JAIME D. VIERNES, CARLOS R. GARCIA, BERNARD BUSTILLO, DANILO C. BALANAG, FERDINAND DELLA, EDWARD A. ABELLERA, ALEXANDER ABANAG, DOMINGO ASIA, FRANCISCO BAYUGA, ARTHUR M. ORIBELL…

Viernes versus Benguet Electric Cooperative

The Case

This is a labor case that began as a consolidated complaint for illegal dismissal, underpayment of wages, and indemnity pay filed by fifteen meter readers against the Benguet Electric Cooperative, which the parties call BENECO. The workers had been hired as meter readers on short fixed-term appointments, then were kept on the job past the expiry of those terms, and were finally terminated with a notice that reached them after the date of termination it announced. The case matters because it draws the line between a genuine fixed-term or probationary engagement and regular employment, and because it fixes the consequences of an illegal dismissal: reinstatement as a regular employee, full backwages, nominal damages for the violation of due process, and attorney's fees.

Procedural History

The workers filed their complaints before the Labor Arbiter. The Labor Arbiter dismissed the complaints for illegal dismissal, but directed BENECO to extend new temporary contracts to the complainants except one, and to pay each of them an amount representing one month's salary as indemnity for failure to give the thirty-day notice required by Article 283 of the Labor Code. The Labor Arbiter also ordered payment of underpaid wages, the extension to one complainant of an appointment as a regular employee, and attorney's fees. Both sides appealed to the National Labor Relations Commission. The Commission modified the judgment: it declared the dismissal illegal, ordered reinstatement to the position of meter reader or an equivalent position with backwages limited to one year, deleted the indemnity and the attorney's fees, and affirmed the award of underpaid wages. The workers moved for clarification and partial reconsideration, which the Commission denied. The workers then came to the Supreme Court on a petition for certiorari. The Court noted that under its ruling in the St. Martin case, petitions for certiorari against decisions of the National Labor Relations Commission should be filed with the Court of Appeals, but that where the memoranda of both parties had already been filed with the Supreme Court before that ruling, the Court generally opts to take the case itself for final disposition. Because the parties had filed their memoranda as early as 1994, the Court resolved the petition itself.

Facts

BENECO engaged the fifteen complainants as meter readers under appointments couched in identical terms. Each appointment described the worker as a meter reader, apprentice, under BENECO management, at a daily rate of sixty-six pesos and seventy-five centavos, for the period from October 8 to October 31, 1990.

Despite the stated term, the workers were allowed to keep working beyond October 31, 1990, and continued in the same capacity until January 2, 1991, without a new contract and without the term being fixed anew. On January 3, 1991, each was served an identical notice of termination dated December 29, 1990, informing them that their services would be terminated effective at the close of office hours of December 31, 1990, and explaining that the termination had nothing to do with performance but was due to retrenchment because the cooperative was already overstaffed.

On the same date, the workers filed their complaints for illegal dismissal, later amended, and submitted their joint position paper. They contended that they were not apprentices but regular employees whose services were illegally and unjustly terminated in a whimsical and capricious manner. BENECO invoked Article 283 of the Labor Code in defense of the dismissal.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion in ordering reinstatement of the workers as meter readers on probationary status despite finding them regular employees under Article 280 of the Labor Code.
• Whether or not the Commission committed grave abuse of discretion in limiting the backwages to one year despite finding the dismissal illegal.
• Whether or not the Commission committed grave abuse of discretion in deleting the award of indemnity pay and the award of attorney's fees.
• Whether or not the rule making the reinstatement aspect of a Labor Arbiter's decision immediately executory even pending appeal applies equally to a decision of the National Labor Relations Commission.

Applicable Provisions

Article 280 of the Labor Code, which supplies the definition of a regular employee, 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.

This is the provision under which the workers were classified as regular employees, because their work as meter readers was necessary to BENECO's usual business.

Article 281 of the Labor Code, on probationary employment, provides:

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

This is the provision the Court used to reject the claim that the workers were probationary, since no reasonable standards for regularization were ever made known to them at the time of engagement.

Article 279 of the Labor Code, as amended, provides:

Article 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to 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.

This is the basis for the award of full backwages running to actual reinstatement, rather than backwages limited to one year.

Article 283 of the Labor Code, on the notice required for termination, provides:

Article 283. Closure of Establishment and Reduction of Personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one month before the intended date thereof.

This is the provision BENECO invoked, and its violation is what made the employer liable for indemnity in the form of nominal damages.

Article 2221 of the Civil Code, on nominal damages, provides:

Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

This explains why the indemnity may stand together with backwages: the two rest on different grounds.

Article 111 of the Labor Code, on attorney's fees, provides:

Article 111. Attorney's fees. (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered. (b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorney's fees which exceed ten percent of the amount of wages recovered.

This is the basis for restoring the award of attorney's fees at ten percent of the total monetary award.

Article 223 of the Labor Code, on the finality of the Commission's decisions, provides:

Article 223. Appeal. The decision of the Commission shall be final and executory after ten (10) calendar days from receipt thereof by the parties.

This is the provision the Court reconciled with the Commission's own rule on motions for reconsideration in resolving the last issue.

Ruling

On the first issue, the Court held that the workers must be reinstated as regular employees, not on probationary status. Reinstatement means restoration to a state or condition from which one had been removed. Probationary employment requires the employer to make known to the employee, at the time of engagement, the reasonable standards under which he may qualify as a regular employee. Nothing in the letters of appointment showed probationary employment, and no such standards were shown to have been communicated. The workers were first engaged for a fixed period, from October 8 to October 31, 1990, but after that date they were allowed to continue in the same capacity without a new contract and without the term being fixed anew. At that point the character of the relationship changed and they attained the status of regular employees. BENECO's reliance on the Brent School case was misplaced, because the principle there applies only to genuine fixed-term employment. The Court applied the test from its earlier decisions: the primary standard is the reasonable connection between the activity performed and the usual business of the employer, and the job of a meter reader is necessary because without it there could be no valid basis for billing customers. That the workers served less than six months did not make their status probationary.

On the second issue, the Court held that since the workers were employed on October 8, 1990, the amended Article 279 applied, entitling them to full backwages from the time compensation was withheld up to actual reinstatement. Limiting the backwages to one year was patently erroneous and amounted to grave abuse of discretion.

On the third issue, the Court held that indemnity is due where the employer fails to comply with due process in effecting dismissal, and that it is in the nature of nominal damages meant to vindicate the employee's right to procedural due process, not to penalize the employer. Indemnity and backwages are not incompatible because they rest on different considerations: backwages are granted on grounds of equity for earnings lost, while indemnity vindicates the right to due process. Here the notice was served on January 3, 1991, terminating services effective December 29, 1990, retroactively, in contravention of Article 283. The Court found no reason to modify the indemnity of two thousand five hundred ninety pesos and fifty centavos, equivalent to one month's salary, as just and reasonable. On attorney's fees, the Court held the award justified under Article 111.

On the last issue, the Court held that Article 223 and the Commission's rule are not inconsistent: the rule merely provides for situations where a motion for reconsideration is filed, so the ten-day period runs from receipt of the resolution on that motion. Since the workers received the denial on October 22, 1992, the questioned decision became executory on November 2, 1992.

Doctrine

A worker is a regular employee when he is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, and the primary test is the reasonable connection between the activity performed and that business. A fixed-term engagement does not survive the parties' conduct: where the employee is allowed to continue working in the same capacity after the term expires, without a new contract and without the term being fixed anew, he becomes a regular employee. Probationary status cannot be presumed; under Article 281 the employer must make known the reasonable standards for regularization at the time of engagement, and length of service alone does not make employment probationary. An illegally dismissed regular employee is entitled to reinstatement without loss of seniority rights and to full backwages computed to actual reinstatement under Article 279. Indemnity for failure to give the notice required by Article 283 is nominal damages under Article 2221, vindicating the right to due process, and may be awarded together with backwages. Attorney's fees may be assessed at ten percent of the wages recovered under Article 111.

Disposition

The petition was partially granted: BENECO was ordered to reinstate the workers to their former or substantially equivalent positions as regular employees without loss of seniority rights, with full backwages until actual reinstatement, the indemnity of two thousand five hundred ninety pesos and fifty centavos was reinstated, and attorney's fees of ten percent of the total monetary award were imposed, with costs against BENECO.

Remember This

The one line to memorize: a worker allowed to continue working after his fixed term expires, without a new contract, becomes a regular employee entitled to reinstatement and full backwages. Examiners use this case on the fixed-term versus regular employment distinction, on probationary status requiring notice of standards at engagement, and on indemnity as nominal damages that may coexist with backwages.