Cagayan Capitol College and Laureana S. Rosales vs. NLRC, et al.

A full-time teacher who has rendered three consecutive years of service does not automatically acquire permanent employment; satisfactory service during probation is a required third requisite, and the employer may determine whether that standard has been met. This prerogative of the school is consistent with academic freedom and constitutional autonomy.

Cagayan Capitol College is a private educational institution; petitioner Laureana S. Rosales is joined with it. Private respondents Virgilio P. Villegas and Leonor Pagapong were faculty members engaged on probationary, fixed-term contracts. The dispute concerns the standards for acquiring permanent status and security of tenure for private-school teachers under the Manual of Regulations for Private Schools and the school’s prerogative to evaluate probationary service. The governing standard invoked is paragraph 75 of the Manual, which provides that full-time teachers who have rendered three consecutive years of satisfactory services shall be considered permanent.

Private respondents Virgilio P. Villegas and Leonor Pagapong were probationary teachers of Cagayan Capitol College. Villegas was initially hired as an instructor in the Nautical Science Department on a ten-month contractual basis ending March 31, 1982. After the contract expired, he re-applied and received a new contract from June 1, 1982 to March 31, 1983. He re-applied again and was given a contract for a fixed period starting June 1, 1983 up to March 31, 1984. By mutual agreement, the contract was extended to include the summer of 1984 up to May 31, 1984, still part of school year 1983-1984. When that period expired, he sent a letter re-applying for employment, but his application was turned down because of various complaints from students, borne out by the report of his superiors who investigated the matter. He then filed a complaint in the Regional Arbitration Office of the NLRC in Cagayan City for illegal dismissal with reinstatement, backwages, moral damages, and attorney’s fees, including claims for underpayment of salary, allowances, wage orders, and his share in tuition fee increases under Presidential Decree No. 451, docketed as NLRC Case No. RAB-C-0513-84.

Pagapong was initially hired as a probationary instructor in the High School Department on June 15, 1981 on a contractual basis ending March 31, 1982. Upon re-application, her contract was renewed for another fixed period covering June 1, 1982 up to March 31, 1983, still on a probationary basis. A third contract was executed covering the period starting June 15, 1983 and ending March 31, 1984. After the third contract terminated, she wrote to the college seeking re-employment, accompanied by a clearance, but her application was denied upon the recommendation of her immediate superiors, who considered her inefficient. She filed a complaint with the Regional Arbitration Branch of the NLRC for illegal dismissal with reinstatement, backwages, moral damages, and attorney’s fees, including claims for underpayment of wages, allowances, wage orders, and non-payment of shares in tuition fee increases under Presidential Decree No. 451, docketed as NLRC Case No. RAB-C-0560-84.

The two cases were jointly heard upon agreement of the parties, the issues and facts being identical. In their position paper, private respondents alleged that they were dismissed without valid grounds and deprived of their constitutional right to due process and security of tenure. They also raised non-compliance with presidential decrees and wage orders pertaining to the payment of emergency cost of living allowance and their basic salary, including non-payment of their shares in tuition fee increases under Presidential Decree No. 451. Petitioners denied illegal dismissal and maintained that the probationary contracts expired and were not renewed because private respondents’ performances were considered unsatisfactory while on probation. Petitioners contended that private respondents, as probationary employees, did not qualify for tenureship because their services on probation, upon evaluation, did not reach the prescribed standard, and denied entitlement to backwages, moral damages, and attorney’s fees.

At the start of their employment, private respondents were furnished the Faculty Manual stating, among others, the duties of teachers and the grounds for termination of employment or non-appointment to permanent status of a probationary employee. The Labor Arbiter found that both were hired on a ten-month contractual basis for three consecutive contracts of employment or school years. The NLRC found that Villegas had worked for six consecutive regular semesters as a college instructor and Pagapong for three consecutive years as a classroom teacher. The school’s evaluation, which the Supreme Court credited, was that Villegas’s performance was unsatisfactory because of student complaints investigated by the Acting Dean of the Nautical Department, and that Pagapong was inefficient due to her absences.

• Interpretation of the Manual and Labor Code: Petitioners argued that the NLRC committed grave abuse of discretion and seriously erred in interpreting the Manual of Regulations for Private Schools, the Labor Code, and applicable laws and jurisprudence by ruling that private respondents acquired permanent employment status and could not be dismissed except for cause.
• Non-Renewal as Illegal Dismissal: Petitioners maintained that the NLRC likewise erred in ruling that the non-renewal of the teaching contracts was tantamount to illegal dismissal and in ordering reinstatement with backwages.
• Unsatisfactory Probationary Service: Petitioners contended that private respondents were probationary employees whose fixed-term contracts expired and were not renewed because their performances were unsatisfactory; upon evaluation, they did not reach the standard prescribed for probationary employees.
• No Monetary Liability: Petitioners denied that private respondents were entitled to backwages, moral damages, or attorney’s fees, and asserted that wages, allowances, and shares in tuition fee increases had been paid.

• Illegal Dismissal and Due Process: Private respondents alleged that they were dismissed without valid grounds and deprived of their constitutional right to due process and security of tenure.
• Non-Compliance with Labor Laws: They raised non-compliance with presidential decrees and wage orders pertaining to payment of emergency cost of living allowance and basic salary, including non-payment of their shares in tuition fee increases under Presidential Decree No. 451.
• Entitlement to Relief: They sought reinstatement, backwages, moral damages, and attorney’s fees, and claimed underpayment of salary, allowances, and wage-order benefits.

• Permanent Employment Status: Whether private respondents acquired permanent employment status and security of tenure after three consecutive years of full-time service, despite the requirement of satisfactory service during probation.
• Illegal Dismissal: Whether the non-renewal of private respondents’ probationary teaching contracts amounted to illegal dismissal, entitling them to reinstatement with backwages.
• Employer’s Evaluation and Academic Freedom: Whether the school’s determination that private respondents’ services were unsatisfactory was within its prerogative and consistent with academic freedom and constitutional autonomy.
• Reinstatement and Backwages: Whether the NLRC correctly ordered reinstatement with three years backwages and attorney’s fees after finding illegal dismissal.

• Permanent Employment Status: No. Three consecutive years of full-time service do not automatically confer permanent status; satisfactory service during probation is a required third requisite under paragraph 75 of the Manual of Regulations for Private Schools.
• Illegal Dismissal: No. Non-renewal of probationary contracts after unsatisfactory service is not illegal dismissal and does not warrant reinstatement or backwages.
• Employer’s Evaluation and Academic Freedom: Yes. The school may set standards for its teachers and determine whether those standards have been met, consistent with academic freedom and constitutional autonomy.
• Reinstatement and Backwages: No. Because there was no illegal dismissal, the NLRC’s order of reinstatement with three years backwages and attorney’s fees cannot stand.

• Permanent Employment Status: Paragraph 75 of the Manual provides that full-time teachers who have rendered three consecutive years of satisfactory services shall be considered permanent. In University of Sto. Tomas vs. National Labor Relations Commission, the requisites for permanent employment and security of tenure are: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years of service; and (3) such service must have been satisfactory. Private respondents met the first two requisites, but not the third. The contention that a teacher automatically becomes permanent upon termination of the three-year probationary period is not correct; permanence is conditioned on satisfactory service. The employer sets the standards and determines whether the employee’s services are satisfactory. The school furnished private respondents the Faculty Manual at the start of employment. Villegas’s performance was considered unsatisfactory after student complaints were investigated by the Acting Dean of the Nautical Department; his summer 1984 teaching was still part of the third probationary period. Pagapong was found inefficient due to her absences. Thus, no permanent status was acquired.
• Illegal Dismissal: Since private respondents did not acquire permanent status, they remained probationary employees. The non-renewal of their fixed-term contracts upon expiration, based on unsatisfactory performance, was not illegal dismissal. No security of tenure attached. The NLRC’s finding of illegal dismissal was therefore reversible error.
• Employer’s Evaluation and Academic Freedom: The prerogative of a school to provide standards for its teachers and to determine whether those standards have been met is in accordance with academic freedom and constitutional autonomy, which give educational institutions the right to choose who should teach. It is also the employer’s prerogative to determine whether the standards have been complied with, and even to shorten the probationary period if impressed with the employee’s services. The school’s evaluation of unsatisfactory service was thus within its prerogative.
• Reinstatement and Backwages: Because there was no illegal dismissal, the NLRC’s award of reinstatement, three years backwages without qualification or deduction, and 10% attorney’s fees had no basis. The complaints were dismissed, and the restraining order was made permanent.

• Requisites for Permanent Employment of Private School Teachers — Under paragraph 75 of the Manual of Regulations for Private Schools, full-time teachers who have rendered three consecutive years of satisfactory services shall be considered permanent. The Supreme Court, citing University of Sto. Tomas vs. National Labor Relations Commission, enumerated three requisites: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years of service; and (3) such service must have been satisfactory. The first two requisites do not suffice; satisfactory service is indispensable. In this case, private respondents met the first two but not the third, so they did not acquire permanent status.
• Employer’s Prerogative and Academic Freedom in Evaluating Probationary Teachers — The employer sets the standards and determines whether the employee’s services are satisfactory. A school’s prerogative to provide standards for its teachers and to determine whether those standards have been met is in accordance with academic freedom and constitutional autonomy, which give educational institutions the right to choose who should teach. The Court applied this to uphold the non-renewal of private respondents’ contracts based on unsatisfactory performance.
• Non-Renewal of Probationary Employment — The expiration and non-renewal of a probationary employment contract is not illegal dismissal where the employee has not qualified for permanent status. No security of tenure attaches to probationary employment unless the requisites for permanence are satisfied.

• "Full time teachers who have rendered three (3) consecutive years of satisfactory services shall be considered permanent." — This is the governing standard under paragraph 75 of the Manual of Regulations for Private Schools, which the Court applied to require satisfactory service for permanence.
• "the legal requisites for a teacher to acquire permanent employment and security of tenure are as follows: (1) The teacher is a full time teacher; (2) The teacher must have rendered three (3) consecutive years of service; and (3) Such service must have been satisfactory." — This passage, drawn from University of Sto. Tomas vs. National Labor Relations Commission, states the three-part test applied by the Court.
• "The contention of respondents that upon termination of the three-year probationary period the teacher automatically becomes permanent is not quite correct. It must be conditioned on the compliance with the third requisite that the services of said teacher during the probationary period was satisfactory." — This is the ratio decidendi rejecting automatic permanence after three years.
• "This prerogative of a school to provide standards for its teachers and to determine whether or not these standards have been met is in accordance with academic freedom and constitutional autonomy which give educational institution the right to choose who should teach." — This passage grounds the school’s evaluation of probationary teachers in academic freedom and institutional autonomy.

• University of Sto. Tomas vs. National Labor Relations Commission, G.R. No. 85519, February 15, 1990 — The Court relied on this precedent for the legal requisites for a teacher to acquire permanent employment and security of tenure: full-time teacher, three consecutive years of service, and satisfactory service. It is the controlling precedent in the decision.

• Paragraph 75, Manual of Regulations for Private Schools — Provides that full-time teachers who have rendered three consecutive years of satisfactory services shall be considered permanent. The Court applied this provision to require satisfactory service as a condition for permanence.
• Section 102, Manual of Regulations for Private Schools, 7th Edition, 1984 — Provides that the probationary period for academic personnel shall not be more than six consecutive regular semesters for those in the tertiary level. The NLRC cited this in finding permanent status; the Court instead focused on the satisfactory-service requirement under paragraph 75.
• Presidential Decree No. 451 — Mentioned as the basis for private respondents’ claims for shares in tuition fee increases; because the complaints were dismissed, the decision does not otherwise apply or interpret this decree.
• Academic Freedom and Constitutional Autonomy — The Court invoked academic freedom and constitutional autonomy to uphold the school’s prerogative to set standards for its teachers and determine whether those standards have been met, including the right to choose who should teach. The text does not specify a particular constitutional article.

Narvasa (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.