Title
Adstratworld Holdings, Inc. vs. Magallones
Case
G.R. No. 233679
Decision Date
Jul 6, 2022
Employees worked over a year without written contracts, later deemed regular employees. Illegally dismissed without just cause or due process; awarded separation pay, backwages, and damages.
illegal dismissal
probationary contracts
regular employees
A

Case Summary (G.R. No. 233679)

Factual Background

Respondents alleged that from January 2012 to July 15, 2013, they worked for Adstratworld without any written contract. They stated that they received a basic monthly salary of P10,000.00, with limited benefits consisting of thirteenth month pay in the amount of P4,000.00 and a cash bonus of P1,000.00 during a Christmas party.

They further alleged that on July 16, 2013, petitioners issued probationary contracts commencing that date until December 16, 2013, increasing their basic salary to P11,000.00. Respondents claimed that on January 8, 2014, they were illegally dismissed and were no longer allowed to report for work. They argued that they were regular employees because they had rendered more than one year of continuous service and because their tasks were necessary and desirable to Adstratworld’s advertising business. They contended that the probationary contracts were a device to defeat security of tenure, and that their dismissal lacked any just or authorized cause.

In their complaint, respondents sought reinstatement with full backwages and payment of multiple monetary items, including underpaid salary and statutory benefits for the years 2012 and 2013, as well as nominal, moral, and exemplary damages, and attorney’s fees.

Petitioners’ Version of Events and Termination Narrative

Petitioners denied illegal dismissal. They asserted that on July 16, 2013, Adstratworld hired respondents as events marketing and logistics officers on probationary status and tasked them to organize events such as festivals, basketball leagues, and sports fests. Petitioners claimed that respondents would be evaluated during the third to fifth month of probation to determine whether they would qualify as regular employees.

Petitioners also claimed that the evaluation slips reflected declining scores and poor performance. They stated that they served a Notice of Disciplinary Action dated August 8, 2013 requiring respondents to explain why they distributed jersey shirts from a work project to company executives without permission and contrary to the employee code of ethics. After written explanations were submitted, petitioners suspended Magallones for five days and Lucino for three days.

They further averred that on November 12, 2013, Lucino was reprimanded for bringing singlets inside the company premises without an entry pass, and Lucino was reprimanded and suspended due to accumulated tardiness for August, September, and October 2013, resulting in a suspension from December 16, 2013 to December 18, 2013. Petitioners claimed that on December 12, 2013, they notified respondents of the termination of their probationary status and that respondents failed to qualify as regular employees. They also required turnover of tasks until January 7, 2014. Petitioners argued that the dismissal was a valid exercise of management prerogative grounded on failure to meet reasonable standards for regularization made known at the time of engagement.

Proceedings Before the Labor Arbiter

On October 3, 2014, the LA dismissed the complaint for lack of merit but ordered petitioners to pay respondents their last pay—P5,000.00 for Magallones and P6,500.00 for Lucino. The LA found that employment records showed respondents’ disregard of company rules and unsatisfactory performance, concluding that respondents were unfit for permanent employment.

NLRC Ruling

Respondents appealed. On February 4, 2015, the NLRC affirmed with modification, ordering only Adstratworld to pay the unpaid salary of respondents in the total amount of P11,500.00. The NLRC reasoned that, based on respondents’ work performance evaluation and alleged infractions of company rules, they were inadequate to meet employment standards duly made known at the time of engagement. The NLRC held that petitioners merely exercised their prerogative to refuse regular employment after the probationary period. It also denied overtime pay, holiday pay premium, and night shift differential pay for lack of substantial proof, and it exonerated the individual corporate officers on the basis that Adstratworld had a separate and distinct juridical personality.

CA Ruling

On November 29, 2016, the CA reversed the NLRC. The CA held that respondents were regular employees of Adstratworld because their work was necessary and desirable in its advertising business. It ruled that respondents were neither fixed term nor properly probationary employees, considering that Adstratworld employed them without a contract in January 2012 and could not alter their already established employment status by issuing probationary contracts only on July 16, 2013.

The CA also concluded that even if the January 2012 engagement were treated as probationary, respondents must be considered regular by July 16, 2013 since they had already been in service for more than one year.

On dismissal, the CA ruled that respondents were illegally dismissed. It found that Adstratworld terminated them for failing to qualify for regularization, yet that ground did not constitute a valid basis for dismissal under the applicable framework for regular employees. It further determined that Adstratworld failed to observe procedural due process, because it did not provide respondents an opportunity to answer the alleged acts or omissions prior to dismissal.

The CA ordered, in lieu of reinstatement, separation pay equivalent to one month salary for every year of service, plus full backwages computed from January 8, 2014 until finality of its Decision, and it awarded multiple monetary claims on the premise that Adstratworld denied liability without proof of payment. It sustained awards of moral and exemplary damages based on bad faith reflected in non-observance of due process and the issuance of probationary status despite Adstratworld’s alleged knowledge that respondents were regular employees. It also granted attorney’s fees on account of respondents’ need to litigate. Finally, it remanded the case to the Labor Arbiter to determine computation of certain awards due to deficiencies in the record.

Issues Raised in the Petition

Petitioners assigned two main errors: first, whether the CA erred in finding grave abuse of discretion on the part of the NLRC in affirming the dismissal of the complaint; and second, whether the CA erred in finding that respondents were illegally dismissed.

Petitioners’ Contentions on Certiorari

Petitioners asserted that the petition fell within exceptions to the general rule that only questions of law may be raised in a Rule 45 petition. They argued that the CA overlooked relevant facts and that its conclusions rested on speculation, conjecture, and misapprehension of facts. They maintained that the NLRC carefully evaluated the facts and applied relevant law and jurisprudence in concluding that respondents were not illegally dismissed because they were aware of their probationary status for five months, failed to qualify under the employer’s standards, and were served written notice of termination of probationary contracts.

Respondents’ Position

Respondents maintained that they were regular employees from the beginning of their employment with Adstratworld. They argued that the probationary contracts issued on July 16, 2013 were a circumvention of the law because they had already worked for Adstratworld from January 2012 until they were dismissed on January 8, 2014. As regular employees, respondents argued that they enjoyed security of tenure and could not be dismissed absent any valid cause and compliance with due process.

Standard of Review and Grave Abuse of Discretion Framework

The Court held that the issues on whether respondents were regular employees and whether they were illegally dismissed initially involved factual matters generally outside the scope of Rule 45. Nonetheless, considering differing fact findings among the LA/NLRC and the CA, the Court treated the controversy within the limited labor review framework to determine whether the CA correctly found grave abuse of discretion by the NLRC.

The Court reiterated that in labor cases, its review focused on whether the CA properly determined the presence or absence of grave abuse of discretion by the NLRC in rendering its decision. Grave abuse of discretion, the Court explained, referred to a judgment rendered in a capricious, whimsical, or arbitrary manner equivalent to lack of jurisdiction. It existed where the ruling lacked substantial evidence or sufficient relevant evidence that a reasonable mind might accept as adequate.

The Court’s Assessment of Employment Status

The Court found no reversible error in the CA’s conclusion that the NLRC committed grave abuse of discretion in affirming the dismissal of respondents’ complaint. Petitioners argued that respondents were newly engaged only on July 16, 2013 upon issuance of probationary contracts and that respondents failed to prove illegal dismissal. The Court rejected these arguments.

It noted that the probationary contracts reflected a change in employment status and an increase in salary, and that such changes presupposed that respondents were already working for Adstratworld before July 16, 2013. The contracts showed the Employment Status From/To and indicated a merit increase in basic salary from Php 10,000/mo to Php 11,000/mo, effective July 16, 2013.

The Court also relied on respondents’ payslips for July 1–15, 2013, a period before the issuance of the probationary contracts. These payslips and the contract contents supported respondents’ position that they were employed earlier without a written contract and that they were regular employees from the start.

Applying Article 295 of the Labor Code, the Court held that respondents were regular employees because they performed tasks usually necessary or desirable in Adstratworld’s usual business and trade. It further held that even if the engagement in January 2012 were treated as merely probationary, by July 16, 2013 respondents

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