Kiamco vs. NLRC

A project employee may not be dismissed upon the mere expiration of a fixed-term contract where the project remains ongoing and no just or authorized cause exists; such dismissal, especially without the two written notices required by due process, is illegal and entitles the employee to reinstatement and full back wages.

PNOC, through its Energy Research and Development Division later incorporated as PNOC-EDC, operated the Geothermal Agro-Industrial Demonstration Plant Project in Valencia, Negros Oriental. Kiamco was engaged to work on that project under fixed-term contracts. The Labor Code, particularly Article 280, governs whether such an engagement is regular or project employment, while termination for just or authorized cause and the two-notice due process requirement govern the validity of dismissal.

On 1 July 1992, PNOC, through its Energy Research and Development Division later incorporated as PNOC-EDC, hired Cisell A. Kiamco as a project employee in its Geothermal Agro-Industrial Plant Project in Valencia, Negros Oriental. The first Contract of Employment engaged him as a technician for five months from 1 July 1992 to 30 November 1992, or until completion of the project, whichever came first, at a monthly salary of P3,500.00. After that contract ended, the parties entered into a second contract with basically the same terms and conditions, except that work-time was reduced to twenty-two days per month instead of twenty-six; it covered 1 December 1992 to 30 April 1993. Kiamco was re-hired under a third contract for six months from 1 May 1993 to 30 November 1993, with an increased monthly salary of P3,850.00.

On 20 October 1993, Kiamco received a Memorandum from the administration department demanding an explanation for alleged infractions: (1) misconduct for replacing the stereo of a UNDP-ERDC vehicle without permission from the company; (2) absence without official leave on 13 October 1993 and 15 October 1993; (3) non-compliance with administrative reporting procedure on accidents for failing to submit the Police Accident Report and other necessary requirements of a vehicular accident; and (4) unauthorized use of company vehicles for using the UNDP-ERDC company vehicle without permission from his superiors. In a letter dated 22 October 1993, Kiamco explained his side, but private respondents found the explanation unsatisfactory. On 28 October 1993, he received another Memorandum placing him under preventive suspension from 1 November 1993 to 30 November 1993 pending further investigation. No investigation was ever conducted. Private respondents contended that an investigation was unnecessary because Kiamco had ceased to be an employee ipso facto upon expiration of his employment contract on 30 November 1993.

On 1 December 1993, Kiamco reported back to work but security guards prevented him from entering the company premises. On 25 April 1994, he filed before the NLRC Sub-Regional Arbitration Branch No. VII, Dumaguete City, a Complaint for illegal suspension and dismissal against PNOC, praying for reinstatement to his former position and payment of back wages. On 27 May 1994, PNOC-EDC reported to the Department of Labor and Employment that Kiamco was terminated on 1 November 1993 due to expiration of his employment contract and abolition of his position.

The Labor Arbiter found that the three employment contracts were freely and voluntarily signed by Kiamco and PNOC representatives and plainly stated that Kiamco was hired for a specific project and fixed term. The NLRC, on the other hand, found that Kiamco’s stipulated duties included providing assistance in installation, operation and maintenance of the plant, handling raw materials, safekeeping of equipment, tools, service vehicle and supplies, and servicing transportation requirements in the project site; that these services were needed until full completion of the Geothermal Agroindustrial Demonstration Project; that work in the project was still going on when his service was terminated; and that private respondents failed to show proof as to when the project was completed. The NLRC also observed that no investigation was conducted and that Kiamco was simply informed upon his return that he was terminated due to expiration of his contract.

• Grave Abuse of Discretion: Petitioner charged the NLRC with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the 23 January 1997 Resolution, and prayed that it be nullified and that he be reinstated to his former position.
• Employment Status: Petitioner raised the issue whether he is a regular employee or a project employee, assailing the NLRC’s 23 January 1997 Resolution which declared him a project employee.
• Reinstatement and Back Wages: Petitioner maintained that he was entitled to reinstatement without loss of seniority rights and privileges and to payment of full back wages.
• Damages: Petitioner sought moral and exemplary damages and attorney’s fees.
• Motion for Reconsideration: Petitioner argued that his failure to file a motion for reconsideration with the NLRC was not fatal because the issues raised before the Supreme Court were the same issues squarely raised in and passed upon by the NLRC, and the assailed Resolution was itself the result of a motion for reconsideration filed by private respondents; another motion would only rehash arguments.

• Motion for Reconsideration: Both the Solicitor General and private respondents insisted that the petition should be dismissed because Kiamco failed to file a motion for reconsideration with the NLRC; they argued the assailed Resolution became final and executory, and certiorari lies only if there is no appeal or other plain, speedy and adequate remedy, with a motion for reconsideration being the plain and adequate remedy.
• Employment Status: Private respondents contended that Kiamco was not a regular employee and that the Labor Arbiter’s finding that he was a project employee should be affirmed.
• Reinstatement: Private respondents postulated that Kiamco could not be reinstated because (a) he was not a regular employee; (b) the position had already been abolished; (c) he failed to substantiate that the project was still ongoing; and (d) his separation was not cordial, as he incurred the ire and anger of co-workers and superiors.
• Abolition of Position: Private respondents argued that reinstatement was no longer possible since the position had already been abolished for being unnecessary.
• Strained Relations: Private respondents argued against reinstatement based on the “strained relations” principle.
• Valid Cause: Private respondents relied solely on the expiration of the employment contract to legitimize Kiamco’s termination.

• Motion for Reconsideration: Whether the petition should be dismissed for failure of petitioner Kiamco to file a motion for reconsideration with the NLRC.
• Employment Status: Whether petitioner is a regular employee or a project employee.
• Legality of Dismissal and Due Process: Whether petitioner’s termination was valid and complied with the due process requirement.
• Reinstatement and Back Wages: Whether petitioner is entitled to reinstatement without loss of seniority rights and privileges and to payment of full back wages.
• Damages: Whether petitioner is entitled to moral and exemplary damages.

• Motion for Reconsideration: No. Failure to file a motion for reconsideration is not fatal where the questions raised are the same as those already squarely raised in and passed upon by the NLRC, and the assailed Resolution was itself issued upon a motion for reconsideration by private respondents.
• Employment Status: Project employee. Under Article 280 of the Labor Code and the principal test in Violeta vs. NLRC, project employees are those hired for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement.
• Legality of Dismissal and Due Process: Illegal. No proof of just or authorized cause was presented; private respondents relied solely on expiration of the contract. Due process required two written notices, and the second notice informing Kiamco of his actual dismissal was not complied with.
• Reinstatement and Back Wages: Yes. The normal consequences of illegal dismissal are reinstatement without loss of seniority rights and payment of back wages; these do not depend on the employee’s status prior to dismissal but on the legality of termination.
• Damages: No. Moral and exemplary damages are recoverable only where the dismissal was attended with bad faith, fraud, oppression, or a wanton, oppressive or malevolent manner; the evidence showed none.

• Motion for Reconsideration: The general rule is that certiorari will not lie unless a motion for reconsideration is first filed before the respondent tribunal to allow it to correct assigned errors. However, the rule admits exceptions. Macawiwili Gold Mining and Development Co., Inc. vs. Court of Appeals recognizes that when the questions raised before the Supreme Court are the same as those squarely raised in and passed upon by the lower court, a motion for reconsideration is no longer a prerequisite. The issues Kiamco raised were the very same issues submitted to the NLRC, and the questioned Resolution was already the result of a motion for reconsideration filed by private respondents. Thus, another motion for reconsideration would only be a rehash of arguments already considered. Kiamco’s failure to file one was not fatal.

• Employment Status: Article 280 of the Labor Code provides that an employment is deemed regular where the employee performs activities usually necessary or desirable in the employer’s usual business or trade, except where the 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 is seasonal. The principal test is whether the employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time of engagement. Project employees are those hired for a specific project or undertaking, and the completion or termination of such project or undertaking has been determined at the time of engagement. Under Policy Instruction No. 20, project employees are those employed in connection with a particular project, while non-project or regular employees are those employed without reference to any particular project. Kiamco’s three contracts stipulated that he was employed in the Geothermal Agro-Industrial Demonstration Plant Project. The contracts also fixed the term or stated that employment would last until completion of the project. He was specifically assigned to a particular project, and the termination and completion of the project were determined and stipulated at the time of employment. He was therefore correctly classified as a project employee.

• Legality of Dismissal and Due Process: The dismissal of an employee must be for any of the just and authorized causes enumerated in the Labor Code. In termination cases, the burden of proving just and valid cause rests on the employer, and failure to do so results in a finding that the dismissal is unjustified, as held in De la Cruz vs. NLRC. Private respondents presented no proof or evidence to justify Kiamco’s termination. They relied solely on the expiration of the employment contract, instead of the administrative infractions they had earlier alleged, thereby abandoning any valid cause under the Labor Code. They also ignored due process, which requires two written notices: one apprising the employee of the particular acts or omissions for which dismissal is sought, and a subsequent notice informing the employee of the employer’s decision to dismiss. The records showed that the second written notice was not complied with; when Kiamco returned to work, he was bluntly informed that he was already terminated due to expiration of his employment contract. The lack of due process further tainted the dismissal. Although Wenphil Corp. vs. NLRC and Rubberworld (Phils.) vs. NLRC held that lack of due process may be cured by subsequent administrative proceedings, those cases involved dismissals later proved to be for a valid cause; here no valid or justifiable cause was proved. Even if the last contract fixed the term from 1 May 1993 to 31 October 1993, or 30 November 1993 as stated earlier, this did not give private respondents unbridled authority to terminate Kiamco upon expiration. As a project employee specifically assigned to a particular project, and absent any valid reason to terminate him, private respondents should have retained his services until actual completion of the project, consistent with De Ocampo, Jr. vs. NLRC.

• Reinstatement and Back Wages: The normal consequences of a finding of illegal dismissal are reinstatement to the former position without loss of seniority rights and payment of back wages, as held in Santos vs. NLRC. Reinstatement restores the employee to his status quo ante dismissal, while back wages allow him to recover wages lost as a result of the dismissal. These rights do not depend on the status of employment prior to dismissal but on the legality and validity of the termination. The fact that an employee is not a regular employee does not mean he can be dismissed anytime, even illegally. Private respondents’ argument that reinstatement and back wages cannot be granted because Kiamco was not a regular employee is misplaced. Their claim that the position had been abolished was correctly rejected by the NLRC: Kiamco’s stipulated duties showed his services were needed until full completion of the project; work in the project was still going on when he was terminated; and private respondents failed to show proof of when the project was completed. The burden of proving that Kiamco is not entitled to reinstatement rests on private respondents, who as employer would possess the necessary documents and proof. The “strained relations” principle cannot be applied indiscriminately. Under Globe-Mackay Cable and Radio Corp. vs. NLRC, it must be proved that the employee occupies a position of trust and confidence and that reinstatement would likely generate an atmosphere of antipathy and antagonism adversely affecting efficiency and productivity. No strained relations should arise from a valid legal act of asserting one’s right; otherwise an employee could be easily separated by paying separation pay on the pretext of strained relations. Thus, reinstatement with full back wages was proper.

• Damages: Moral damages are recoverable only where the dismissal was attended with bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. Exemplary damages may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent manner. The evidence on record did not show any fraud, malice or bad faith on the part of private respondents that would justify payment of moral and exemplary damages. The claim was therefore denied.

• Project Employment vs. Regular Employment — Under Article 280 of the Labor Code, an employment is deemed regular where the employee performs activities usually necessary or desirable in the employer’s usual business or trade, except where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. The principal test is whether the employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time of engagement. Project employees are those hired for a specific project or undertaking, and the completion or termination of such project or undertaking has been determined at the time of engagement. Under Policy Instruction No. 20, project employees are those employed in connection with a particular project, while non-project or regular employees are those employed without reference to any particular project. The Court applied this test to Kiamco’s contracts, which assigned him to the Geothermal Agro-Industrial Demonstration Plant Project and fixed the term or until completion, and held him to be a project employee.

• Illegal Dismissal of Project Employee — A project employee may not be dismissed at will upon expiration of the contract where the project remains ongoing and no just or authorized cause exists. The employer bears the burden of proving just and valid cause for dismissal, and failure to do so results in a finding that the dismissal is unjustified. The normal consequences of illegal dismissal are reinstatement to the former position without loss of seniority rights and payment of back wages. These rights do not depend on the employee’s status prior to dismissal but on the legality and validity of the termination. The fact that an employee is not a regular employee does not mean that he can be dismissed any time, even illegally, by his employer.

• Due Process in Termination — Due process in termination cases requires the employer to furnish the worker or employee sought to be dismissed with two written notices: a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and a subsequent notice which informs the employee of the employer’s decision to dismiss him. The Court found that the second written notice was not complied with, thereby further tainting Kiamco’s dismissal with irregularity.

• Strained Relations Principle — The “strained relations” principle cannot be applied indiscriminately. It must be proved that the employee concerned occupies a position where he enjoys the trust and confidence of his employer, and that it is likely that if reinstated, an atmosphere of antipathy and antagonism may be generated as to adversely affect the efficiency and productivity of the employee concerned. No strained relations should arise from a valid legal act of asserting one’s right; otherwise an employee who asserts his right could be easily separated from the service by merely paying separation pay on the pretext that his relationship with his employer had already become strained. The Court refused to apply the principle because private respondents did not establish the required requisites.

• Moral and Exemplary Damages in Labor Cases — Moral damages are recoverable only where the dismissal of the employee was attended with bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good custom or public policy. Exemplary damages may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent manner. The evidence on record did not show any fraud, malice or bad faith on the part of private respondents, so the claim for moral and exemplary damages was denied.

• Motion for Reconsideration as Condition for Certiorari — Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed before the respondent tribunal, to allow it an opportunity to correct its assigned errors. This rule is not without exceptions. When the questions raised before the Supreme Court are the same as those which have been squarely raised in and passed upon by the court below, the filing of a motion for reconsideration before certiorari can be instituted is no longer prerequisite. The Court applied this exception because the issues Kiamco raised were the very same issues submitted to the NLRC, and the assailed Resolution was already the result of a motion for reconsideration filed by private respondents.

• “The fact that an employee is not a regular employee does not mean that he can be dismissed any time, even illegally, by his employer.” — This passage states the ratio decidendi on the illegality of dismissing a project employee without valid cause and supports the award of reinstatement and back wages notwithstanding Kiamco’s project-employment status.
• “In termination cases, the burden of proving just and valid cause for dismissing an employee from his employment rests upon the employer, and the latter’s failure to do so results in finding that the dismissal is unjustified.” — This excerpt defines the burden of proof in termination cases and explains why private respondents’ reliance on contract expiration, without proof of just cause, resulted in a finding of illegal dismissal.
• “Due process in termination cases requires the employer to furnish the worker or employee sought to be dismissed with two (2) written notices, i.e., a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and a subsequent notice which informs the employee of the employer’s decision to dismiss him.” — This passage is the canonical formulation of the two-notice requirement applied by the Court in finding that Kiamco’s dismissal was tainted with irregularity.
• “The principal test for determining whether particular employees are properly characterized as "project employees," as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were specified at the time the employees were engaged for that project.” — This excerpt states the controlling test for project employment, which the Court applied to classify Kiamco as a project employee rather than a regular employee.

• Violeta vs. NLRC, G.R. No. 119523, 10 October 1997, 280 SCRA 520 — Cited for the principal test distinguishing project employees from regular employees: whether the employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time of engagement.
• Santos vs. NLRC, G.R. No. 76721, 21 September 1987, 154 SCRA 166 — Cited for the rule that the normal consequences of illegal dismissal are reinstatement to the former position without loss of seniority rights and payment of back wages.
• De la Cruz vs. NLRC, G.R. No. 119536, 17 February 1997, 268 SCRA 458 — Cited for the rule that the burden of proving just and valid cause for dismissing an employee rests upon the employer, and failure to do so results in a finding that the dismissal is unjustified.
• De Ocampo, Jr. vs. NLRC, G.R. No. 81077, 6 June 1990, 186 SCRA 360 — Cited for the principle that project workers should be retained until completion of an ongoing project absent a valid reason for termination.
• Globe-Mackay Cable and Radio Corp. vs. NLRC, G.R. No. 82511, 3 March 1992, 206 SCRA 701 — Cited to qualify the “strained relations” principle and require proof that the employee occupies a position of trust and confidence and that reinstatement would adversely affect efficiency and productivity.
• Macawiwili Gold Mining and Development Co., Inc. vs. Court of Appeals, G.R. No. 115104, 12 October 1998 — Cited for the exception to the motion-for-reconsideration requirement before certiorari, where the questions raised are the same as those already squarely raised in and passed upon by the lower court.
• Wenphil Corp. vs. NLRC, G.R. No. 80587, 8 February 1989, 170 SCRA 69 and Rubberworld (Phils.) vs. NLRC, G.R. No. 72779, 21 March 1990, 183 SCRA 421 — Cited for the rule that lack of due process may be cured by subsequent administrative proceedings where the dismissal was for a valid cause; distinguished because no valid cause was proved in Kiamco’s case.
• Palomado vs. NLRC, 257 SCRA 680 — Cited by respondents for the general rule that failure to file a motion for reconsideration is fatal; the Court declined to apply it rigidly in light of the recognized exceptions.

• Article 280, Labor Code — Defines regular and casual employment and the project-employment exception. It provides that an employment is deemed regular where the employee performs activities usually necessary or desirable in the employer’s usual business or trade, except where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. The Court applied this provision in holding that Kiamco was a project employee because his contracts assigned him to a specific project and fixed the term or until completion.
• Article 282, Labor Code — Enumerates the just causes for termination by the employer, such as serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud or willful breach, commission of a crime, and analogous causes. The Court applied this provision by noting that private respondents failed to prove any just cause and instead relied solely on the expiration of the employment contract.
• Article 283, Labor Code — Authorizes closure of establishment and reduction of personnel, and requires written notice and separation pay under specified conditions. The Court applied this provision in rejecting private respondents’ claim of abolition of position, since no proof was presented to substantiate the abolition or the completion of the project.
• Article 279, Labor Code — Referred to in the Globe-Mackay quotation as the reinstatement provision. The Court declined to apply its exception for strained relations because private respondents did not prove that Kiamco occupied a position of trust and confidence or that reinstatement would adversely affect efficiency and productivity.

Justices Puno, Mendoza, Quisumbing, and Buena concurred.