Hacienda San Isidro/Silos Farms and Llamado vs. Villaruel

A seasonal employee attains regular employment status when (1) the employee performs work or services that are seasonal in nature, and (2) the employee is employed to perform such work or services for more than one season. Being free to make one's services available to others does not negate regular employment status for as long as the employee is hired repeatedly for the same activities and not merely on and off for any single phase of agricultural work. Being compensated under a pakyaw scheme does not negate regular employment so long as the employer has the right to exercise the power of control or supervision over the performance of an employee's duties, regardless of whether the same is actually exercised.

Spouses Lucito and Helen Villaruel worked in Hacienda San Isidro, a sugar plantation in Himamaylan, Negros Occidental, administered by Rey Silos Llamado and forming part of Silos Farms owned by Fidel Silos. The dispute concerns the proper classification of seasonal farm workers in the sugar industry under Article 295 (formerly Article 280) of the Labor Code, specifically whether a seasonal worker repeatedly hired for the same activities across multiple seasons attains regular employment status.

Spouses Lucito Villaruel and Helen Villaruel worked in Hacienda San Isidro, a sugar plantation in Himamaylan, Negros Occidental, administered by Rey Silos Llamado and forming part of Silos Farms owned by Fidel Silos. Helen performed sugarcane cultivation, counting patdan (canepoints), and other work related to sugar farming — activities that are seasonal in nature and repeated every year.

On December 18, 2009 and April 7, 2010, the Spouses Villaruel filed separate complaints before the NLRC against petitioners for illegal dismissal, underpayment of wages, payment of service incentive leave pay, and attorney's fees. The cases were consolidated and re-assigned to Labor Arbiter Henry B. Tañoso, who rendered a Decision on February 14, 2011 declaring Lucito's dismissal for just cause but without due process (ordering nominal damages), and declaring Helen a regular employee who was illegally dismissed, ordering backwages, separation pay, and other monetary awards.

Petitioners appealed to the NLRC, which on September 30, 2011 granted the appeal, declaring that Lucito was afforded due process, deleting the nominal damages, and declaring that Helen was not an employee of the hacienda. Upon respondents' Motion for Reconsideration, the NLRC reversed itself on January 27, 2012, reinstating the LA's Decision with modifications: Lucito's dismissal was declared illegal, Helen's dismissal was declared illegal, and monetary awards were ordered for both, plus 10% attorney's fees. The NLRC denied petitioners' subsequent Motion for Reconsideration on March 30, 2012.

Petitioners elevated the matter to the Court of Appeals via Petition for Certiorari. The CA initially granted the petition on March 27, 2013, declaring Lucito justly dismissed with due process and declaring Helen not an employee. However, upon respondents' Motion for Reconsideration, the CA issued an Amended Decision on January 9, 2015, reversing its earlier ruling on Helen and declaring her a regular employee illegally dismissed, ordering backwages with wage differentials and separation pay. The CA denied petitioners' Motion for Partial Reconsideration on July 20, 2015.

Petitioners then filed the instant Petition for Review on Certiorari before the Supreme Court, raising the sole legal issue of whether Helen, as a seasonal worker in a sugar plantation, should be considered a regular employee. The Court initially denied the petition on November 9, 2015, but upon petitioners' Motion for Reconsideration, granted the same on November 7, 2016, setting aside the earlier Resolution and reinstating the Petition. The LA, the NLRC (in its January 27, 2012 Resolution), and the CA (in its Amended Decision) uniformly found that Helen was a regular employee of petitioners — a factual finding the Court declined to disturb, it being a settled rule that factual findings of quasi-judicial agencies affirmed by the appellate court are accorded finality.

• Sporadic Employment on Pakyaw Basis: Petitioners contended that Helen merely worked sparingly in the hacienda on pakyaw basis and that they did not wield any control over the manner by which she performed her work. They presented affidavits showing she was hired intermittently, counting patdan at times, and even managed and operated her own sari-sari store. They further noted that payroll and worksheets submitted by Helen showed she was not required to report daily or observe definite hours of work.
• Freedom to Contract Elsewhere: Petitioners argued that Helen was free to work elsewhere, citing Gapayao vs. Fulo which held that when seasonal employees are free to contract their services with other farm owners, the former are not regular employees.
• Lack of Control Over Pakyaw Worker: Petitioners contended that Helen was a pakyaw worker not subject to their control, and that she failed to prove by substantial evidence that petitioners had control over the manner she performed her work, citing Gapayao which held that pakyaw workers may be considered regular employees only if their employers have control over the conduct of their work.

• No Evidence of Work Elsewhere: Respondents argued that there is no evidence showing Helen worked with other haciendas or farm owners, and that sample payrolls, worksheets, and the affidavit of a former secretary of the hacienda prove she worked as a regular employee of petitioners for many years.
• Pakyaw as Mere Method of Compensation: Respondents maintained that pakyaw is just a method of compensation and does not negate regular employment.
• Regular Employment Under Article 295: Respondents argued that under Article 280 (now Article 295) of the Labor Code, Helen is a regular employee because she was engaged to perform activities necessary or desirable in the usual business or trade of the employer, and that she rendered at least one year of service, whether continuous or broken, with respect to the activity for which she was employed.

• Regular Employment of Seasonal Worker: Whether Helen, as a seasonal worker in a sugar plantation, should be considered a regular employee.

• Regular Employment of Seasonal Worker: Yes. Helen is a regular employee because she performed seasonal work for more than one season, satisfying both requisites for regular employment status of seasonal employees under Article 295 of the Labor Code. The CA's conclusion was affirmed, though its reasoning was corrected.

• Regular Employment of Seasonal Worker: It is undisputed that Helen is a seasonal worker; the parties differ only as to whether she is a regular employee. The LA, NLRC, and CA uniformly found her to be a regular employee, and the Court declined to disturb this factual finding, it being a settled rule that factual findings of quasi-judicial agencies affirmed by the appellate court are accorded finality. However, the Court corrected the CA's erroneous reasoning. The CA improperly categorized Helen as a casual employee and applied the proviso in the second paragraph of Article 295, which applies only to casual employees — not to those covered by the first paragraph, as held in Paz vs. Northern Tobacco Redrying Co., Inc. citing Mercado, Sr. vs. NLRC. The correct basis is the "exception to the exception" under the first paragraph: Article 295 excepts from regular employment only seasonal employees whose employment is "for the duration of the season," i.e., for one season. Seasonal employees employed for more than one season in the same activities fall under the general rule of regular employment, not under the exception. The Court deduced two requisites: (1) the seasonal employee performs work or services that are seasonal in nature, and (2) the seasonal employee is employed to perform such work or services for more than one season. Both requisites are present: petitioners themselves do not dispute that Helen performs seasonal work repeated every year. Petitioners' reliance on Mercado (as cited in Gapayao) for the proposition that freedom to contract services elsewhere negates regular employment is misplaced. In Mercado, workers were hired on and off for any single phase of agricultural work and were not hired regularly and repeatedly for the same activities — unlike Helen, who was hired repeatedly for sugarcane cultivation, counting patdan, and other sugar farming activities. Whether she was free to make her services available to other farm owners is irrelevant, and her maintenance of a sari-sari store is inconsequential and not incompatible with regular employment. On the pakyaw argument, a pakyaw or task basis arrangement defines not the relationship between the parties but the manner of payment of wages, as held in Abuda vs. L. Natividad Poultry Farms. The control test merely calls for the existence of the right to control, not necessarily its exercise. Since Helen performed her tasks at petitioners' hacienda, petitioners could easily exercise control and supervision; whether they actually did so is immaterial. Moreover, petitioners' argument that pakyaw status negates the employer-employee relationship essentially invites a factual review, which is not allowed under a Rule 45 petition reviewing a CA decision rendered under Rule 65 — the narrow scope of inquiry is whether the CA correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC.

• Regular Seasonal Employee Doctrine — A seasonal employee is deemed a regular employee if they perform work or services that are seasonal in nature and are employed to perform such work or services for more than one season. The two requisites are: (1) the seasonal employee performs work or services that are seasonal in nature; and (2) the seasonal employee is employed to perform such work or services for more than one season. Both requisites being present, the worker falls under the general rule of regular employment in the first paragraph of Article 295, not under the exception for seasonal workers employed "for the duration of the season."

• Exception to the Exception — The first paragraph of Article 295 excepts from regular employment status only seasonal employees whose employment is "for the duration of the season," i.e., for one season. Seasonal employees employed for more than one season no longer fall under the exception but under the general rule of regular employment. This is the "exception to the exception" — the basis for regular employment status of seasonal workers is the first paragraph, not the proviso in the second paragraph.

• Proper Application of the Proviso in Article 295, Second Paragraph — The proviso in the second paragraph of Article 295 applies only to "casual" employees and not to those covered by the first paragraph. It is erroneous to categorize a seasonal employee as a casual employee and then apply the proviso to attain regular employment status. The office of a proviso is to qualify or modify only the phrase immediately preceding it or restrain or limit the generality of the clause that it immediately follows.

• Freedom to Contract Elsewhere Does Not Negate Regular Employment — The fact that an employee is free to make their services available to others does not negate regular employment status for as long as they are hired repeatedly for the same activities and not merely on and off for any single phase of agricultural work. The distinction is between workers hired on and off for any single phase (as in Mercado, Sr. vs. NLRC) and workers hired repeatedly for the same activities across multiple seasons (as in this case).

• Pakyaw and the Control Test — Being compensated under a pakyaw scheme does not negate regular employment so long as the employer has the right to exercise the power of control or supervision over the performance of an employee's duties, regardless of whether the same is actually exercised. The control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is enough that the employer has the right to wield the power; actual supervision is not essential.

• "A seasonal employee is deemed a regular employee if they perform work or services that are seasonal in nature and is employed to perform such work or services for more than one season." — This is the opening statement of the decision and articulates the core doctrine governing regular employment status of seasonal workers, establishing the two-requisite test.

• "The fact that an employee is free to make their services available to others does not negate regular employment status for as long as they are hired repeatedly for the same activities and not merely on and off for any single phase of agricultural work. Likewise, being compensated under a pakyaw scheme does not negate regular employment so long as the employer has the right to exercise the power of control or supervision over the performance of an employee's duties, regardless of whether the same is actually exercised." — This passage states the ratio decidendi on two key subsidiary holdings: the irrelevance of freedom to contract elsewhere and the sufficiency of the right to control (as opposed to actual exercise) in pakyaw arrangements.

• "The basis for saying that Helen is a regular seasonal employee is, therefore, not the proviso in the second paragraph but the exception to the exception, i.e., the general rule enunciated in the first paragraph." — This passage articulates the Court's correction of the CA's erroneous reasoning, clarifying that the proper basis for regular seasonal employment is the first paragraph of Article 295, not the proviso in the second paragraph.

• "Unlike the workers in Mercado, Helen was not hired on and off for any single phase of agricultural work. She was hired repeatedly for the same activities, i.e., sugarcane cultivation, counting patdan, etc. Hence, whether she was free to make her services available to other farm owners is of no relevance here." — This passage distinguishes Mercado, Sr. vs. NLRC and explains why the freedom-to-contract-elsewhere exception does not apply when a worker is repeatedly hired for the same activities across multiple seasons.

• Gapayao vs. Fulo, 711 Phil. 179 (2013) — Cited by petitioners for the propositions that seasonal employees free to contract services elsewhere are not regular employees, and that pakyaw workers are regular employees only if subject to employer control. The Court distinguished the first proposition (inapplicable because Helen was hired repeatedly for the same activities, not on and off for any single phase) and clarified the second (control test requires only the existence of the right to control, not actual exercise).

• Mercado, Sr. vs. NLRC, 278 Phil. 345 (1991) — Cited by petitioners through Gapayao for the freedom-to-contract-elsewhere exception. The Court found petitioners' reliance misplaced, distinguishing Mercado on the ground that workers there were hired on and off for any single phase of agricultural work, unlike Helen who was hired repeatedly for the same activities. The Court reiterated the explanation in Hacienda Fatima vs. National Federation of Sugarcane Workers-Food and General Trade for Mercado's inapplicability.

• Abasolo vs. National Labor Relations Commission, 400 Phil. 86 (2000) — Cited for the definition of regular seasonal employees as workers called to work from time to time, mostly during a certain season, temporarily laid off during off-season, yet not separated from service but merely considered on leave until reemployed.

• Universal Robina Sugar Milling Corp. vs. Acibo, 724 Phil. 489 (2014) — Cited for the proposition that continuous and repeated hiring of a seasonal worker to perform the same tasks for several seasons is a badge of regular employment, and for the distinction between regular seasonal employees and regular employees who perform tasks year-round regardless of season.

• Hacienda Fatima vs. National Federation of Sugarcane Workers-Food and General Trade, 444 Phil. 587 (2003) — Cited for the "exception to the exception" principle and for the explanation of why Mercado is inapplicable when workers perform the same tasks every season for several years. The Court quoted this case at length to distinguish Mercado.

• Paz vs. Northern Tobacco Redrying Co., Inc., 754 Phil. 251 (2015) — Cited for the holding that the proviso in the second paragraph of Article 280 (now 295) applies only to casual employees and not to those covered by the first paragraph, supporting the Court's correction of the CA's erroneous reasoning.

• Abuda vs. L. Natividad Poultry Farms, 835 Phil. 554 (2018) — Cited for the proposition that a pakyaw or task basis arrangement defines not the relationship between the parties but the manner of payment of wages.

• David vs. Macasio, 738 Phil. 293 (2014) — Cited for the scope of inquiry in a Rule 45 petition reviewing a CA decision rendered under Rule 65 (whether the CA correctly determined grave abuse of discretion by the NLRC) and for the principle that the control test requires only the existence of the right to control.

• Formantes vs. Duncan Pharmaceuticals, Phils., Inc., 622 Phil. 287 (2009) — Cited for the settled rule that factual findings of quasi-judicial agencies, when affirmed by the appellate court, are accorded finality by the Supreme Court.

• Article 295 (formerly Article 280), Labor Code — Defines regular and casual employment. The first paragraph provides that employment is deemed regular where the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, except where employment is fixed for a specific project or where work is seasonal in nature and employment is for the duration of the season. The second paragraph provides that employment not covered by the first paragraph is deemed casual, with a proviso that any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which employed. The Court applied the first paragraph's "exception to the exception" — seasonal employees employed for more than one season fall under the general rule of regular employment, not under the seasonal-work exception — and held that the proviso in the second paragraph applies only to casual employees, not to seasonal employees covered by the first paragraph.

Gesmundo, C.J. (Chairperson), Hernando, Zalameda, and Marquez, JJ., concurred.