Laurente vs. Helenar Construction and Argarin

Regular employment is determined by the nature of the work performed, not by the employment contract, written or otherwise; work that is usually necessary or desirable in the employer’s usual business or trade renders the employee regular, and a belated unsigned project contract cannot defeat security of tenure. Corollarily, an employer must prove a valid cause and due process for dismissal; failure to do so makes the dismissal illegal.

Helenar Construction, owned by Joel Argarin, is principally engaged in the construction business. Freddie B. Laurente worked as a painter at several of its project sites from April 2012 until November 2014. The Labor Code’s Article 280 supplies the statutory standard for determining whether such work is regular or project-based employment.

Freddie B. Laurente filed a complaint for Illegal Dismissal with Money Claims on November 9, 2014 against Helenar Construction and its registered owner Joel Argarin before the Labor Arbiter. He alleged that he was a regular employee performing work necessary and desirable to respondents’ construction business, having continuously worked as a painter since April 2012 at respondents’ various project locations: Binondo, Manila from April 2012 to May 2012; Buendia, Makati from May 2012 to July 2012; and Little Baguio Terraces, San Juan, Manila from July 2012 until his service was terminated in November 2014.

According to Freddie, on October 24, 2014, respondents’ foreman William Bragais required him to sign a three-month labor contract for the Little Baguio Terraces project. The contract stated that his employment would be renewable “depending on the evaluation of the site engineer and foreman,” that the first party had the power to remove the second party before project completion for violation of the stated rules, and that the second party would work eight hours per day. Freddie refused to sign because the contract would violate his security of tenure. On November 7, 2014, respondents’ project-in-charge, Engineer Camille Palattao, barred Freddie from entering the construction site.

Respondents countered that Freddie was not their regular employee. They claimed that their subcontractor, William, recruited Freddie as a painter for the project and that it was practice in the construction industry for subcontractors to be hired for flooring, ceiling, painting, electrical, and other related services. They also claimed that Freddie refused to sign the labor contract they prepared and unjustifiably stopped reporting for work.

The Labor Arbiter found that Freddie was respondents’ employee and was illegally dismissed. It ruled that Freddie was a regular employee, not a project employee, noting that respondents prepared the labor contract and not William; that neither respondents nor the alleged subcontractor reported Freddie’s termination to the Department of Labor and Employment due to project completion; that Freddie had no project employment contracts; and that he performed work necessary and desirable to respondents’ business. The Labor Arbiter awarded Freddie backwages, separation pay, service incentive leave pay, and 13th month pay.

• Regular Employment and Illegal Dismissal: Petitioner maintained that he is a regular employee of respondents and was illegally terminated, and that as such he is entitled to his monetary claims.

• No Employer-Employee Relationship: Respondents countered that Freddie was not their regular employee; their subcontractor, William, recruited Freddie as a painter for the project.
• Industry Practice: Respondents argued that it is a practice in the construction industry for subcontractors to be hired for flooring, ceiling, painting, electrical, and other related services.
• Refusal to Sign and Abandonment: Respondents claimed that Freddie refused to sign the labor contract they prepared and unjustifiably stopped reporting for work.

• Regular Employment: Whether petitioner Freddie B. Laurente was a regular employee of respondents Helenar Construction and Joel Argarin, or a project employee of a subcontractor.
• Illegal Dismissal: Whether petitioner was illegally dismissed from service.
• Monetary Awards: Whether petitioner is entitled to his monetary claims.

• Regular Employment: Yes. Freddie was a regular employee; the nature of his work as a painter was usually necessary or desirable in respondents’ construction business, and no substantial evidence showed he was informed of project-employee status at engagement.
• Illegal Dismissal: Yes. The dismissal was illegal; respondents failed to prove a just or authorized cause and did not observe due process.
• Monetary Awards: Yes. Separation pay in lieu of reinstatement, backwages, service incentive leave pay, 13th month pay, attorney’s fees, and 6% interest per annum from finality are proper.

• Regular Employment: Article 280 provides that an employment is regular where the employee is engaged to perform activities usually necessary or desirable in the employer’s usual business or trade, notwithstanding any written or oral agreement, except project or seasonal employment. The standard is whether the work undertaken is necessary or desirable in the usual business or trade, assessed by the nature of the services and their relation to the general scheme of the business. Respondents are principally engaged in construction; Freddie, as a painter, prepared, sanded, and painted various construction works. His job was necessary in respondents’ usual business, and his continuous rehiring to different projects from April 2012 until November 2014 attested to the desirability of his services. His work as usually necessary and desirable disqualified it as a specific undertaking. Project employment requires that the worker be assigned to a specific project or undertaking whose duration and scope were specified at and made known to him at the time of engagement; the worker must be informed of his project status at hiring, and the period must be knowingly and voluntarily agreed upon without force, duress, or improper pressure. No substantial evidence showed Freddie was adequately informed of project-employee status at engagement or fully apprised of the duration and scope of the projects. The Court of Appeals and the NLRC relied on the unsigned labor contract, but respondents offered no plausible reason why the supposed subcontractor required Freddie to sign only on October 24, 2014, beyond the date he started reporting for work; Freddie also had no employment contracts for his past 2012 projects. The labor contract was an afterthought designed to deny him the benefits of a regular employee, particularly security of tenure. A worker is presumed regular absent clear agreement showing he was properly informed of the nature of his employment. Thus, the Labor Arbiter correctly held Freddie a regular employee.
• Illegal Dismissal: As a regular employee, Freddie could be dismissed only for a just or authorized cause under the Labor Code and with due process, including the opportunity to be heard and defend himself. Respondents failed to prove a valid cause; there was no proof Freddie unjustifiably stopped reporting for work. The facts showed Freddie refused to sign the belated labor contract prepared by respondents, which irked respondents, their foreman, and engineer, and thereafter he was barred from the construction site. The dismissal also suffered procedural infirmity because no administrative investigation was conducted and no prior notices were served. In termination disputes, the burden of proof is on the employer to prove a valid cause; failure to do so means the dismissal is not justified. Evidence must be clear, convincing, and free from any inference that the prerogative to dismiss was abused for a vindictive end. The dismissal was therefore illegal.
• Monetary Awards: The Labor Arbiter’s findings that Freddie was illegally dismissed were affirmed. Because of the strained relationship between the parties, the more equitable disposition was separation pay in lieu of reinstatement. Backwages are a relief given to illegally dismissed employees. The Labor Arbiter correctly ordered service incentive leave pay and 13th month pay absent proof of payment. Attorney’s fees of 10% of the total monetary award were warranted because Freddie was forced to litigate and incur expenses to protect his interests. The total award earns interest at 6% per annum from the date of finality of the Decision until fully paid.

• Regular Employment Test — Under Article 280 of the Labor Code, an employment is regular where the employee is engaged to perform activities usually necessary or desirable in the employer’s usual business or trade, notwithstanding any written or oral agreement to the contrary, except where employment is fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement, or where work is seasonal. The test is the reasonable connection between the particular activity performed and the usual business of the employer. Applied: Freddie’s painting work was necessary or desirable to Helenar’s construction business, so he was regular.
• Project Employment Requisites — The principal test for project-based employment is whether the employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at, and made known to, him at the time of engagement. The worker must be informed of his status as a project employee at the time of hiring, and the period of employment must be knowingly and voluntarily agreed upon without force, duress, or improper pressure. Applied: no substantial evidence showed Freddie was informed of project status at engagement; the unsigned belated contract did not establish project employment.
• Presumption of Regular Employment — A worker is presumed a regular employee absent clear agreement showing that he was properly informed of the nature of his employment. Applied: respondents failed to rebut the presumption; the labor contract was an afterthought designed to deny Freddie security of tenure.
• Burden of Proof in Dismissal — In termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a valid cause; failure to do so means the dismissal is not justified. Evidence must be clear, convincing, and free from any inference that the prerogative to dismiss was abused and unjustly used to further a vindictive end. Applied: respondents failed to prove a valid cause and did not observe due process.
• Due Process in Dismissal — A regular employee may be dismissed only for a just or authorized cause and with substantive and procedural due process, the basic requirement being the opportunity to be heard and to defend oneself. Applied: no administrative investigation or prior notices were served on Freddie.
• Separation Pay in Lieu of Reinstatement — Where reinstatement is no longer equitable due to strained relations, separation pay may be awarded in lieu of reinstatement. Applied: the strained relationship between the parties made separation pay the more equitable disposition.
• Attorney’s Fees and Interest — Attorney’s fees may be awarded when the employee was forced to litigate and incur expenses to protect his interests; the total monetary award earns legal interest from finality until fully paid. Applied: 10% attorney’s fees and 6% per annum interest were granted.

• "At the outset, we stress that what determines regular employment is not the employment contract, written or otherwise, but the nature of the job." — This states the controlling test for regular employment and anchors the Court’s rejection of the unsigned project contract as determinative.
• "Contrary to the CA and the NLRC's findings, Freddie's nature of work as usually necessary and desirable disqualifies it outrightly as a specific undertaking." — This is the ratio for holding Freddie a regular employee rather than a project employee.
• "Evidently, the labor contract was an afterthought designed to deny Freddie the benefits of a regular employee, particularly, his security of tenure." — This explains why the belated unsigned contract could not defeat Freddie’s regular status.
• "In termination disputes, it is settled that the burden of proof is always on the employer to prove that the dismissal was for a valid cause, failure to do so would necessarily mean that the dismissal is not justified." — This states the burden-of-proof rule that led to the finding of illegal dismissal.

• A.M. Oreta and Co., Inc. vs. NLRC, 257 Phil. 214 (1989) — Cited for the rule that regular employment is determined by the nature of the job, not by the employment contract.
• De Leon vs. NLRC, 257 Phil. 626 (1989) — Cited for the applicable test: the reasonable connection between the particular activity performed by the employee and the usual business of the employer.
• Magsalin vs. National Organization of Working Men, 451 Phil. 254 (2003) — Cited for assessing whether work is necessary or desirable by looking into the nature of the services rendered and its relation to the general scheme under which the business is pursued.
• Bela Electric Corporation vs. NLRC, 261 Phil. 496 (1990) — Cited for the principle that work which is usually necessary and desirable disqualifies the employment outrightly as a specific undertaking.
• Pasos vs. Philippine National Labor Construction Corporation, 713 Phil. 416 (2013) — Cited for the principal test in determining project-based employment: assignment to a specific project or undertaking whose duration and scope were specified at and made known at the time of engagement.
• Jamias vs. NLRC, 783 Phil. 16 (2016) — Cited for the requirements that the worker be informed of project-employee status at hiring and that the period of employment be knowingly and voluntarily agreed upon without force, duress, or improper pressure.
• Regala vs. Manila Hotel Corp., G.R. No. 204684, October 5, 2020 — Cited for the presumption that a worker is a regular employee absent clear agreement showing that he was properly informed of the nature of his employment.
• Mendoza vs. NLRC, 369 Phil. 1113 (1999); Austria vs. NLRC, 369 Phil. 557 (1999); Maranaw Hotels and Resort Corporation vs. NLRC, 363 Phil. 163 (1999); Harborview Restaurant vs. Labro, 605 Phil. 349 (2009) — Cited for the rule that the burden of proof in termination disputes is on the employer to prove a valid cause, and failure to do so means the dismissal is not justified.
• St. Michael's Institute vs. Santos, 422 Phil. 723 (2001) — Cited for the requirement that evidence of a valid dismissal be clear, convincing, and free from any inference that the prerogative to dismiss was abused for a vindictive end.
• Jardine Davies, Inc. vs. NLRC, 370 Phil. 310 (1999); Lopez vs. NLRC, 358 Phil. 141 (1998) — Cited for the award of separation pay in lieu of reinstatement due to strained relations.
• Phil-Man Marine Agency, Inc. vs. Dedace, Jr., 835 Phil. 536 (2018) — Cited for the award of attorney’s fees.
• Dusol vs. Lazo, G.R. No. 200555, January 20, 2021, citing Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited for the 6% per annum interest on the total monetary award from finality until fully paid.

• Article 280, Labor Code — Regular and Casual Employment. It provides that an employment is regular where the employee is engaged to perform activities usually necessary or desirable in the employer’s usual business or trade, notwithstanding any written or oral agreement to the contrary, except project or seasonal employment. Applied: Freddie’s painting work was necessary or desirable to respondents’ construction business, making him regular.
• Article 280 (now Article 295), Labor Code — Services of a project employee may be terminated upon the end or completion of the project or phase for which he was hired. Applied: project employment was not established because Freddie was not informed of project status at engagement and the belated unsigned contract did not prove it.
• Department Order No. 19 — Cited in the Labor Arbiter’s decision as requiring employers to submit a written report with the nearest public employment office every time a worker’s employment is terminated due to project completion; non-compliance was treated as an indication that Freddie was not a project employee.

Perlas-Bernabe, S.A.J., Lazaro-Javier, Rosario, and J. Lopez, JJ., concur. J. Lopez was designated as an additional member per Special Order No. 2822 dated April 7, 2021.