53. MALICDEM VS. MARULAS INDUSTRIAL CORPORATION necessary and indispensable to the usual business or trade of the employer.

In D.M. Consunji, Inc. v. Estelito Jamin, 670 SCRA 235 (2012), and Liganza

G.R. No. 204406. February 26, 2014.* v. RBL Shipyard Corporation, 504 SCRA 678 (2006), the Court reiterated the
MACARTHUR MALICDEM and HERMENIGILDO FLORES, ruling that an employment ceases to be coterminous with specific projects
petitioners, vs. MARULAS INDUSTRIAL CORPORATION and MIKE when the employee is continuously rehired due to the demands of the
MANCILLA, respondents.  employer’s business and re-engaged for many more projects without
Labor Law; Regular Employees; When an employer renews a contract interruption.
of employment after the lapse of the six-month probationary period, the Same; Same; Project Employees; The project employment contracts
employee thereby becomes a regular employee. No employer is allowed to that the petitioners were made to sign every year since the start of their
determine indefinitely the fitness of its employees.—Under Article 281 of the employment were only a stratagem to violate their security of tenure in the
Labor Code, however, “an employee who is allowed to work after a company.—The respondents cannot use the alleged expiration of the
probationary period shall be considered a regular employee.” When an employment contracts of the petitioners as a shield of their illegal acts. The
employer renews a contract of employment after the lapse of the six-month project employment contracts that the petitioners were made to sign every
probationary period, the employee thereby becomes a regular employee. No year since the start of their employment were only a stratagem to violate their
employer is allowed to determine indefinitely the fitness of its security of tenure in the company. As restated in Poseidon Fishing v.
employees. While length of time is not the controlling test for project NLRC, 482 SCRA 717 (2006), “if from the circumstances it is apparent that
employment, it is vital in determining if the employee was hired for a specific periods have been imposed to preclude acquisition of tenurial security by the
undertaking or tasked to perform functions vital, necessary and employee, they should be disregarded for being contrary to public policy.”
indispensable to the usual business of trade of the employer. Thus, in the Same; Project Employees; Construction Industry; It is widely known
earlier case of Maraguinot, Jr. v. NLRC, 284 SCRA 539 (1998), it was ruled that in the construction industry, a project employee’s work depends on the
that a project or work pool employee, who has been: (1) continuously, as availability of projects, necessarily the duration of his employment.—The
opposed to intermittently, rehired by the same employer for the same tasks respondents’ invocation of William Uy Construction Corp. v. Trinidad, 615
or nature of tasks; and (2) those tasks are vital, necessary and indispensable SCRA 180 (2010), is misplaced because it is applicable only in cases
to the usual business or trade of the employer, must be deemed a regular involving the tenure of project employees
employee. 565in the construction industry. It is widely known that in the
Same; Same; The test to determine whether employment is regular or construction industry, a project employee’s work depends on the availability
not is the reasonable connection between the particular activity performed by of projects, necessarily the duration of his employment. It is not permanent
the employee in relation to the usual business or trade of the employer.—The but coterminous with the work to which he is assigned. It would be extremely
test to determine whether employment is regular or not is the reasonable burdensome for the employer, who depends on the availability of projects, to
connection between the particular activity performed by the employee in carry him as a permanent employee and pay him wages even if there are no
relation to the usual business or trade of the employer. If the employee has projects for him to work on. The rationale behind this is that once the project
been performing the job for at least one year, even if the performance is not is completed it would be unjust to require the employer to maintain these
continuous or merely intermittent, the law deems the repeated and continuing employees in their payroll. To do so would make the employee a privileged
_______________ retainer who collects payment from his employer for work not done. This is
* THIRD DIVISION. extremely unfair to the employers and amounts to labor coddling at the
564need for its performance as sufficient evidence of the necessity, if expense of management.”
not indispensability of that activity to the business. Same; Termination of Employment; Under Article 279 of the Labor
Same; Same; An employment ceases to be coterminous with specific Code, an employee who is unjustly dismissed from work shall be entitled to
projects when the employee is continuously rehired due to the demands of reinstatement without loss of seniority rights and other privileges and to his
the employer’s business and re-engaged for many more projects without full backwages, inclusive of allowances, and to his other benefits or their
interruption.—Granting that they were project employees, the petitioners monetary equivalent computed from the time his compensation was withheld
could only be considered as regular employees as the two factors from him up to the time of his actual reinstatement.—Now that it has been
enumerated in Maraguinot, Jr., are present in this case. It is undisputed that clearly established that the petitioners were regular employees, their
the petitioners were continuously rehired by the same employer for the same termination is considered illegal for lack of just or authorized causes. Under
position as extruder operators. As such, they were responsible for the Article 279 of the Labor Code, an employee who is unjustly dismissed from
operation of machines that produced the sacks. Hence, their work was vital, work shall be entitled to reinstatement without loss of seniority rights and
Page 1 of 5
other privileges and to his full backwages, inclusive of allowances, and to his also terminated after signing a similar document. Thus, both claimed to have
other benefits or their monetary equivalent computed from the time his been illegally dismissed.
compensation was withheld from him up to the time of his actual Marulas countered that their contracts showed that they were fixed-term
reinstatement. The law intends the award of backwages and similar benefits employees for a specific undertaking which was to work on a particular order
to accumulate past the date of the LA decision until the dismissed employee of a customer for a specific period. Their severance from employment was
is actually reinstated. due to the expiration of their contracts.
PETITION for review on certiorari of the decision and resolution of the Court On February 7, 2011, Malicdem and Flores lodged a complaint against
of Appeals. Marulas and Mancilla for illegal dismissal.
The facts are stated in the opinion of the Court. On July 13, 2011, the Labor Arbiter (LA) rendered a decision[5] in favor of
  Urbano, Palamos & Fabros for petitioners. the respondents, finding no illegal dismissal. He ruled that Malicdem and
   Fortun, Narvasa & Salazar for respondents.  Flores were not terminated and that their employment naturally ceased when
566 their contracts expired. The LA, however, ordered Marulas to pay Malicdem
MENDOZA, J.: and Flores their respective wage differentials, to wit:
This petition for review on certiorari[1] under Rule 45 of the Rules of WHEREFORE, the complaints for illegal dismissal are dismissed for lack
Court filed by Macarthur Malicdem (Malicdem) and Hermenigildo Flores of merit. Respondent Marulas Industrial Corporation is, however, ordered to
(Flores) assails the July 18, 2012 Decision[2] and the November 12, 2012 pay complainants wage differential in the following amounts:
Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 124470, 1. Macarthur Malicdem P20,111.26
dismissing their petition for certiorari under Rule 65 in an action for illegal      
dismissal.   2/2/07 – 6/13/08 = None  
    6/14/08 – 8/27/08 = 2.47 mos.  
The Facts:   P377-P362 = P15  
A complaint[4] for illegal dismissal, separation pay, money claims, moral   x 26 days x 2.47 mos. = 963.30
and exemplary damages, and attorney’s fees was filed by petitioners   8/28/08 – 6/30/10 = 22.06 mos.  
Malicdem and Flores against respondents Marulas Industrial Corporation   P382-P362 = P20  
(Marulas) and Mike Mancilla (Mancilla), who were engaged in the business of   x 26 days x 22.06 mos. = 11,471.20
manufacturing sacks intended for local and export markets.
Malicdem and Flores were first hired by Marulas as extruder operators in _______________
2006, as shown by their employment contracts. They were responsible for [5] Id., at pp. 141-149. Penned by Labor Arbiter Raymund M. Celino.
the bagging of filament yarn, the quality of pp yarn package and the 568
cleanliness of the work place area. Their employment contracts were for a   7/1/10 – 2/2/11 = 7.03 mos.  
period of one (1) year. Every year thereafter, they would sign a   P404-P362 = P42  
Resignation/Quitclaim in favor of Marulas a day after their contracts ended,   x 26 days x 7.03 mos. = 7,676.16
and then sign another contract for one (1) year. Until one day, on December     20,111.26
16, 2010, Flores was told not to report for work anymore after being asked to      
sign a ; and    
_______________      
[1] Rollo, pp. 26-44. 2. Hermenigildo Flores P18,440.50
[2] Id., at pp. 8-21; penned by Associate Justice Celia C. Librea-Leagogo      
with Associate Justices Franchito N. Diamante and Abraham B. Borreta,   2/2/08 – 6/13/08 = 4.36 mos. None  
concurring.   6/14/08 – 8/27/08 = 963.30
[3] Id., at pp. 23-24; penned by Associate Justice Celia C. Librea-   8/28/08 – 6/30/10 = 11,471.20
Leagogo with Associate Justices Franchito N. Diamante and Abraham B.   7/1/10 – 12/16/10 = 5.50 mos.  
Borreta, concurring.   P404 – P362 = P42  
[4] Id., at pp. 63-64.   x 26 days x 5.50 mos. = 6,006.00
567paper by Marulas’ HR Head to the effect that he acknowledged the     18,440.50
completion of his contractual status. On February 1, 2011, Malicdem was  
Page 2 of 5
 All other claims are dismissed for lack of merit. _______________
SO ORDERED.[6]  [9] Id., at p. 56.
  [10] Id., at p. 55.
Malicdem and Flores appealed to the NLRC which partially granted their 570on the principal argument that the appellate court erred in affirming the
appeal with the award of payment of 13th month pay, service incentive leave NLRC decision that there was no illegal dismissal because the petitioners’
and holiday pay for three (3) years. The dispositive portion of its December contracts of employment with the respondents simply expired. They claim
19, 2011 Decision[7] reads: that their continuous rehiring paved the way for their regularization and, for
WHEREFORE, the appeal is GRANTED IN PART. The Decision of Labor said reason, they could not be terminated from their jobs without just cause.
Arbiter Raymund M. Celino, dated July 13, 2011, is MODIFIED. In addition to In their Comment,[11] the respondents averred that the petitioners failed
the award of salary differentials, complainants should also be awarded to show that the CA erred in affirming the NLRC decision. They posit that the
13th month pay, service incentive leave and holiday pay for three years. petitioners were contractual employees and their rehiring did not amount to
SO ORDERED.[8] regularization. The CA cited William Uy Construction Corp. v. Trinidad,
_______________ [12] where it was held that the repeated and successive rehiring of project
[6] Id., at p. 148. employees did not qualify them as regular employees, as length of service
[7] Id., at pp. 175-183. Penned by Commissioner Dolores M. Peralta- was not the controlling determinant of the employment tenure of a project
Beley. employee, but whether the employment had been fixed for a specific project
[8] Id., at p. 182. or undertaking, its completion had been determined at the time of the
569 engagement of the employee. The respondents add that for said reason, the
Still, petitioners filed a motion for reconsideration, but it was denied by the petitioners were not entitled to full backwages, separation pay, moral and
NLRC on February 29, 2011. exemplary damages, and attorney’s fees.
Aggrieved, Malicdem and Flores filed a petition for certiorari under Rule Now, the question is whether or not the CA erred in not finding any grave
65 with the CA. abuse of discretion amounting to lack or excess of jurisdiction on the part of
On July 18, 2012, the CA denied the petition,[9] finding no grave abuse of the NLRC.
discretion amounting to lack or excess of jurisdiction on the part of the NLRC.  
It ruled that the issue of whether or not the petitioners were project The Court’s Ruling:
employees or regular employees was factual in nature and, thus, not within The Court grants the petition.
the ambit of a petition for certiorari. Moreover, it accorded respect and due _______________
consideration to the factual findings of the NLRC, affirming those of the LA, [11] Id., at pp. 227-235.
as they were supported by substantial evidence. [12] G.R. No. 183250, March 10, 2010, 615 SCRA 180, citing Caseres v.
On the substantive issue, the CA explained that “the repeated and Universal Robina Sugar Milling Corporation, 560 Phil. 615; 534 SCRA 356
successive rehiring of project employees do not qualify them as regular (2007).
employees, as length of service is not the controlling determinant of the 571
employment tenure of a project employee, but whether the employment has The petitioners have convincingly shown that they should be considered
been fixed for a specific project or undertaking, its completion has been regular employees and, as such, entitled to full backwages and other
determined at the time of the engagement of the employee.”[10] entitlements.
Corollarily, considering that there was no illegal dismissal, the CA ruled A reading of the 2008 employment contracts,[13] denominated as
that payment of backwages, separation pay, damages, and attorney’s fees “Project Employment Agreement,” reveals that there was a stipulated
had no factual and legal bases. Hence, they could not be awarded to the probationary period of six (6) months from its commencement. It was
petitioners. provided therein that in the event that they would be able to comply with the
Aggrieved, Malicdem and Flores filed a motion for reconsideration, but company’s standards and criteria within such period, they shall be
their pleas were denied in the CA Resolution, dated November 12, 2012. reclassified as project employees with respect to the remaining period of the
  effectivity of the contract. Specifically, paragraph 3(b) of the agreement
The Petition reads:
Malicdem and Flores now come before this Court by way of a petition for The SECOND PARTY hereby acknowledges, agrees and understands
review on certiorari under Rule 45 of the Rules of Court praying for the that the nature of his/her employment is probationary and on a project-basis.
reversal of the CA decision anchored The SECOND PARTY further acknowledges, agrees and understands that
Page 3 of 5
within the effectivity of this Contract, his/her job performance will be [16] 348 Phil. 580; 284 SCRA 539 (1998).
evaluated in accordance with the standards and criteria explained and 573
disclosed to him/her prior to signing of this Contract. In the event that the The test to determine whether employment is regular or not is the
SECOND PARTY is able to comply with the said standards and criteria reasonable connection between the particular activity performed by the
within the probationary period of six month/s from commencement of employee in relation to the usual business or trade of the employer. If the
this Contract, he/she shall be reclassified as a project employee (o)f the employee has been performing the job for at least one year, even if the
FIRST PARTY with respect to the remaining period of the effectivity of this performance is not continuous or merely intermittent, the law deems the
Contract. repeated and continuing need for its performance as sufficient evidence of
  the necessity, if not indispensability of that activity to the business.[17]
Under Article 281 of the Labor Code, however, “an employee who is Guided by the foregoing, the Court is of the considered view that there
allowed to work after a probationary period shall be considered a regular was clearly a deliberate intent to prevent the regularization of the petitioners.
employee.” When an employer renews a contract of employment after the To begin with, there is no actual project. The only stipulations in the
lapse of the six-month probationary period, the employee thereby becomes a contracts were the dates of their effectivity, the duties and responsibilities of
regular employee. No employer is allowed to determine indefi- the petitioners as extruder operators, the rights and obligations of the parties,
_______________ and the petitioners’ compensation and allowances. As there was no specific
[13] Rollo, pp. 91-124. project or undertaking to speak of, the respondents cannot invoke the
572nitely the fitness of its employees.[14] While length of time is not the exception in Article 280 of the Labor Code.[18] This is a clear attempt to
controlling test for project employment, it is vital in determining if the frustrate the regularization of the petitioners and to circumvent the law.
employee was hired for a specific undertaking or tasked to perform functions Next, granting that they were project employees, the petitioners could
vital, necessary and indispensable to the usual business of trade of the only be considered as regular employees as the two factors enumerated
employer.[15] Thus, in the earlier case of Maraguinot, Jr. v. NLRC,[16] it was in  Maraguinot, Jr., are present in this case. It is undisputed that the
ruled that a project or work pool employee, who has been: (1) continuously, petitioners were continuously rehired by the same employer for the same
as opposed to intermittently, rehired by the same employer for the same position as extruder operators. As such, they were responsible for the
tasks or nature of tasks; and (2) those tasks are vital, necessary and operation of machines that produced the sacks. Hence, their work was vital,
indispensable to the usual business or trade of the employer, must be necessary and indispensable to the usual business or trade of the employer.
deemed a regular employee. Thus: _______________
x x x. Lest it be misunderstood, this ruling does not mean that simply [17] Integrated Contractor and Plumbing Works, Inc. vs. NLRC, 503 Phil.
because an employee is a project or work pool employee even outside the 875; 466 SCRA 265 (2005).
construction industry, he is deemed, ipso jure, a regular employee. All that [18] Except where the employment has been fixed for a specific project or
we hold today is that once a project or work pool employee has been: (1) undertaking the completion or termination of which has been determined at
continuously, as opposed to intermittently, re-hired by the same employer for the time of the engagement of the employee.
the same tasks or nature of tasks; and (2) these tasks are vital, necessary 574
and indispensable to the usual business or trade of the employer, then the In D.M. Consunji, Inc. v. Estelito Jamin[19] and Liganza v. RBL Shipyard
employee must be deemed a regular employee, pursuant to Article 280 of Corporation,[20] the Court reiterated the ruling that an employment ceases to
the Labor Code and jurisprudence. To rule otherwise would allow be coterminous with specific projects when the employee is continuously
circumvention of labor laws in industries not falling within the ambit of Policy rehired due to the demands of the employer’s business and reengaged for
Instruction No. 20/Department Order No. 19, hence allowing the prevention many more projects without interruption.
of acquisition of tenurial security by project or work pool employees who The respondents cannot use the alleged expiration of the employment
have already gained the status of regular employees by the employer’s contracts of the petitioners as a shield of their illegal acts. The project
conduct.  employment contracts that the petitioners were made to sign every year
_______________ since the start of their employment were only a stratagem to violate their
[14] Voyeur Visage Studio, Inc. v. Court of Appeals, 493 Phil. 831; 453 security of tenure in the company. As restated in Poseidon Fishing v. NLRC,
SCRA 721 (2005), citing CENECO v. NLRC, G.R. No. 106246, September 1, [21] “if from the circumstances it is apparent that periods have been imposed
1994, 236 SCRA 108. to preclude acquisition of tenurial security by the employee, they should be
[15] Liganza v. RBL Shipyard Corporation, 534 Phil. 662; 504 SCRA 678 disregarded for being contrary to public policy.”
(2006).
Page 4 of 5
 The respondents’ invocation of William Uy Construction Corp. v. [25] Cartagenas v. Romago, 258 Phil. 445; 177 SCRA 637 (1989).
Trinidad[22] is misplaced because it is applicable only in cases involving the [26] De Ocampo v. NLRC, 264 Phil. 728; 186 SCRA 360 (1990).
tenure of project employees in the construction industry. It is widely known 576
that in the construction industry, a project employee’s work depends on the SO ORDERED.
availability of projects, necessarily the duration of his employment.[23] It is Velasco, Jr. (Chairperson), Peralta, Bersamin** and Leonen, JJ.,
not permanent but coterminous with the work to which he is assigned.[24] It concur.
would be extremely burdensome for the employer, who depends on the Petition granted, judgment and resolution annulled and set aside. 
availability of projects, to carry him as a permanent employee and pay him Notes.—A project employee is one who is hired for a specific project or
wages even if undertaking, and the completion or termination of such project or undertaking
_______________ has been determined at the time of engagement of the employee. (D.M.
[19] G.R. No. 192514, April 18, 2012, 670 SCRA 235. Consunji Corporation vs. Bello,  702 SCRA 347 [2013])
[20] 534 Phil. 662; 504 SCRA 678 (2006). The extension of the employment of a project employee long after the
[21] 518 Phil. 146; 482 SCRA 717 (2006). supposed project has been completed removes the employee from the scope
[22] Supra note 12. of a project employee and makes him a regular employee. (Id.)
[23] Archbuild Masters and Construction, Inc. and Joaquin C. Regala v. ——o0o——
NLRC and Rogelio Cayanga, 321 Phil. 869; 251 SCRA 483 (1995). _______________
[24] Mamansag v. NLRC, G.R. No. 97520, February 9, 1992, 218 SCRA
722.
575there are no projects for him to work on.[25] The rationale behind this is
that once the project is completed it would be unjust to require the employer
to maintain these employees in their payroll. To do so would make the
employee a privileged retainer who collects payment from his employer for
work not done. This is extremely unfair to the employers and amounts to
labor coddling at the expense of management.”[26]
Now that it has been clearly established that the petitioners were regular
employees, their termination is considered illegal for lack of just or authorized
causes. Under Article 279 of the Labor Code, an employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his
actual reinstatement. The law intends the award of backwages and similar
benefits to accumulate past the date of the LA decision until the dismissed
employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The assailed July 18, 2012
decision of the Court of Appeals and its November 12, 2012 Resolution in
CA-G.R. SP No. 124470, are hereby ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is hereby ordered
to reinstate petitioners Macarthur Malicdem and Hermenigildo Flores to their
former positions without loss of seniority rights and other privileges and to
pay their full backwages, inclusive of allowances and their other benefits or
their monetary equivalent computed from the time their compensations were
withheld from them up to the time of their actual reinstatement plus the wage
differentials stated in the July 13, 2011 decision of the Labor Arbiter, as
modified by the December 19, 2011 NLRC decision.
_______________
Page 5 of 5