Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 122653 December 12, 1997

PURE FOODS CORPORATION, petitioner,

DAVIDE, JR., J.:

The crux of this petition for certiorari is the issue of whether employees hired for a definite period
and whose services are necessary and desirable in the usual business or trade of the employer are
regular employees.

The private respondents (numbering 906) were hired by petitioner Pure Foods Corporation to work
for a fixed period of five months at its tuna cannery plant in Tambler, General Santos City. After the
expiration of their respective contracts of employment in June and July 1991, their services were
terminated. They forthwith executed a "Release and Quitclaim" stating that they had no claim
whatsoever against the petitioner.

On 29 July 1991, the private respondents filed before the National Labor Relations Commission
(NLRC) Sub-Regional Arbitration Branch No. XI, General Santos City, a complaint for illegal
dismissal against the petitioner and its plant manager, Marciano Aganon.   This case was docketed
1

as RAB-11-08-50284-91.

On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a decision   dismissing the
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complaint on the ground that the private respondents were mere contractual workers, and not
regular employees; hence, they could not avail of the law on security of tenure. The termination of
their services by reason of the expiration of their contracts of employment was, therefore, justified.
He pointed out that earlier he had dismissed a case entitled "Lakas ng Anak-Pawis-NOWM v. Pure
Foods Corp." (Case No. RAB-11-02-00088-88) because the complainants therein were not regular
employees of Pure Foods, as their contracts of employment were for a fixed period of five months.
Moreover, in another case involving the same contractual workers of Pure Foods (Case No. R-196-
ROXI-MED-UR-55-89), then Secretary of Labor Ruben Torres held, in a Resolution dated 30 April
1990, that the said contractual workers were not regular employees.

The Labor Arbiter also observed that an order for private respondents' reinstatement would result in
the reemployment of more than 10,000 former contractual employees of the petitioner. Beside, by
executing a "Release and Quitclaim," the private respondents had waived and relinquished whatever
right they might have against the petitioner.
The private respondents appealed from the decision to the National Labor Relations Commission
(NLRC), Fifth Division, in Cagayan de Oro City, which docketed the case as NLRC CA No. M-
001323-93.

On 28 October 1994, the NLRC affirmed the Labor Arbiter's decision.   However, on private
3

respondents' motion for reconsideration, the NLRC rendered another decision on 30 January
1995   vacating and setting aside its decision of 28 October 1994 and holding that the private
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respondent and their co-complainants were regular employees. It declared that the contract of
employment for five months was a "clandestine scheme employed by [the petitioner] to stifle [private
respondents'] right to security of tenure" and should therefore be struck down and disregarded for
being contrary to law, public policy, and morals. Hence, their dismissal on account of the expiration
of their respective contracts was illegal.

Accordingly, the NLRC ordered the petitioner to reinstate the private respondents to their former
position without loss of seniority rights and other privileges, with full back wages; and in case their
reinstatement would no longer be feasible, the petitioner should pay them separation pay equivalent
to one-month pay or one-half-month pay for every year of service, whichever is higher, with back
wages and 10% of the monetary award as attorney's fees.

Its motion for reconsideration having been denied,   the petitioner came to this Court contending that
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respondent NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing
the decision of the Labor Arbiter.

The petitioner submits that the private respondents are now estopped from questioning their
separation from petitioner's employ in view of their express conformity with the five-month duration of
their employment contracts. Besides, they fell within the exception provided in Article 280 of the
Labor Code which reads: "[E]xcept where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee." Moreover, the first paragraph of the said article must be read and
interpreted in conjunction with the proviso in the second paragraph, which reads: "Provided that any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is
employed . . ." In the instant case, the private respondents were employed for a period of five
months only. In any event, private respondents' prayer for reinstatement is well within the purview of
the "Release and Quitclaim" they had executed wherein they unconditionally released the petitioner
from any and all other claims which might have arisen from their past employment with the
petitioner.

In its Comment, the Office of the Solicitor General (OSG) advances the argument that the private
respondents were regular employees, since they performed activities necessary and desirable in the
business or trade of the petitioner. The period of employment stipulated in the contracts of
employment was null and void for being contrary to law and public policy, as its purpose was to
circumvent the law on security of tenure. The expiration of the contract did not, therefore, justify the
termination of their employment.

The OSG further maintains that the ruling of the then Secretary of Labor and Employment in  LAP-
NOWM v. Pure Foods Corporation is not binding on this Court; neither is that ruling controlling, as
the said case involved certification election and not the issue of the nature of private respondents'
employment. It also considers private respondents' quitclaim as ineffective to bar the enforcement
for the full measure of their legal rights.
The private respondents, on the other hand, argue that contracts with a specific period of
employment may be given legal effect provided, however, that they are not intended to circumvent
the constitutional guarantee on security of tenure. They submit that the practice of the petitioner in
hiring workers to work for a fixed duration of five months only to replace them with other workers of
the same employment duration was apparently to prevent the regularization of these so-called
"casuals," which is a clear circumvention of the law on security of tenure.

We find the petition devoid of merit.

Article 280 of the Labor Code defines regular and casual employment as follows:

Art. 280. Regular and Casual Employment. — The provisions of written agreement to
the contrary notwithstanding and regardless of the oral argument of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.

An employment shall be deemed to be casual if it is not covered by the preceding

Thus, the two kinds of regular employees are (1) those who are engaged to perform activities which
are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with
respect to the activity in which they are employed.6

In the instant case, the private respondents' activities consisted in the receiving, skinning, loining,
packing, and casing-up of tuna fish which were then exported by the petitioner. Indisputably, they
were performing activities which were necessary and desirable in petitioner's business or trade.

Contrary to petitioner's submission, the private respondents could not be regarded as having been
hired for a specific project or undertaking. The term "specific project or undertaking" under Article
280 of the Labor Code contemplates an activity which is not commonly or habitually performed or
such type of work which is not done on a daily basis but only for a specific duration of time or until
completion; the services employed are then necessary and desirable in the employer's usual
business only for the period of time it takes to complete the project.
7

The fact that the petitioner repeatedly and continuously hired workers to do the same kind of work as
that performed by those whose contracts had expired negates petitioner's contention that those
workers were hired for a specific project or undertaking only.

Now on the validity of private respondents' five-month contracts of employment. In the leading case
of Brent School, Inc. v. Zamora,   which was reaffirmed in numerous subsequent cases,   this Court
8 9

has upheld the legality of fixed-term employment. It ruled that the decisive determinant in term
employment should not be the activities that the employee is called upon to perform but the day
certain agreed upon by the parties for the commencement and termination of their employment
relationship. But, this Court went on to say that where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy and morals.

Brent also laid down the criteria under which term employment cannot be said to be in circumvention
of the law on security of tenure:

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or

2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former over the latter.  10

None of these criteria had been met in the present case. As pointed out by the private respondents:

[I]t could not be supposed that private respondents and all other so-called "casual"
workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month
employment contract. Cannery workers are never on equal terms with their
employers. Almost always, they agree to any terms of an employment contract just to
get employed considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because theirs is the
freedom to starve if they refuse to work as casual or contractual workers. Indeed, to
the unemployed, security of tenure has no value. It could not then be said that
petitioner and private respondents "dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the former over the latter.  10

The petitioner does not deny or rebut private respondents' averments (1) that the main bulk of its
workforce consisted of its so-called "casual" employees; (2) that as of July 1991, "casual" workers
numbered 1,835; and regular employee, 263; (3) that the company hired "casual" every month for
the duration of five months, after which their services were terminated and they were replaced by
other "casual" employees on the same five-month duration; and (4) that these "casual" employees
were actually doing work that were necessary and desirable in petitioner's usual business.

As a matter of fact, the petitioner even stated in its position paper submitted to the Labor Arbiter that,
according to its records, the previous employees of the company hired on a five-month basis
numbered about 10,000 as of July 1990. This confirms private respondents' allegation that it was
really the practice of the company to hire workers on a uniformly fixed contract basis and replace
them upon the expiration of their contracts with other workers on the same employment duration.

This scheme of the petitioner was apparently designed to prevent the private respondents and the
other "casual" employees from attaining the status of a regular employee. It was a clear
circumvention of the employees' right to security of tenure and to other benefits like minimum wage,
cost-of-living allowance, sick leave, holiday pay, and 13th month pay.   Indeed, the petitioner
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succeeded in evading the application of labor laws. Also, it saved itself from the trouble or burden of
establishing a just cause for terminating employees by the simple expedient of refusing to renew the
employment contracts.

The five-month period specified in private respondents' employment contracts having been imposed
precisely to circumvent the constitutional guarantee on security of tenure should, therefore, be struck
down or disregarded as contrary to public policy or morals.   To uphold the contractual arrangement
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between the petitioner and the private respondents would, in effect, permit the former to avoid hiring
permanent or regular employees by simply hiring them on a temporary or casual basis, thereby
violating the employees' security of tenure in their jobs. 
13

The execution by the private respondents of a "Release and Quitclaim" did not preclude them from
questioning the termination of their services. Generally, quitclaims by laborers are frowned upon as
contrary to public policy and are held to be ineffective to bar recovery for the full measure of the
workers' rights.   The reason for the rule is that the employer and the employee do not stand on the
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same footing. 15

Notably, the private respondents lost not time in filing a complaint for illegal dismissal. This act is
hardly expected from employees who voluntarily and freely consented to their dismissal.  16

The NLRC was, thus, correct in finding that the private respondents were regular employees and
that they were illegally dismissed from their jobs. Under Article 279 of the Labor Code and the recent
jurisprudence,   the legal consequence of illegal dismissal is reinstatement without loss of seniority
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rights and other privileges, with full back wages computed from the time of dismissal up to the time
of actual reinstatement, without deducting the earnings derived elsewhere pending the resolution of
the case.

However, since reinstatement is no longer possible because the petitioner's tuna cannery plant had,
admittedly, been close in November 1994,   the proper award is separation pay equivalent to one
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month pay or one-half month pay for every year of service, whichever is higher, to be computed from
the commencement of their employment up to the closure of the tuna cannery plant. The amount of
back wages must be computed from the time the private respondents were dismissed until the time
petitioner's cannery plant ceased operation.  19

WHEREFORE, for lack of merit, the instant petition is DISMISSED and the challenged decision of 30
January 1995 of the National Labor Relations Commission in NLRC CA No. N-001323-93 is hereby
AFFIRMED subject to the above modification on the computation of the separation pay and back
wages.

SO ORDERED.

Bellosillo, Vitug and Kapunan, JJ., concur.