A.M. Oreta & Co., Inc. vs. National Labor Relations Commission

An employee hired under a twelve-month overseas employment contract, with no stipulation or proof that he was placed on probationary status and no standards for regularization made known at engagement, is a regular employee entitled to security of tenure; dismissal for alleged unsatisfactory performance, without just cause and without notice and hearing, is illegal and entitles him to salaries for the unexpired portion of the contract.

A.M. Oreta & Co., Inc. and Engineering Construction & Industrial Development Co. (ENDECO) were the employer-side parties in the overseas employment of Sixto Grulla Jr. as a carpenter in Jeddah, Saudi Arabia. The Labor Code governs regular and probationary employment, just causes for dismissal, and the notice-and-hearing requirements that employers must observe before terminating an employee.

Sixto Grulla Jr. was engaged by Engineering Construction and Industrial Development Company (ENDECO), through A.M. Oreta and Co., Inc., as a carpenter in ENDECO's projects in Jeddah, Saudi Arabia. The contract of employment, entered into on June 11, 1980, was for a period of twelve months, and Grulla left the Philippines for Jeddah on August 5, 1980.

On August 15, 1980, while working at the jobsite, Grulla met an accident that fractured his lumbar vertebra. He was rushed to the New Jeddah Clinic and confined there for twelve days. On August 27, 1980, he was discharged and told that he could resume normal duties after two weeks of physical therapy.

On September 18, 1980, Grulla reported back to his Project Manager and presented a medical certificate declaring him fit for work. He then worked again until he received a notice of termination of his employment on October 9, 1980.

In December 1981, Grulla filed a complaint for illegal dismissal, recovery of medical benefits, unpaid wages for the unexpired ten months of his contract, and P1,000.00 as reimbursement of medical expenses against A.M. Oreta and ENDECO with the POEA. Petitioners answered that the employment contract provided, as a ground for termination, violations of the contractor's rules and regulations, and that Grulla was dismissed because he had not performed his duties satisfactorily within a three-month probationary period.

The records included a medical certificate issued by the hospital where Grulla was confined stating that he was physically fit for work after his release. No evidence showed that Grulla had been appraised of a probationary status or of the requirements he had to comply with to become a regular employee.

• Probationary Status and Unsatisfactory Performance: Petitioner argued that Grulla was still a probationary employee and was validly dismissed for unsatisfactory performance during the probationary period.
• Due Process: Petitioner maintained that notice and hearing are important only if the employee is not aware of the problems affecting his employment, and that Grulla knew all along that he could no longer effectively perform his job due to his physical condition.
• Grave Abuse of Discretion: Petitioner contended that the NLRC committed grave abuse of discretion in affirming the POEA decision.

• Illegal Termination: Whether Sixto Grulla Jr.'s employment was illegally terminated by petitioner A.M. Oreta & Co., Inc.
• Salaries for Unexpired Portion: Whether Sixto Grulla Jr. is entitled to salaries corresponding to the unexpired portion of his employment contract.

• Illegal Termination: Yes. Grulla was a regular employee, not a probationary employee, and his dismissal for alleged unsatisfactory performance was without just cause and without the required notice and hearing.
• Salaries for Unexpired Portion: Yes. Because his dismissal violated his security of tenure under the twelve-month employment contract, he is entitled to salary for the unexpired ten months.

• Illegal Termination: The SC rejected petitioner's claim that Grulla was a probationary employee. Under Article 280 (formerly Article 281) of the Labor Code, regularity of employment is determined by the nature of the job, not by the written contract; an employee engaged to perform activities usually necessary or desirable in the employer's usual business is regular, except where employment is fixed for a specific project or undertaking or where the work is seasonal. Policy Instructions No. 12 states that what determines regularity or casualness is the nature of the job. Grulla was employed as a carpenter for a twelve-month period, and the contract was renewable subject to future agreements; the SC concluded he was hired as a regular employee, not a mere probationary employee. Even if he were probationary, Article 281 (formerly Article 282) requires the employer to make known to the employee at the time of engagement the reasonable standards by which he would qualify as a regular employee. No such stipulation appeared in the contract, and no evidence showed Grulla was appraised of a probationary status or the requirements for regularization; absent these requisites, he was a regular employee entitled to security of tenure. Assuming arguendo that he was probationary, he still enjoyed security of tenure during his tenure and could not be removed except for cause, as held in Euro-Linea Phils., Inc. vs. NLRC and Manila Hotel Corporation vs. NLRC. The alleged ground of unsatisfactory performance was not among the just causes under Article 282 of the Labor Code, nor among the grounds for termination under Article VII of the contract. Petitioner also failed to prove the particular acts or omissions constituting unsatisfactory performance, and the medical certificate stated Grulla was physically fit for work after release. On due process, the SC held that the twin requirements of notice and hearing are essential in employee dismissal: notice informs the employee of the employer's intent to dismiss and the reason, while hearing affords an opportunity to answer and defend before dismissal. Grulla was not notified of the charges and no hearing or investigation was conducted; the dismissal therefore violated due process.
• Salaries for Unexpired Portion: The SC held that because the dismissal violated the security of tenure under the contract, which specifically provided a twelve-calendar-month term, Grulla should be paid his salary for the unexpired portion of the contract, which was ten months, citing Cuales vs. NLRC. The SC also upheld the POEA and NLRC findings that Grulla was entitled to US$3,700.00 or its equivalent for the unexpired portion and P1,000.00 as reimbursement of medical expenses, giving weight to findings of administrative agencies with acquired expertise. Judicial review of labor cases is limited to issues of jurisdiction or grave abuse of discretion, and the NLRC resolution was not tainted with arbitrariness amounting to grave abuse of discretion.

• Regular employment determined by nature of job — Under Article 280 of the Labor Code, an employment is regular where the employee is engaged to perform activities usually necessary or desirable in the employer's usual business or trade, regardless of written or oral agreements, except where employment is fixed for a specific project or undertaking or where the work is seasonal. Policy Instructions No. 12 states that what determines regularity or casualness is the nature of the job, not the employment contract. The SC applied this to Grulla, a carpenter whose twelve-month contract was renewable, and held he was a regular employee.
• Probationary employment requires standards made known at engagement — Under Article 281, an employee engaged on a probationary basis may be terminated for just cause or for failure to qualify as a regular employee in accordance with reasonable standards made known by the employer at the time of engagement. The SC applied this by finding no contractual stipulation of a three-month probation and no evidence that Grulla was appraised of his probationary status and the requirements for regularization; he was therefore regular.
• Security of tenure of probationary employees — Even a probationary or temporary employee has limited tenure but still enjoys security of tenure and cannot be removed except for cause during the tenure or before the contract expires. The SC applied this assuming arguendo that Grulla was probationary, citing Euro-Linea Phils., Inc. vs. NLRC and Manila Hotel Corporation vs. NLRC.
• Just causes for dismissal are limited; unsatisfactory performance must be proved — Article 282 lists the just causes for termination, and alleged unsatisfactory performance is not one of them unless it falls under an analogous cause; it must also be a ground under the employment contract. The SC applied this by holding that unsatisfactory performance was neither a statutory nor contractual ground and that petitioner failed to prove the particular acts or omissions, while the medical certificate stated Grulla was fit for work.
• Twin notice and hearing requirements in dismissal — Due process in employee dismissal requires notice informing the employee of the employer's intent to dismiss and the reason, and a hearing affording an opportunity to answer and defend before dismissal. The SC applied this by finding Grulla was not notified of the charges and no hearing or investigation was conducted.
• Deference to administrative findings absent grave abuse of discretion — Findings of administrative agencies with acquired expertise are generally accorded respect and finality, and judicial review in labor cases is limited to issues of jurisdiction or grave abuse of discretion. The SC applied this by upholding the POEA and NLRC findings on Grulla's entitlement to unexpired salaries and medical expenses, finding no arbitrariness amounting to grave abuse.

• "It is clear from the employment contract that the respondent Grulla was hired by the company as a regular employee and not just mere probationary employee." — The SC rejects petitioner's claim that Grulla was merely a probationary employee based on the twelve-month renewable contract.
• "The law is clear to the effect that in all cases involving employees engaged on probationary period basis, the employer shall make known to the employee at the time he is hired, the standards by which he will qualify as a regular employee." — The SC states the statutory requirement for probationary employment and applies it to find no probationary status was established.
• "The twin requirements of notice and hearing constitute essential elements of due process in cases of employee dismissal: the requirement of notice is intended to inform the employee concerned of the employer's intent to dismiss and the reason for the proposed dismissal, while the requirement of hearing affords the employee an opportunity to answer his employer's charges against him and accordingly to defend himself therefrom before dismissal is effected." — The SC defines the due process requirements violated in Grulla's dismissal.
• "Consequently the respondent Grulla should be paid his salary for the unexpired portion of his contract of employment which is ten (10) months" — The SC states the consequence of the illegal dismissal and the violation of Grulla's security of tenure.

• Euro-Linea Phils., Inc. vs. NLRC, No. L-75782, December 1, 1987, 156 SCRA 78 — Cited for the rule that a probationary or temporary employee has limited tenure but still enjoys security of tenure and cannot be removed except for cause during the tenure.
• Manila Hotel Corporation vs. NLRC, No. L-53453, January 22, 1986, 141 SCRA 169 — Cited together with Euro-Linea for the security of tenure of probationary or temporary employees.
• Century Textile Mills, Inc., et al. vs. NLRC, et al., G.R. No. 77859, May 25, 1988 — Cited for the rule that the twin requirements of notice and hearing are essential elements of due process in employee dismissal.
• Cuales vs. NLRC, et al., No. L-57379, April 28, 1983, 121 SCRA 812 — Cited for the award of salary for the unexpired portion of the employment contract after an illegal dismissal.
• Special Events and Central Shipping Office Workers Union vs. San Miguel Corporation, Nos. L-51002-06, May 30, 1983, 122 SCRA 557 — Cited for the principle that findings of administrative agencies with acquired expertise are generally accorded respect and finality, and judicial review is limited to issues of jurisdiction or grave abuse of discretion.

• Article 280, Labor Code — Defines regular and casual employment and provides that regularity is determined by the nature of the job, not by written or oral agreements; applied to hold Grulla a regular employee.
• Policy Instructions No. 12, Minister of Labor — States that what determines regularity or casualness is not the employment contract but the nature of the job; applied to support the finding that Grulla was regular.
• Article 281, Labor Code — Governs probationary employment and requires the employer to make known to the employee at the time of engagement the reasonable standards for becoming regular; applied to hold no probationary status was established.
• Article 282, Labor Code — Lists the just causes for termination of employment; applied to hold that alleged unsatisfactory performance was not a just cause.
• Constitution (due process requirement) — Requires notice and hearing in employee dismissal; applied to hold Grulla's dismissal illegal for lack of both.
• Rule 65, Rules of Court — Governs the petition for certiorari; the SC found no grave abuse of discretion in the NLRC resolution.