EMILIO M. CAPAROSO AND JOEVE P. QUINDIPAN, PETITIONERS, VS. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, COMPOSITE ENTERPRISES INCORPORATED, AND EDITH TAN, RESPONDENTS.

Caparoso versus Court of Appeals

The Case

This is a labor case about two deliverymen, Emilio Caparoso and Joeve Quindipan, who sued their employer, Composite Enterprises Incorporated, and its personnel manager, Edith Tan, for illegal dismissal. The petitioners claim they were regular employees who were dismissed without cause; the company claims they were fixed-term workers whose contracts simply expired. The case matters because it is the Supreme Court's clearest restatement of when a fixed-term employment contract is valid and when it is a scheme to circumvent security of tenure, and because it shows how the six-month probationary period operates as a ceiling on regularization.

Procedural History

The petitioners filed a consolidated complaint for illegal dismissal before the Labor Arbiter. The Labor Arbiter ruled in their favor, declaring them regular employees who had been illegally dismissed, and ordered Composite to reinstate them with full backwages. Composite and Tan appealed to the National Labor Relations Commission, which reversed the Labor Arbiter, held the fixed-term contracts valid and binding as the law between the parties, and dismissed the complaint. The petitioners moved for reconsideration, which was denied. They then filed a petition for certiorari before the Court of Appeals, which affirmed the Commission in its Decision of 27 June 2002 and denied reconsideration in its Resolution of 30 September 2002. The petitioners came to the Supreme Court by petition for review, and the Court denied the petition and affirmed the Court of Appeals.

Facts

Composite Enterprises is engaged in the distribution and supply of confectioneries to retail establishments in the Philippines. Caparoso and Quindipan worked for Composite as deliverymen. Caparoso claimed he was hired on 8 November 1998, while Quindipan claimed he had been working on an intermittent basis since 1997 and continuously since August 1998. Composite and Tan, on the other hand, alleged that both were hired on 11 May 1999 as deliverymen, initially for three months and then on a month-to-month basis.

On 8 October 1999, the petitioners were dismissed from the service. They filed a complaint for illegal dismissal. The company's position was that the dismissal resulted from the expiration of their employment contracts on that date.

The petitioners failed to substantiate their claims of earlier hiring. The payslips they submitted were handwritten and showed only the date and amount of pay, without even the name of the employer, while the printed payslips covering the contract period showed the employer's name and a breakdown of net pay. On the records, the petitioners were employed for a total of five months, from 11 May 1999 to 8 October 1999.

Issues

• Whether or not the petitioners are regular employees of the respondents.
• Whether or not the respondents are guilty of illegal dismissal.

Applicable Provisions

Article 280 of the Labor Code, on regular and casual employment, 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 is the provision that defines regular employment and that the Court reads as not forbidding a fixed term agreed upon knowingly and voluntarily.

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

Article 281. Probationary Employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

This is the provision that caps the petitioners' five-month engagement and explains why they never attained regular status.

Ruling

On the first issue, the Court held that the petitioners are not regular employees. It acknowledged that under Article 280 a regular employee is one engaged to perform activities necessary or desirable in the usual trade or business of the employer, or a casual employee who has rendered at least one year of service. But it held that even such an employee may be engaged for a definite period. Quoting Brent School versus Zamora, the Court said the clause in Article 280 ruling out agreements conflicting with regular employment 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 where a fixed period was agreed upon knowingly and voluntarily, without force, duress or improper pressure, and absent any circumstance vitiating consent, or where the parties dealt with each other on more or less equal terms with no moral dominance by the employer. Here, there was no indication of force, duress or improper pressure when the petitioners signed, and no proof that the company regularly hired workers for a minimum of five months to prevent regularization.

The Court added that at most the petitioners' employment for less than six months can be considered probationary under Article 281. Hired on 11 May 1999 for three months and then month to month until 8 October 1999, they served a total of five months, which did not even exceed six months to entitle them to become regular employees. Their bare allegations of earlier hiring were unsubstantiated by the handwritten payslips.

On the second issue, the Court held that the petitioners were not illegally dismissed. Their terms of employment were governed by their fixed-term contracts, which had expired. The Court reiterated that if from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security, they should be disregarded as contrary to public policy, but here it was not established that the respondents intended to deny the petitioners their right to security of tenure.

Doctrine

A fixed-term employment contract is valid where the fixed period was knowingly and voluntarily agreed upon by the parties without force, duress or improper pressure, and absent any circumstance vitiating consent, or where the employer and employee dealt with each other on more or less equal terms with no moral dominance exercised by either. The prohibition in Article 280 against agreements contrary to regular employment reaches only agreements entered into precisely to circumvent security of tenure. Where periods are shown to have been imposed to preclude the acquisition of tenurial security, they are disregarded as contrary to public policy. Finally, employment for less than six months, even if extended month to month, does not ripen into regular status, since Article 281 treats six months as the ceiling of probationary employment.

Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals, so the company won and the dismissal stood as a lawful expiration of fixed-term contracts.

Remember This

Memorize the Brent test: a fixed term is valid when knowingly and voluntarily agreed upon without force, duress or improper pressure, or when the parties dealt on more or less equal terms with no moral dominance. Examiners use this case to test the fixed-term contract exception to Article 280 and the six-month probationary ceiling under Article 281.