G.R. No. 178505 - Price vs. Innodata Philippines Inc.

Petitioners, namely Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera, were employed by Innodata Philippines, Inc./Innodata Corporation (INNODATA).
They were hired as formatters to perform work integral to the data encoding and processing services that INNODATA rendered for various clients.
The parties executed a “Contract of Employment for a Fixed Period” stipulating a one-year term.

The contract explicitly stated that employment was effective for one year, with a termination date set as the day the employer ceased operations or at the end of the agreed period.
It contained provisions allowing pre-termination by the employer or the employee upon giving notice – either three (3) days or fifteen (15) days notice – with or without cause, and made reference to adjustments in cases such as project completion or business losses.

INNODATA’s business centered on data encoding, indexing, formatting, and quality control for various clients, necessitating a flexible workforce which, according to respondents, justified the use of fixed-term contracts.
Although the employment contracts purportedly provided for a one-year term, discrepancies emerged:

Documents indicated contradictory dates with some contracts showing an effective start of February 16, 1999 (with actual reporting on February 17, 1999) and others later indicating September 6, 1999 after alterations.
The alterations were visibly made (with the original date crossed out) without proper initialing by the petitioners, thus raising suspicions of contractual manipulation.

On February 16, 2000, the HRAD Manager issued a letter signaling the cessation of petitioners’ employment on that day, prompting respondents to maintain that the contract had naturally expired.
Petitioners filed a complaint for illegal dismissal and damages on May 22, 2000, claiming that their roles, being necessary and indispensable to the company’s business, should confer regular employee status and security of tenure notwithstanding the fixed-term contractual label.
In the Labor Arbiter’s Decision:

It was ruled that petitioners, by virtue of performing functions vital to the company’s core operations, were de facto regular employees.
Their termination was deemed illegal, warranting orders for reinstatement and backwages plus attorney’s fees.

The National Labor Relations Commission (NLRC) reversed the Labor Arbiter’s ruling, holding that the fixed-term contracts were valid and that petitioners had been lawfully dismissed upon the expiry of their contracts.
The Court of Appeals later affirmed the NLRC’s decision, reasoning that the stipulated term was governing and that no duress was involved in the entering of such contracts.

Petitioners then elevated the case to the Supreme Court through a Petition for Review on Certiorari, alleging errors in the understanding and application of whether the contracts were actually fixed-term in nature, and arguing that the contractual terms were manipulated to undermine their right to security of tenure.

The record showed clear attempts by respondents to alter the effective date of the employment contracts, arguably to reduce the period of service and preclude the acquisition of regular status by petitioners.
The contracts included ambiguous and poorly executed modifications not initially agreed upon by the petitioners, accentuating the dispute over whether the contracts were bona fide fixed-term agreements or instruments designed to circumvent labor laws granting security of tenure.
Although respondents argued that petitioners were hired for a specific “project” (namely, the Earthweb project), the employment records and contracts lacked any clear designation of such a project or its parameters, undermining that assertion.

Whether the petitioners were validly employed under fixed-term contracts or should be classified as regular employees based on the nature of their work.

Did the stipulations in the employment contracts accurately reflect a fixed-term relationship, or were they merely contrived to circumvent protections afforded to regular employees?

Whether the alterations and ambiguities in the employment contracts amounted to a contravention of labor law principles, particularly in denying petitioners security of tenure.

Was the modification of the effective date, without the petitioners’ explicit consent, sufficient to negate the contractual period originally agreed upon?

Whether the termination of the petitioners’ employment was lawful given that their roles were integral to the usual business or trade of the employer.

Does the fact that petitioners performed functions that were necessary or desirable for INNODATA’s operations automatically confer regular status as prescribed under Article 280 of the Labor Code, despite the fixed-term label?

Whether the Court of Appeals’ reliance on the said contracts, rather than the actual nature of the employment relationship, constitutes a serious error of law and abuse of discretion.