G.R. No. 162839 - Innodata Philippines, Inc. vs. Quejada-Lopez

The case involves Innodata Philippines, Inc. (petitioner), a company engaged in the encoding and data conversion business, and its former employees, Jocelyn L. Quejada-Lopez and Estella G. Natividad (respondents).
The respondents were employed as formatters and worked from March 4, 1997, until their separation on March 3, 1998.
Respondents claimed that their work was necessary and desirable to the usual business of the company, alleging that they enjoyed regular employment status under Article 280 of the Labor Code.

Innodata Philippines, Inc. relied on fixed-term contracts, purporting that the employment relationship was for a period of one (1) year only.
The petitioner contended that the contracts, being for a fixed term, justified the termination of the respondents upon expiration, invoking earlier cases (e.g., Brent School) to support its position.
Respondents, however, argued that the nature of their employment was regular and that the contractual arrangement was merely an attempt to circumvent regulatory requirements regarding security of tenure.

Initially, the Labor Arbiter rendered a decision in favor of the respondents, finding that they were illegally dismissed, ordering their reinstatement without loss of seniority and backwages, along with attorney’s fees.
The petitioner then appealed to the National Labor Relations Commission (NLRC), which reversed the Labor Arbiter’s decision, dismissing the respondents’ complaint on the ground that the contracts were for a fixed period.
A subsequent motion for reconsideration by the petitioner was filed but was denied in an order dated July 22, 2002.

The Court of Appeals (CA) ruled that the respondents were regular employees, holding that the fixed-term contract was a crude attempt to avoid granting security of tenure, consistent with the respondents’ arguments.
The CA opinion emphasized that employment which is necessary and desirable to the usual business of an employer should not be relegated to a fixed-term, probationary arrangement intended to block regularization.

The contracts under scrutiny provided for a one-year term (paragraph 1) and a three-month probationary period (paragraph 7.4) during which the employer could pre-terminate the employment on grounds of failure to meet set standards.
This “double-bladed” scheme—offering both an automatic termination after one year and an early termination clause based on alleged failure to meet qualifications—was found by the Court to subvert the workers’ right to security of tenure.
The language in the contract, though reworded compared to earlier cases such as Villanueva and Servidad, was determined to continue to contain ambiguous provisions that allowed the employer undue discretion in terminating employment.

Whether the fixed-term employment contracts are valid under the law despite the prevailing jurisprudence recognizing such arrangements, particularly when used to circumvent security of tenure.
Whether the CA erred in ruling that the nature of the petitioner’s business mandated regular employment, thus invalidating the fixed-term contracts.
Whether the CA’s interpretation that the contract’s terms—specifically the dual termination provisions—effectively deny the employees the right to regularization and security of tenure was correct.
Whether the provisions in the disputed contracts, which allow termination within the contract term based on failure to meet qualifications, should be construed against the petitioner, as per the rule in favor of labor in cases of ambiguity.
Whether the CA wrongly set aside the NLRC decision that had upheld the validity of fixed-term contracts, thus revisiting the earlier decisions denying the respondents’ claims for regularization.