NOT FIXED OR CONTRACTUAL IN AT LEAST
TWO (2) CASES AGAINST INNODATA PHILS., INC.
II
THE HON. COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN
IT DID NOT STICK TO PRECENDENT AS IT HAS ALREADY RULED IN AN
EARLIER CASE THAT THE NATURE OF EMPLOYMENT AT INNODATA PHILS.,
INC. IS REGULAR AND NOT CONTRACTUAL
III
THE HON. COURT OF APPEALS PATENTLY ERRED IN LAW AND COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
RULING THAT PETITIONERS' EMPLOYMENT IS FOR A FIXED PERIOD COTERMINOUS WITH A PROJECT WHEN THERE IS NO PROJECT TO SPEAK OF
IV
THE HON. COURT OF APPEALS PALPABLY ERRED IN LAW IN RULING THAT
THE STIPULATION IN CONTRACT IS GOVERNING AND NOT THE NATURE OF
EMPLOYMENT AS DEFINED BY LAW.[22]
The petitioners maintain that the nature of employment in Innodata had
been settled in Villanueva v. National Labor Relations Commission (Second
Division)[23] and Servidad v. National Labor Relations Commission,[24]
whereby the Court accorded regular status to the employees because the
work they performed were necessary and desirable to the business of data
encoding, processing and conversion. [25] They insist that the CA
consequently committed serious error in not applying the pronouncement
in said rulings, thereby ignoring the principle of stare decisis in declaring
their employment as governed by the contract of employment; that the CA
also erroneously found that the engagement of the petitioners was
coterminous with the project that was nonexistent; that Innodata engaged
in "semantic interplay of words" by introducing the concept of "fixed term
employment" or "project employment" that were not founded in law;[26] and
that Article 280 of the Labor Code guarantees the right of workers to

security of tenure, which rendered the contracts between the petitioners

and Innodata meaningless.[27]
In refutation, Innodata insists that the contracts dealt with in Villanueva
and Servidad were different from those entered into by the petitioners
herein,[28] in that the former contained stipulations that violated the
provisions of the Labor Code on probationary employment and security of
tenure,[29] while the latter contained terms known and explained to the
petitioners who then willingly signed the same; [30] that as a mere service
provider, it did not create jobs because its operations depended on the
availability of job orders or undertakings from its client; [31] that Article 280
of the Labor Code allowed "term employment" as an exception to security
of tenure; and that the decisive determinant was the day certain agreed
upon by the parties, not the activities that the employees were called upon
to perform.[32]
Were the petitioners regular or project employees of Innodata?
Ruling of the Court
We deny the petition for review on certiorari.
I
Stare decisis does not apply where the facts are essentially
different
Contrary to the petitioners' insistence, the doctrine of stare decisis, by
which the pronouncements in Villanueva and Servidad would control the
resolution of this case, had no application herein.
The doctrine of stare decisis enjoins adherence to judicial precedents.[33]
When a court has laid down a principle of law as applicable to a certain
state of facts, it will adhere to that principle and apply it to all future cases
in which the facts are substantially the same; but when the facts are
essentially different, stare decisis does not apply because a perfectly
sound principle as applied to one set of facts might be entirely
inappropriate when a factual variance is introduced.[34]
Servidad and Villanueva involved contracts that contained stipulations not
found in the contracts entered by the petitioners. The cogent observations
in this regard by the CA are worth reiterating:
A cursory examination of the facts would reveal that while all the cases
abovementioned involved employment contracts with a fixed term, the
employment contract subject of contention in the Servidad and Villanueva
cases provided for double probation, meaning, that the employees
concerned, by virtue of a clause incorporated in their contracts, were made
to remain as probationary employees even if they continue to work beyond
the six month probation period set by law. Indeed, such stipulation
militates against Constitutional policy of guaranteeing the tenurial security
of the workingman. To Our mind, the provision alluded to is what prodded
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the Supreme Court to disregard and nullify altogether the terms of the
written entente. Nonetheless, it does not appear to be the intendment of
the High Tribunal to sweepingly invalidate or declare as unlawful all
employment contracts with a fixed period. To phrase it differently, the said
agreements providing for a one year term would have been declared valid
and, consequently, the separation from work of the employees concerned
would have been sustained had their contracts not included any unlawful
and circumventive condition.
It ought to be underscored that unlike in the Servidad and Villanueva
cases, the written contracts governing the relations of the respondent
company and the petitioners herein do not embody such illicit stipulation.
[35]

We also disagree with the petitioners' manifestation[36] that the Court

struck down in Innodata Philippines, Inc. v. Quejada-Lopez [37] a contract of
employment that was similarly worded as their contracts with Innodata.
What the Court invalidated in Innodata Philippines, Inc. v. Quejada-Lopez
was the purported fixed-term contract that provided for two periods - a
fixed term of one year under paragraph 1 of the contract, and a threemonth period under paragraph 7.4 of the contract - that in reality placed
the employees under probation. In contrast, the petitioners' contracts did
not contain similar stipulations, but stipulations to the effect that their
engagement was for the fixed period of 12 months, to wit:
1. The EMPLOYER shall employ the EMPLOYEE and the EMPLOYEE shall
serve the EMPLOYER in the EMPLOYER'S business as a MANUAL EDITOR on
a fixed term only and for a fixed and definite period of twelve months,
commencing on August 7, 1995 and terminating on August 7, 1996, x x x.
[38]

In other words, the terms of the petitioners' contracts did not subject them
to a probationary period similar to that indicated in the contracts struck
down in Innodata, Villanueva and Servidad.
II
A fixed period in a contract of employment does not by itself
signify an intention to circumvent Article 280 of the Labor Code
The petitioners argue that Innodata circumvented the security of tenure
protected under Article 280 of the Labor Code by providing a fixed term;
and that they were regular employees because the work they performed
were necessary and desirable to the business of Innodata.
The arguments of the petitioners lack merit and substance.
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 or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed 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 actuallv
exists.
The provision contemplates three kinds of employees, namely: (a) regular
employees; (b) project employees; and (c) casuals who are neither regular
nor project employees. The nature of employment of a worker is
determined by the factors provided in Article 280 of the Labor Code,
regardless of any stipulation in the contract to the contrary. [39] Thus, in
Brent School, Inc. v. Zamora,[40] we explained that the clause referring to
written contracts should be construed to refer to agreements entered into
for the purpose of circumventing the security of tenure. Obviously, Article
280 does not preclude an agreement providing for a fixed term of
employment knowingly and voluntarily executed by the parties. [41]
A fixed term agreement, to be valid, must strictly conform with the
requirements and conditions provided in Article 280 of the Labor Code. The
test to determine whether a particular employee is engaged as a project or
regular employee is whether or not the employee is assigned to carry out a
specific project or undertaking, the duration or scope of which was
specified at the time of his engagement.[42] There must be a determination
of, or a clear agreement on, the completion or termination of the project at
the time the employee is engaged.[43] Otherwise put, the fixed period of
employment must be knowingly and voluntarily agreed upon by the
parties, without any force, duress or improper pressure being brought to
bear upon the employee and absent any other circumstances vitiating his
consent, or it must satisfactorily appear that the employer and employee
dealt with each other on more or less equal terms with no moral
dominance whatsoever being exercised by the former on the latter. [44]
The contracts of the petitioners indicated the one-year duration of their
engagement as well as their respective project assignments (i.e., Jamias
being assigned to the CD-ROM project; Cruz and Matuguinas to the TSET
project).[45] There is no indication that the petitioners were made to sign
the contracts against their will. Neither did they refute Innodata's assertion
that it did not employ force, intimidate or fraudulently manipulate the
petitioners into signing their contracts, and that the terms thereof had
been explained and made known to them.[46] Hence, the petitioners
knowingly agreed to the terms of and voluntarily signed their respective
contracts.
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That Innodata drafted the contracts with its business interest as the
overriding consideration did not necessarily warrant the holding that the
contracts were prejudicial against the petitioners.[47] The fixing by Innodata
of the period specified in the contracts of employment did not also indicate
its ill-motive to circumvent the petitioners' security of tenure. Indeed, the
petitioners could not presume that the fixing of the one-year term was
intended to evade or avoid the protection to tenure under Article 280 of
the Labor Code in the absence of other evidence establishing such
intention. This presumption must ordinarily be based on some aspect of
the agreement other than the mere specification of the fixed term of the
employment agreement, or on evidence aliunde of the intent to evade. [48]
Lastly, the petitioners posit that they should be accorded regular status
because their work as editors and proofreaders were usually necessary to
Innodata's business of data processing.
We reject this position. For one, it would be unusual for a company like
Innodata to undertake a project that had no relationship to its usual
business.[49] Also, the necessity and desirability of the work performed by
the employees are not the determinants in term employment, but rather
the "day certain" voluntarily agreed upon by the parties.[50] As the CA
cogently observed in this respect:
There is proof to establish that Innodata's operations indeed rests upon job
orders or undertakings coming from its foreign clients. Apparently, its
employees are assigned to projects - one batch may be given a fixed
period of one year, others, a slightly shorter duration, depending on the
estimated time of completion of the particular job or undertaking farmed
out by the client to the company.[51]
In fine, the employment of the petitioners who were engaged as project
employees for a fixed term legally ended upon the expiration of their
contract. Their complaint for illegal dismissal was plainly lacking in merit.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the
decision promulgated on July 31, 2002; and ORDER the petitioners to pay
the costs of suit
SO ORDERED.

G.R. No. 208451, February 03, 2016

MANILA MEMORIAL PARK CEMETERY, INC., PETITIONER, VS. EZARD
D. LLUZ, NORMAN CORRAL, ERWIN FUGABAN, VALDIMAR BALISI,
EMILIO FABON, JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN
ESPARES, GAVINO FARINAS, AND WARD TRADING AND SERVICES,
RESPONDENTS.
DECISION
CARPIO, J.:

The Case
This is a petition for review on certiorari[1] assailing the Decision[2] dated 21
January 2013 and the Resolution[3] dated 17 July 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 119237.
The Facts
On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc.
(Manila Memorial) entered into a Contract of Services with respondent
Ward Trading and Services (Ward Trading). The Contract of Services
provided that Ward Trading, as an independent contractor, will render
interment and exhumation services and other related work to Manila
Memorial in order to supplement operations at Manila Memorial Park,
Paraaque City.
Among those assigned by Ward Trading to perform services at the Manila
Memorial Park were respondents Ezard Lluz, Norman Corral, Erwin
Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael
Curioso, Junlin Espares, and Gavino Farinas (respondents). They worked six
days a week for eight hours daily and were paid P250 per day.
On 26 June 2007, respondents filed a Complaint[4] for regularization and
Collective Bargaining Agreement benefits against Manila Memorial; Enrique
B. Lagdameo, Manila Memorial's Executive Vice-President and Director in
Charge for Overall Operations, and Ward Trading. On 6 August 2007,
respondents filed an amended complaint to include illegal dismissal,
underpayment of 13th month pay, and payment of attorney's fees.
Respondents alleged that they asked Manila Memorial to consider them as
regular workers within the appropriate bargaining unit established in the
collective bargaining agreement by Manila Memorial and its union, the
Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial
refused the request since respondents were employed by Ward Trading, an
independent labor contractor. Thereafter, respondents joined the MMP
Union. The MMP Union, on behalf of respondents, sought their
regularization which Manila Memorial again declined. Respondents then
filed the complaint. Subsequently, respondents were dismissed by Manila
Memorial. Thus, respondents amended the complaint to include the prayer
for their reinstatement and payment of back wages.
Meanwhile, Manila Memorial sought the dismissal of the complaint for lack
of jurisdiction since there was no employer-employee relationship. Manila
Memorial argued that respondents were the employees of Ward Trading.
In a Decision[5] dated 29 March 2010, the Labor Arbiter dismissed the
complaint for failing to prove the existence of an employer-employee
relationship. The dispositive portion of the Decision states:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the above-entitled case for complainants' lack of employerLABOR LAW REV | Additional Cases | 092816 | kb | 4

employee relationship with respondent Manila Memorial Park Cemetery,

Inc.

Manila Memorial then filed a Motion for Reconsideration which was denied
by the CA in a Resolution dated 17 July 2013.

SO ORDERED.[6]
Respondents appealed[7] to the NLRC. In a Decision[8] dated 30 September
2010, the NLRC reversed the Labor Arbiter's findings. The NLRC ruled that
Ward Trading was a labor-only contractor and an agent of Manila Memorial.
The dispositive portion of the Decision states:
WHEREFORE, premises considered, complainants' appeal is GRANTED. The
assailed Decision of Labor Arbiter Geobel A. Bartolabac dated March 29,
2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled
to the benefits provided for under the CBA between the latter and the
Manila Memorial Park Free Workers Union.

Hence, the instant petition.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage

differentials to complainants as follows:
1. Ezard D. Lluz P43,982.
79
2. Norman
P29,765.
Corral 67
3. Erwin
P28,634.
Fugaban 67
4. Valdimar
P20,310.
Balisi 33
5. Emilio Fabon P43,982.
79
6. John Mark
P43,982.
Aplicador 79
7. Michael
P43,982.
Curioso 79
8. Ju[n]lin
P43,982.
Espares 79
9. Gavino
P43,982.
Farinas 79
SO ORDERED.[9]
Manila Memorial filed a Motion for Reconsideration which was denied in a
Resolution[10] dated 31 January 2011.

The Issue
The main issue for our resolution is whether or not an employer-employee
relationship exists between Manila Memorial and respondents for the latter
to be entitled to their claim for wages and other benefits.
The Court's Ruling
The petition lacks merit.
Manila Memorial contends that Ward Trading has total assets in excess of
P1.4 million, according to Ward Trading's financial statements for the year
2006, proving that it has sufficient capitalization to qualify as a legitimate
independent contractor. Manila Memorial insists that nowhere is it provided
in the Contract of Services that Manila Memorial controls the manner and
means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the
latter's employees to abide by company rules and regulations.
Respondents, on the other hand, assert that they are regular employees of
Manila Memorial since Ward Trading cannot qualify as an independent
contractor but should be treated as a mere labor-only contractor.
Respondents state that (1) there is enough proof that Ward Trading does
not have substantial capital, investment, tools and the like; (2) the workers
recruited and placed by the alleged contractors performed activities that
were related to Manila Memorial's business; and (3) Ward Trading does not
exercise the right to control the performance of the work of the contractual
employees.
As a general rule, factual findings of the CA are binding upon this Court.
One exception to this rule is when the factual findings of the former are
contrary to those of the trial court, or the lower administrative body, as the
case may be. This Court is obliged to resolve an issue of fact due to the
conflicting findings of the Labor Arbiter on one hand, and the NLRC and the
CA on the other.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision

dated 21 January 2013, the CA affirmed the ruling of the NLRC. The CA
found the existence of an employer-employee relationship between Manila
Memorial and respondents. The dispositive portion of the Decision states:
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is
DENIED. The Decision, dated September 30, 2010 and the Resolution,
dated January 31, 2011, rendered by the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.

In order to determine whether there exists an employer-employee

relationship between Manila Memorial and respondents, relevant provisions
of the labor law and rules must first be reviewed. Article 106 of the Labor
Code states:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall
be paid in accordance with the provisions of this Code.

SO ORDERED.[11]

In the event that the contractor or subcontractor fails to pay the wages of
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his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by
him.
The Secretary of Labor and Employment may, by appropriate regulations,
restrict or prohibit the contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
(Emphasis supplied)
Sections 3, 5 and 7 of Department Order No. 18-02 [12] distinguish between
legitimate and labor-only contracting and assume the existence of an
employer-employee relationship if found to be engaged in labor-only
contracting. The provisions state:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In
legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the principal
and the contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers. Hence, there are
three parties involved in these arrangements, the principal which decides
to farm out a job or service to a contractor or subcontractor, the contractor
or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job, work or
service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job,

work or service for a principal, and any of the following elements are
present:
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and
the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248 (c) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job,
work or service contracted out.
The "right to control" shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be
used in reaching that end.
xxxx
Section 7. Existence of an employer-employee relationship. - The
contractor or subcontractor shall be considered the employer of the
contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarity
liable with the contractor in the event of any violation of any provision of
the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in
any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof. (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the
performance of specific jobs or services under the law and its
implementing rules are allowed. However, contracting must be made to a
legitimate and independent job contractor since labor rules expressly
prohibit labor-only contracting.
Labor-only contracting exists when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal and any of the following elements are present:
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1) The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
2) The contractor does not exercise the right to control the performance
of the work of the contractual employee.[13]
In the present case, Manila Memorial entered into a Contract of Services
with Ward Trading, a single proprietorship owned by Emmanuel Mayor
Ward with business address in Las Pias City on 23 February 2006. In the
Contract of Services, it was provided that Ward Trading, as the contractor,
had adequate workers and substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials which
were necessary in the conduct of its business.
However, a closer look at the Contract of Services reveals that Ward
Trading does not have substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials since it is
Manila Memorial which owns the equipment used in the performance of
work needed for interment and exhumation services. The pertinent
provision in the Contract of Services which shows that Manila Memorial
owns the equipment states:
The COMPANY shall [sell] to the contractor the COMPANY owned equipment
in the amount of ONE MILLION FOUR HUNDRED THOUSAND PESOS ONLY
(Php1,400,000.00) payable in two (2) years or a monthly payment of FIFTY
EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY
(Php58,335.00) to be deducted from the CONTRACTOR'S billing. [14]
Just by looking at the provision, it seems that the sale was a regular
business transaction between two parties. However, Manila Memorial did
not present any evidence to show that the sale actually pushed through or
that payments were made by Ward Trading to prove an ordinary arms
length transaction. We agree with the NLRC in its findings:
While the above-cited provision of the Contract of Service implies that
respondent MMPCI would sell subject equipment to Ward at some future
time, the former failed to present any contract of sale as proof that,
indeed, it actually sold said equipment to Ward. Likewise, respondent
MMPCI failed to present any "CONTRACTOR'S billing" wherein the purported
monthly installment of P58,335.00 had been deducted, to prove that Ward
truly paid the same as they fell due. In a contract to sell, title is retained by
the vendor until full payment of the price.
Moreover, the Contract of Service provides that:
"5. The COMPANY reserves the right to rent all or any of the
CONTRACTOR'S equipment in the event the COMPANY requires the use of
said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to
use or enjoy subject equipment, considering that its right to do so is

subject to respondent MMPCI's use thereof at any time the latter requires
it. Such provision is contrary to Article 428 of the Civil Code, which
provides that "The owner has the right to enjoy and dispose of a thing,
without other limitation than those established by law." It is plain to see
that Ward is not the owner of the equipment worth P1,400,000.00 that is
being actually and directly used in the performance of the services
contracted out.
Further, the Service Contract states that:
"For its part, the COMPANY agrees to provide the following:
a) Area to store CONTRACTOR'S equipment and materials
b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and
directly used by Ward in the performance of the services contracted out is
owned by respondent MMPCI.[15]
Also, the difference in the value of the equipment in the total amount of
P1,400,000.00 can be glaringly seen in Ward Trading's financial statements
for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by
Manila Memorial without any certification that these financial statements
were actually audited by an independent certified public accountant. Ward
Trading's Balance Sheet[16] as of 31 December 2005 showed that it had
assets in the amount of P441,178.50 and property and equipment with a
net book value of P86,026.50 totaling P534,705. A year later, Ward
Trading's Balance Sheet[17] ending in 31 December 2006 showed that it had
assets in the amount of P57,084.70 and property and equipment with a net
book value of P1,426,468 totaling P1,491,052.70. Ward Trading, in its
Income Statements[18] for the years 2005 and 2006, only earned a net
income of P53,800 in the year ending 2005 and P68,141.50 in 2006.
Obviously, Ward Trading could not have raised a substantial capital of
P1,400,000.00 from its income alone without the inclusion of the
equipment owned and allegedly sold by Manila Memorial to Ward Trading
after they signed the Contract of Services on 23 February 2006.
Further, the records show that Manila Memorial and Enrique B. Lagdameo
admitted that respondents performed various interment services at its
Sucat, Paraaque branch which were directly related to Manila Memorial's
business of developing, selling and maintaining memorial parks and
interment functions. Manila Memorial even retained the right to control the
performance of the work of the employees concerned. As correctly
observed by the CA:
A perusal of the Service Contract would reveal that respondent Ward is still
subject to petitioner's control as it specifically provides that although Ward
shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of
petitioner Memorial Park, particularly:
"It is also agreed that:
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a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave

sites/areas being dug to ensure compliance with the COMPANY'S interment
schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment
days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination
with the COMPANY'S schedule of interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s
and/or structure/s resulting from its operation, which must be restored to
its/their original condition without delay and at the expense of
CONTRACTOR."
The contract further provides that petitioner has the option to take over
the functions of Ward's personnel if it finds any part or aspect of the work
or service provided to be unsatisfactory, thus:
"6.1 It is hereby expressly agreed and understood that, at any time during
the effectivity of this CONTRACT and its sole determination, the COMPANY
may take over the performance of any of the functions mentioned in
Paragraph I above, in any of the following cases:
xxx
c. If the COMPANY finds the performance of the CONTRACTOR in any part
or aspect of the grave digging works or other services provided by it to be
unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at
the mercy of petitioner Memorial Park as the contract states that the latter
may take over if it finds any part of the services to be below its
expectations, including the manner of its performance. x x x. [19]
The NLRC also found that Ward Trading's business documents fell short of
sound business practices. The relevant portion in the NLRC's Decision
states:
It is also worth noting that while Ward has a Certificate of Business Name
Registration issued by the Department of Trade and Industry on October
24, 2003 and valid up to October 24, 2008, the same expressly states that
it is not a license to engage in any kind of business, and that it is valid only
at the place indicated therein, which is Las Pias City. Hence, the same is
not valid in Paraaque City, where Ward assigned complainants to perform
interment services it contracted with respondent MMPCI. It is also noted
that the Permit, which was issued to Ward by the Office of the Mayor of Las
Pias City on October 28, 2003, was valid only up to December 31, 2003.
Likewise, the Sanitary Permit to Operate, which was issued to Ward by the
Office of the City Health Officer of the Las Pias City Health Office on
October 28, 2003, expired on December 31, 2003. While respondents
MMPCI and Lagdameo were able to present copies of the above-mentioned
documents, they failed to present any proof that Ward is duly registered as
[a] contractor with the Department of Labor and Employment.[20]
Section 11 of Department Order No. 18-02, which mandates registration of
contractors or subcontractors with the DOLE, states:

Section 11. Registration of Contractors or Subcontractors. - Consistent with

authority of the Secretary of Labor and Employment to restrict or prohibit
the contracting out of labor through appropriate regulations, a registration
system to govern contracting arrangements and to be implemented by the
Regional Office is hereby established.
The Registration of contractors and subcontractors shall be necessary for
purposes of establishing an effective labor market information and
monitoring.
Failure to register shall give rise to the presumption that the contractor is
engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is
engaged in labor-only contracting unless the contractor overcomes the
burden of proving that it has substantial capital, investment, tools and the
like.[21]
In this case, however, Manila Memorial failed to adduce evidence to prove
that Ward Trading had any substantial capital, investment or assets to
perform the work contracted for. Thus, the presumption that Ward Trading
is a labor-only contractor stands. Consequently, Manila Memorial is
deemed the employer of respondents. As regular employees of Manila
Memorial, respondents are entitled to their claims for wages and other
benefits as awarded by the NLRC and affirmed by the CA.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21
January 2013 and the Resolution dated 17 July 2013 of the Court of
Appeals in CA-G.R. SP No. 119237.
SO ORDERED.

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G.R. No. 211263, August 05, 2015

OKS DESIGNTECH, INC. REPRESENTED BY ZAMBY O. PONGAD,
PETITIONER, VS. MARY JAYNE L. CACCAM,* RESPONDENT.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated
December 13, 2012 and the Resolution[3] dated January 15, 2014 of the
Court of Appeals (CA) in CA-G.R. SP No. 121451, which reversed and set
aside the Decision[4] dated April 29, 2011 and the Resolution [5] dated June
29, 2011 of the National Labor Relations Commission (NLRC) in NLRC LAC
Case No. 05-001098-10 and instead, reinstated the Decision [6] dated April
23, 2010 of the Labor Arbiter (LA) in NLRC RAB-CAR Case No. 07-0303-09
finding respondent Mary Jayne L. Caccam (respondent) to have been
illegally dismissed.
The Facts
Petitioner OKS DesignTech, Inc. (petitioner) hired respondent as an
accountant under a Contract of Employment for a Fixed Period[7] from
January 21, 2008 to June 21, 2008. Thereafter, the contract was renewed [8]
for the period June 22, 2008 to June 21, 2009.
On June 8, 2009, respondent received a letter[9] dated June 6, 2009 signed
by the Company Manager, Engineer Zamby O. Pongad (Pongad), informing
her of the expiration of her contract on June 21, 2009. She was also given
the option to consume her 19 days of unused leave credits until the end of
her contract with the balance, if any, to be converted to cash and released
together with her last salary and 13th month pay on or before June 30,
2009.[10]
Claiming to have been summarily dismissed by virtue of the aforementioned letter and not paid her earned salary and benefits as promised,
respondent filed on July 2, 2009, a complaint [11] for illegal dismissal, nonpayment of salaries (for the period May 21, 2009 to June 20, 2009), 13 th
month pay, allowances, service incentive leave pay, damages and
attorney's fees, with prayer for reinstatement, against petitioner, its
President, Satoshi Okanda (Okanda), Pongad, and Samuel Bumangil,
docketed as NLRC RAB-CAR Case No. 07-0303-09.
Respondent claimed that she was a regular employee, arguing that the
nature of her work was necessary and desirable in the usual business of
petitioner, and that she was merely imposed a fixed-term employment with
an understanding that her contract would just be renewed upon its
expiration. Hence, in view of her regular status, and petitioner's failure to
afford her the opportunity to be heard before terminating her employment,
she asserted that she was illegally dismissed. [12] In support of her claim,
respondent presented, among others, a Certificate of Employment dated
June 6, 2009 which showed that her employment was terminated on June

5, 2009.[13]
During the mandatory conference, respondent was paid in full her money
claims in the total amount of P21,168.00.[14] As such, in an Order[15] dated
August 4, 2009, the LA limited the issue to the validity of respondent's
dismissal and her claim for damages.
For their part, petitioner, together with the officers impleaded in
respondent's complaint, denied[16] that the latter was illegally dismissed.
Instead, they claimed that it was respondent who requested Pongad to sign
the notice of end contract dated June 6, 2009, and the certificate of
employment which were to be used in her legal action for correction of her
first name in her birth certificate. They averred that the complaint was
used only in retaliation to the criminal complaint for Qualified Theft and
Falsification of Private Documents that was filed against respondent after
having discovered several unauthorized withdrawals amounting to
P500,000.00 from its bank in violation of the trust and confidence reposed
in her. They added that the June 6, 2009 letter was not actually a
termination letter but a mere notice of the expiration of her employment
contract since Pongad was not authorized to dismiss employees, which
power was exclusively lodged in Okanda and the Board of Directors. After
the discovery of the anomalous transactions, respondent failed to heed the
directive to explain the charges, and while she reported on June 12, 2009
to claim her salary, she did not proceed since her husband, who was then
with her, was not allowed entry in the premises and just left. They, thus,
denied the claim for damages for lack of factual and legal bases.
In reply,[17] respondent opposed the charges leveled against her, positing
that it was Pongad who misappropriated the funds since the company
passbooks were always in the latter's possession. While she admitted
having secured the Certificate of Employment from Pongad, she
nonetheless denied having caused him to issue and sign the notice of end
contract. She further admitted that she opted not to report for work after
she received the notice of end of contract on June 8, 2009 since she was
allowed to use her 19 days unused leave credits, as stated in the June 6,
2009 letter.[18] She nonetheless maintained that she was prevented entry
on June 12, 2009 by the security guard when she tried to claim her salary
for the period May 21, 2009 to June 5, 2009.
The LA Ruling
In a Decision[19] dated April 23, 2010, the LA declared respondent to have
been illegally dismissed. The LA ruled that since the latter signed the first
contract only on April 21, 2008 and not on January 21, 2008, the date she
was hired, the said contract was deemed a probationary contract, and that
by extending it for another year, she attained the status of a regular
employee who may be dismissed only for just or authorized cause. The LA
further held that even with the pending criminal case against respondent,
there was no substantial evidence to support petitioner's claim of loss of
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trust and confidence, noting that it was not part of respondent's duty to
withdraw money from the company's depository bank, and that the
questioned check transactions were all authorized and signed by the
manager with no allegation of forgery.
Consequently, the LA ordered petitioner to reinstate respondent to her
former position with all the rights and benefits and to pay her backwages
computed from the time of her dismissal until finality of the decision with
legal interest until actual or payroll reinstatement. However, in view of the
strained relations, she was awarded separation pay in lieu of reinstatement
equivalent to one month pay for every year of service including all other
benefits and facilities that she was entitled to. The LA likewise found
petitioner to have acted in bad faith and as such, awarded moral and
exemplary damages in the amounts of P300,000.00 and P200,000.00,
respectively, the amount of P30,000.00 as indemnity for petitioner's failure
to comply with due process, and attorney's fees.
Dissatisfied, petitioner appealed[20] to the NLRC.
The NLRC Ruling
In a Decision[21] dated April 29, 2011, the NLRC reversed and set aside the
LA's decision and instead, dismissed the complaint, ratiocinating that there
was no factual basis to support the conclusion that the first contract was a
contract for probationary employment. It observed that none of the parties
assailed the fixed period employment, adding that the nature of
respondent's work, even if necessary and desirable in the usual trade or
business of petitioner, and the fact that the period of her employment
extended for more than one year were not decisive indicators for regularity
of employment in a fixed period employment. It further held that in such
kind of employment, no prior notice of termination was required to comply
with the due process requirement. Thus, the notice of end contract dated
June 6, 2009 was a mere reminder of the eventual expiration of her
contract, and that the subsequent payment of the money due her for the
period covered by the second contract supports such fact. Finally, there
was no illegal dismissal as it was respondent who left the company
premises on June 12, 2009.
Respondent's motion for reconsideration[22] was denied in a Resolution[23]
dated June 29, 2011. Aggrieved, she elevated the matter to the CA via
petition for certiorari.[24]
The CA Ruling
In a Decision[25] dated December 13, 2012, the CA reversed and set aside
the NLRC's April 29, 2011 Decision and reinstated the LA's April 23, 2010
Decision insofar as it declared respondent's termination from work to be
illegal. It concurred with the LA that respondent was a regular employee,
despite the existence of a fixed-term contract of employment, since said
contract, despite purportedly beginning on January 21, 2008, was actually
executed only on April 21, 2008, and extended for another year, during

which respondent was performing tasks that were usually necessary and
desirable in the usual trade or business of petitioner. Further, citing the
case of Innodata Philippines, Inc. v. Quejada-Lopez[26] (Innodata), the CA
ruled that the terms and conditions of the first contract and the second
contract negated a fixed-term employment since they state that
respondent's employment may be terminated prior to the expiration
thereof for "just or authorized cause or when the EMPLOYEE fails to meet
the reasonable standards made known to him by the EMPLOYER." Hence, it
concluded that respondent was a regular employee who had been illegally
dismissed. Therefore, she was entitled to the payment of full backwages,
inclusive of allowances and other benefits with interest in accordance with
the Labor Code. However, the CA deleted the award of moral and
exemplary damages for lack of cogent foundation therefor.
Petitioner's motion for reconsideration[27] was denied in a Resolution[28]
dated January 15, 2014; hence, this petition.
The Issue Before the Court
The sole issue for the Court's resolution is whether the CA erred in ruling
that the NLRC gravely abused its discretion in finding that respondent was
not a regular employee and as such, validly dismissed due to the
expiration of her fixed-term contract.
The Court's Ruling
The petition is meritorious.
It is well-settled that only questions of law may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court.[29] The Court is not
a trier of facts and does not routinely examine the evidence presented by
the contending parties.[30] Nevertheless, the divergence in the findings of
fact by the LA and the NLRC, on the one hand, and that of the CA, on the
other, is a recognized exception for the Court to open and scrutinize the
records to determine whether the CA, in the exercise of its certiorari
jurisdiction, erred in finding grave abuse of discretion on the part of the
NLRC in ruling that respondent was not illegally dismissed. [31]
To justify the grant of the extraordinary remedy of certiorari, petitioner
must satisfactorily show that the court or quasi-judicial authority gravely
abused the discretion conferred upon it. Grave abuse of discretion
connotes a capricious and whimsical exercise of judgment, done in a
despotic manner by reason of passion or personal hostility, the character
of which being so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.[32] It has also been held that grave abuse of
discretion arises when a lower court or tribunal patently violates the
Constitution, the law or existing jurisprudence. [33] The existence of such
patent violation evinces that the assailed judicial or quasi-judicial act is
snared with the quality of whim and caprice, amounting to lack or excess
of jurisdiction.
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Tested against these considerations, the Court finds that the CA committed
reversible error in granting respondent's certiorari petition since the NLRC
did not gravely abuse its discretion in ruling that respondent was legally
dismissed.
In this case, the validity of respondent's dismissal depends on whether she
was hired for a fixed period, as ruled by the NLRC, or as a regular
employee who may not be dismissed except for just or authorized causes.
Article 294[34] of the Labor Code[35] provides that:
Art. 294. 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 service to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity
exists.
Under the foregoing provision, regular employment exists when the
employee is: (a) one engaged to perform activities that are necessary or
desirable in the usual trade or business of the employer; or (b) a casual
employee who has rendered at least one year of service, whether
continuous or broken, with respect to the activity in which he is employed.
[36]

Meanwhile, an employee is said to be under a fixed-term employment

when he is hired under a contract which specifies that the employment will
last only for a definite period.
In the landmark case of Brent School, Inc. v. Zamora,[37] this Court
sustained the validity of fixed-term employment contracts as follows:
Accordingly, and since the entire purpose behind the development of
legislation culminating in the present Article 280 [now, Article 294] of the
Labor Code clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the clause
in said article indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular employment as defined
therein should be construed to refer to the substantive evil that the Code
itself has singled out: agreements entered into precisely to circumvent

security of tenure. It should have no application to instances where

a fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent
any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance
whatever being exercised by the former over the latter. Unless thus
limited in its purview, the law would be made to apply to purposes other
than those explicitly stated by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences. (Emphasis supplied)
In light of the foregoing, the Court laid down the following indicators under
which fixed-term employment could not be construed as a circumvention
of the law on security of tenure:
(a) The fixed period of employment was knowingly and voluntarily agreed
upon by the parties without any force, duress, or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent; or
(b) It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance exercised
by the former or the latter.[38]
An examination of the contracts entered into by respondent reveals that
her employment was clearly limited to a fixed period and did not go
beyond such period. She, however, asserted that she is deemed a regular
employee in view of the nature of her employment as an accountant, an
activity that is necessary and desirable in the usual business or trade of
the company. This notwithstanding, case law dictates that even if an
employee is engaged to perform activities that are necessary or
desirable in the usual trade or business of the employer, the same
does not preclude the fixing of employment for a definite period.[39]
There is nothing essentially contradictory between a definite period of
employment and the nature of the employee's duties. In St. Theresa's
School of Novaliches Foundation v. NLRC,[40] it was explained:
Article 280 [now, Article 294] of the Labor Code does not proscribe or
prohibit an employment contract with a fixed period provided the same
is entered into by the parties, without any force, duress or
improper pressure being brought to bear upon the employee and
absent any other circumstance vitiating consent. It does not
necessarily follow that where the duties of the employee consist of
activities usually necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing on a period of time for
the performance of such activities. There is thus nothing essentially
contradictory between a definite period of employment and the
nature of the employee's duties. (Emphases and underscoring
supplied)
In fact, the Court, in Brent, had already pronounced that the decisive
determinant in fixed-term employment should not be the activities
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that the employee is called upon to perform, but the day certain
agreed upon by the parties for the commencement and
termination of their employment relationship.[41]
Here, respondent undisputedly executed a first employment contract which
clearly states on its face that it was for a fixed period of five (5) months
beginning from January 21, 2008 to June 21, 2008. While it appears that
the said contract was actually signed only on April 21, 2008, the fact
remains that respondent was made well-aware of the fixed period
undertaking from the time of her engagement on January 21, 2008.
Otherwise, she would not have agreed to the contract's signing.
Significantly, nothing on record shows that respondent's consent thereto
was vitiated or that force, duress, or improper pressure was exerted on her,
or that petitioner exercised moral dominance over her. The same holds
true for the second fixed-term contract covering the period from June 22,
2008 until June 21, 2009 which she voluntarily signed on June 21, 2008.
In Labayog v. M.Y. San Biscuits, Inc.,[42] the Court upheld the validity of the
fixed-term employment contracts of the employees therein, noting that
from the time they were hired, they were informed that their engagement
was for a specific period, as respondent was in this case:
Simply put, petitioners were not regular employees. While their
employment as mixers, packers and machine operators was necessary and
desirable in the usual business of respondent company, they were
employed temporarily only, during periods when there was heightened
demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their
contracts. There was even no need for notice of termination because they
knew exactly when their contracts would end. Contracts of employment for
a fixed period terminate on their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is
objectionable is the practice of some scrupulous employers who try to
circumvent the law protecting workers from the capricious termination of
employment. Employers have the right and prerogative to choose their
workers. The law, while protecting the rights of the employees, authorizes
neither the oppression nor destruction of the employer. When the law
angles the scales of justice in favor of labor, the scale should never be so
tilted if the result is an injustice to the employer.
That respondent was made to believe that her contract will just be
renewed every time it expires was not supported by substantial evidence.
It bears stressing that self-serving and unsubstantiated declarations are
not sufficient where the quantum of evidence required to establish a fact is
substantial evidence, described as more than a mere scintilla. [43] Moreover,
Section 3 (d), Rule 131 of the Rules of Court carries a legal presumption
that a person takes ordinary care of his concerns. To this, case law dictates
that the natural presumption is that one does not sign a document without
first informing himself of its contents and consequences. [44] Also, Section 3
(p) of the same Rule equally presumes that private transactions have been

fair and regular. It therefore behooves every contracting party to learn and
know the contents of a document before he signs the same. To add, since
the employment contracts were duly acknowledged before a notary public,
it is deemed prima facie evidence of the facts expressed therein and such
notarial documents have in their favor the presumption of regularity that
may be contradicted only by clear, convincing and more than merely
preponderant evidence,[45] which respondent failed to show in this case.
The crucial factor to it all is that there is no showing that the subject
contracts were used as subterfuge to deny respondent of her security of
tenure. Contrary to the findings of the CA, there was no ambiguity in the
said contracts when it stipulated that the employee may be terminated if
he "fails to meet the reasonable standards made known to him." While
such provision would commonly appear in a probationary contract
pursuant to Article 295[46] of the Labor Code, its inclusion in the fixedperiod contracts in this case never gave rise to an implied probationary
employment status, for which she was to be evaluated by the company
under certain regularization standards during a specified trial period,
simply because respondent was never employed on a probationary basis.
On the contrary, records fully support the NLRC's finding that respondent's
employment was hinged on a stipulated term. In Mercado v. AMA
Computer College-Paraaque City, Inc.,[47] the Court delineated the
foundational difference between probationary and fixed-term employment
contracts, to the latter this case clearly falls:
The fixed-term character of employment essentially refers to the period
agreed upon between the employer and the employee; employment exists
only for the duration of the term and ends on its own when the term
expires. In a sense, employment on probationary status also refers to a
period because of the technical meaning "probation" carries in Philippine
labor law - a maximum period of six months, or in the academe, a period of
three years for those engaged in teaching jobs. Their similarity ends there,
however, because of the overriding meaning that being "on probation"
connotes, i.e., a process of testing and observing the character or abilities
of a person who is new to a role or job.
Understood in the above sense, the essentially protective character of
probationary status for management can readily be appreciated. But this
same protective character gives rise to the countervailing but equally
protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly
communicated standards. Otherwise stated, within the period of the
probation, any employer move based on the probationary standards and
affecting the continuity of the employment must strictly conform to the
probationary rules.
Further, it would not be amiss to point out that while respondent had
presented a Certificate of Employment dated June 6, 2009 which showed
that she was supposedly "terminated" on June 5, 2009, the same cannot be
considered as evidence of her premature termination from the company
but instead, evidence to show that respondent had chosen to avail of her
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19 days unused leave credits, as allowed by the company per its June 6,
2009 letter. Upon her own request, she was issued this certification to clear
her of all her outstanding liabilities since she, as admitted, [48] would not
anymore report for work in view of her leave availment.
Finally, it should be clarified that the Innodata[49] case relied upon by the
CA to negate the finding of fixed-term employment in this case is not
applicable. In Innodata, the Court struck down the purported "fixed-term
employment" contract therein for being contrary to law, morals, good
customs, public order or public policy as it granted the employer the "right
to pre-terminate this Contract within the first three (3) months of its
duration upon failure of the EMPLOYEE to meet and pass the
qualifications and standards set by the EMPLOYER and made known to the
EMPLOYEE prior to the execution hereof." This contractual right to
terminate within a three (3) month probationary period was in addition to
the contract's automatic termination clause which states that "This
Contract shall automatically terminate on March 03, 1998 without need
of notice of demand." Under these circumstances then, the employer had
fused a probationary contract into a fixed-term contract. Therefore, the
Court concluded that "[c]learly, to avoid regularization, [the employer] has
again sought to resort alternatively to probationary employment and
employment for a fixed-term." Likewise, a reading of Servidad v. NLRC,[50] a
case that was used as basis in resolving Innodata, shows that the
employment contract struck down therein also provided for two periods
to preclude the employee's acquisition of tenurial security. However, as
earlier intimated, this two-period probationary/fixed-term employment

mechanism does not obtain here.

For all the foregoing reasons, the Court therefore upholds the NLRC's
finding that respondent was a fixed-term employee and not a regular one
whose employment may be validly terminated upon the expiration of her
contract.[51] To reiterate, contracts of employment for a fixed period are not
per se unlawful. What is objectionable is the practice of some unscrupulous
employers who try to circumvent the law protecting the workers from the
capricious termination of employment.[52]
In fine, having been hired under a valid fixed-period employment contract,
respondent's employment was lawfully terminated upon its expiration on
June 21, 2009 without need of any further notice. Hence, the CA erred in
ascribing grave abuse of discretion on the part of the NLRC which, in fact,
correctly found respondent not to have been illegally dismissed.
WHEREFORE, the petition is GRANTED. The Decision dated December
13, 2012 and the Resolution dated January 15, 2014 of the Court of
Appeals in CA-G.R. SP No. 121451 are hereby REVERSED and SET ASIDE.
The Decision dated April 29, 2011 and the Resolution dated June 29, 2011
of the National Labor Relations Commission in NLRC LAC Case No. 05001098-10 dismissing respondent Mary Jayne L. Caccam's complaint for
illegal dismissal are REINSTATED.
SO ORDERED.

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