FILIPINAS (PRE-FABRICATED BLDG.) SYSTEMS “FILSYSTEMS,” INC. AND FELIPE A. CRUZ, JR., PETITIONERS, VS. ERNESTO GATLABAYAN, RICARDO P. ANTONIO, PAULINO C. FRANCISCO, ROGELIO E. BE…

Filsystems versus Gatlabayan

The Case

This is a labor case about thirteen workers — grillers, carpenters, millers, and laborers — who were told their services were no longer needed after the completion of a construction project, and who sued their employer and its president for illegal dismissal. The employer, Filipinas Pre-Fabricated Building Systems, known as Filsystems, and its president Felipe Cruz, Jr., insisted the workers were mere project employees whose employment ended with the project. The workers insisted they were regular employees who had worked for years at the company's main plant and were entitled to security of tenure. The case matters because it is a clean illustration of how the Supreme Court treats the project employee defense, the burden of proof that goes with it, and the mandatory written notice required for retrenchment.

Procedural History

The workers filed separate complaints for illegal dismissal against Filsystems and Cruz before the Labor Arbiter, and the cases were consolidated. The Labor Arbiter ruled for the workers, declaring them regular employees who had been dismissed without lawful or just cause, and ordered the payment of backwages, thirteenth month pay, and separation pay. Filsystems appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter and denied reconsideration. Filsystems and Cruz then went to the Court of Appeals on a petition for certiorari, and the Court of Appeals affirmed the Commission with modification, holding that backwages should run up to the finality of the decision and separation pay should be computed from the start of service up to that finality. Reconsideration was denied. The case reached the Supreme Court by petition for review on certiorari.

Facts

Filsystems is a domestic corporation engaged in the construction business. It employed the thirteen respondents as grillers, carpenters, and laborers on various dates from 1992 to July 1999. The workers claimed that they were assigned to the wood-working department of the company's main plant, fabricating wooden door samples and doing other woodwork, and that while they were sometimes sent to project sites, they would report back to the main plant afterward. Their length of service ranged from two to nine years.

In the early part of August 1999, the workers filed complaints for illegal dismissal. They narrated that they were verbally told their services were no longer needed on July 24, 1999, on the ground that they were only project employees and their last project had been completed. When they reported for work on July 26, 1999, their timecards were gone. On July 27, 1999, the personnel department told them they were terminated because of the completion of the Meralco project, and that to claim their wages and benefits they had to sign the letter of termination. Some signed out of necessity; others refused.

Filsystems countered that the workers were project employees hired for specific projects, that their employment ended with each project's completion, and that each termination was reported to the Department of Labor and Employment. It added that the workers were placed at the main plant only because of space limitations at the project sites. The Labor Arbiter, the Commission, and the Court of Appeals all found for the workers. Before the Supreme Court, Filsystems shifted ground, conceding the workers were regular employees but arguing that their termination was really a retrenchment or a mere suspension of work, and invoking the ruling in Agabon that a dismissal for a valid cause without due process does not make the dismissal illegal.

Issues

• Whether or not the respondents were regular employees of Filsystems rather than project employees.
• Whether or not the respondents were illegally dismissed from employment.
• Whether or not the respondents are entitled to the monetary awards of backwages, thirteenth month pay, and separation pay.
• Whether or not the petitioners may raise, for the first time on appeal, the new theory that the respondents were retrenched or merely suspended.

Applicable Provisions

Article 283 of the Labor Code of the Philippines provides:

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installment 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. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one month pay or to at least one month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year.

This provision governs the petitioners' belated claim that the respondents were retrenched, and it supplies the mandatory one-month written notice that the Court found was never given.

Ruling

On the first issue, the Court held that the respondents were regular employees. The petitioners themselves conceded this on appeal, admitting that the circumstances surrounding the work gave the respondents the status of regular employees. The Court of Appeals had also found that the successive contracts, the repeated rehiring, and the performance of the same tasks showed that the respondents' work was necessary or desirable in the usual trade or business of the petitioners.

On the second issue, the Court held that the respondents were illegally dismissed. The petitioners' new theory of retrenchment was rejected because it was raised for the first time on appeal. The Court stated the procedural rule plainly:

As a rule, no questions will be entertained on appeal unless they have been raised below. Points of law, theories, issues and arguments not brought to the attention of the lower court or agency need not be, and ordinarily, will not be considered by the reviewing court as they cannot be raised for the first time at the later stage.

Even on the merits, the retrenchment claim failed. The Court found no evidence of any written notice to the respondents that their employment was terminated on the ground of retrenchment. Quoting Sebuguero, the Court stressed that the requirement of notice to both the employees and the Department of Labor and Employment is mandatory, must be written, and must be given at least one month before the intended date of retrenchment, so that the employees may look for other means of employment and ease the impact of losing their jobs. The Court also noted that the minutes of the August 22, 2000 meeting showed only thirteen rank and file employees attended, with no evidence that the respondents were present, and no evidence that Article 283 was complied with at all.

On the third issue, the Court sustained the monetary awards. Since the dismissal was illegal and the respondents were regular employees, the backwages, thirteenth month pay, and separation pay stood, as modified by the Court of Appeals.

On the fourth issue, the Court refused to entertain the new theory of retrenchment or suspension of work, holding that points of law and arguments not raised below will not be considered for the first time on appeal.

Doctrine

First, the project employee defense must be proven, not merely asserted. Where workers are repeatedly rehired, perform the same tasks, and render work necessary or desirable in the usual business of the employer, they are regular employees entitled to security of tenure, and the completion of a project does not sever the employment relationship.

Second, a party cannot change its theory on appeal. A defense not raised before the Labor Arbiter or the Commission cannot be raised for the first time in the Court of Appeals or the Supreme Court.

Third, retrenchment under Article 283 requires a written notice served on both the affected employees and the Department of Labor and Employment at least one month before the intended date of retrenchment. This requirement is mandatory. Failure to comply renders the dismissal illegal, and the employer cannot cure the defect by invoking the rule that a dismissal for a valid cause without due process merely warrants nominal damages.

Disposition

The petition was denied, and the decision of the Court of Appeals affirming the findings of illegal dismissal and the monetary awards in favor of the respondents was upheld.

Remember This

Memorize this line: the one-month written notice to both the employee and the Department of Labor and Employment is mandatory for retrenchment, and a new defense cannot be raised for the first time on appeal. Examiners use this case to test the project employee defense, the burden of proof in illegal dismissal, and the strict notice requirement under Article 283 of the Labor Code.