Case Summary (G.R. No. 199683)
Key Dates
Relevant contract period: recurring academic-year retainers from June 1 to March 31 over a span beginning in 1989 and renewed for about fifteen years; last retainer covered June 1, 2003 to March 31, 2004. Decision reviewed by the Supreme Court issued in 2016; the 1987 Constitution governs the legal framework applied.
Applicable Law and Precedents
Primary statutory provision: Article 280 of the Labor Code (classification of regular, project, seasonal, and casual employment; security of tenure). Other applicable law noted: Presidential Decree No. 856 (Sanitation Code) as establishing sanitary obligations for private educational institutions. Controlling jurisprudence relied upon by the Court includes Brent v. Zamor (exception for fixed‑term contracts where parties are on equal footing), Sonza v. ABS‑CBN, Price et al. v. Innodata Corp., Fuji Network Television v. Espiritu, Dumpit‑Murillo, Philips Semiconductors v. Fadriquela, Corporal Sr. v. NLRC, and earlier decisions recognizing when professionals are independent contractors.
Factual Background
From 1989 onward LSGI engaged medical professionals as an HST under uniform one‑page Contracts of Retainer limited to each academic year. The contract form characterized the retainer as temporary, automatically ceasing at the specified expiration (end of school year), and subject to termination for unsatisfactory performance or just cause. Petitioners rendered services regularly on scheduled clinic days (approximate clinic hours averaging nine hours/week), were on call for the school community, received monthly payments, 13th month pay, annual salary increases and performance bonuses, participated in staff meetings and school activities, and were publicly identified as part of the “La Sallian Family” in the student handbook. LSGI informed the HST at the end of the 2003–2004 school year that contracts would not be renewed because LSGI intended to hire full‑time doctors; one HST physician was later hired as a full‑time doctor.
Procedural History
Petitioners filed an illegal dismissal complaint with the NLRC claiming regular employment, entitlement to reinstatement or separation pay and back wages. The Labor Arbiter initially found petitioners to be independent contractors and dismissed the complaint but awarded compassionate separation pay. Both parties appealed to the NLRC. The NLRC held the petitioners were fixed‑term employees under valid contracts of retainer and denied reinstatement or separation pay. Petitioners sought certiorari relief in the Court of Appeals, which dismissed the petition, affirming the NLRC’s determination that petitioners were fixed‑term employees. Petitioners then filed a petition for review on certiorari with the Supreme Court under Rule 45.
Issues Presented to the Supreme Court
- Whether petitioners were fixed‑period employees and not regular employees of LSGI.
- Whether petitioners were illegally dismissed.
- Whether petitioners are entitled to reinstatement, back wages, separation pay, damages, and attorney’s fees.
- Whether respondents acted in bad faith such that they are solidarily liable.
Labor Arbiter, NLRC, and Court of Appeals Findings (summarized)
- Labor Arbiter: held petitioners to be independent contractors (no employer control; professional fees not salary; clinic logins and IDs for security, not discipline), but nonetheless awarded compassionate separation pay.
- NLRC: rejected independent contractor classification; found petitioners to be valid fixed‑term employees under the Contracts of Retainer, emphasizing petitioners’ understanding and voluntary acceptance of fixed terms over many years; concluded non‑renewal was a valid termination of the fixed‑term contract, thus no entitlement to reinstatement or separation pay. NLRC relied on Brent v. Zamor.
- Court of Appeals: affirmed NLRC, holding that LSGI, as employer, may regulate employment terms, that receipt of benefits or compliance with administrative rules did not automatically convert petitioners into regular employees, and that petitioners were hired for specific tasks under fixed terms.
Legal Standards Articulated by the Supreme Court
- 1987 Constitution and the Labor Code enshrine security of tenure; classification under Article 280 of the Labor Code governs whether a worker is a regular employee entitled to protection against arbitrary dismissal.
- Nomenclature of contract (the label placed by parties) does not determine employment status; courts look to the substantive nature of the relationship (Price v. Innodata; Fuji v. Espiritu).
- Fixed‑term employment is permissible only in limited circumstances: (a) where a fixed term was agreed upon freely and knowingly without vitiating factors; and (b) where employer and employee dealt on substantially equal terms with no moral dominance by the employer (Brent as exception).
- The power of control is decisive — existence of the employer’s right to control the manner and means of work is sufficient; actual exercise of control is not required (control refers to the right, not necessary actual supervision).
Application of Law to Facts — Independence vs. Employer Control
- The Court found that petitioners were not independent contractors. Although they were professionals, the relationship lacked the essential features of equal bargaining position and freedom from employer control required for independent contractor status. Precedents recognizing professionals as independent contractors were distinguished where those professionals operated with autonomy and without the employer’s right of control — circumstances absent here.
- The Contracts of Retainer were prepared solely by LSGI, lacked specificity regarding tasks, contained termination provisions vesting LSGI with discretion to terminate for unsatisfactory performance or just cause, and thus evidenced LSGI’s power of control. The Court emphasized that the mere fact that professionals signed the contract does not establish equality of bargaining power; repeated renewals over fifteen years and absence of negotiated, specific terms showed petitioners were not on equal footing with LSGI.
Application of Law to Facts — Regular Employment and Repeated Renewals
- The Court identified three decisive factors converting the relationship into regular employment: (
Case Syllabus (G.R. No. 199683)
Procedural History
- Complaint for illegal dismissal with prayer for separation pay, damages and attorney’s fees filed before the National Labor Relations Commission (NLRC) by members of the Health Service Team (HST), including petitioners; Bro. Bernard S. Oca included as respondent.
- Labor Arbiter dismissed the complaint, ruling petitioners were independent contractors under retainership contracts; nonetheless awarded separation pay on compassionate grounds.
- Both parties appealed to the NLRC. NLRC (First Division) modified the Labor Arbiter’s ruling: found petitioners to be fixed-term employees under valid Contracts of Retainer and denied reinstatement and separation pay to complainants affected by that ruling.
- Petitioners filed a petition for certiorari under Rule 65 before the Court of Appeals; the Court of Appeals dismissed the petition, finding no grave abuse of discretion by the NLRC and affirming fixed-term status.
- Petitioners elevated the matter by petition for review on certiorari under Rule 45 to the Supreme Court (G.R. No. 199683).
- Supreme Court granted the petition, reversed the Court of Appeals and NLRC decisions as to the three petitioners who filed the Rule 45 appeal, and remanded to the NLRC for computation of separation pay and full back wages.
Facts
- Since 1989 and for fifteen (15) consecutive years, La Salle Greenhills, Inc. (LSGI) contracted medical professionals (pediatricians, dentists, a physician) as its Health Service Team (HST).
- Members of the HST, including petitioners Arlene T. Samonte, Vladimir P. Samonte and Ma. Aurea S. Elepano, signed identical one-page Contracts of Retainer for each academic calendar year, generally from June 1 to March 31.
- The last Contract of Retainer covered the school year June 1, 2003 to March 31, 2004.
- On the last day of the 2003–2004 school year, LSGI Head Administrator Herman Rochester informed the HST that their contracts would not be renewed because LSGI decided to hire two full-time doctors/dentists; one physician from the HST was subsequently hired as a full-time doctor.
- Petitioners’ requests for separation pay were denied by LSGI, prompting the filing of the NLRC complaint.
Contract of Retainer (form and salient clauses)
- The Contracts of Retainer were uniform one-page documents prepared by LSGI, containing fields for name, address, tax details, department assigned, project/undertaking, job task and rate.
- The Job Task entry typically read: School [physician] from June 1, [x x x] to March 31, [x x x].
- Conditions expressly stated:
- "This retainer is only temporary in character and, as above specified, shall be solely and exclusively limited to the project/undertaking and/or to the job/task assigned to the retainer within the said project/undertaking;"
- "This retainer shall, without need of any notice to the retainer, automatically cease on the aforespecified expiration date/s of the said project/undertaking and/or the said job/task; provided, that this retainer shall likewise be deemed terminated if the said project/undertaking and/or job/task shall be completed on a date/s prior to their aforespecified expiration date/s;"
- "The foregoing notwithstanding, at any time prior to said expiration or completion date/s, La Salle Greenhills, Inc. may upon prior written notice to the retainer, terminate this contract should the retainer fail in any way to perform his assigned job/task to the satisfaction of La Salle Greenhills, Inc. or for any other just cause."
- Contracts bore the signatures of LSGI officials: Herman G. Rochester (Head Administrator Retainer), Belen T. Masilungan (Personnel Officer) and were signed in the presence of Dante M. Ferrer and Bro. Bernard S. Oca (FRD Head Administrator / President).
Petitioners’ Allegations and Evidence of Regular Employment
- Petitioners alleged they were regular employees who could only be dismissed for just and authorized causes.
- Evidence of regular employment asserted by petitioners included:
- Monthly salary for the ten-month period of a given school year, with specific amounts listed for various HST members, including:
- Jennifer A. Ramirez – Php 20,682.73
- Brandon D. Ericta – Php 28,603.62
- Arlene T. Samonte – Php 20,682.73
- Vladimir P. Samonte – Php 20,682.73
- Alma S. Resurrecion – Php 12,700.83
- Ma. Socorro A. Salazar – Php 21,117.00
- Ma. Aurea S. Elepano – Php 8,429.43
- Annual 13th month pay equivalent to one month’s salary.
- Automatic yearly salary increases, discretionary to LSGI’s Executive Administrator, reflected in subsequent monthly salaries.
- Since 1996, performance bonuses and year-end performance evaluations were instituted for the HST.
- Monthly salary for the ten-month period of a given school year, with specific amounts listed for various HST members, including:
- Petitioners’ work schedule and duties advanced as indicia of regular employment:
- Average of nine hours of work per week, plus being on call for medical exigencies of the La Sallian community.
- Assignment over the years to additional tasks and services including:
- Attendance at staff meetings and participation in formulation/adoption of policies and programs.
- Participation in school-sponsored gatherings and activities (e.g., Kabihasnan fair), symposiums, seminars, orientations, workshops, lectures, and NAMFREL quick count.
- Participation in medical/dental missions in the name of respondent school.
- Formulation of the Health Services Unit Manual.
- Participation in collation and evaluation of services for PAASCU accreditation.
- Yearly performance evaluations administered by HRD-CENTRO Head Administrator.
- Designation of certain complainants (e.g., Dr. Jennifer A. Ramirez) as members of panels of investigation into alleged misconduct of regular employees.
- Regular inspection of canteen concessionaire and toilet facilities to ensure sanitation standards.
- Public presentation of complainants as members of the "LA SALLIAN FAMILY: Builder of a Culture of Peace" under the heading "Health Services Team" in the La Salle Green Hills High School Student Handbook 2003–2004.
Respondent LSGI’s Position and Defense
- LSGI denied petitioners were regular employees and argued they were independent contractors retained for their medical skills and expertise to provide ancillary medical and dental services.
- LSGI’s contentions included:
- Complainants were professional physicians and dentists on retainer basis, paid monthly retainer fees (not regular salaries).
- LSGI had no power to impose