Title
Grandspan Development Corp. vs. Bernardo
Case
G.R. No. 141464
Decision Date
Sep 21, 2005
Workers employed by Grandspan Development Corporation were illegally dismissed; court ruled them regular employees, not project-based, due to lack of evidence and due process violations.
truck scale monitors
illegal dismissal
regular employees

Case Summary (G.R. No. 141464)

Factual Background

Respondents alleged that sometime in 1990, petitioner employed them as truck scale monitors, with a daily salary of P104.00 each, assigning them to the Truck Scale Section of petitioner’s Warehouse/Materials Department. Respondents claimed that petitioner issued them identification cards signed by petitioner’s personnel manager, Bonifacio Selmo. On October 28, 1992, petitioner allegedly sent them a notice terminating their services effective October 29, 1992, citing their use of profane or offensive language in violation of Article VI (2) (a) of the company’s Rules and Regulations.

Petitioner denied that respondents were its employees. It asserted that respondents were employees of J. Narag Construction, which petitioner described as an independent contractor. Petitioner explained that in the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioner for fabrication works for the HCMG or Sogo project due for completion in September 1992. Petitioner claimed it subcontracted those services to J. Narag Construction, which in turn allegedly assigned its “three helpers,” corresponding to respondents, to work for petitioner’s project.

Petitioner further stated that in October 1992, Manuel G. Lee, petitioner’s warehouse manager, received a report from supervisor Robert Ong that respondents vandalized the company’s logbook and chairs. Petitioner then sent J. Narag Construction a memorandum terminating respondents’ services for violation of the company’s rules.

Labor Arbiter Proceedings

After the submission of pleadings and position papers, the Labor Arbiter rendered a decision on June 30, 1994 dismissing respondents’ complaint. The Labor Arbiter concluded that respondents were project employees whose services ended upon completion of the project for which they were hired.

NLRC Remand and Subsequent Certiorari

On appeal, the National Labor Relations Commission (NLRC) issued a Resolution dated March 7, 1995 remanding the case to the Labor Arbiter for appropriate proceedings to determine whether an employer-employee relationship existed between the parties. The parties filed motions for reconsideration, but the NLRC denied them in separate resolutions dated April 28, 1995 and May 31, 1995.

Respondents filed a petition for certiorari. By reason of the Court’s ruling in St. Martin’s Funeral Home vs. NLRC, the petition was referred to the Court of Appeals in line with the hierarchy of courts. During the appellate proceedings, respondent Edgar Del Prado died, and Edgardo Del Prado was substituted as his surviving parent.

Court of Appeals’ Decision and Resolution

On September 17, 1999, the Court of Appeals granted respondents’ petition. It annulled the NLRC resolutions and ordered petitioner and J. Narag Construction to reinstate respondents Bernardo and Cenidoza to their former positions and to pay jointly and severally their backwages and other benefits. It also ordered petitioner to pay Edgar Del Prado’s surviving parent, Edgardo Del Prado, separation pay.

The Court of Appeals held that respondents were employees of petitioner. It reasoned that respondents were assigned to petitioner’s truck scaling materials department, worked in petitioner’s premises using petitioner’s materials, supplies, and equipment, were supervised by petitioner in the manner and results of their work, and performed services directly connected to petitioner’s usual business, namely fabrication of heavy structural components. It observed that the memorandum dismissing respondents was issued by petitioner’s materials manager, Manuel G. Lee, and addressed to petitioner’s personnel department, despite containing a self-serving statement that respondents were “J. Narag Construction personnel.” Based on those circumstances, the Court of Appeals found that J. Narag Construction was a labor-only contractor and that while respondents were on J. Narag’s payroll, such fact did not establish J. Narag as the employer.

On the asserted project-employment theory, the Court of Appeals found respondents to be non-project workers because petitioner failed to present proof of termination reports required for project employees, citing the need for reports filed with the nearest public employment office as required by policy. It held that respondents were illegally dismissed due to failure of substantial evidence for the asserted charge of profane or offensive language and due to denial of notice and hearing. It ruled that petitioner violated notice-and-hearing requirements and thus rendered the dismissal void, and consequently applied Article 279 on security of tenure and entitlement to reinstatement and full backwages. For Del Prado, the Court of Appeals adjusted the remedy to separation pay due to the impracticability of reinstatement, computing separation pay as one month salary for every year of service in addition to backwages.

On January 6, 2000, the Court of Appeals denied petitioner’s motion for reconsideration, but modified the decision to award Del Prado separation pay and backwages.

The Parties’ Contentions Before the Supreme Court

The principal issue on review was whether the Court of Appeals erred in holding that respondents were employees of petitioner. Petitioner argued that it had no employer-employee relationship with respondents and maintained that they were employees of J. Narag Construction, which petitioner characterized as an independent contractor.

Petitioner also insisted that respondents were project employees, and thus their employment ended upon completion of petitioner’s HCMG or Sogo project in September 1992.

Legal Basis and Reasoning on Employer-Employee Relationship

The Supreme Court applied the test for determining an employer-employee relationship: it hinges on resolving who selected the employees, who paid their wages, who had the power to dismiss them, and who exercised control over the methods and results of the work, as articulated in Miguel vs. JCT Group, Inc.

The Court held that the circumstances found by the Court of Appeals established petitioner’s control and indicia of employment. Respondents were assigned to activities directly related to petitioner’s main business. They worked in petitioner’s premises using petitioner’s equipment, materials, and supplies. Petitioner’s warehouse manager and supervisors supervised their work. Petitioner’s termination of respondents also appeared to have emanated from its management, rather than from J. Narag Construction.

The Court further addressed petitioner’s contractor theory. It found no basis to disturb the Court of Appeals’ finding that J. Narag Construction was a labor-only contractor, under Article 106 of the Labor Code, as amended. The Supreme Court noted specific factual deficiencies supporting that conclusion: J. Narag Construction was not registered as a building contractor with the SEC, it had no contract with petitioner, and there was no proof of financial capability or a list of equipment, tools, machinery, and implements used in the business. Given those findings, J. Narag Construction could not be the employer.

Legal Basis and Reasoning on Project Employment

On petitioner’s claim that respondents were project employees, the Supreme Court relied on the governing criteria in Kiamco vs. NLRC for distinguishing project employees from regular employees: project employment exists when employees are hired for a specific project whose duration and scope are specified at the time of hiring, and when completion or termination is determined at the time of engagement.

The Court found that petitioner failed to present employment contracts showing that respondents were hired for the duration of the HCMG or Sogo project. It also found that petitioner failed to present termination reports upon project completion. The Court treated the requirement of termination reporting as an indication of project employment, referencing Section 2.2 (e) of Labor Department Order No. 19 and the doctrine that failure to file such reports with the nearest public employment office indicates that the workers were not project employees. As a result, the Court upheld the Court of Appeals’ finding that respondents were regular employees.

Security of Tenure and Illegality of Dismissal

As regular employees, respondents were entitled to security of tenure under Article 279 of the Labor Code. Under established jurisprudence reflected in the decision, the burden rested on the employer to prove, by the required quantum of evidence, that dismissal was not illegal. The Supreme Court held that petitioner failed to discharge that burden.

Petitioner’s grounds for dismissal were largely premised on the alleged completion of the project and an alleged report that respondents uttered profane or offensive language violating company rules. Since respondents were not project employees and since the Court of Appeals had found no evidence substantiating the charge of profane or offensive language, the Court held that the dismissal could not be justified.

The Court also sustained the finding of denial of due process. It invoked the rule that an employee sought to be dismissed must receive two written notices: the first to apprise the employee of the particular acts or omissions, and the second to inform the employee of the employer’s decision to dismiss. The decision emphasized that non-compliance with the two-notice requirement makes the dismissal illegal and void. Here, the records showed respondents were not served with notices of the particular acts for which dismissal was

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