G.R. No. 211892 - Innodata Knowledge Services, Inc. vs. Inting

Case Summary (G.R. No. 211892)

Key Dates and Procedural Posture

Respondents were placed on forced leave effective January 7, 2010; IKSI later issued termination notices dated May 27, 2010 with effectivity July 7, 2010. Labor Arbiter rendered decision November 10, 2010; National Labor Relations Commission (NLRC) affirmed with modification on May 31, 2011. Court of Appeals (Cebu) reversed the NLRC on August 30, 2013; the CA denied reconsideration on March 12, 2014. The petition for review to the Supreme Court followed.

Applicable Law and Constitutional Basis

The legal analysis is governed by the 1987 Philippine Constitution’s guarantees on security of tenure and protection of labor, and by the Labor Code provisions cited in the record: Article 295 (regular, project, seasonal, casual employment), Article 297 (just causes for dismissal), Article 298 (closure and reduction of personnel/retrenchment), Article 301 (suspension of operation not deemed termination when bona fide and within six months), and related jurisprudence on fixed-term and project employment and employer burden of proof.

Factual Summary

Respondents were contracted as senior/junior reviewers under written contracts indicating employment “for the duration of the Project” expected to last up to five years. IKSI required respondents to work temporarily on a different project (Bloomberg) without new contracts. IKSI placed respondents on forced leave January 7, 2010, citing business conditions and client requirements, and issued termination letters on May 27, 2010 effective July 7, 2010. IKSI continued some operations and hired new personnel after placing respondents on forced leave.

Central Issues Presented

(1) Whether respondents were properly characterized as project or fixed-term employees, or whether they were regular employees entitled to security of tenure; (2) whether IKSI’s placement of respondents on forced leave and subsequent termination constituted a lawful temporary lay-off/retrenchment or an illegal (constructive or actual) dismissal; and (3) whether procedural defects (verification and certification against forum shopping) justified exclusion of certain respondents from relief.

Legal Standard on Employment Status and Contracts

The Labor Code determines employment status regardless of parties’ labels; project employment is valid only when the employment is for a specific project whose duration and scope are determined at engagement. Fixed-term contracts are distinct from project contracts: fixed-term focuses on a day certain for commencement and termination. Labor contracts are impressed with public interest and construed in favor of the worker; ambiguities are resolved against the employer who drafted the contract.

Court’s Analysis of the Contracts’ Nature

The Supreme Court found that, although the written contracts bore “project-based” language and a five-year maximum term, IKSI failed to prove that respondents worked exclusively on the specified ACT Project and that the project’s duration and scope were adequately determined at hiring. The requirement that respondents perform work on a different project (Bloomberg) without new contracts placed their duties outside the declared scope of the ACT Project and undermined the project-employee characterization. Moreover, the five-year “term” operated like a fixed-term arrangement. Because IKSI’s contracts were ambiguous and susceptible to dual characterization (project or fixed-term) and because such ambiguity must be resolved against the drafting employer, the Court concluded the contracts did not validly preclude regular status.

Burden of Proof and Requirement for Bona Fide Suspension or Retrenchment

Where an employer relies on temporary lay-off, suspension or retrenchment for economic reasons, it bears the burden of proving with clear and convincing evidence the existence of bona fide suspension of operations, substantial or imminent losses, and that no reasonable alternatives (such as reassignment) existed. Article 301 permits suspension without termination only where the bona fide suspension of operation does not exceed six months and employees are recalled within statutory parameters; otherwise, suspension beyond that period or failure to recall renders the employment terminated.

Court’s Findings on IKSI’s Economic Justification and Conduct

IKSI did not present sufficient evidence of a bona fide suspension of operations or specific, substantial losses that would legitimize temporary lay-off or permanent retrenchment. IKSI’s notices were issued after the forced leave took effect; it did not comply with the mandatory one-month prior notice to employees and the DOLE under Article 298 for retrenchment. IKSI continued to operate, retained other ACT Project personnel, and advertised for and hired new employees after placing respondents on forced leave—facts inconsistent with a genuine lack of work and undermining IKSI’s claim of bona fide suspension. The termination notices also did not invoke any statutory just cause under Article 297. Given these failures, the Court found that IKSI’s forced leave was not a legitimate temporary suspension under Article 301 and that, when the employer later issued termination letters, respondents had in fact been constructively and subsequently actually dismissed.

Constructive Dismissal and Reliance on Precedent

The Court applied precedent holding that forced leave crafted to be indefinite or used to place employees in an uncertain status can amount to constructive dismissal where the employer seeks to circumvent labor protections. The circumstances here—abrupt forced leave, surrender of IDs and vacating workstations, absence of proper notices, subsequent hiring of replacements, and delayed or inconsistent positions taken by IKSI—aligned with such precedents and demonstrated bad faith.

Procedural Issues: Verification and Certification Against Forum Shopping

The Court applied flexible procedural rules in labor cases. Verification defects and missing certifications against forum shopping are formal requirements that may be relaxed when substantial

Case Syllabus (G.R. No. 211892)

Case Background and Procedural Posture

Petition for review filed by Innodata Knowledge Services, Inc. (IKSI) seeking reversal of the Court of Appeals (CA), Cebu, Twentieth Division Decision dated August 30, 2013 and its Resolution dated March 12, 2014 in CA-G.R. CEB-SP No. 06443, which had reversed and set aside the NLRC Decision of May 31, 2011.
Labor Arbiter (LA) issued consolidated decision on November 10, 2010 (NLRC RAB VII consolidated cases), ruling there was no illegal dismissal and ordering recall when work becomes available or, if reinstatement infeasible, separation pay in lieu of reinstatement.
NLRC affirmed LA ruling with modification on May 31, 2011, awarding in lieu of reinstatement Php563,500.00 to twelve complainants-appellants named in the NLRC decision.
CA granted petition of the employees on August 30, 2013, reversed NLRC, declared petitioners illegally dismissed, and awarded backwages, separation pay, moral and exemplary damages, and attorney’s fees; remanded to LA for computation.
IKSI’s Motion for Reconsideration before the CA denied in Resolution dated March 12, 2014.
The Supreme Court (Peralta, J.) dismissed IKSI’s petition and affirmed with modifications the CA decision (G.R. No. 211892; decision penned December 06, 2017 as appears in the source; reported 822 Phil. 314; 114 O.G. No. 39).

Facts of the Case

IKSI is engaged in data processing, encoding, indexing, abstracting, typesetting, imaging, and related activities; it was hired by Applied Computer Technologies (ACT) (U.S.-based) to review litigation documents.
ACT required IKSI to hire lawyers or law graduates as reviewers to classify litigation documents and ensure timely outputs.
IKSI engaged respondents as senior and junior reviewers under “Project-Based Employment Contracts” with a contract duration of five (5) years (the Content Supply Chain Project / ACT Project).
On January 7, 2010 respondents received notices of forced leave from IKSI placing them on indefinite forced leave allegedly due to changes in business conditions, client requirements and specifications.
Respondents filed complaints for illegal dismissal, reinstatement or separation pay, backwages and damages.
On May 27, 2010 IKSI sent separate notices terminating project employment contracts citing unavailability of new work in the product stream and uncertainties regarding new workloads; termination letters indicated effective date of July 7, 2010.
Evidence showed respondents were required at one point (sometime in November 2008) to work on another project called “Bloomberg” without new contracts and were referred to as Case Classifiers rather than Document Reviewers; respondents initially resisted but complied for fear of losing employment.
IKSI continued operations after January 2010 forced leave and hired additional employees via paid advertisements in Sunstar Cebu (February 24, 2010 and March 7, 2010).

Employment Contracts — Terms and Specific Provisions (as pleaded by IKSI)

Contracts titled “Project-Based Employment Contracts.”
“Whereas” clause: Company desires services of a Project Employee for the Content Supply Chain Project.
Clause 1 (Term of Employment): Employee shall hold position of [Junior/Senior] Reviewer and perform duties for the duration of the Project, expected to be completed after a maximum of five (5) years, or on or before ______; grants one Saturday off per month for duration of project-based contract.
Clause 2 (Work Description): Employee to render work per schedule/program assigned/reassigned from time to time for completion of the Project; may perform other duties related or incidental to the Project as assigned.
Clause 5 (Termination): Company may terminate contract upon thirty (30) days prior notice during the Term for reasons including completion of contracted services prior to agreed date, earlier completion of specific phase, substantial decrease in volume of work for the Project, or cancellation/indefinite suspension/termination of the project contract.
Clause 6 (Compensation and Benefits): Employee to receive gross salary and possible incentive pay for exceeding project quota.

Issues Presented

Whether the CA erred in reversing the NLRC which had found respondents to be project employees validly placed on floating status and not illegally dismissed.
Whether respondents’ employment status was project-based, fixed-term, or regular given the contract language and the actual circumstances of employment.
Whether IKSI lawfully placed respondents on forced leave/floating status and, if not, whether respondents were constructively and/or actually dismissed and entitled to reliefs.
Procedural issue: whether some respondents could be included as petitioners despite non-compliance with verification and certification against forum shopping requirements; whether Atty. Ennoh Chentis Fernandez was properly included in CA decision.

Governing Legal Provisions and Doctrines Quoted by the Court

Article 295, Labor Code (Regular and casual employment) — statutory test distinguishing regular employees, project employees, seasonal employees and casual employees; provision quoted in full in the source.
Article 297, Labor Code (Termination by Employer) — enumerates just causes for dismissal (serious misconduct, gross neglect, fraud, commission of crimes, and analogous causes).
Article 298, Labor Code (Closure and Reduction of Personnel) — retrenchment, redundancy and separation pay rules; one (1) month pay or one (1) month pay per year, etc.; one month DOLE notice requirement.
Article 301, Labor Code (When Employment not Deemed Terminated) — bona fide suspension of operation not exceeding six (6) months does not terminate employment; employee must indicate desire to resume not later than one month from resumption; six-month limit for suspension reiterated.
Article 1700, Civil Code — relation between capital and labor impressed with public interest; labor contracts subject to special laws and police power.
Article 2220, Civil Code — basis for awarding moral damages (referenced as the legal basis for moral damages award).
Authorities and jurisprudence cited: ALU-TUCP v. NLRC; Dacles v. Millenium Erectors; Villanueva v. NLRC and Innodata; Servidad v. NLRC; Innodata Philippines, Inc. v. Quejada-Lopez; Price v. Innodata Phils., Inc.; GMA Network, Inc. v. Pabriga; Brent School v. Zamora; Bontia v. NLRC; Lopez v. Irvine Construction Corp.; PT&T v. NLRC; Nasipit Lumber v. NOWM; ICT Marketing Services, Inc. v. Sales; others as referenced in source.

Court’s Analysis — Nature of the Employment Relationship

General principle: law, not the parties’ label, determines employment status; labor contracts yield to public interest and statutory protections.
Project employment recognized where employment is fixed for a specific project the duration and scope of which are determined at engagement.
Employer bears the burden of proving: (a) duration and scope of employment were specified at time of engagement; and (b) there was indeed a project.
IKSI proved existence of a written contract referring to the ACT Project and an expected maximum five-year term, but failed to prove that respondents actually worked only on that specific project or that duration and scope were reasonably determinable at hiring.
Significant factual finding: respondents were required to work on the separate Bloomberg pro