Freyssinet Filipinas Corp. vs. Lapuz

Factual Background

Respondent worked as a warehouse supervisor for petitioner Freyssinet Filipinas Corporation (FFC), a domestic corporation engaged in general construction and pre-stressed and post-tensioning work. Respondent claimed that his employment began in 1977, when he allegedly worked for prior corporate names, namely FF Interior from 1977 to 1982, Freyssinet Post Tensioning System Philippines, Inc. (FPTSPI) or Filsystem from 1982 to 1999, and FFC from 2006 to 2012. He asserted that, except for FPTSPI which he said was owned by Philip Cruz, the remaining entities were owned and operated by petitioner Eric A. Cruz.

Respondent was assigned to various FFC projects. The last assignment was at the Wharton Parksuite Project in Binondo, Manila. In December 2011, respondent stated that he was verbally informed of his termination by the project manager, petitioner Gaudencio S. Reyes, when he was told, “Hoy umalis ka na dyan,” after which he was allegedly no longer allowed to perform his work and enter the premises. Respondent continued reporting until he received a written notice of termination dated January 5, 2012, directing him to secure clearance from the HRD Department, which he complied with.

Petitioners offered a different employment chronology. They claimed that respondent started as warehouse supervisor only on April 11, 2007 under a project employment contract for the Texas Instruments project in Pampanga, which lasted until September 2008. Respondent was allegedly rehired thereafter on a per-project basis for the following assignments: Robinson’s Place in Dumaguete City from September 12, 2008 until February 26, 2010; Calumpit Plant project from March 7, 2010 until April 4, 2011; and Wharton Parksuite project from April 22, 2011 until December 31, 2011. Petitioners supported the claim with copies of respondent’s project employment contracts for Wharton Parksuite showing intermittent engagement for fixed periods of one (1) or three (3) months. Petitioners also asserted that the termination of projects was reported to the DOLE in accordance with Section 2.2 of D.O. No. 19-93, and that corporate officers should not be personally liable absent proof of bad faith.

Proceedings Before the Labor Arbiter

In a Decision dated January 26, 2014, the Labor Arbiter found respondent to be a regular employee of FFC and held that his dismissal was without just or authorized cause. The Labor Arbiter reasoned that petitioners failed to show that they filed termination reports with the DOLE every time a project or phase ended, which the Labor Arbiter treated as indicative that respondent was not a project employee. The Labor Arbiter also considered that respondent had been employed since 1977 and that his work as warehouse supervisor involved tasks usually necessary or desirable in the usual business of the company.

The Labor Arbiter ordered petitioners to pay separation pay equivalent to one month pay for every year of service from 1977 up to 2012, in the amount of P610,500.00, with full backwages from dismissal, plus moral and exemplary damages of P50,000.00 each, and ten percent (10%) attorney’s fees due to the need to litigate.

NLRC Ruling: Project Employment and Expiry of Contract

Petitioners appealed to the NLRC. In a Resolution dated April 30, 2014, the NLRC reversed and set aside the Labor Arbiter’s Decision. It held that respondent was a project employee whose services ended upon the completion of a specific project. The NLRC emphasized that FFC operated in the construction industry, where workers are hired for specific phases of work. It found that respondent was made aware of his project-based employment and duration, and it relied on indicia such as respondent’s identification card, clearance, project employment contracts, and establishment termination reports to the DOLE. Since the most recent project contract had allegedly ended, respondent could not be deemed illegally dismissed; thus, he was not entitled to backwages, separation pay, or other benefits.

The NLRC denied damages for lack of basis and found no showing that petitioners acted in bad faith in terminating respondent, and it likewise denied attorney’s fees. The NLRC’s Resolution dated June 25, 2014 denied respondent’s motion for reconsideration.

Court of Appeals Review: Regular Employment From 1977

Respondent sought relief from the NLRC rulings via a petition for certiorari before the Court of Appeals. In a Decision dated April 20, 2016, the CA reversed the NLRC and reinstated the Labor Arbiter. The CA found respondent to be a regular employee of FFC as early as 1977. It rejected petitioners’ claim that FF Interior, FPTSPI/Filsystem, and FFC were separate and distinct corporations. The CA held that those entities were run by the same people and had merely evolved through different names from the establishment in 1972 to the present corporate name as FFC.

The CA also agreed with the Labor Arbiter that petitioners’ failure to religiously file termination reports established respondent’s regular employment status, and it treated the project employment contracts as an after-thought intended to escape obligations attached to regular employment. Petitioners’ motion for reconsideration was denied in a Resolution dated August 23, 2016, prompting the instant petition.

Issue and the Supreme Court’s Framework for Certiorari

The Supreme Court framed the essential question as whether the CA erred in finding that the NLRC committed grave abuse of discretion. It reiterated that certiorari is an extraordinary remedy. Petitioners had to show that the NLRC gravely abused its discretion. Grave abuse of discretion was described as a capricious and whimsical exercise of judgment, done in a despotic manner due to passion or personal hostility, and amounting to evasion of duty or refusal to perform a duty enjoined by law. It also arises when a tribunal patently violates the Constitution, the law, or established jurisprudence.

Determination of Regular vs Project Employment

The Court held that the CA committed no reversible error in ruling that respondent was a regular and not a project employee. Under Article 295 of the Labor Code, regular employment exists when the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, or when the employee is a casual worker whose activities are not usually necessary or desirable and who has rendered at least one year of service with respect to the activity for which he was employed. By contrast, project employment exists when an employee is hired under a contract specifying that employment lasts only for a specific project, the completion or termination of which is determined at the time of engagement.

To consider an employee as project-based, the employer must prove that the employee was assigned to a specific project or undertaking and that the duration and scope were specified at the time of engagement. If a project employee is assigned to a project or phase with determined or determinable start and end, services may be lawfully terminated upon completion of the project or phase. The Court also underscored the jurisprudential rule that if the job or undertaking is within the regular or usual business of the company and is not identifiably distinct and separate such that constant necessity exists, the work should not be considered a project.

Applying these principles, the Court noted that respondent was supposedly assigned as warehouse supervisor to multiple projects: the Texas Instruments project in Pampanga, Robinson’s Place, the Calumpit Plant project, and Wharton Parksuite. The Court found that petitioners failed to show for the first three projects that respondent was hired on a project basis and that the duration and scope of his work were communicated at the time of engagement. Petitioners presented no employment contracts for those projects. While the absence of a written contract does not automatically grant regular status, the Court treated the lack of contracts as evidence that petitioners failed to establish that respondent was informed of project duration and scope.

The Court further found that petitioners did not show that termination reports were submitted to the DOLE for each completed project, as mandated by Section 2.2(e) of D.O. No. 19-93. It reiterated that failure to file termination reports every time a project or phase ends indicates that workers hired were not project employees. It noted that while petitioners submitted project employment contracts for Wharton Parksuite, those contracts were still insufficient to prove project employment because respondent was repeatedly and successively rehired as warehouse supervisor for the Wharton Parksuite project across multiple short periods. The Court listed the successive re-hiring periods covering July 1 to August 31, 2010; September 1 to September 30, 2010; October 1 to October 31, 2010; January 16 to February 28, 2011; March 1 to March 31, 2011; June 1 to June 30, 2011; July 1 to September 30, 2011; and October 1 to December 31, 2011.

Despite the repeated re-engagement, petitioners failed to show that respondent’s services were needed only for the contracted periods and that the particular phase or undertaking had been completed to justify termination. The Court concluded that the successive short-term contracts and continued re-hiring to perform the same kind of work for the same project, contract after contract, indicated an attempt to circumvent tenurial security. It reiterated the rule that periods imposed to prevent an employee from acquiring tenurial security should be struck down as contrary to public morals, good customs, or public order.

Even assuming project employment, the Court invoked the doctrine that employment ceases to be co-terminous with specific projects when an employee is continuously rehired due to the employer’s business demands and re-engaged for many more p