NOELITO FABELA, MARCELO DELA CRUZ III, ROGELIO LASAT, HENRY MALIWANAG, MANUEL DELOS SANTOS, AND ROMMEL QUINES, PETITIONERS, VS. SAN MIGUEL CORPORATION AND ARMAN HICARTE, RESPOND…

Fabela versus San Miguel Corporation

The Case

This is a labor case about the security of tenure of six relief salesmen against San Miguel Corporation and its Human Resources Manager. The petitioners claim they were regular employees who were illegally dismissed; the company answers that they were hired under fixed-term contracts that simply expired and were not renewed. The case matters because it is the Supreme Court's clearest application of the Brent doctrine: a fixed-term contract is not illegal in itself, but it is struck down when the evidence shows the period was imposed to strip the worker of security of tenure.

Procedural History

The petitioners, together with two other workers, filed separate complaints for illegal dismissal before the Labor Arbiter. The complaints were consolidated. The Labor Arbiter ruled that the six petitioners were illegally dismissed and ordered their reinstatement with full backwages, while dismissing the complaints of the two other workers. On appeal, the National Labor Relations Commission affirmed the Labor Arbiter by Resolution dated April 28, 2000, and denied the company's motion for reconsideration.

The company then filed a petition for certiorari with the Court of Appeals, arguing that the petitioners were validly hired for fixed periods that were not renewed. The Court of Appeals granted the petition in its Decision of July 30, 2001, reversed the Labor Arbiter and the NLRC, and dismissed the complaints. It found no indication that the contracts were not knowingly and voluntarily agreed upon, and that the parties were aware of the day certain when each contract would expire. The petitioners' motion for reconsideration was denied, so they came to the Supreme Court on review.

Facts

San Miguel Corporation hired the petitioners as Relief Salesmen for the Greater Manila Area under separate but almost identically worded Contracts of Employment With Fixed Period. The petitioners were hired on various dates: Marcelo dela Cruz in December 1991, Noelito Fabela in May 1992, Rommel Quines in October 1994, Henry Maliwanag in May 1995, and Rogelio Lasat in August 1995. Each entered into successive contracts of the same nature, and their services were terminated between 1996 and 1997 after the company declined to forge another contract with them.

The company claimed the hiring was never intended to be permanent. It said it was gradually shifting from the old Route System, where a Regular Salesman with two Route Helpers sold and delivered products along an assigned route, to a Pre-Selling System beginning in 1993, where selling would be done by upgraded Accounts Specialists and delivery by third-party contractors. During the transition, the company said it still had to sell beer the conventional way while its regular route crew underwent training, so it hired relief personnel for a fixed period co-terminus with the transition and training program. Its principal evidence was the affidavit of its Assistant Vice President and Area Sales Manager.

Claiming illegal dismissal, the petitioners and two companions filed complaints. The Labor Arbiter and the NLRC both found that the petitioners were regular employees, the NLRC even stating that the periods in their contracts were fixed not because of temporary exigencies but as a scheme to prevent them from acquiring tenurial security. The Court of Appeals saw it the other way and upheld the fixed-term contracts.

Issues

• Whether or not the petitioners were hired as fixed-term employees under the Brent doctrine, or as regular employees entitled to security of tenure.
• Whether or not the termination of the petitioners' services upon the expiration of their contracts was valid.

Applicable Provisions

Article 280 of the Labor Code, as quoted in the decision, 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 provision supplies the test of regular employment, and the Court notes that the company does not dispute that the petitioners' duties were necessary or desirable in its usual business.

The second paragraph of the same article provides:

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 actually exists.

This paragraph, together with the first, yields the two kinds of regular employees the Court identifies, and it shows that Article 280 does not expressly recognize employment for a fixed period.

The Brent doctrine, quoted in the decision, supplies the test for fixed-term contracts:

Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter.

This is the standard against which the petitioners' contracts are measured, and it is the standard the Court finds they fail.

Ruling

On the first issue, the Court held that the petitioners were not valid fixed-term employees but regular employees. It began from the rule that the factual findings of the Labor Arbiter and the NLRC are accorded great weight and respect, even finality, when supported by substantial evidence, and that both tribunals had found the petitioners to be regular employees. The company's mere presentation of contracts stating fixed periods did not suffice, because Brent teaches that a contract stipulating a fixed term, even if clear as regards the existence of a period, is invalid if shown to have been executed with the intention of circumventing security of tenure, and should be ignored.

The Court found substantial evidence of that intent. Fabela's own contract described a twelve-month transition period beginning in April 1995, yet Fabela had been working on a fixed-term basis since 1992, and dela Cruz since December 1991, both before the alleged 1993 shift. Quines was hired in 1994, also before the transition the contracts described. Apart from the affidavit of its Area Sales Manager, the company presented no evidence that the shift began as early as 1993, and its contracts were dated no earlier than April 1995. The Court also noted that the company never alleged that the petitioners themselves insisted on the fixed term; their sustained desire to enter into new contracts showed the opposite. Nor did the company establish that a definite date of termination was a sine qua non, that is, an indispensable necessity, of the engagement.

On the second issue, since the petitioners were regular employees, they could not be dismissed except for just or authorized causes, and the expiration of a void fixed term is not one of them. Their termination was therefore illegal, as the Labor Arbiter and the NLRC had found.

Doctrine

First, Article 280 recognizes two kinds of regular employees: those engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, and casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. Project employment is distinct from casual employment, and the one-year proviso applies only to casual employees.

Second, employment for a fixed period is not in itself illegal, even if the duties are necessary or desirable in the employer's business. But a fixed-term contract is invalid and must be ignored when it is shown that the period was imposed to circumvent security of tenure. It is valid only where the employee knowingly and voluntarily agreed to the period without force, duress, or improper pressure, or where the parties dealt on more or less equal terms with no moral dominance by the employer, or where the employee himself insisted on the period, or where the nature of the engagement makes a definite date of termination a sine qua non.

Third, the employer bears the burden of showing that the fixed term is genuine and not a device to evade tenure; bare contracts reciting a period do not discharge that burden.

Disposition

The petition was granted; the Court of Appeals decision was set aside, and the Labor Arbiter's decision of September 23, 1998, affirmed by the NLRC, was reinstated, awarding the petitioners reinstatement with full backwages.

Remember This

Memorize the line that a fixed-term contract, though clear as to its period, is invalid if used to circumvent security of tenure. Examiners use this case to test the Brent doctrine and the rule that findings of the Labor Arbiter and the NLRC bind the Court when supported by substantial evidence.