350 Phil. 664
MENDOZA, J.:
This is a
petition for certiorari to set aside the decision of the National Labor
Relations Commission which affirmed in toto the decision of the Labor
Arbiter, finding petitioner guilty of the illegal dismissal of private
respondent Virginia Camacho Quintia, as well as its resolution denying
reconsideration.
Petitioner
International Pharmaceuticals, Inc. (IPI) is a corporation engaged in the
manufacture, production and sale of pharmaceutical products. In March 1983, it employed private
respondent Virginia Camacho Quintia as Medical Director of its Research and
Development department, replacing one Diana Villaraza.[1] The government, in that year,
launched a program encouraging the development of herbal medicine and offering
incentives to interested parties. Petitioner decided to venture into the development of herbal medicine,
although it is now alleged that this was merely experimental, to find out if it
would be feasible to include herbal medicine in its business.[2] One of the government requirements
was the hiring of a pharmacologist. Petitioner avers that it was only for this purpose that private
respondent was hired, hence its contention that private respondent was a
project employee.
The contract of
employment provided for a term of one year from the date of its execution
on March 19, 1983, subject to renewal
by mutual consent of the parties at least thirty days before its
expiration. It provided for a monthly
compensation of P4,000.00. It
was agreed that Quintia could continue teaching at the Cebu Doctor’s Hospital,[3] where she was, at that time, a
full-time member of the faculty.
Quintia claimed
that when her contract of employment was about to expire, she was invited by
Xavier University in Cagayan de Oro City to be the chairperson of its
pharmacology department. However, Pio
Castillo, the president and general manager, prevailed upon her to stay,
assuring her of security of tenure. Because of this assurance, she declined the offer of Xavier University.[4] Indeed, after her contract expired on March 19, 1984, she remained in the
employ of petitioner where she not only performed the work of Medical Director
of its Research and Development department but also that of company
physician. This continued until her
termination on July 12, 1986.
In her
complaint, private respondent alleges that the reason for her termination “was
her taking up the cudgels for the rank and file employees when she felt they
were given a raw deal by the officers of their own Savings and Loan
Association.” She claimed that sometime
in June 1986, while Pio Castillo was in China, the Association declared
dividends to its members. Due to complaints of the employees, meetings were
held during which private respondent pointed out the “inequality in the
imposition of interest rate to the low-salaried employees” and led them in the
demand for a full disclosure of the association’s financial status. Her participation was resented by the
association’s officers, all of whom were appointed by management, so that when
Castillo arrived, private respondent was summoned to Castillo’s office where
she was berated for her acts and humiliated in front of some laborers. When she
sought permission to explain her side, she was arrogantly turned down and told
to leave.[5]
On July 10,
1986, Quintia was replaced as head of the Research and Development department
by Paz Wong. Two days later, on July
12, 1986, she received an inter-office memorandum officially terminating her
services allegedly because of the expiration of her contract of employment.
On January 21,
1987,[6] private respondent filed a
complaint, charging petitioner with illegal dismissal and praying that
petitioner be ordered to reinstate private respondent and to pay her full
backwages and moral damages.[7]
In its position
paper, petitioner claimed that private respondent had been hired on a
“consultancy basis coterminous with the duration of the project” involving the
development of herbal medicine and that her employment was terminated upon the
abandonment of that project. It
explained that Quintia’s employment,
which lasted for more than two years after the original contract expired, was
by virtue of an oral agreement with the same terms as the written contract
or, at the very least, by virtue of
implied extensions of the said contract which lasted until the “company decided
that nothing would come out from said project.”[8]
In a decision
rendered on December 18, 1990, the Labor Arbiter found private respondent to
have been illegally dismissed. He held
that private respondent was a regular employee and not a project employee and
so could not be dismissed without just and/or legal causes as provided in the
Labor Code. Moreover, he found that
petitioner failed to observe due process in terminating Quintia’s services. For this reason, the Labor Arbiter ordered
the petitioner to reinstate private respondent and to pay her backwages for
three years, including 13th month pay
and Service Incentive Leave, moral damages and attorney’s fees amounting to
P177,099.94. He further ruled that if
reinstatement was no longer feasible, petitioner should pay private respondent P6,000
as separation pay.
On appeal, the
NLRC affirmed the ruling in a decision dated May 26, 1992. Petitioner moved for reconsideration, but
its motion was denied for lack of merit. The NLRC directed the Labor Arbiter to conduct a hearing to determine
whether reinstatement was feasible. Hence, this petition.
We find the
petition to be without merit.
First. Art. 280 of the Labor Code provides:
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 with respect to the activity in which he is employed and his employment shall continue while such activity exists.
In Brent
School, Inc. v. Zamora,[9] it was held that although work done
under a contract is necessary and desirable in relation to the usual business
of the employer, a contract for a fixed period may nonetheless be made so long
as it is entered into freely, voluntarily and knowingly by the parties. Applying this ruling to the case at bar, the
NLRC held that the written contract between petitioner and private respondent
was valid, but, after its expiration on March 18, 1984, as the petitioner had
decided to continue her services, it must respect the security of tenure of the
employee in accordance with Art. 280. It said:
To our mind, when complainant was allowed to continue working without the benefit of a contract after the expiration of the one year period provided in their written contract, that act completely changed the complexion of the relationship between the parties.
The NLRC cited
the following facts to justify its ruling: Quintia was continued as Medical Director and even given the additional function of company physician after the
expiration of the original contract; she undertook various civic activities for
and in behalf of petitioner, such as conducting free clinics and giving out IPI
products; she did work which was necessary and desirable in relation to the
trade or business of petitioner; and her employment lasted for more than (3)
three years.
Petitioner
contends:
(1) that the NLRC’s reliance on Art. 280 is “clearly contrary to this Court’s decisions;”
(2) that private respondent’s tasks are really not necessary and desirable to the usual business of petitioner;
(3) that there is “clearly no legal or factual basis to support respondent NLRC’s reliance on the absence of a new written contract as indicating that respondent Quintia became a regular employee.”[10]
Petitioner’s first
ground is that the ruling of the NLRC is contrary to the Brent School decision. He contends that Art. 280 should not be so
interpreted as to render employment
contracts with a fixed term invalid. But the NLRC precisely upheld
the validity of the contract in
accordance with the Brent School case. Indeed, the validity of the written contract is not in issue in this
case. What is in issue is whether private respondent did not become
a regular employee after the expiration of the written contract on March 18,
1984 on the basis of the facts pointed out by the NLRC, simply because there
was in the beginning a contract of employment with a fixed term.
Petitioner also
invokes the ruling in Singer Sewing Machine v. Drilon[11] in which it was stated:
The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter’s business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner’s argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.
Petitioner
argues:
Even assuming arguendo that respondent Quintia was performing tasks which were ‘necessary and desirable to the main business’ of petitioner, said standard cannot apply since said Article merely distinguishes between regular and casual employment for the purpose of determining entitlement to benefits under the Labor Code. In this case, respondent Quintia’s alleged status as “regular” employee has precisely been disputed by petitioner. And, as this Honorable Court noted in the foregoing case, an agreement may provide that one party will render services, no matter how necessary for the other party’s business, without being hired as a regular employee, and this is precisely the nature of the contract entered into by the parties in this case.[12]
Clearly,
petitioner misapplies the ruling in Singer. Quintia’s status as an
employee is not disputed in this case. Therefore, in determining whether she was a project employee or a
regular employee, the question is
whether her work was “necessary and desirable to the main business of the
employer.” It is true that, as held in Singer, parties can enter
into an agreement for the rendering of services by one to the other and that
however necessary such services may be to the latter’s business the contract
will not necessarily give rise to an employer-employee relationship if the
elements of such relationship are not present. But that is not the question in this case. Quintia was an employee. The question is whether, given the fact
that she was an employee, she was a regular or a project employee, considering
that she had been continued in the service of petitioner for more than two
years following the expiration of her written contract.
Petitioner’s
second point is that private respondent’s tasks were not really necessary and
desirable in respect of the usual business of petitioner, the work done by
Quintia being on a temporary basis only.[13] According to petitioner, Quintia’s
engagement was only for the duration of its herbal medicine development
project. In addition, petitioner points
out that private respondent was not required to keep fixed office hours and
this arrangement continued even after the expiration of the written contract,
thus indicating the temporary nature of her employment.
Petitioner’s
allegations are contrary to the factual findings of both the NLRC and the Labor
Arbiter, particularly their findings that she was the head of petitioner’s
Research and Development department; that in addition, she performed the
function of company physician; and that she undertook various civic activities
in behalf of petitioner and that this engagement lasted for more than three
years (1983 - 1986).[14] Certainly, as the NLRC observed,
these facts show complainant working “not as ‘consultant’ but as a regular
employee albeit a managerial one.”[15] It should be added that Quintia was
hired to replace one Diana Villaraza,[16] which suggests that the position to
which she was appointed by petitioner was an existing one, so much so
that after the termination of Quintia’s employment, somebody else (Paz
Wong) was appointed in her place.[17] If private respondent’s employment
was for a particular project which had allegedly been terminated, why would
there be a need to replace her?
We are not
prepared to throw overboard the findings of both the NLRC and the Labor Arbiter
on the matter. These are essentially
factual matters which are within the competence of the labor agencies to
determine. Their findings are accorded
by this Court respect and finality if, as in this case, they are supported by substantial
evidence.[18]
Indeed, the
terms of the written employment contract are clear:
. . . That the FIRST PARTY is a manufacturer of medicines and pharmaceutical preparations, while the SECOND PARTY is a Doctor of Medicine and Pharmacologist of long standing;
That the FIRST PARTY desires to hire the SECOND PARTY as Medical Director of its Research and Development department, which the latter accepts, under the following terms and conditions, to wit:
1. That the SECOND PARTY shall perform and/or cause the performance of the
following:
a) Microbiological research and testing;
b) Clinical research and testing;
c) Prove and support First Party’s claims in its brochures, literature and
advertisements;
d) Register with and cause the approval by Food and Drug Administration of
all pharmaceutical and medical preparations developed and tested by the First
Party’s R&D department; and
e) To do and perform such other duties as may, from time to time, be
assigned by the First Party consonant to and in accord with the position herein
conferred. . . .
There is no
mention whatsoever of any project or of any consultancy in the contract. As aptly observed by the Solicitor General,
the duties of Quintia as provided for in the contract reject any notion of
consultancy. Clearly, she was hired as
Medical Director of the Research and Development department of petitioner
company and not as consultant nor for
any particular project. The work she
performed was manifestly necessary and
desirable to the usual business of petitioner, considering that it is engaged
in the manufacture and production of medicinal preparations. Petitioner itself admits that research and
development are part of its business.[19]
We agree with
the Labor Arbiter that the fact that she was not required to report at a fixed
hour or to keep fixed hours of work does not detract from her status as a
regular employee. As petitioner itself
admits, Quintia was a managerial employee[20] and therefore not covered by the
Labor Code provisions on hours of work. What this Court said in once
case [21] is apropos:
The primary standard, . . . of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists.
Neither does the
fact that private respondent was teaching full-time at the Cebu Doctors’
College negate her regular status since this fact does not affect the nature of
Quintia’s work. Whether one’s
employment is regular is not determined by the number of hours one works, but
by the nature of the work and by the length of time one has been in that
particular job.
Considering the
foregoing, it is clear that Quintia became a regular employee of petitioner
after her contract expired on March 18, 1984 and her services were continued
for more than two years in the usual trade or business of the employer.
Petitioner goes
on to state his third point that “there is clearly no legal or factual basis to
support respondent NLRC’s reliance on the absence of a new written contract as
indicating that respondent Quintia became a regular employee.”[22] In support, the petitioner again
cites the Brent School case[23] where it was recognized that term
contracts can be made orally.[24] Hence, it is argued that “the mere fact that there was no subsequent
written contract does not mean that the original agreement was abandoned and/or
that respondent became a regular employee due to the absence thereof and/or
that the parties had executed a new agreement, in the absence of evidence
showing intent to abandon and/or novate the same.” It posits that, based on the acts of the parties, an implied
renewal was entered into, or, at the very least, petitioner claims, the absence
of a written contract only indicates that the parties impliedly agreed to
extend their written contract.
There is
absolutely no principle of law to support the proposition urged by
petitioner. On the other hand the
written contract in this case provided that it was subject to renewal by mutual
consent of the parties at least thirty days before its expiration on March 18,
1984. There is no evidence to show that
the parties mutually agreed to renew their contract. On the other hand, to sustain petitioner’s contention that there
was an implied extension after the expiration of the original contract would
make it possible for employers like petitioner to circumvent Art. 280 of the
Labor Code and thus prevent an employee from becoming regular through the
simple expedient of making him sign a contract for a term and then extend to
him a contract term, after term, after term.
Moreover,
assuming that petitioner is correct that there was at least an implied renewal
of the written contract containing the same terms and conditions, then
Quintia’s termination should have been effective in March of 1986 or March of
1987 rather than July of 1986. It
should be noted that the fixed term stated in the written contract allegedly
renewed is one year. Considering that
the said contract was executed on March 19, 1983, then if there really were
implied renewals with the same terms and conditions, private respondent’s
employment should not have been terminated in July of 1986. As discussed earlier, the decision of the
NLRC is based not alone on inference drawn from the expiration of the contract
but on facts which, in light of Art.
280, show that private respondent’s work was in pursuance of the business of
petitioner.
Second. Prescinding from the premise that private respondent was a project
employee, petitioner claims that because it had discontinued its herbal medicine
project after it had been shown not to be viable, private respondent’s
employment had to be terminated, too.
We have already
shown why this claim has no basis and no merit. Petitioner was unable to prove that it had actually undertaken a
project. Private respondent’s contract
will be searched in vain for any mention of a project. What it states is that Quintia’s employment
was one for a definite period, not for a project as petitioner would have it. A project employment is one where the
employment has been fixed for a specific project/undertaking, the completion or
termination of which has been determined at the time of the engagement of the
employee.[25] Quintia’s engagement after the
expiration of the written contract cannot be said to have been pre-determined
because, if petitioner’s other claim is to be believed, it was essentially
contingent upon the feasibility of herbal medicine as part of petitioner’s
business and for as long as the herbal
medicine development was being pursued by it.
It follows from
the conclusion that private respondent Quintia was a regular employee that she
could only be dismissed for just or authorized cause.[26] The records are bereft of any
evidence showing the existence of any of the specified causes in the Labor
Code. It may be that an employer is
allowed wider discretion in terminating employment in respect of managerial
personnel compared to rank-and-file
employees, and that such managerial employees can be separated from the service
for loss of confidence.[27] However, a mere allegation of such
ground is not sufficient. As this Court
has held in Western Shipping Agency, Inc. v. NLRC:[28]
Loss of confidence is a valid ground for the dismissal of managerial employees . . . But even managerial employees enjoy security of tenure, . . . and, . . . can only be dismissed after cause is shown in an appropriate proceeding. The loss of confidence must be substantiated by evidence. The burden of proof is on the employer to show grounds justifying the loss of confidence.
Petitioner in this case failed to discharge this burden, as both the
Labor Arbiter and the NLRC found.
Moreover, as the
labor arbiter found, petitioner failed to accord due process to private
respondent in terminating her services. In the case of Aurora Land Projects Corp. v. NLRC it was stated: [29]
The law requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer’s decision to dismiss him (Section 13, BP 130; Sections 2-6, Rule XIV, Book V Rules and Regulations Implementing the Labor Code as amended). Failure to comply with the requirements taints the dismissal with illegality. This procedure is mandatory; in the absence of which, any judgment reached by management is void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National Service Corporation v. NLRC, 168 SCRA 122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].
The memoranda
dated July 12, 1986 and July 10, 1986, copies of which were furnished the complainant, informing her of the
termination of her contract and the appointment of a replacement, without
apprising her of the particular acts or omissions for which her dismissal was
sought, do not suffice to satisfy the requirements of notice. Nor was petitioner given the opportunity to be heard.[30] Consequently, her dismissal from
the service was illegal.
Third. Petitioner contends that the reinstatement of private respondent is not
feasible because the position which she held was abolished on account of its
decision to discontinue its herbal medicine development project and that, in any event, because the position is a sensitive one which needs an employee in
whom the petitioner has full faith and confidence. It is also contended that reinstatement would be untenable
considering the antagonism engendered as a result of this case.[31]
As regards the
claim that the position has already been abolished and, therefore, reinstatement is impossible, suffice it to
state that the factual findings of the Labor Arbiter belie this. A replacement for private respondent was
appointed two (2) days prior to her termination. If the position had been abolished, there would have been no
necessity for a replacement.
But we agree
that because of antagonism generated by this case and the private respondent’s
own preference for separation pay, reinstatement would no longer be feasible. It would thus
be in the best interest of the parties to order the payment of separation pay
in lieu of reinstatement. Such an
amount should not be equivalent to one-half month salary for every year of
service only, as ordered by the Labor Arbiter and affirmed by the NLRC but, in accordance with our decisions,[32] it must be equivalent to one month
salary for every year of service.
Private
respondent should be given separation pay and backwages in accordance with the
Labor Code. The backwages, however, are
to be computed only for three years from July 12, 1986, the date of her
dismissal, without deduction or qualification, considering that the dismissal was made before the effectivity on March 21, 1989, of R.A. No. 6715, which
provides for the payment of full backwages to employees who are illegally
dismissed.[33]
WHEREFORE, the
petition is DISMISSED. The decision of the National Labor Relations Commission
is MODIFIED by ordering petitioner to pay private respondent separation pay
equivalent to one month salary for every year of service. In all other respects, the decision of the NLRC is AFFIRMED.
SO ORDERED.
[1] Petition, Annex E, p. 2.
[2] Id., p. 3.
[3] Id.,
Annex C, p. 1.
[4] Id.,
Annex F, pp. 2-3.
[5] Id., pp.
3-4.
[6] Should be August 22, 1986 as per complaint form.
[7] Petition, Annex F, p. 1.
[8] Id.,
Annex E, pp. 2-3.
[9] 181 SCRA 702 (1990).
[10] Petition, pp. 9-14.
[11] 193 SCRA 270 (1991).
[12] Petition, p. 12 (emphasis added).
[13] Id.,
Annex G, p. 6.
[14] Id.,
Annex A, p. 4.
[15] Ibid.
[16] Id.,
Annex E, p. 2.
[17] Id.,
Annex A, p. 2.
[18] Chua v. National Labor Relations Commission,
267 SCRA 196 (1997).
[19] Petition, p. 13.
[20] Id., Annex G, p. 7.
[21] De Leon v. National Labor Relations
Commission, 176 SCRA 615, 621 (1989). Accord, Capitol Industrial Construction Groups v. National Labor
Relations Commission, 221 SCRA 469 (1993).
[22] Petition, Annex A, p. 14.
[23] Supra note
9.
[24] Supra note
9 at p. 716.
[25] Labor Code, Art 280; Rules to Implement the Labor
Code, Book VI , Rule I, §5(a).
[26] Constitution, Art. XIII, §3; Labor Code, Art. 279.
[27] Coca-Cola Bottlers Phils, Inc. v. National
Labor Relations Commission, 172 SCRA 751 (1989); Metro Drug Corp. v. National Labor Relations Commission,
143 SCRA 132 (1986).27
[28] 253 SCRA 405 (1996).
[29] 266 SCRA 48 (1997).
[30] Petition, Annex F, pp. 4 and 10.
[31] Petition, pp. 17-18.
[32] Liana’s Supermarket v. National Labor
Relations Commission, 257 SCRA 186, 198-199 (1996).
[33] Mendoza v. National Labor Relations
Commission, G.R. No. 122481, March 5, 1998; Magcalas v. National Labor Relations Commission, 269 SCRA 453
(1997).