G.R. No. 183572 - Mercado vs. AMA Computer College-Paranaque City, Inc.

The petitioners – Yolanda M. Mercado, Charito S. De Leon, Diana R. Lachica, Margarito M. Alba, Jr., and Felix A. Tonog – were all former faculty members of AMA Computer College-ParaAaque City, Inc. (AMACC).
They started teaching on May 25, 1998, with differing academic ranks: Mercado was a Professor 3, Tonog an Assistant Professor 2, and De Leon, Lachica, and Alba, Jr. as Instructor 1s.

The petitioners executed individual Teacher’s Contracts on a trimester basis.
A common stipulation in these contracts stipulated a non-tenured appointment for a fixed term, with renewal dependent on the teaching load as approved by the school’s dean or SAVP-COO.

For the school year 2000-2001, AMACC introduced revised faculty screening guidelines via its Guidelines on the Implementation of AMACC Faculty Plantilla.
The new guidelines set performance standards based on teaching experience, capability, potential, academic qualifications, and research background.
The petitioners, however, did not obtain passing ratings under these performance standards, leading to no salary increases.

As a result of non-renewal for the following term, the petitioners filed a complaint with the NLRC alleging underpayment of wages, non-payment of overtime and overload compensation, 13th month pay, and discriminatory practices.
On September 7, 2000, each petitioner received a memorandum from AMACC stating that their contract would not be renewed, effectively ending their employment.
The petitioners amended their arbitration complaint to include an illegal dismissal charge, claiming the termination was laid in retaliation for their complaint and that due notice was not provided.

On March 15, 2002, Labor Arbiter Florentino R. Darlucio ruled that the petitioners had been illegally dismissed and ordered reinstatement with full backwages, attorney’s fees, and other benefits.
The NLRC, in its July 18, 2005 resolution, affirmed the LA’s ruling of illegal dismissal on the basis that the new screening guidelines could not be retroactively imposed on faculty employed since 1998.
The NLRC highlighted that the applicable law was Section 92 of the Manual of Regulations for Private Schools (mandating a probationary period of nine consecutive trimesters for tertiary academic personnel) instead of Article 281 of the Labor Code.

AMACC petitioned the CA for certiorari under Rule 65, arguing grave abuse of discretion by the NLRC.
On November 29, 2007, the CA reversed the LA and NLRC rulings, reasoning that:

The petitioners were employed under fixed-term, non-tenured contracts within their probationary period.
Their contracts expired as scheduled and were not renewed due to failure to meet newly established performance standards.

The CA emphasized the school’s inherent right to set and revise its assessment standards and noted that no evidence of bad faith by AMACC was shown.

The petitioners argued that the CA erred in reversing the findings of illegal dismissal and in not ordering their reinstatement with backwages.
They contended that the NLRC and LA, being the triers of fact, properly assessed the evidence and that the new performance standards were not communicated at the time of their engagement.
AMACC defended its actions by asserting its management prerogative and the inherent right, under academic freedom, to upgrade quality standards.

The Court emphasized that in certiorari proceedings under Rule 65, the appellate court should not re-weigh evidence but check for grave abuse of discretion in the NLRC’s finding.
It addressed the conflict between the probationary status under Article 281 (or corresponding rules under the Manual of Regulations for Private Schools) and the operation of fixed-term contracts.
The Court noted that while fixed-term contracts are a valid employment mode, when they are used during the probationary period, the protective features of probationary status prevail.
Owing to gaps in evidence on the communication and application of the performance standards, the Court found that AMACC failed to prove just cause for non-renewal.

Whether the petitioners were illegally dismissed when their fixed-term contracts expired without renewal, in view of their probationary status.

Did AMACC properly communicate and implement the revised performance standards applicable for regularization?
Can non-renewal of a fixed-term, probationary contract be equated to an illegal dismissal absent evidence of bad faith?

Whether the CA correctly determined that there was grave abuse of discretion on the part of the NLRC when finding illegal dismissal.

Did the CA err in substituting its judgment for that of the Labor Arbiter and NLRC, who were the triers of fact?
Was the imposition of the new screening guidelines, which were not in place at the time of the petitioners’ engagement, validly applied?

The proper interpretation and application of the rules governing probationary employment versus fixed-term contracts in the academic context.

How should the overlap between probationary status and fixed-term employment be reconciled in this case?
What is the role of academic freedom and management prerogative in setting employment standards?