Case Summary (G.R. No. 112019)
Petitioner’s Employment Contract and Factual Background
Alegre was engaged by Brent School as athletic director under a written contract dated July 18, 1971, providing a five-year term from July 18, 1971 to July 17, 1976 and annual compensation of P20,000. Subsequent subsidiary agreements in 1973 and 1974 reiterated the same terms including the expiry date. On April 20, 1976 Brent School notified the Department of Labor of termination effective July 16, 1976, citing completion of contract/expiration of definite period. Alegre received pro rata pay in May 1976 for the final contractual period but protested during a labor conciliator’s investigation, asserting that after five years he had acquired regular status and could not be removed except for just cause.
Procedural History
The Regional Director treated the school’s report as an application for clearance to terminate and, following the conciliator’s recommendation, denied clearance and ordered reinstatement of Alegre as a permanent employee with full back wages and seniority. The Labor Secretary upheld the Regional Director. The Office of the President dismissed Brent School’s appeal, affirming that expiration of contract was not a just cause under the Labor Code. Brent School filed a certiorari petition to the Supreme Court.
Legal Issue Presented
Whether the provisions of the Labor Code, as amended, abolished the validity of fixed‑term (term or definite‑period) employment contracts and thereby rendered the expiration of such contracts an impermissible ground of termination when the employee performed work “usually necessary or desirable in the usual business” of the employer.
Applicable Law
- Labor Code (P.D. No. 442), as amended by P.D. 850 and B.P. Blg. 130, including provisions on probationary, regular, casual and fixed‑period employment (e.g., Arts. 270/271/280/283 depending on numbering after amendments).
- Civil Code provisions recognizing obligations with a definite period and general freedom of contract (Art. 1193 and Art. 1306 cited by the Court).
- Republic Acts 1052 and 1787 (Termination Pay Law and amendment) historically recognizing the mesada and permitting term employment.
- Jurisprudence cited in the decision (e.g., Biboso v. Victorias Milling Co., J. Walter Thompson Co. v. NLRC, Escudero v. Office of the President, Labajo v. Alejandro).
- 1987 Philippine Constitution (designated by instruction as the constitutional basis given the decision date).
Historical and Statutory Background (Court’s Exposition)
The Court recounts that fixed‑term employment was recognized prior to the Labor Code: the Code of Commerce and later RA 1052/RA 1787 acknowledged the licitness of term contracts and the mesada. When the Labor Code took effect in 1974, its original provisions included references to fixed‑period employment but subsequent amendments (P.D. 850 in 1975 and B.P. Blg. 130 in 1981) progressively altered or removed language referring to fixed‑period employment, adding clauses such as “The provisions of written agreement to the contrary notwithstanding” and finally eliminating express reference to employment with a definite period.
Court’s Analysis of the Relationship Between the Civil Code and the Labor Code
The Court emphasizes that the Civil Code has always permitted contracts with definite periods and that the general rule of freedom of contract applies unless impeded by law or public policy. The Court observes that many lawful and socially accepted employment arrangements (e.g., certain administrative posts in education, overseas employment contracts, company officials elected for fixed terms) reasonably require fixed terms and are not inherently designed to defeat security of tenure.
Statutory Construction and Purpose of Article 280 (formerly Arts. 319, 270, etc.)
The Court applies principles of statutory construction, holding that a literal, undifferentiated reading of the Labor Code clause that purports to make written agreements “to the contrary” irrelevant would lead to absurd and unjust results by outlawing all fixed‑term contracts. Instead, the Court construes the clause narrowly: it targets agreements made to circumvent the employee’s right to security of tenure, not all voluntarily and knowingly agreed fixed‑term contracts entered into without duress, coercion, or intent to evade labor protections.
Reliance on Prior Jurisprudence
The Court cites prior cases (Biboso, Thompson, and more recent Escudero and Labajo) establishing the rule that a contract for a definite period terminates by its own terms at the expiration of that period and that a notice of non‑renewal is a reminder rather than a termination letter when the contract itself defines the end date. The Court reaffirms that principle as consistent with the Civil Code and established doctrine.
Application to the Facts and Holding
Applying the foregoing construction, the Court finds that Brent School’s contract with Alegre lawfully expired on the agreed date and that
...continue readingCase Syllabus (G.R. No. 112019)
Case Citation and Court
- 260 Phil. 747, EN BANC; G.R. No. L-48494; February 05, 1990.
- Decision penned by Justice Narvasa; Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Cortes, Grino-Aquino, Medialdea, and Regalado, JJ., concur.
- Chief Justice Fernan took no part related to counsel for petitioners; Justice Sarmiento filed a separate opinion concurring in part and dissenting in part.
Procedural History
- Proceedings commenced by petition for certiorari under Rule 65, Rules of Court, challenging the decision of the Office of the President and related administrative labor determinations. [1]
- Brent School reported the termination of Alegre’s services to the Department of Labor; a Labor Conciliator investigated Alegre’s protest.
- The Regional Director treated Brent School’s report as an application for clearance to terminate employment, refused clearance, and ordered reinstatement of Alegre as a permanent employee with full back wages.
- Brent School’s motion for reconsideration before the Regional Director was denied and the case was forwarded to the Secretary of Labor.
- The Secretary of Labor sustained the Regional Director’s ruling.
- Brent School appealed to the Office of the President; the appeal was dismissed for lack of merit and the Labor Secretary’s decision was affirmed, holding Alegre a permanent employee who could not be dismissed except for just cause.
- Petitioners brought the case to the Supreme Court by certiorari challenging these administrative rulings.
Facts
- Doroteo R. Alegre was engaged by Brent School, Inc. as athletic director under a written contract dated July 18, 1971, with yearly compensation of P20,000.00. [4]
- The employment contract expressly fixed the term of employment for five (5) years: from July 18, 1971 to July 17, 1976.
- Subsequent subsidiary agreements dated March 15, 1973; August 28, 1973; and September 14, 1974 reiterated identical terms and the same expiry date as the original contract. [5]
- On April 20, 1976 (some three months before the stipulated expiration), Alegre was given a copy of Brent School’s report filed with the Department of Labor advising of the termination of his services effective July 16, 1976; the stated ground was “completion of contract, expiration of the definite period of employment.” [6]
- On May 26, 1976 Alegre accepted P3,177.71 and signed a receipt containing the phrase “in full payment of services for the period May 16, to July 17, 1976 as full payment of contract.”
- At the Labor Conciliator’s investigation of the report of termination, Alegre protested the announced termination, asserting that (a) his services were necessary and desirable in the usual business of his employer and (b) having rendered five years’ service he had acquired the status of a regular employee and could not be removed except for valid cause. [6]
Central Issues Presented
- Whether the provisions of the Labor Code (P.D. No. 442), as amended, have effectively anathematized or outlawed fixed-period (term) employment.
- Whether respondent Alegre, whose engagement was governed by an express five-year term, became a regular (permanent) employee entitled to security of tenure such that expiration of the contract would not constitute a valid ground of termination absent just cause.
Relevant Statutes, Regulations, and Historical Legal Sources
- Labor Code of the Philippines, P.D. No. 442, effective November 1, 1974, and its amendments including P.D. No. 850 (effective December 16, 1975) and Batas Pambansa Blg. 130 (effective August 21, 1981). [2][3]
- Prior to P.D. 442: Termination Pay Law, R.A. No. 1052 (eff. June 12, 1954) as amended by R.A. No. 1787 (eff. June 21, 1957), which recognized the mesada and impliedly acknowledged the licitness of term employment. [11][12]
- Code of Commerce, Art. 302, which governed employment without a fixed period before repeal and implicitly acknowledged fixed-term employment and the mesada concept.
- Civil Code of the Philippines (approved June 18, 1949; eff. August 30, 1950), which treats obligations with a period and contains no prohibition against term employment; Article 1193 (third paragraph) cited in construing the concept of a day certain. [19]
- Circular No. 8, series of 1969, of the Bureau of Private Schools (referenced by the Regional Director as prohibitive of the termination ground relied upon by Brent School). [7]
- Minister of Labor Policy Instructions No. 8 (promulgated April 26, 1976), recognizing certain company officials may lose jobs when not re-elected, implicitly recognizing fixed-term practice in some corporate contexts. [27]
Precedents and Illustrative Authorities Discussed
- Biboso v. Victorias Milling Co., Inc., 76 SCRA 250 (March 31, 1977): recognized validity of stipulations for a term in employment and held that parties aware of a limited tenure are free to renew or let lapse the contract. [13]
- J. Walter Thompson Co. (Phil.) v. NLRC, 126 SCRA 458 (December 29, 1983): involved an executive engaged for a fixed period, cited as supportive of fixed-term validity. [14]
- Escudero v. Office of the President, G.R. No. 57822 (April 26, 1989): held that expiration of a definite-period employment terminates the appointment without need of additional termination letter; the notice of non-renewal is a reminder, not a termination letter. [32]
- Labajo v. Alejandro, G.R. No. 80383 (September 26, 1988): cited in Escudero as consistent authority.
- American authorities cited for general principle: 17 Am Jur 2d; 56 C.J.S.; quotations that a contract specifying its period terminates upon expiration. [16][17]
- Additional j