Regala vs. Manila Hotel Corp.

Factual Background

Petitioner was engaged by respondent as a waiter in February 2000 and later performed duties as cook helper from October 18, 2004 to June 26, 2006. He worked six days weekly and received a stated daily wage of P382.00 until December 2009. Manila Hotel remitted SSS and PhilHealth contributions on his behalf. His waiter duties included mise en place, order taking, and serving at several hotel outlets and he attended hotel trainings between October 2008 and May 2009. Petitioner alleged he was not recognized as a regular rank-and-file employee despite years of service and that respondent constructively dismissed him by reducing his work days from five days to two days per week beginning December 2, 2009, thereby diminishing his salary.

Claims and Defenses at First Instance

Regala filed a complaint for constructive dismissal and regularization, non-payment of paternity leave pay, and claims for backwages against Manila Hotel Corporation and its officers. Respondent denied regular employment status and contended that petitioner was an extra or freelance waiter engaged on short-term, fixed or determinable periods to meet temporary increases in business. Manila Hotel produced sample fixed-term service contracts and several one-to-three-day Service Agreements which it described as evidencing temporary engagements and expressly stating that the extra waiters were not considered employees of the company.

Labor Arbiter Ruling

The Labor Arbiter dismissed the complaint on September 8, 2010. The Arbiter found that petitioner was a fixed-term employee who voluntarily executed Service Agreements and knew his engagement was for a fixed period. The Arbiter also found no coercion or vitiation of consent in the execution of those contracts. The Labor Arbiter further held that constructive dismissal failed because petitioner continued to report for work when he filed the complaint, and denied claims for paternity leave pay and backwages.

NLRC Ruling

On appeal, the NLRC reversed the Labor Arbiter in its March 24, 2011 Decision. The NLRC held that Manila Hotel failed to produce a written contract from the time of petitioner’s initial engagement in February 2000 that would show fixed-term employment. In the absence of such proof, the NLRC applied the presumption of regular employment. The Commission further found that petitioner performed activities usually necessary and desirable to respondent’s business. The NLRC concluded that the reduction of petitioner’s work days from five to two per week amounted to constructive dismissal and ordered reinstatement without loss of seniority and payment of full backwages from December 2, 2009 to actual reinstatement, less wages already received.

Court of Appeals Ruling

Manila Hotel petitioned the Court of Appeals for certiorari alleging grave abuse of discretion by the NLRC. The CA granted the petition on May 22, 2012 and set aside the NLRC decision and resolution, reasoning that petitioner failed to prove coercion in executing his fixed-term contracts and that respondent’s practice of hiring extra waiters for specified periods did not vitiate the validity of those contracts. The CA concluded that petitioner was a fixed-term employee and that the expiration of his service agreements did not constitute illegal dismissal. The CA denied reconsideration in a November 19, 2012 Resolution.

Issues Presented to the Supreme Court

The dispositive issues were whether petitioner was a regular employee of Manila Hotel Corporation and whether he was constructively dismissed. The case turned on the character of petitioner’s employment and the legal consequences of the hotel’s changes to his work schedule and remuneration.

Preliminary Evidentiary Ruling

Manila Hotel sought belated admission into the Supreme Court record of petitioner’s Daily Time Records and Payroll Journals submitted by way of a March 2016 Manifestation. The Supreme Court refused to admit those documents. The Court explained that the belated submission raised new issues and an inconsistent theory not advanced before the labor tribunals and that evidence in the possession of respondent since 2009 could not be presented for the first time on appeal. The Court emphasized the rule that a reviewing court generally will not entertain factual findings based on evidence produced for the first time on appeal and rejected respondent’s reliance on an inapposite precedent.

Presumption of Regularity and Applicability of Article 295

The Supreme Court held that in the absence of a clear written agreement from petitioner’s initial hiring that he was engaged for a fixed period, he enjoyed the presumption of regular employment. The Court applied Article 295 of the Labor Code which identifies two categories of regular employees: those engaged to perform activities usually necessary or desirable to the employer’s business and those who have rendered at least one year of service. The Court found that petitioner’s duties as a waiter were necessary and desirable to the hotel’s trade and business and that his continuous service since February 2000 confirmed the regularity and indispensability of his functions.

Validity of Service Agreements and Fixed-Term Doctrine

The Court examined the Service Agreements which Manila Hotel relied upon and concluded they were not true fixed-term employment contracts. The instruments showed only specific effectivity dates (March 1, 2, and 3, 2010) but failed to specify definite expiration periods or to account for petitioner’s employment since February 2000. The Court reiterated the jurisprudential rule that the decisive determinant in term employment is the day certain agreed upon for commencement and termination. It held that the Service Agreements were vague, insufficient, and incapable of proving a genuine fixed-term engagement covering petitioner’s long tenure.

Contracts of Adhesion and Brent Criteria

Applying the criteria of Brent School, Inc. v. Zamora, the Court found that the Service Agreements were contracts of adhesion drafted unilaterally by respondent’s Personnel Department and not the product of arm’s-length negotiations. The Court concluded that petitioner did not knowingly and voluntarily agree to be hired on a fixed-term basis at the inception of his employment in 2000 and that he was not on equal footing with Manila Hotel to bargain for those terms. The Court therefore struck down the Service Agreements as intended to deny security of tenure and as contrary to law and public policy.

Constructive Dismissal Analysis

Having concluded that petitioner was a regular employee,