A.C. No. 12768 - Bondoc vs. Licudine

Petitioner Joaquin T. Servidad was employed by respondent Innodata on May 9, 1994, as a Data Control Clerk.
He was hired under a contract of employment that prescribed a one-year term, commencing on May 10, 1994, and ending on May 10, 1995, unless terminated earlier.
The contract contained two key periods:

The first six months (May 10, 1994 to November 10, 1994), during which the employer could terminate the services by written notice at any time.
A subsequent six-month period that was characterized as probationary, wherein upon demonstration of sufficient skill, the employee would become regular.

The terms allowed the employer wide discretion in terminating employment without clearly defined criteria for performance evaluation.

On July 7, 1994, he received high overall ratings of 100% and 98% in internal evaluations.
A separate evaluation by a private respondent recorded a 98.5% rating, evidencing his strong job performance.

After six months, on November 9, 1995, petitioner was made to sign a three-month probationary employment agreement which was later extended for an additional three months, thereby extending his probationary period to May 9, 1995.

On May 9, 1995, petitioner was dismissed on the ground of termination of the employment contract, without clear linkage to performance deficiencies.
Dissatisfied with the dismissal, petitioner filed a case for illegal dismissal.
The Labor Arbiter ruled in his favor, concluding that the dismissal was unlawful by ordering:

Full backwages from the time of dismissal until reinstatement; and
His reinstatement to his former or equivalent position without loss of benefits or seniority.

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter’s decision, holding that the contract was for a fixed term, thereby validating the dismissal upon expiration of the contract.

The core dispute centers on whether the contract was genuinely of fixed duration or whether it covertly permitted termination at the employer’s discretion, thereby violating the employee’s right to security of tenure.
The ambiguous language in the contract allowed the employer to invoke either termination upon expiration or termination based on alleged failure to meet work standards—a move seen as a deliberate tactic to circumvent regularization.
Judicial analysis invoked Article 1377 of the Civil Code, emphasizing that ambiguous provisions must not favor the party causing the obscurity, and stressed that any scheme defeating tenurial security contradicts public policy.

Whether the disputed employment contract is valid and enforceable notwithstanding its ambiguous terms.

Whether the contract should be construed as a fixed-term agreement giving the employer unilateral termination discretion.
Whether petitioner, having worked beyond the six-month period, had thereby acquired the status of a regular employee.

Whether the NLRC gravely abused its discretion in deeming the dismissal valid on the basis that the contract was of fixed term.

Whether the contractual scheme, which allowed termination based on insufficiently defined performance standards, violates the constitutional guarantee against unwarranted dismissal.

Whether the allegations of moral damages (reputation besmirched, embarrassment, sleepless nights) are sufficiently substantiated to warrant an award.