535 Phil. 263
PANGANIBAN, CJ:
"WHEREFORE, the challenged decision of November 27, 2001 and resolution of July 22, 2002 of the National Labor Relations Commission are SET ASIDE, and the decision of the Labor Arbiter of December 29, 1999 in NLRC NCR CASE NO. 00-03-02732-98 is REINSTATED and AFFIRMED in all respect."[4]
"Innodata Philippines, Inc., is engaged in the encoding/data conversion business. It employs encoders, indexers, formatters, programmers, quality/quantity staff, and others, to maintain its business and do the job orders of its clients.
"Estrella G. Natividad and Jocelyn L. Quejada were employed as formatters by Innodata Philippines, Inc. They [worked] from March 4, 1997, until their separation on March 3, 1998.
"Claiming that their job was necessary and desirable to the usual business of the company which is data processing/conversion and that their employment is regular pursuant to Article 280 of the Labor Code, [respondents] filed a complaint for illegal dismissal and for damages as well as for attorney's fees against Innodata Phils., Incorporated, Innodata Processing Corporation and Todd Solomon. [Respondents] further invoke the stare decicis doctrine in the case of Juanito Villanueva vs. National Labor Relations Commission, et al., G.R. No. 127448 dated September 17, 1998 and the case of Joaquin Servidad vs. National Labor Relations Commission, et al., G.R. No. 128682 dated March 18, 1999, arguing that the Highest Court has already ruled with finality that the nature of employment at [petitioner] corporation is regular and not on a fixed term basis, as the job in the company is necessary and desirable to the usual business of the corporation.
"On the other hand, [petitioner] contends that [respondents'] employment contracts expired, for [these were] only for a fixed period of one (1) year. [Petitioner] company further invoked the Brent School case by saying that since the period expired, [respondents'] employment was likewise terminated.
"After examination of the pleadings filed, Labor Arbiter Donato G. Quinto rendered a judgment in favor of complainants, the dispositive portion of which reads:'WHEREFORE, foregoing premises considered, judgment is hereby rendered:"Not satisfied, [petitioner] corporation interposed an appeal in the National Labor Relations Commission, which reversed and set aside the Labor Arbiter's decision and dismissed [respondents'] complaint for lack of merit. It declared that the contract between [respondents] and [petitioner] company was for a fixed term and therefore, the dismissal of [respondents], at the end of their one year term agreed upon, was valid.
(1) Holding complainants Estella G. Natividad and Jocelyn Quejada to have been illegally dismissed by [Petitioners] Innodata Philippines Incorporated and Innodata Processing Corporation and ordering said [petitioners] to reinstate them to their former position without los[s] of seniority rights, or to a substantially equivalent position, and to pay them jointly and severally, backwages computed from the time they were illegally dismissed on March 3, 1998 up to the date of this decision in the amount of P112,535.28 EACH, or in the total amount of P225,070.56 for the two of them; (2) Further, [petitioners] are ordered to pay, jointly and severally, [respondents] attorney's fees in the amount equivalent to 10% of their respective awards; and (3) All other claims are hereby dismissed for lack of merit.
'SO ORDERED.'
"A motion for reconsideration was filed but was denied in an order dated July 22, 2002."[5]
The foregoing issues may be reduced into one question: whether the alleged fixed-term employment contracts entered into by petitioner and respondents are valid.I
"Whether or not the Court of Appeals committed serious reversible error when it did not take into consideration that fixed-term employment contracts are valid under the law and prevailing jurisprudence.II
"Whether or not the Court of Appeals committed serious reversible error when it failed to take into consideration the nature of the business of petitioner vis-à-vis its resort to fixed-term employment contracts.III
"Whether or not the Court of Appeals seriously erred when it failed to consider the fixed-term employment contracts between petitioner and respondents as valid.IV
"Whether or not the Court of Appeals seriously erred when it held that regularity of employment is always premised on the fact that it is directly related to the business of the employer.V
"Whether or not the Court of Appeals committed serious reversible error in setting aside the Decision of the National Labor Relations Commission, dated 27 November 2001 and Resolution of 22 July 2002, respectively[,] and reinstated the decision of the Labor Arbiter dated 29 December 1999."[7]
"Section 2. This Contract shall be effective for a period of 1 [year] commencing on May 10, 1994, until May 10, 1995 unless sooner terminated pursuant to the provisions hereof.In comparison, the pertinent portions of the present employment contracts in dispute read as follows:
"From May 10, 1994 to November 10, 1994, or for a period of six (6) months, the EMPLOYEE shall be contractual during which the EMPLOYER can terminate the EMPLOYEE'S services by serving written notice to that effect. Such termination shall be immediate, or at whatever date within the six-month period, as the EMPLOYER may determine. Should the EMPLOYEE continue his employment beyond November 10, 1994, he shall become a regular employee upon demonstration of sufficient skill in the terms of his ability to meet the standards set by the EMPLOYER. If the EMPLOYEE fails to demonstrate the ability to master his task during the first six months he can be placed on probation for another six (6) months after which he will be evaluated for promotion as a regular employee."[14]
"TERM/DURATIONLike those in Villanueva and Servidad, the present contracts also provide for two periods. Aside from the fixed one-year term set in paragraph 1, paragraph 7.4 provides for a three-month period during which petitioner has the right to pre-terminate the employment for the "failure of the employees to meet and pass the qualifications and standards set by the employer and made known to the employee prior to" their employment. Thus, although couched in ambiguous language, paragraph 7.4 refers in reality to a probationary period.
- The EMPLOYER hereby employs, engages and hires the EMPLOYEE, and the EMPLOYEE hereby accepts such appointment as FORMATTER effective March 04, 1997 to March 03, 1998, a period of one (1) year.
x x x x x x x x x
"TERMINATION
7.1 This Contract shall automatically terminate on March 03, 1998 without need of notice or demand.x x x x x x x x x 7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this Contract upon his express representation that he/she is qualified and possesses the skills necessary and desirable for the position indicated herein. Thus, the EMPLOYER is hereby granted the right to pre-terminate this Contract within the first three (3) months of its duration upon failure of the EMPLOYEE to meet and pass the qualifications and standards set by the EMPLOYER and made known to the EMPLOYEE prior to execution hereof. Failure of the EMPLOYER to exercise its right hereunder shall be without prejudice to the automatic termination of the EMPLOYEE's employment upon the expiration of this Contract or cancellation thereof for other causes provided herein and by law."[15] (Emphasis supplied)
"If the contract was really for a fixed term, the [employer] should not have been given the discretion to dismiss the [employee] during the one year period of employment for reasons other than the just and authorized causes under the Labor Code. Settled is the rule that an employer can terminate the services of an employee only for valid and just causes which must be shown by clear and convincing evidence.In the interpretation of contracts, obscure words and provisions shall not favor the party that caused the obscurity.[17] Consequently, the terms of the present contract should be construed strictly against petitioner, which prepared it.[18]x x x x x x x x x
"The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the employee of tenurial security. Thereunder, [the employer] has two options. It can terminate the employee by reason of expiration of contract, or it may use "failure to meet work standards" as the ground for the employee's dismissal. In either case, the tenor of the contract jeopardizes the right of the worker to security of tenure guaranteed by the Constitution."[16]
"Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects."Indeed, a contract of employment is impressed with public interest. For this reason, provisions of applicable statutes are deemed written into the contract. Hence, the "parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other."[19] Moreover, in case of doubt, the terms of a contract should be construed in favor of labor.[20]