D.M. Consunji, Inc. vs. Gobres

Where the termination of a project employee is brought about by the completion of the contract or phase thereof, no prior notice of termination is required, and the employer's failure to give advance notice does not constitute a violation of procedural due process warranting nominal damages. The doctrine in Agabon vs. NLRC, which awards nominal damages for failure to observe procedural due process in dismissals for just cause under Article 282, does not apply to project employees whose employment is automatically terminated by completion of the work.

D.M. Consunji, Inc. is a construction company that engaged respondents Antonio Gobres, Magellan Dalisay, Godofredo Paragsa, Emilio Aleta, and Generoso Melo as carpenters in various construction projects on different occasions. The construction industry's employment relations were governed by Policy Instruction No. 20, later superseded by Department Order No. 19, series of 1993, which distinguish between project and non-project employees and require employers to report terminations of project employees to the Department of Labor and Employment upon completion of the project or phase thereof.

Respondents Antonio Gobres, Magellan Dalisay, Godofredo Paragsa, Emilio Aleta, and Generoso Melo were employed as carpenters in the construction projects of petitioner D.M. Consunji, Inc. on several occasions and at various times. Their termination from each project was reported to the Department of Labor and Employment in accordance with Policy Instruction No. 20, later superseded by Department Order No. 19, series of 1993. Respondents' last assignment was at the Quad 4-Project in Glorietta, Ayala, Makati, where they began working on September 1, 1998. On October 14, 1998, respondents discovered their names included in a Notice of Termination posted on the bulletin board at the project premises.

Respondents filed a complaint with the Arbitration Branch of the National Labor Relations Commission against petitioner and David M. Consunji for illegal dismissal, non-payment of 13th month pay, five days service incentive leave pay, damages, and attorney's fees. Petitioner countered that respondents were project employees whose services were terminated when their respective phases of work or the projects themselves were completed, and that notices of termination were filed with DOLE in compliance with applicable regulations. Petitioner also claimed that respondents had been duly paid their service incentive leave pay and 13th month pay through bank remittances.

Respondents replied that the Quad 4-Project was estimated to take two years to finish but they were dismissed within that period without prior notice. They argued that even assuming they were project employees, they were illegally dismissed for non-observance of procedural due process.

The Labor Arbiter dismissed the complaint, finding respondents to be project employees validly terminated upon completion of their phases of work, with termination reports duly filed with DOLE. The NLRC affirmed this decision and denied respondents' motion for reconsideration. Respondents then filed a petition for certiorari with the Court of Appeals. The appellate court sustained the finding that respondents were project employees but held that their right to statutory due process was violated for lack of advance notice of termination, citing Agabon vs. NLRC. Accordingly, the Court of Appeals ordered petitioner and David M. Consunji to pay each respondent ₱20,000.00 as nominal damages. Petitioner's partial motion for reconsideration was denied, prompting the present petition.

• No Prior Notice Required: Petitioner contended that the award of nominal damages was unwarranted under Section 2(III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, which expressly provides that "no prior notice is required" if the termination is brought about by completion of the contract or phase thereof.
• Inapplicability of Agabon: Petitioner argued that Agabon vs. NLRC does not apply to this case because the termination therein was for just cause (abandonment of work), whereas respondents were terminated due to the completion of the phases of work for which their services were engaged.
• Governing Law for Construction Industry: Petitioner pointed out that under Department Order No. 19, series of 1993, the construction industry's governing law, there is no provision requiring an administrative hearing or investigation before a project employee may be terminated on account of completion of a phase of work or the project itself.

• Procedural Due Process Violation: Respondents argued that even if they were project employees, they were still illegally dismissed for non-observance of procedural due process, as they had no prior notice of their termination.
• Premature Dismissal: Respondents replied that the Quad 4-Project was estimated to take two years to finish, but they were dismissed within the two-year period, and had they been given prior notice, they would not have reported for work on October 14, 1998.

• Applicability of Agabon Doctrine: Whether the doctrine in Agabon vs. NLRC, which awards nominal damages for failure to observe procedural due process in dismissals for just cause, applies to the termination of project employees due to completion of the contract or phase thereof.
• Requirement of Prior Notice: Whether prior or advance notice of termination is required when a project employee is terminated by reason of the completion of the contract or phase thereof for which the employee was engaged.

• Applicability of Agabon Doctrine: No. Agabon vs. NLRC is inapplicable because it involved dismissal of regular employees for abandonment — a just cause under Article 282 of the Labor Code — which requires observance of the twin requirements of notice and hearing. Respondents were not terminated for just cause but due to completion of their phases of work.
• Requirement of Prior Notice: No. Section 2(III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code expressly provides that "no prior notice is required" if the termination is brought about by the completion of the contract or phase thereof. Completion of the work or project automatically terminates the employment, and the employer is only obliged to render a report to DOLE.

• Applicability of Agabon Doctrine: The Court distinguished Agabon vs. NLRC on the ground that it involved the dismissal of regular employees for abandonment of work, which is a just cause under Article 282 of the Labor Code. Dismissals based on just causes contemplate acts or omissions attributable to the employee. In such cases, the employer is required to observe procedural due process — the twin requirements of notice and hearing — under Section 2, Rule 1, Book VI of the Omnibus Rules. Since the employer in Agabon failed to comply with these requirements, the Court ordered payment of nominal damages. In the present case, however, respondents were not terminated for any just cause attributable to them; they were terminated due to the completion of the phases of work for which their services were engaged. The rationale for awarding nominal damages in Agabon — indemnification for violation of statutory due process rights in just-cause dismissals — simply does not extend to terminations occasioned by project completion.

• Requirement of Prior Notice: As project employees, respondents' termination is governed by Section 1(c) and Section 2(III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code. Section 1(c) provides that in cases of project employment, no employee shall be dismissed prior to the completion of the project or phase thereof, unless the dismissal is for just or authorized cause subject to the requirements of due process or prior notice, or is brought about by the completion of the phase of the project. The records showed that respondents were dismissed after the expiration of their respective project employment contracts and due to the completion of the phases of work for which they were engaged. Section 2(III) expressly states that "if the termination is brought about by the completion of the contract or phase thereof, no prior notice is required." The Court cited Cioco, Jr. vs. C.E. Construction Corporation, which explained that completion of the work or project automatically terminates the employment, in which case the employer is only obliged to render a report to DOLE. Since prior notice is not part of procedural due process when termination results from completion of the contract or phase thereof, petitioner did not violate any procedural due process requirement, and there is no basis for the payment of nominal damages.

• Project Employment Doctrine — A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement, or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. Project employees are not entitled to termination pay when terminated as a result of the completion of the project or any phase thereof. The employer is required only to report the termination to DOLE, not to obtain clearance from the Secretary of Labor. The Court applied this doctrine by affirming the unanimous finding of the Labor Arbiter, NLRC, and Court of Appeals that respondents were project employees.

• Distinction Between Just-Cause Termination and Project-Completion Termination — Dismissals based on just causes under Article 282 of the Labor Code contemplate acts or omissions attributable to the employee, and require observance of procedural due process (written notice, hearing or conference, and written notice of termination). In contrast, termination of project employees due to completion of the contract or phase thereof is automatic and requires no prior notice under Section 2(III), Rule XXIII, Book V of the Omnibus Rules. The Court applied this distinction to hold that the Agabon doctrine on nominal damages for procedural due process violations does not extend to project-completion terminations.

• "If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required." — This is the controlling provision from Section 2(III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, which the Court relied upon to delete the award of nominal damages and to distinguish the case from Agabon vs. NLRC.

• "Completion of the work or project automatically terminates the employment, in which case, the employer is, under the law, only obliged to render a report to the DOLE on the termination of the employment." — This passage, quoted from Cioco, Jr. vs. C.E. Construction Corporation, articulates the rationale for why no prior notice is required in project-completion terminations and why the employer's obligation is limited to reporting to DOLE.

• "Dismissal based on just causes contemplate acts or omissions attributable to the employee." — This sentence defines the scope of Article 282 just-cause dismissals and explains why Agabon — which involved abandonment — cannot govern terminations based on project completion, which involve no fault or omission on the part of the employee.

• Agabon vs. NLRC, 485 Phil. 248 (2004) — Distinguished. Agabon held that where dismissal is for just cause, lack of statutory due process should not nullify the dismissal but the employer should indemnify the employee with nominal damages. The Court held Agabon inapplicable because it involved dismissal for abandonment (a just cause under Article 282), whereas the present case involved termination of project employees due to completion of phases of work, where no prior notice is required.

• Cioco, Jr. vs. C.E. Construction Corporation, 481 Phil. 270 (2004) — Followed. The Court cited Cioco for the proposition that under Section 2(III), Rule XXIII, Book V of the Omnibus Rules, no prior notice of termination is required if the termination is brought about by completion of the contract or phase thereof, because completion automatically terminates the employment and the employer is only obliged to render a report to DOLE.

• Saberola vs. Suarez, G.R. No. 151227, July 14, 2008, 558 SCRA 135 — Cited for the definition of a project employee under Article 280 of the Labor Code.

• Article 280, Labor Code — Defines a project employee as one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. Applied to confirm respondents' status as project employees, as found by all lower tribunals.

• Article 282, Labor Code — Enumerates just causes for termination by employer (serious misconduct, gross neglect, fraud, commission of a crime, and analogous causes). The Court distinguished dismissals under this article — which require procedural due process — from terminations due to project completion, which do not.

• Section 1(c), Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code — Provides that in project employment, no employee shall be dismissed prior to completion of the project or phase thereof, unless the dismissal is for just or authorized cause subject to due process requirements, or is brought about by completion of the phase of the project. Applied to show that the due process requirements apply only to dismissals for just or authorized cause, not to terminations by completion.

• Section 2(III), Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code — Expressly provides that "if the termination is brought about by the completion of the contract or phase thereof, no prior notice is required." This was the decisive provision relied upon to delete the award of nominal damages.

• Policy Instruction No. 20 — Stabilized employer-employee relations in the construction industry by classifying employees as project or non-project and requiring only a report to the nearest Public Employment Office upon termination of project employees due to completion of the project or phase thereof.

• Department Order No. 19, series of 1993 — Superseded Policy Instruction No. 20 and set forth indicators of project employment, including that termination of employment in a particular project must be reported to DOLE within 30 days following separation from work.

Justice Antonio T. Carpio (Chairperson), Justice Antonio Eduardo B. Nachura, Justice Roberto A. Abad, and Justice Jose Catral Mendoza concurred. No separate concurring opinions were written.