ALU-TUCP vs. NLRC

An employee hired for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement, is a project employee whose services are co-terminous with the project, regardless of the length of service.

Petitioners were engineers, technicians, and support staff hired by private respondent National Steel Corporation (NSC) at various dates from 1981 to 1985. They were assigned to work on NSC's Five Year Expansion Program (FAYEP I & II), which involved the construction, installation, and commissioning of new facilities like a Cold Rolling Mill and a Billet Steel-Making Plant. After their services were terminated upon the completion of the expansion phases, they filed complaints for unfair labor practice, regularization, and monetary benefits.

• Nature of Employment and Project: Petitioners were hired by NSC at various times between 1981 and 1985 for positions such as engineers, survey aides, warehousemen, and machine operators. Their employment contracts were for NSC's Five Year Expansion Program (FAYEP I & II), a multi-phase project to expand the company's production capacity and product lines.
• Components of the Project: The FAYEP included specific component projects like the "Cold Rolling Mill Expansion Project," the "Billet Steel-Making Plant (BSP)," the "Five Stand TDM," and the "Cold Mill Peripherals Project." Petitioners were assigned to these components.
• Separation from Service: Petitioners were separated from service at various dates (mostly in 1991 and 1992) upon the completion of the expansion phases to which they were assigned. Some were still employed at the time of the complaint.
• Complaints and Arbiter's Ruling: Petitioners filed complaints claiming they were regular employees entitled to benefits. The Labor Arbiter declared them "regular project employees" but ordered they receive the salary and benefits of regular employees under the CBA.
• NLRC Modification: The NLRC affirmed their status as project employees under Article 280 of the Labor Code but deleted the award of benefits for lack of legal basis, as project employees are not entitled to the same benefits as regular employees.

• Regularization Based on Nature of Work: Petitioners argued that their jobs were "necessary, desirable and work-related to private respondent's main business, steel-making," which should qualify them as regular employees under Article 280 of the Labor Code.
• Regularization Based on Length of Service: Petitioners contended that their continuous service for six (6) or more years entitled them to regular status, invoking the proviso in the second paragraph of Article 280 that an employee who has rendered at least one year of service shall be considered a regular employee.

• Project Employment: Respondent NSC maintained that petitioners were project employees hired specifically for the Five Year Expansion Program (FAYEP I & II), a specific undertaking with a predetermined completion date, which is an exception to regular employment under the first paragraph of Article 280.
• Distinct from Regular Business: NSC argued that the expansion project was a distinct undertaking separate from its regular business of steel manufacturing, as NSC was not in the business of construction or engineering for third parties.

• Characterization of Employment: Whether the petitioners are regular employees or project employees under Article 280 of the Labor Code.
• Effect of Length of Service: Whether the petitioners' length of service (more than one year) converted their status to that of regular employees.

• Characterization of Employment: The petitioners are project employees. The principal test is whether the employee was assigned to a "specific project or undertaking," the duration and scope of which were specified at the time of engagement. The FAYEP was a specific, predetermined project distinct from NSC's regular business of steel production. The work (construction, installation, commissioning) was performed only for NSC's own expansion and not as a business offered to the public.
• Effect of Length of Service: The length of service does not convert a project employee into a regular employee. The proviso in the second paragraph of Article 280, which grants regular status after one year of service, applies only to casual employees, not to project employees who fall under the exception in the first paragraph of the same article.

• Project Employee vs. Regular Employee — Under Article 280 of the Labor Code, an employee is a project employee if hired for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. The principal test is the determinable duration of the project, not the nature of the work or the length of service. This applies even if the project is related to the employer's main business, provided it is a distinct, identifiable undertaking with a predetermined end.
• Two Types of Projects — The Court identified two types of "projects" for purposes of project employment: (1) a particular job or undertaking within the employer's regular business but distinct and separate from its other undertakings (e.g., a specific construction project of a construction company); and (2) a particular job or undertaking not within the regular business of the employer but still identifiably separate from its ordinary operations (e.g., a steel company's in-house expansion program). The FAYEP fell under the second type.
• Applicability of the One-Year Provism — The proviso in the second paragraph of Article 280, which considers an employee who has rendered at least one year of service as regular, applies only to casual employees. It does not apply to project employees defined in the first paragraph of the same article.

• "The principal test for determining whether particular employees are properly characterized as 'project employees' as distinguished from 'regular employees,' is whether or not the 'project employees' were assigned to carry out a 'specific project or undertaking,' the duration (and scope) of which were specified at the time the employees were engaged for that project."
• "The simple fact that the employment of petitioners as project employees had gone beyond one (1) year, does not detract from, or legally dissolve, their status as project employees."

• Mercado, Sr. vs. National Labor Relations Commission, 201 SCRA 332 (1991) — Cited as controlling authority that the one-year proviso in Article 280's second paragraph relates only to casual employees and is not applicable to project employees.
• Rada v. National Labor Relations Commission, 205 SCRA 69 (1992) — Cited for the principle that the length of service of a project employee is not the controlling test of employment tenure.
• Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674 (1985) — Cited as an example where project employment was upheld based on a specific undertaking with a predetermined completion.

• Article 280, Labor Code of the Philippines — The core provision defining regular and casual employment. The Court applied its first paragraph, which excepts from regular employment those "hired for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement." The Court also interpreted the proviso in its second paragraph as applicable only to casual employees.

Chief Justice Andres R. Narvasa, Justices Teodoro R. Padilla, Abdulwahid A. Bidin, Florenz D. Regalado, Davide, Jr., Romero, Melo, Quiason, Puno, Vitug, Kapunan, and Mendoza. Justice Bellosillo was on leave.