Atlanta Industries, Inc. vs. Sebolino

Employees who are already rendering service to a company as regular employees cannot be subjected to apprenticeship agreements to circumvent their right to regularization, and apprenticeship agreements that fail to comply with the requisites of the Labor Code and its Implementing Rules — including TESDA approval and specification of the trade or occupation — are invalid. A second apprenticeship agreement imposed upon employees who have already completed training and acquired regular status violates the Labor Code and is manifestly unfair to the employees.

Atlanta Industries, Inc. is a domestic corporation engaged in the manufacture of steel pipes. Robert Chan is its President and Chief Operating Officer. The respondents — Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite, and Joseph S. Sagun — were among thirteen workers who filed complaints against Atlanta and Chan for illegal dismissal, regularization, underpayment, nonpayment of wages, and other money claims, as well as moral and exemplary damages and attorney's fees. The workers claimed they had attained regular status having been allowed to work for more than six months from the start of a purported apprenticeship agreement. Atlanta maintained the workers were engaged as apprentices under a government-approved apprenticeship program and were not entitled to regularization.

In February and March 2005, thirteen workers — including Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite, and Joseph S. Sagun — filed complaints for illegal dismissal, regularization, underpayment, nonpayment of wages and other money claims, as well as moral and exemplary damages and attorney's fees against Atlanta Industries, Inc. and its President and Chief Operating Officer Robert Chan. The complaints were consolidated and raffled to Labor Arbiter Daniel Cajilig, but were later transferred to Labor Arbiter Dominador B. Medroso, Jr. The complainants alleged that they had attained regular status because they were allowed to work with Atlanta for more than six months from the start of a purported apprenticeship agreement, and that they were illegally dismissed when the apprenticeship agreement expired.

Atlanta and Chan defended the complaints by arguing that the workers were engaged as apprentices under a government-approved apprenticeship program and were therefore not entitled to regularization or money claims. The company offered to hire them as regular employees in the event vacancies for regular positions occurred in the section of the plant where they had trained. Atlanta also claimed that the workers' names did not appear in the company's Master List of employees prior to their engagement as apprentices. On May 24, 2005, four of the complainants — dela Cruz, Magalang, Zaño, and Chiong — executed a Pagtalikod at Pagwawalang Saysay before Labor Arbiter Cajilig.

On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to the four who executed quitclaims but found the termination of the remaining nine workers illegal, awarding backwages, wage differentials, holiday pay, and service incentive leave pay amounting to ₱1,389,044.57 in the aggregate. Atlanta appealed to the NLRC. In the meantime, on October 10, 2006, Ramos, Alegria, Villagomez, Costales, and Almoite allegedly entered into a compromise agreement with Atlanta, which provided that except for Ramos, Atlanta agreed to pay the workers a specified amount as settlement and to acknowledge them as regular employees.

On December 29, 2006, the NLRC modified the Labor Arbiter's ruling by withdrawing the illegal dismissal finding as to Sagun, Mabanag, Sebolino, and Pedregoza; affirming the dismissal of the complaints of dela Cruz, Zaño, Magalang, and Chiong; approving the compromise agreement entered into by Costales, Ramos, Villagomez, Almoite, and Alegria; and denying all other claims. Sebolino, Costales, Almoite, and Sagun moved for reconsideration, but the NLRC denied the motion on March 30, 2007. The four then filed a petition for certiorari under Rule 65 with the Court of Appeals, charging the NLRC with grave abuse of discretion for failing to recognize their prior employment, declaring the second apprenticeship agreement valid, holding their dismissal legal, and upholding the compromise agreement involving Costales, Ramos, Villagomez, Almoite, and Alegria.

The Court of Appeals granted the petition, finding that the respondents were already employees of Atlanta before they entered into the first and second apprenticeship agreements. Almoite and Costales were employed as early as December 2003 and subsequently entered into a first apprenticeship agreement from May 13, 2004 to October 12, 2004, and before it expired, a second agreement from October 9, 2004 to March 8, 2005. Sebolino and Sagun were employed as early as March 3, 2004, with Sebolino entering into his first apprenticeship agreement from March 20, 2004 to August 19, 2004 and a second from August 20, 2004 to January 19, 2005, while Sagun entered into his first from May 28, 2004 to October 8, 2004 and a second from October 9, 2004 to March 8, 2005. The CA found the apprenticeship agreements defective for failing to indicate the trade or occupation and for lack of TESDA approval. The CA also found the compromise agreement not binding on Costales and Almoite because they did not sign it, and the company itself admitted it did not pursue their inclusion due to their regularization as early as January 11, 2006.

• Prior Employment: Petitioner argued that the CA erred in concluding that the respondent workers were company employees before they were engaged as apprentices, because the CA relied on the unsworn Production and Work Schedule and Monthly Report while disregarding the Master List prepared by company accountant Emelita M. Bernardo, whose veracity was sworn to by Bernardo and by Alex Go, head of the company's accounting division. The names of Costales, Almoite, Sebolino, and Sagun do not appear as employees in the Master List, which "contained the names of all the persons who were employed by and at petitioner."

• Validity of Apprenticeship Agreements: Petitioner maintained that the apprenticeship agreements were valid under the law, provided they did not exceed six months and the apprentices were paid at least 75% of the applicable minimum wage. The respondents voluntarily and willingly entered into a second apprenticeship agreement for the training of a second skill for five months, thus committing no violation of the apprenticeship period. The agreements complied with the requisites under Article 62 of the Labor Code, having been signed by the company's authorized representative and the respondents and ratified by the company's apprenticeship committee, with the program approved and certified by TESDA.

• No Illegal Dismissal: Petitioner argued that there was no illegal dismissal because the workers' tenure ended with the expiration of the apprenticeship agreement, and there was no regular employer-employee relationship between Atlanta and the respondent workers.

• Compromise Agreement: Petitioner contended that the CA erred in disregarding the compromise agreement executed by Costales and Almoite.

• Procedural Defect: Respondents contended that the petition should be dismissed outright for failure to comply with Section 4, Rule 45 of the Rules of Court, which requires that the petition be accompanied by supporting material portions of the records. Petitioners failed to attach a copy of the Production and Work Schedule and a copy of the compromise agreement purportedly executed by Costales and Almoite.

• Prior Employment Established: Respondents maintained that the CA committed no error in holding that they were already Atlanta's employees before being engaged as apprentices, as confirmed by the company's Production and Work Schedule, which meets the requirement of substantial evidence since petitioners failed to question its authenticity. The schedule was prepared by Rose A. Quirit and approved by Adolfo R. Lope, head of the company's PE/Spiral Section, and it was highly unlikely that the head of a production section would prepare and assign work to persons who were not company employees.

• Unreliability of the Master List: Respondents labeled the Master List as self-serving, dubious, and contradictory to Atlanta's own claims. The list is not legible, contains only the names of inactive employees, and even the names of those the NLRC found to have been employed by Atlanta — such as Almoite, Costales, and Sagun — do not appear in it. Despite a "May 2006" cut-off notation, the list contains no entries of employees hired or resigned in 2005 and 2006, and several pages contain names of employees from 1999 to 2004. The presentation of the Master List instead of the payroll raised serious doubts on its authenticity.

• Invalidity of Apprenticeship Agreements: Respondents refused to accept the validity of the apprenticeship agreements, contending that the program was merely a ploy to continually deprive them of their rightful wages and benefits as regular employees. They pointed out that the agreements were submitted to TESDA only in 2005, long after the starting date of the apprenticeship, in violation of Section 23, Rule VI, Book II of the Labor Code. The workers were made to undergo apprenticeship for occupations different from those approved by TESDA, which approved the program for "Plastic Molder" and not for extrusion molding process, engineering, pelletizing process, and mixing process. The respondents were already skilled workers prior to the apprenticeship program, having been employed and made to work in the different job positions where they had undergone training. They were also required to continue as apprentices beyond six months despite TESDA certificates indicating completion after six months.

• Illegal Dismissal: Respondents maintained that they were illegally dismissed because the reason for termination — notice of completion of the second apprenticeship agreement — did not constitute either a just or authorized cause under Articles 282 and 283 of the Labor Code.

• Compromise Agreement Not Binding: Costales and Almoite refused to be bound by the compromise agreement, principally because they did not sign it.

• Procedural Compliance: Whether the petition should be dismissed for failure to attach copies of the Production and Work Schedule and the compromise agreement, as required by Section 4, Rule 45 of the Rules of Court.
• Prior Employment: Whether the respondents were already employees of Atlanta before they were engaged as apprentices.
• Validity of Apprenticeship Agreements: Whether the first and second apprenticeship agreements entered into between Atlanta and the respondents were valid.
• Illegal Dismissal: Whether the respondents were illegally dismissed.
• Binding Effect of Compromise Agreement: Whether the compromise agreement was binding on Costales and Almoite.

• Procedural Compliance: No. The documents attached to the petition sufficiently supported the petitioners' allegations; the accompanying CA decision and resolution, as well as those of the labor arbiter and the NLRC, referred to the parties' position papers, replies, and rejoinders, and the CA decision narrated the factual antecedents, defined the cause of action, and cited the evidence adduced.

• Prior Employment: Yes. The respondents were already rendering service to the company as employees before they were made to undergo apprenticeship, as established by company operational records — the CPS monthly report for December 2003 for Costales and Almoite, and the Production and Work Schedules for Sebolino and Sagun — whose authenticity Atlanta never challenged before the labor arbiter, the NLRC, or the CA.

• Validity of Apprenticeship Agreements: No. The apprenticeship agreements were invalid for non-compliance with the law and its implementing rules, and the second apprenticeship agreement was particularly indefensible as it was imposed upon employees who had already completed training and acquired regular status, in violation of the Labor Code's implementing rules.

• Illegal Dismissal: Yes. The respondents were illegally dismissed because they were regular employees under Article 280 of the Labor Code, occupying positions usually necessary and desirable in Atlanta's business, and their dismissal was effected without just or authorized cause, without notice, and without the opportunity to be heard.

• Binding Effect of Compromise Agreement: No. The compromise agreement was not binding on Costales and Almoite because they did not sign it, and the company itself admitted it did not pursue their inclusion due to their regularization as early as January 11, 2006.

• Procedural Compliance: Citing Mariners Polytechnic Colleges Foundation, Inc. vs. Arturo J. Garchitorena, the Court held that the phrase "of the pleadings and other material portions of the record as would support the allegation of the petition" contemplates the exercise of discretion on the part of the petitioner in the selection of documents deemed relevant. The crucial issue is whether the documents accompanying the petition sufficiently support the allegations therein. The accompanying CA decision and resolution, as well as those of the labor arbiter and the NLRC, referred to the parties' position papers, replies, and rejoinders, and the CA decision narrated the factual antecedents, defined the complainants' cause of action, and cited the arguments and evidence adduced. While some pages of the labor arbiter's and NLRC's decisions were not legible, this defect was not fatal because the challenged CA decision clearly summarized the labor tribunal's rulings.

• Prior Employment: The Court found that based on company operations at the time material to the case, Costales, Almoite, Sebolino, and Sagun were already rendering service to the company as employees before they were made to undergo apprenticeship. The company itself recognized the respondents' status through relevant operational records: the CPS monthly report for December 2003 showed Costales and Almoite assigned to the first shift (7:00 a.m. to 3:00 p.m.), and the Production and Work Schedules showed Sebolino and Sagun scheduled on different shifts for the PE/Spiral Section across multiple periods from July 2004 to March 2005. The CA correctly recognized the authenticity of these operational documents because Atlanta failed to raise any challenge against them before the labor arbiter, the NLRC, and the CA itself. The Master List upon which Atlanta heavily relied was unreliable: it was hardly legible, listed only inactive employees, did not contain the names of workers even Atlanta acknowledged as employed, and despite a "May 2006" cut-off date contained no entries of employees hired or resigned in 2005 and 2006. Its substantive unreliability gave it very minimal probative value, and Atlanta would have been better served by presenting true copies of the payroll.

• Validity of Apprenticeship Agreements: The fact that the respondents were already rendering service to the company when they were made to undergo apprenticeship rendered the apprenticeship agreements irrelevant as far as the four were concerned. The respondents occupied positions such as machine operator, scaleman, and extruder operator — tasks usually necessary and desirable in Atlanta's business as a manufacturer of plastic building materials — characterizing them as regular employees under Article 280 of the Labor Code. Even granting the company's need to train employees through apprenticeship, only the first apprenticeship agreement could be recognized for that purpose. With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of regular employee status. To foist upon them a second apprenticeship agreement for a second skill not even mentioned in the agreement itself was a violation of the Labor Code's implementing rules and manifestly unfair to the employees.

• Illegal Dismissal: Because the respondents were regular employees under Article 280 of the Labor Code, their dismissal without just or authorized cause, without notice, and without the opportunity to be heard was illegal under Articles 279 and 277(b) of the Labor Code. The reason for termination — notice of completion of the second apprenticeship agreement — did not constitute either a just or authorized cause under the Labor Code.

• Binding Effect of Compromise Agreement: The compromise agreement allegedly entered into by Costales and Almoite, together with Ramos, Villagomez, and Alegria, was not binding on Costales and Almoite because they did not sign it. The company itself admitted that while Costales and Almoite were initially intended to be part of the agreement, it did not pursue their inclusion "due to their regularization as early as January 11, 2006."

• Regular Employment under Article 280 of the Labor Code — An employee engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer is a regular employee, regardless of the nomenclature given to the engagement. The Court applied this doctrine by finding that the respondents occupied positions such as machine operator, scaleman, and extruder operator — tasks usually necessary and desirable in Atlanta's manufacture of plastic building materials — thereby characterizing them as regular employees entitled to security of tenure.

• Invalidity of Apprenticeship Agreements Not Complying with Legal Requisites — Apprenticeship agreements must comply with the requisites of the Labor Code and its Implementing Rules, including indication of the trade or occupation in which the apprentice would be trained and approval by TESDA. Agreements that fail to meet these requisites are defective and invalid. The Court found the apprenticeship agreements defective because they did not indicate the trade or occupation and were not properly approved by TESDA.

• Prohibition Against Imposing a Second Apprenticeship Agreement on Regular Employees — When an employee has completed an apprenticeship program and has been retained by the employer, the employer has effectively recognized the completion of training and the acquisition of regular employee status. Imposing a second apprenticeship agreement for a second skill not mentioned in the agreement itself violates the Labor Code's implementing rules and is manifestly unfair to the employee.

• Non-Binding Effect of Unsigned Compromise Agreements — A compromise agreement is not binding on parties who did not sign it. The Court applied this principle by holding that the compromise agreement was not binding on Costales and Almoite because they did not sign it, and the company itself admitted it did not pursue their inclusion.

• Evidentiary Weight of Company Operational Records — Company operational records such as monthly reports and production and work schedules, whose authenticity is not challenged by the employer before the labor tribunals or the appellate court, are sufficient to establish the employment status of workers. The Court gave full probative weight to the CPS monthly report and Production and Work Schedules because Atlanta never questioned their authenticity.

• "To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in the agreement itself, is a violation of the Labor Code's implementing rules and is an act manifestly unfair to the employees, to say the least. This we cannot allow." — This passage articulates the Court's ratio decidendi on the invalidity of the second apprenticeship agreement, establishing the principle that employers cannot circumvent regularization by imposing successive apprenticeship agreements on employees who have already completed training.

• "The crucial issue to consider then is whether or not the documents accompanying the petition sufficiently supported the allegations therein." — This passage states the governing standard for evaluating procedural compliance under Rule 45 (and by analogy Rule 42), derived from Mariners Polytechnic Colleges Foundation, Inc. vs. Garchitorena, emphasizing that the test is sufficiency of support rather than exhaustive attachment of every document mentioned.

• "We stress that the CA correctly recognized the authenticity of the operational documents, for the failure of Atlanta to raise a challenge against these documents before the labor arbiter, the NLRC and the CA itself." — This passage defines the evidentiary principle that unchallenged company operational records are sufficient to establish employment status, placing the burden on the employer to contest authenticity at the earliest opportunity.

• Mariners Polytechnic Colleges Foundation, Inc. vs. Arturo J. Garchitorena, G.R. No. 162253, August 13, 2008, 562 SCRA 80 — Controlling precedent on the procedural issue of attachment of material portions of the record. The Court applied the same principle — that the crucial issue is whether the documents accompanying the petition sufficiently support the allegations — to find no procedural obstacle to resolving the petition on the merits.

• Article 280 (now Article 295), Labor Code — Defines regular employment as engagement in activities usually necessary or desirable in the usual business or trade of the employer. Applied to classify the respondents as regular employees because their positions — machine operator, scaleman, and extruder operator — were usually necessary and desirable in Atlanta's business of manufacturing plastic building materials.

• Articles 279 and 277(b) (now Articles 294 and 296(b)), Labor Code — Govern security of tenure and the requirements for valid dismissal. Applied to hold that the respondents' dismissal was illegal because it was effected without just or authorized cause, without notice, and without the opportunity to be heard.

• Article 61 (now Article 274), Labor Code — Governs apprenticeship agreements, including the requirement that they not exceed six months and that apprentices be paid at least 75% of the applicable minimum wage. Petitioner invoked this provision to argue the agreements' validity, but the Court found the agreements defective for non-compliance with other requisites.

• Article 62 (now Article 275), Labor Code — Sets forth the requisites for valid apprenticeship agreements. Petitioner argued compliance, but the Court found the agreements invalid on other grounds, including the respondents' prior employment status and the defective nature of the agreements.

• Section 18, Rule VI, Book II, Implementing Rules and Regulations of the Labor Code — Requires apprenticeship agreements to indicate the trade or occupation in which the apprentice would be trained. The Court found the agreements defective for failing to indicate the trade or occupation and for lack of proper TESDA approval.

• Section 23, Rule VI, Book II, Implementing Rules and Regulations of the Labor Code — Requires submission of apprenticeship agreements to TESDA. The respondents pointed out that the agreements were submitted to TESDA only in 2005, long after the starting date of the apprenticeship, in violation of this provision.

• Articles 282 and 283 (now Articles 297 and 298), Labor Code — Define just and authorized causes for termination of employment. The respondents maintained that the reason for their termination — notice of completion of the second apprenticeship agreement — did not constitute either a just or authorized cause under these provisions.

• Section 4, Rule 45, Rules of Court — Requires that a petition for review on certiorari be accompanied by material portions of the records supporting the allegations. The Court found substantial compliance, applying the standard from Mariners.

Conchita Carpio Morales, Lucas P. Bersamin, Martin S. Villarama, Jr., and Maria Lourdes P. A. Sereno concurred. No separate concurring opinions were written.