SANDOVAL SHIPYARDS, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, ROGELIO DIAMANTE, MANUEL PACRES, ROLANDO CERVA­LES, DIONISIO CERVALES AND MACARIO SAPUTALO, RESPON…

Sandoval Shipyards versus National Labor Relations Commission

The Case

This is a petition brought by Sandoval Shipyards, Incorporated against the National Labor Relations Commission and several of its dismissed workers. Sandoval Shipyards builds and repairs vessels, and it insists that each vessel is a separate project, so that the employment of the workers assigned to it ends the moment that project is completed. The workers answer that they are regular employees, and that finishing one project does not end their employment because they can be moved to unfinished projects. The case matters because it draws the line between a project employee and a regular employee, and it settles what a shipbuilder owes its workers when the job they were hired for comes to an end.

Procedural History

The workers filed complaints for illegal dismissal. In the first group of cases, the Labor Arbiter ordered the reinstatement of the five complainants with backwages from the day after the project was completed, and the National Labor Relations Commission affirmed that decision. In the second group, the Director of the Ministry of Labor's Capital Region ordered the reinstatement of the complainants, and the Deputy Minister of Labor affirmed that order. Sandoval Shipyards then went to the Supreme Court by petition for certiorari, asking it to set aside the resolutions of the National Labor Relations Commission and of the Deputy Minister of Labor.

Facts

Sandoval Shipyards is engaged in the building and repair of vessels. It does not construct ships for sale; it accepts contracts from third parties for shipbuilding or for the repair of vessels, and it hires workers only when it has such a contract.

In the first group of cases, Rogelio Diamante, Manuel Pacres, Macario Saputalo, Rolando Cervales and Dionisio Cervales were assigned to the construction of the LCT Catarman, Project Number 7511. After three months of work, the project was completed on July 26, 1979. The five workers were served a termination notice, and the termination was reported to the Ministry of Labor on August 3, 1979. They then filed a complaint for illegal dismissal.

In the second group, Danilo de la Cruz and sixteen others, seventeen in all, were assigned to Project Number 7901, the construction of a tanker ordered by Mobil Oil Philippines, Incorporated. There were fifty-five workers in that project. The tanker was launched on January 31, 1980. On the yard manager's recommendation, the personnel manager terminated the services of the welders, helpers and construction workers effective February 4, 1980, and the termination was duly reported to the Ministry of Labor and Employment. Three days later, twenty-seven of the fifty-five workers were hired for a new project, and four of the seventeen respondents were among them. The seventeen nonetheless filed a complaint for illegal dismissal on February 6.

Issues

• Whether or not the private respondents were project employees whose employment was coterminous with the project for which they were hired.
• Whether or not the termination of their employment upon the completion of the project was lawful, so that they are not entitled to reinstatement, backwages or separation pay.
• Whether or not the public respondents acted with grave abuse of discretion in disregarding the prior rulings of the Ministry of Labor and the National Labor Relations Commission on the same employer's project workers.

Applicable Provisions

Section 281 of the Labor Code, as quoted in the decision, defines project employees:

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.

This is the statutory test the Court applies: the employment is tied to a project whose completion was fixed when the worker was engaged.

Policy Instructions Number 20 of the Secretary of Labor, issued to stabilize employer-employee relations in the construction industry, provides:

Project employees are those employed in connection with a particular construction project. Non-project (regular) employees are those employed by a construction company without reference to any particular project.

This instruction supplies the distinction between project and regular employees that governs the case.

The same Policy Instructions Number 20 further provide:

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company. Moreover, the company is not required to obtain clearance from the Secretary of Labor in connection with such termination.

This fixes the consequence of the Court's finding: no termination pay, and no clearance, once the project is completed.

Ruling

On the first issue, the Court held that the private respondents were project employees whose work was coterminous with the project for which they were hired. Their employment was fixed for a specific undertaking whose completion was determined at the time of their engagement, which is exactly the definition in Section 281 of the Labor Code.

On the second issue, the Court held that the termination was lawful. Because they were project employees, they were not entitled to termination pay upon the completion of the project, regardless of the number of projects in which they had been employed, and the company was not required to obtain clearance from the Secretary of Labor for such termination.

On the third issue, the Court found that the public respondents acted with grave abuse of discretion amounting to lack of jurisdiction in disregarding the employer's prior cases. In one, the Deputy Minister of Labor had ruled that the employment of the employees concerned was fixed for a specific project or undertaking, because the nature of the business would not allow the corporation to employ workers for an indefinite period. In another, the National Labor Relations Commission had held that the layoff of seventeen complainants after the construction of a tanker was justified because they were project employees. In a third, the Director had held that two workers were project workers whose employment was terminated upon the completion of the project, and the Deputy Minister had affirmed that finding. The Court held that these precedents could not simply be ignored.

Doctrine

A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. A regular employee, by contrast, is one employed without reference to any particular project. The test is whether the work is tied to a particular undertaking whose end was known when the worker was hired.

When a project employee is terminated because the project, or any phase of it, is completed, the termination is lawful, and the worker is not entitled to termination pay, regardless of how many projects the company has employed him in. The employer is not required to obtain clearance from the Secretary of Labor for such termination; it need only report the termination.

A shipbuilder that does not produce vessels for sale but accepts contracts from third parties, hiring workers only when it has such a contract, may engage project employees, because its business does not call for workers employed for an indefinite period.

Disposition

The Court granted the petition, reversed and set aside the resolution of the National Labor Relations Commission and the order of the Deputy Minister of Labor, and dismissed the complaints for illegal layoff, without costs.

Remember This

The one line to memorize: a project employee's employment is coterminous with the project, and upon its completion he is entitled to no termination pay, regardless of the number of projects he has worked in. Examiners use this case to test the project employee and regular employee distinction, and to test whether an employer in a contract-driven industry may lawfully hire workers project by project.