741 PHIL. 728


[ G.R. No. 207253, August 20, 2014 ]




Assailed in this petition for review on certiorari[1] are the Decision[2] dated September 14, 2012 and the Resolution[3] dated April 12, 2013 of the Court of Appeals (CA) in CA-GR. SP No. 108385-MIN which annulled and set aside the Resolutions dated October 31, 2008[4] and February 12, 2009[5] of the National Labor Relations Commission (NLRC) in NLRC LAC No. 01-000428-2008, and thereby dismissed petitioner Crispin B. Lopez's (Lopez) complaint for illegal dismissal.

The Facts

Respondent Irvine Construction Corp. (Irvine) is a construction firm with office address at San Juan, Manila.[6] It initially hired Lopez as laborer in November 1994 and, thereafter, designated him as a guard at its warehouse in Dasmarifias, Cavite in the year 2000, with a salary of P238.00 per day and working hours from 7 o'clock in the morning until 4 o'clock in the afternoon, without any rest day.[7] On December 18, 2005, Lopez was purportedly terminated from his employment, whereupon he was told "Ikaw ay lay-off muna."[8] Thus, on January 10, 2006, he filed a complaint[9] for illegal dismissal with prayer for the payment of separation benefits against Irvine before the NLRC Sub-Regional Arbitration Branch No. IV in San Pablo City, Laguna, docketed as NLRC Case No. SRAB-IV 1-8693-06-Q.

For its part, Irvine denied Lopez's claims, alleging that he was employed only as a laborer who, however, sometimes doubled as a guard. As laborer, Lopez's duty was to bring construction materials from the suppliers' vehicles to the company warehouse when there is a construction project in Cavite.[10] As evidenced by an Establishment Termination Report[11] dated December 28, 2005 which Irvine previously submitted before the Department of Labor and Employment (DOLE), Lopez was, however, temporarily laid-off on December 27, 2005 after the Cavite project was finished.[12] Eventually, Lopez was asked to return to work through a letter[13] dated June 5, 2006 (return to work order), allegedly sent to him within the six (6) month period under Article 286 of the Labor Code which pertinently provides that "[t]he bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months x x x shall not terminate employment." As such, Irvine argued that Lopez's filing of the complaint for illegal dismissal was premature.[14]

The LA Ruling

On December 6, 2007, the Labor Arbiter (LA) rendered a Decision[15] ruling that Lopez was illegally dismissed.

The LA did not give credence to Irvine's argument that the lack of its project in Cavite resulted in the interruption of Lopez's employment in view of Irvine's contradictory averment that Lopez was merely employed on temporary detail and that he only doubled as a guard. Granting that Lopez's work as a laborer or as a guard was really affected by the suspension of the operations of Irvine in Cavite, the LA still discredited Irvine's lay-off claims considering that the return to work order Irvine supposedly sent to Lopez was not even attached to its pleadings. Hence, without any proof that Lopez was asked to return to work, the LA concluded that the dismissal of Lopez went beyond the six-month period fixed by Article 286 of the Labor Code and was therefore deemed to be a permanent one effectuated without a valid cause and due process.[16] Accordingly, Irvine was ordered to pay Lopez the sum of P272,222.17, consisting of P176,905.70 as backwages and other statutory benefits, and P95,316.00 as separation pay.[17]

At odds with the LA's ruling, Irvine elevated the matter on appeal[18] to the NLRC.

The NLRC Ruling

On October 31, 2008, the NLRC rendered a Resolution[19] upholding the LA's ruling.

It debunked Irvine's contention that Lopez was not illegally dismissed since he was merely placed on temporary lay-off due to the lack of project in Cavite for the reason that there was no indication, much less substantial evidence, that Lopez was a project employee who was assigned to carry out a specific project or undertaking, with the duration and scope specified at the time of the engagement. In this relation, it observed that Lopez worked with Irvine since 1994 and therefore earned the disputable presumption that he was a regular employee entitled to security of tenure.[20] Thus, since Lopez was not relieved for any just or authorized cause under Articles 282 and 283 of the Labor Code, the NLRC upheld the LA's finding that he was illegally dismissed.[21]

Dissatisfied, Irvine filed a motion for reconsideration[22] which was, however, denied in a Resolution[23] dated February 12, 2009; hence, it filed a petition for certiorari[24] before the CA.

The CA Ruling

The CA granted Irvine's certiorari petition m a Decision[25] dated September 14, 2012, thereby reversing the NLRC.

It held that Lopez's complaint for illegal dismissal was prematurely filed since there was no indicia that Lopez was actually prevented by Irvine from returning to work or was deprived of any work assignments or duties.[26] On the contrary, the CA found that Lopez was asked to return to work within the six-month period under Article 286 of the Labor Code. Accordingly, it concluded that Lopez was merely temporarily laid off, and, thus, he could not have been dismissed.[27]

Aggrieved, Lopez sought reconsideration[28] but the same was denied in a Resolution[29] dated April 12, 2013, hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in finding that the NLRC gravely abused its discretion in affirming the LA's ruling that Lopez was illegally dismissed.

The Court's Ruling

The petition is meritorious.

Ruling on the propriety of Irvine's course of action in this case preliminarily calls for a determination of Lopez's employment status that is, whether Lopez was a project or a regular employee.

Case law states that the principal test for determining whether particular employees are properly characterized as "project employees" as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time the employees were engaged for that project. The project could either be (1) a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company; or (2) a particular job or undertaking that is not within the regular business of the corporation. In order to safeguard the rights of workers against the arbitrary use of the word "project" to prevent employees from attaining the status of regular employees, employers claiming that their workers are project employees should not only prove that the duration and scope of the employment was specified at the time they were engaged, but also that there was indeed a project.[30]

In this case, the NLRC found that no substantial evidence had been presented by Irvine to show that Lopez had been assigned to carry out a "specific project or undertaking," with its duration and scope specified at the time of engagement. In view of the weight accorded by the courts to factual findings of labor tribunals such as the NLRC, the Court, absent any cogent reason to hold otherwise, concurs with its ruling that Lopez was not a project but a regular employee.[31] This conclusion is bolstered by the undisputed fact that Lopez had been employed by Irvine since November 1994,[32] or more than 10 years from the time he was laid off on December 27, 2005.[33] Article 280 of the Labor Code provides 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:

Art. 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 service 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 x x x. (Emphasis supplied)

As a regular employee, Lopez is entitled to security of tenure, and, hence, dismissible only if a just or authorized cause exists therefor. Article 279 of the Labor Code states this fundamental rule:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. (Emphasis supplied)

Among the authorized causes for termination under Article 283 of the Labor Code is retrenchment, or what is sometimes referred to as a "lay-off':

Art. 283. Closure of Establishment and Reduction of Personnel. The employer may also terminate the employment of any employee due to the installation 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 (1) 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 (1) month pay or to at least one (1) 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 (1) month pay or at least one-half (112) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphases supplied)

It is defined as the severance of employment, through no fault of and without prejudice to the employee, resorted to by management during the periods of business recession, industrial depression, or seasonal fluctuations, or during lulls caused by lack of orders, shortage of materials, conversion of the plant to a new production program or the introduction of new methods or more efficient machinery, or of automation.[34] Elsewise stated, lay-off is an act of the employer of dismissing employees because of losses in the operation, lack of work, and considerable reduction on the volume of its business, a right recognized and affirmed by the Court.[35] However, a lay-off would be tantamount to a dismissal only if it is pennanent. When a lay-off is only temporary, the employment status of the employee is not deemed terminated, but merely suspended.[36]

Pursuant to Article 286 of the Labor Code, the suspension of the operation of business or undertaking in a temporary lay-off situation must not exceed six (6) months:[37]

ART. 286. When Employment not Deemed Terminated. The bona-fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty. (Emphasis supplied)

Within this six-month period, the employee should either be recalled or permanently retrenched. Otherwise, the employee would be deemed to have been dismissed, and the employee held liable therefor. As pronounced in the case of PT & T Corp. v. NLRC:[38]

[Article 283 of the Labor Code as above-cited] x x x speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status. Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months. After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal.[39] (Emphasis supplied)

Notably, in both a permanent and temporary lay-off, jurisprudence dictates that the one-month notice rule to both the DOLE and the employee under Article 283 of the Labor Code, as above cited, is mandatory.[40] Also, in both cases, the lay-off, being an exercise of the employer's management prerogative, must be exercised in good faith that is, one which is intended for the advancement of employers' interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements.[41] Instructive on the nature of a lay-off as a management prerogative is the following excerpt from the case of Industrial Timber Corporation v. NLRC:[42]

Closure or [suspension] of operations for economic reasons is, therefore, recognized as a valid exercise of management prerogative. The determination to cease [or suspend] operations is a prerogative of management, which the State does not usually interfere with, as no business or undertaking [is] required to continue operating at a loss simply because it has to maintain its workers in employment. Such an act would be tantamount to a taking of property without due process of law.[43]

In the case at bar, Irvine asserts that it only temporarily laid-off Lopez from work on December 27, 2005 for the reason that its project in Cavite had already been finished. To support its claim, it submitted the following pieces of evidence: (a) a copy of an Establishment Termination Report[44] evidencing Lopez's lay-off; (b) a copy of the return to work order dated June 5, 2006;[45] and (c) an affidavit[46] from Irvine's personnel manager, Aguinaldo Santos, which purports that said return to work order was sent to Lopez by ordinary mail on June 5, 2006. The CA gave credence to the foregoing and thus granted Irvine's certiorari petition against the NLRC ruling which affirmed the LA's finding of illegal dismissal.

The CA is mistaken.

As the NLRC correctly ruled in this case, Lopez, who, as earlier discussed was a regular employee of Irvine, was not merely temporarily laid off from work but was terminated from his employment without any valid cause therefor; thus, the proper disposition is to affirm the LA's ruling that Lopez had been illegally dismissed.

Although the NLRC did not expound on the matter, it is readily apparent that the supposed lay-off of Lopez was hardly justified considering the absence of any causal relation between the cessation of Irvine's project in Cavite with the suspension of Lopez's work. To repeat, Lopez is a regular and not a project employee. Hence, the continuation of his engagement with Irvine, either in Cavite, or possibly, in any of its business locations, should not have been affected by the culmination of the Cavite project alone. In light of the well-entrenched rule that the burden to prove the validity and legality of the termination of employment falls on the employer,[47] Irvine should have established the bona fide suspension of its business operations or undertaking that would have resulted in the temporary lay-off of its employees for a period not exceeding six (6) months in accordance with Article 286 of the Labor Code. As enunciated in Nasipit Lumber Co. v. National Organization of Workingmen (NOWM),[48] citing Somerville Stainless Steel Corporation v. NLRC:[49]

[T]he burden of proving, with sufficient and convincing evidence, that such closure or suspension is bonafide falls upon the employer. As we ruled in Somerville Stainless Steel Corporation v. NLRC:
Considering the severe consequences occasioned by retrenchment on the livelihood of the employee(s) to be dismissed, and the avowed policy of the State - under Sec. 3, Art. XIII of the Constitution, and Art. 3 of the Labor Code - to afford full protection to labor and to assure the employee's right to enjoy security of tenure, the Court reiterates that "not every loss incurred or expected to be incurred by a company will justify retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert such losses. Settled is the rule that the employer bears the burden of proving this allegation of the existence or imminence of substantial losses, which by its nature is an affirmative defense. It is the duty of the employer to prove with Clear and satisfactory evidence that legitimate business reasons exist to justify retrenchment. Failure to do so "inevitably results in a finding that the dismissal is. unjustified." And the determination of whether an employer has sufficiently and successfully discharged this burden of proof "is essentially a question of fact for the Labor Arbiter and the NLRC to determine."
Otherwise, such ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures to ease out employees.[50] Emphasis supplied; citations omitted)

In this case, Irvine failed to prove compliance with the parameters of Article 286 of the Labor Code. As the records would show, it merely completed one of its numerous construction projects which does not, by and of itself, amount to a bona fide suspension of business operations or undertaking. In invoking Article 286 of the Labor Code, the paramount consideration should be the dire exigency of the business of the employer that compels it to put some of its employees temporarily out of work.[51] This means that the employer should be able to prove that it is faced with a clear and compelling economic reason which reasonably forces it to temporarily shut down its business operations or a particular undertaking, incidentally resulting to the temporary lay-off of its employees.

Due to the grim economic consequences to the employee, case law states that the employer should also bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned.[52] Thus, in the case of Mobile Protective & Detective Agency v. Ompad,[53] the Court found that the security guards therein were constructively dismissed considering that their employer was not able to show any dire exigency justifying the latter's failure to give said employees any further assignment, viz.:

[Article 286 of the Labor Code] has been applied by analogy to security guards in a security agency who are placed "off detail" or on "floating" status. In security agency parlance, to be placed "off detail" or on "floating" status means "waiting to be posted." Pursuant to Article 286 of the Labor Code, to be put off detail or in floating status requires no less than the dire exigency of the employer's bona fide suspension of operation, business or undertaking. In security services, this happens when there is a surplus of security guards over available assignments as when the clients that do not renew their contracts with the security agency are more than those clients that do and the new ones that the agency gets.

Again, petitioners only alleged that respondent's last assignment was with VVCC for the period of September 29 to October 31, 1997. He was not given further assignment as he allegedly went on AWOL and lost interest to work. As explained, these claims are unconvincing. Worse still, they are inadequate under the law. The records do not show that there was a lack of available post after October 1997. It appears that petitioners simply stopped giving respondent any assignment. Absent any dire exigency justifying their failure to give respondent further assignment, the only logical conclusion is that respondent was constructively dismissed.[54] (Emphases supplied)

The same can be said of the employee in this case as no evidence was submitted by Irvine to show any dire exigency which rendered it incapable of assigning Lopez to any of its projects. Add to this the fact that Irvine did not proffer any sufficient justification for singling out Lopez for lay-off among its other three hundred employees, thereby casting a cloud of doubt on Irvine's good faith in pursuing this course of action. Verily, Irvine cannot conveniently suspend the work of any of its employees in the guise of a temporary lay-off when it has not shown compliance with the legal parameters under Article 286 of the Labor Code. With Irvine failing to prove such compliance, the resulting legal conclusion is that Lopez had been constructively dismissed; and since the same was effected without any valid cause and due process, the NLRC properly affirmed the LA's ruling that Lopez's dismissal was illegal.

In light of the foregoing, the CA therefore erred in granting Irvine's certiorari petition. Indeed, a petition for certiorari should only be granted when grave abuse of discretion exists - that is, when a court or tribunal acts in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction.[55] These qualities of capriciousness and whimsicality the Court finds wanting in any of the NLRC 's actions in this case; as such, the reversal of the CA's Decision is hereby warranted.

WHEREFORE, the petition is GRANTED. The Decision dated September 14, 2012 and the Resolution dated April 12, 2013 of the Court of Appeals in CA-G.R. SP No. 1 08385-MIN are hereby REVERSED and SET ASIDE. The Resolutions dated October 31, 2008 and February 12, 2009 of the National Labor Relations Commission in NLRC LAC No. 01-000428-2008 are REINSTATED.


Carpio, (Chairperson), Velasco, Jr.,* Del Castillo, and Perez, JJ., concur.

* Designated Additional Member per Special Order No. 1757 dated August 20, 2014.

[1] Rollo, pp. I 0-18.

[2] Id. at 110-117. Penned by Associate Justice Marilyn B. Lagura-Yap, with Associate Justices Edgardo A. Camello and Renato C. Francisco, concurring.

[3] Id. at 133-134. Penned by Associate Justice Renato C. Francisco, with Associate Justices Edgardo A. Camello and Edgardo T. Lloren, concurring.

[4] Id. at 59-62. Penned by Presiding Commissioner Salic B. Dumarpa, with Commissioners Proculo T. Sarrnen and Dominador B. Medroso, Jr., concurring.

[5] Id. at 70-71.

[6] Id. at 46.

[7] Id.

[8] Id. at 112.

[9] Id. at 22.

[10] Id. at 33.

[11] Id. at 33 and 37.

[12] See id. at 33, 47, and Ill.

[13] NLRC records, Vol. I, p. 94.

[14] Rollo, pp. 60 and 111-112.

[15] Id. at 46-49. Penned by LA Melchisedek A. Guan.

[16] Id. at 48.

[17] Id. at 48-49.

[18] Id. at 50-57.

[19] Id. at 59-62.

[20] Id. at 60-61.

[21] ld. at 61.

[22] Id. at 63-68.

[23] ld. at 70-71.

[24] Id. at 72-93.

[25] Id. at 110-117.

[26] Id. at 113.

[27] Id. at 114-11 5.

[28] Id. at 118-126.

[29] Id. at 133-134.

[30] See GMA Network, Inc. v. Pabriga, G.R. No. 176419, November27, 2013.

[31] Rollo, pp. 60-61.

[32] Id. at 46.

[33] ld. at 51.

[34] Andrada v. NLRC, 565 Phil. 821, 842-843 (2007), citing Sebuguero v. NLRC, G.R. No. 115394, September 27, 1995, 248 SCRA 532, 542; and Dela Cruz v. NLRC, 335 Phil. 932, 939-940 (1997).

[35] Dela Cruz v. NLRC, id. at 940.

[36] ld.

[37] See id.

[38] 496 Phil. 164 (2005).

[39] Id. at 177; citation omitted.

[40] See id. at 177-178.

[41] See id. at 173-178. See also Julie's Bake Shop v. Arnaiz, GR. No. 173884, February 15, 2012, 666 SCRA 101, 112-118.

[42] 339 Phil. 395 (1997).

[43] ld. at 404-405.

[44] Rollo, p. 37.

[45] NLRC records, Vol. I, p. 94.

[46] ld. at 95.

[47] See Sevillana v. I.T. (International) Corp./Samir Maddah & Travellers Insurance & Surety Corp., 408 Phil. 570, 583-588 (200 I).

[48] 486 Phil. 348 (2004).

[49] 350 Phil 859 (1998).

[50] Nasipit Lumber Co. v. National Organization of Workingmen (NOWM), supra note 48, at 363-364.

[51] Phil. Industrial Security Agency Corp. v. Dapiton, 377 Phil. 951, 962 (1999).

[52] Pido v. NLRC, 545 Phil. 507, 516 (2007).  .

[53] 497 Phil. 621 (2005).

[54] Id. at 633-634.

[55] Yu v. Hon. Reyes-Carpio, G.R. No. 189207, June 15, 20 II, 652 SCRA 341, 348; citations omitted.

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