VIRGILIO D. BACUS, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, 8TH DIVISION, ALTERDEV SERVICES FOUNDATION, INC., AS REPRESENTED BY THE BOARD OF TRUSTEES, SALLY JOY R. B…

Bacus versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Virgilio Bacus against the National Labor Relations Commission, its Eighth Division, and Alterdev Services Foundation, Incorporated, which is represented by its Board of Trustees. Bacus asks the Supreme Court to set aside the resolutions of the National Labor Relations Commission that reversed the Labor Arbiter and declared that he had not been illegally dismissed. The case matters because it is the Court's occasion to draw the line between a genuine fixed-term employment contract, valid under the Brent doctrine, and a contract that merely disguises regular employment in order to defeat security of tenure. It also reminds the Bar candidate that the existence of a project is not indispensable to a valid fixed-term contract, but the voluntariness of the parties is.

Procedural History

Bacus filed a complaint for illegal dismissal, reinstatement, and payment of backwages, damages, and other benefits before the Labor Arbiter of the National Labor Relations Commission, Regional Arbitration Branch Thirteen, in Butuan City. On October 30, 2009, the Labor Arbiter rendered a decision finding that Bacus had been illegally dismissed. The Labor Arbiter declared Alterdev guilty of illegally terminating his employment, ordered his reinstatement on payroll, ordered the payment of backwages in the amount of 146,348.04 pesos, and awarded moral and exemplary damages in the amount of 500,000 pesos.

Alterdev appealed to the National Labor Relations Commission. In its resolution dated July 30, 2010, the Eighth Division reversed the Labor Arbiter and dismissed the complaint for lack of merit, holding that Bacus was a fixed-term contractual employee whose contract had simply expired. Bacus moved for reconsideration, but the National Labor Relations Commission denied the motion in its resolution dated October 29, 2010. Bacus then filed this petition for certiorari before the Supreme Court, raising grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

Alterdev Services Foundation, Incorporated is a non-government organization engaged in non-stock, non-profit services, undertaking development initiative programs funded by donor organizations both local and foreign. On the invitation of its then president, Nielo Tingzon, Virgilio Bacus joined Alterdev on November 20, 2003 as its Executive Director. He underwent a probationary period of three months, after which his performance was to be appraised to determine his qualification for the regular position of Executive Director. He was given a good evaluation, and an employment contract was executed on January 25, 2005, effective retroactively from January 1, 2005 to the end of December 2005, terminable by either party upon written notice at least thirty days prior to the termination date.

On October 16, 2006, Bacus's employment was renewed, and a contract was executed reiterating the earlier provisions, this time effective retroactively from January 1 to the end of December 2008, again with a thirty-day written notice clause. Under his directorship, Alterdev secured several projects funded by AECID and IPADE of Spain, by PACAP of Australia, and by Heifer International. Bacus claimed that his efforts generated resentment among senior staff who sought his removal through the Board of Trustees. On January 10, 2009, the Board met and discussed the termination of his employment contract, which had expired on December 31, 2008. No notice was served on him after that meeting, and he continued reporting for work until he was told that Tingzon now held the appointment letter as Executive Director. His salary was reduced effective February 1, 2009, and on February 13, 2009, he was served a memorandum informing him that his employment had been terminated.

Alterdev, for its part, insisted that its life as a cause-oriented organization depends on donor-funded projects, so it employs project employees and employees with fixed-term contracts. It admitted that the duties of Bacus as Executive Director were necessary in its operations, but argued that his contract was founded on mutuality and voluntariness, that the contract itself served as notice of termination on December 31, 2008, and that his continued employment in January 2009 was an extension for the completion of the annual project and the final production of the terminal report. It contended that there was no illegal dismissal because his contract simply expired.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion when it found that Bacus was a project employee, or that his employment had been fixed for a specific project or undertaking whose completion or termination was determined at the time of his engagement.
• Whether or not the National Labor Relations Commission committed grave abuse of discretion when it found that Bacus was not illegally dismissed by Alterdev.

Applicable Provisions

Article 280 of the Labor Code, as amended, provides:

Article 280. Regular and casual employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

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

This provision supplies the test of regular employment and the exception for project employment, and it is the yardstick against which Bacus's contract is measured.

Ruling

On the first issue, the Court held that the National Labor Relations Commission committed grave abuse of discretion in finding Bacus to be a project employee. The Court reviewed the October 2006 contract and found that nothing in its provisions made Bacus's employment dependent on the Banikauswagan Project Phase Two. The contract spoke only of the position of Executive Director, the functions and competencies required, the package of remuneration, and the period of effectivity from January 1 to the end of December 2008, with a thirty-day written notice for termination. Nothing at all was said about projects or programs. Hence, Bacus was not a project employee.

The Court then asked whether the contract was a valid fixed-term contract under the Brent doctrine. It answered in the negative. The Court stressed that Bacus joined Alterdev on November 20, 2003 under an agreed three-month probationary period, after which a performance appraisal would determine whether he was qualified for the regular position of Executive Director. He performed excellently and was retained. Yet he was made to sign a fixed-term contract on January 25, 2005, eleven months after the probationary period had expired. On these facts, the fixed-term stipulation did not satisfy the requirement that the period be agreed upon knowingly and voluntarily by the parties without force, duress, or improper pressure, and absent any circumstance vitiating consent, or that the employer and employee dealt with each other on more or less equal terms with no moral dominance exercised by the employer. The Court recalled the Brent guidelines:

stipulations in employment contracts providing for term employment or fixed period employment are valid when the period were agreed upon knowingly and voluntarily by the parties without 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.

On the second issue, because Bacus was a regular employee and not a validly contracted fixed-term employee, his services could not be terminated except for just or authorized cause and with due process. The expiration of his contract was not among the just causes under the Labor Code, and he was not given the required twin notices and the opportunity to be heard. His dismissal was therefore illegal.

Doctrine

A Bar candidate should retain these rules. First, under Article 280 of the Labor Code, an employee engaged to perform activities usually necessary or desirable in the usual business or trade of the employer is a regular employee, notwithstanding a written agreement to the contrary, except where the employment is fixed for a specific project or undertaking whose completion or termination was determined at the time of engagement, or where the work is seasonal. Second, a pre-determined project is not indispensable to a valid fixed-term contract; what the Brent doctrine requires is that the fixed period was agreed upon knowingly and voluntarily, without force, duress, or improper pressure, and absent any circumstance vitiating consent, or that the parties dealt with each other on more or less equal terms with no moral dominance by the employer. Third, where the employee was first taken in under a probationary period for a regular position, was retained after passing appraisal, and was made to sign a fixed-term contract long after the probationary period expired, the fixed-term stipulation fails the Brent test and cannot defeat security of tenure. Fourth, the expiration of a contract that is not a valid fixed-term contract is not a just cause for dismissal, and dismissal without the twin notices and hearing is illegal.

Disposition

The Court granted the petition, set aside the resolutions of the National Labor Relations Commission, and reinstated the decision of the Labor Arbiter finding Bacus illegally dismissed.

Remember This

The single line worth memorizing is that a fixed-term contract is valid only when the period was agreed upon knowingly and voluntarily, on more or less equal terms, without moral dominance by the employer; a pre-determined project is not required. Examiners use this case to test the Brent doctrine, the distinction between project, regular, and fixed-term employment under Article 280, and the rule that a fixed-term stipulation imposed after a probationary period for a regular position is a sham that cannot defeat security of tenure.