Octaviano vs. NLRC

An employee who is allowed to work after the expiration of a probationary period, or who is repeatedly rehired under successive six-month probationary contracts, is considered a regular employee by operation of law; the employer's failure to prove the reasonable standards for regularization renders the dismissal illegal. Such an employee is entitled to reinstatement without loss of seniority rights and to full backwages, which are fixed at three years without deduction or qualification under the Court's established policy.

General Diesel Power Corporation, a corporation engaged in dealing in parts, sales, and services, employed Lina B. Octaviano in various capacities, initially as a component mechanic and later as a parts clerk. The dispute turns on the Labor Code's regime governing probationary employment — Article 281, which caps the probationary period at six months absent an apprenticeship agreement stipulating a longer period, and Articles 279 and 280, which guarantee security of tenure and define regular employment — read against the constitutional guarantee of security of tenure. The case also implicates the Court's settled policy on the computation of backwages for illegally dismissed workers.

General Diesel Power Corporation, a corporation engaged in dealing in parts, sales, and services, hired Lina B. Octaviano as a component mechanic under a temporary employment contract issued for the period November 21, 1984 to May 21, 1985. Although the contract denominated her a component mechanic, she was in fact made to work as a secretary and parts clerk.

On May 22, 1985, the corporation extended her another contract of employment providing for a six-month probationary period. On November 21, 1985, management terminated her upon the expiration of that probationary period.

On January 20, 1986, the corporation rehired Octaviano as a parts clerk and, pursuant to management's prior arrangement, issued her a third six-month probationary employment contract. On June 5, 1986, she was dismissed once more.

On July 8, 1986, Octaviano lodged a complaint for illegal dismissal, which she amended on January 30, 1987. She alleged that she had been unceremoniously terminated to prevent her from becoming a regular employee and to exclude her from the benefits attaching to regular status. The corporation, for its part, maintained that during her probationary periods she had failed to measure up to the standards of her work and had been found unfit for her job, and that she had received separation pay upon termination and had signed a quitclaim discharging the company from any liability.

The labor arbiter and the NLRC both found that Octaviano had been unjustly and unlawfully terminated after successively completing three six-month probationary periods of employment, which should have converted her status to that of a regular employee. Both tribunals noted that no apprenticeship agreement covered her employment, that she had been rehired after each probationary period — a fact negating the claim that she had failed to qualify — and that the corporation had failed to establish any reasonable standards by which she was to be measured for regularization, the records disclosing no such standards. The NLRC nonetheless reduced the award of full backwages to one year, reasoning that her chemical engineering degree made it easy for her to find a job during her lay-off, so that awarding more would be tantamount to rewarding idleness.

• Limitation of Backwages: Petitioner complained that the NLRC erred in limiting the award of backwages to one year, invoking Article 279 of the Labor Code, which guarantees security of tenure to a regular employee, prohibits his termination except for a just cause, and entitles an unjustly dismissed worker to reinstatement with full backwages.
• Termination to Prevent Regularization: Petitioner maintained that she was unceremoniously terminated by the respondent company to prevent her from becoming a regular employee and to exclude her from all the benefits attaching thereto.

• Failure to Qualify: Respondent argued that the petitioner, while in her probationary periods, had failed to measure up to the standards of her work and had been found unfit for her job.
• Separation Pay: Respondent argued that the petitioner should not be entitled to backwages because she was given separation pay upon termination of her employment.
• Quitclaim: Respondent argued that the petitioner had signed a quitclaim discharging the company from any liability.

• Grave Abuse of Discretion — Backwages: Whether the NLRC gravely abused its discretion in limiting the award of backwages to one year.
• Regular Employment: Whether the petitioner became a regular employee by operation of law.
• Separation Pay and Quitclaim: Whether receipt of separation pay and execution of a quitclaim bar the petitioner from recovering backwages.

• Grave Abuse of Discretion — Backwages: Yes. The NLRC gravely abused its discretion in reducing the award to one year; backwages computed from dismissal to reinstatement restore income lost through unlawful dismissal and are not a reward for idleness.
• Regular Employment: Yes. Petitioner became a regular employee by operation of law, having been allowed to work after her probationary periods and having performed activities necessary and desirable in the employer's usual business.
• Separation Pay and Quitclaim: No. Backwages and separation pay are distinct and separate reliefs, and a quitclaim will not estop a dismissed employee from complaining to the authorities.

• Grave Abuse of Discretion — Backwages: Article 279 of the Labor Code entitles an employee unjustly dismissed from work to reinstatement without loss of seniority rights and other privileges, to full backwages inclusive of allowances, and to other benefits or their monetary equivalent, computed from the time compensation was withheld up to the time of actual reinstatement. The award is not tantamount to rewarding idleness but enables the worker to recover the loss of income caused by her dismissal. The NLRC's justification — that Octaviano, a chemical engineering graduate, could easily have landed a better-paying job had she seriously looked for one — compounded the abuse, since it penalized the worker for the very unemployment the unlawful dismissal produced. The Solicitor General himself manifested that he did not agree with the NLRC's position and could not represent it without going against the law, the evidence, and jurisprudence.

• Regular Employment: Article 281 of the Labor Code provides that probationary employment shall not exceed six months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period, and that an employee allowed to work after a probationary period shall be considered a regular employee. Octaviano was a regular employee on all counts. First, her job as parts clerk required activities necessary and desirable in the usual business of General Diesel Power Corporation — dealing in parts, sales, and services — and she was neither contracted for a specified project nor required to perform work seasonal in nature; under Article 280, she was therefore a regular employee, the provisions of any written agreement to the contrary notwithstanding. Second, her employment was not covered by any apprenticeship agreement. Third, she was rehired on May 22, 1985 and again on January 20, 1986, and was even promoted to parts clerk, which negated the claim that she had failed to qualify. She had successively completed three six-month probationary periods, and the successive hirings and firings were a ploy to avoid the obligations imposed by law on employers for the protection of probationary employees. The employer's claim that she had failed to meet its standards was self-defeating, since no reasonable standards were shown to exist; had there been any, copies should have been attached to its pleadings, and the records revealed none. That she worked on a contract-to-contract basis could not alter the character of her employment, because contracts cannot override the mandate of law.

• Separation Pay and Quitclaim: The fact that petitioner received separation pay should not be taken against her, for it is but natural for her to accept whatever amounts the company would give her; receipt of separation pay does not relieve the company of its obligations under the law. Backwages and separation pay are reliefs distinct and separate from each other: backwages restore the income lost by reason of unlawful dismissal, while separation pay provides the employee money during the period in which he is locating a new job. A quitclaim, moreover, will not estop a dismissed employee from complaining to the authorities. The Court has consistently adopted the policy of awarding backwages to illegally dismissed employees equivalent to three years without qualification or deduction, in order to avoid protracted delay in the execution of the award caused by extended hearings and the difficulty of determining the earnings of laid-off employees during the pendency of the case for purposes of deducting the same from the gross backwages awarded. No good reason appeared to depart from that established policy.

• Regularization by Operation of Law — An employee who is allowed to work after a probationary period is considered a regular employee. Article 281 of the Labor Code caps probationary employment at six months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period. Octaviano successively completed three six-month probationary periods and was rehired after each, so her status converted to that of a regular employee by operation of law.
• Regular Employment under Article 280 — An employee is deemed regular when he performs activities that are necessary and desirable in the usual business or trade of the employer, the provisions of a written agreement to the contrary notwithstanding. Octaviano's work as a parts clerk involved dealing in parts, sales, and services — the very business of General Diesel Power Corporation — and she was neither contracted for a specified project nor required to perform work seasonal in nature. She was therefore a regular employee on this ground as well.
• Contract-to-Contract Employment — The fact that an employee works on a contract-to-contract basis cannot alter the character of her employment, because contracts cannot override the mandate of law. The Court applied this to reject the employer's reliance on successive fixed-term probationary contracts.
• Successive Probationary Contracts as a Circumvention Device — Repeated hiring and firing of employees on successive probationary contracts is a ploy to avoid the obligations imposed by law on employers for the protection and benefit of probationary employees, who are often kept in unending probationary employment without complaint due to the serious unemployment problem. The Court will not countenance such overreaching, and no member of the country's work force must be allowed to be taken advantage of by any employer.
• Security of Tenure — Security of tenure is a right of paramount value guaranteed by the Constitution and should not be denied to workers through stratagems designed to circumvent the law on security of tenure. An employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and other privileges, and to full backwages inclusive of allowances and other benefits or their monetary equivalent.
• Backwages Distinguished from Separation Pay — Backwages and separation pay are reliefs distinct and separate from each other. Backwages restore the income lost by reason of unlawful dismissal, while separation pay provides the employee money during the period in which he is locating a new job. Receipt of separation pay does not relieve the employer of its obligations under the law.
• Quitclaim Does Not Bar Relief — A quitclaim will not estop a dismissed employee from complaining to the authorities.
• Three-Year Backwages Policy — The Court has consistently adopted the policy of awarding backwages to illegally dismissed employees equivalent to three years without qualification or deduction, in order to avoid protracted delay in the execution of the award due to extended hearings and the unavoidable difficulties encountered in determining the earnings of laid-off employees ordered reinstated with backwages during the pendency of the case, for purposes of deducting the same from the gross backwages awarded.

• "We perceive these successive hirings and firings as a ploy to avoid the obligations imposed by law on employers for the protection and benefit of probationary employees, who, more often than not, are kept in the bondage, so to speak, of unending probationary employment without any complaint due to the serious unemployment problem besetting our country today." — This passage articulates the Court's characterization of successive probationary contracts as a circumvention device and supplies the policy rationale for refusing to give effect to such arrangements.
• "The fact that Lina worked on a contract-to-contract basis can not alter the character of her employment, because contracts can not override the mandate of law." — This states the ratio decidendi on the primacy of statutory regularization over the parties' fixed-term stipulations, a formulation frequently invoked in subsequent security-of-tenure cases.
• "Backwages and separation pay are reliefs distinct and separate from each other. Payment of backwages in the forin of rehef that restores the income that was lost by reason of unlawful dismissal is distinguished from separation pay which provides the employee money during the period in which he is locating a new job." — This defines the canonical distinction between the two reliefs and disposes of the employer's argument that receipt of separation pay bars recovery of backwages.
• "We have consistently adopted the policy of awarding back wages to illegally dismissed employees equivalent to three years without qualification or deduction, in order to avoid protracted delay in the execution of the award for backwage due to extended hearings and unavoidable delays and difficul ties encountered in determining the earnings of laid-off employees ordered to be reinstated with backwages during the pendency of the case for purposes of deducting the same from the gross backwages awarded." — This is the Court's canonical statement of the three-year backwages policy and the practical justification for fixing the award without deduction or qualification.

• Cebu Royal Plants (SMC) vs. The Honorable Deputy Minister of Labor and Employment, G.R. No. 58639, August 12, 1987, 153 SCRA — Cited for the rule that an employee allowed to work after a probationary period shall be considered a regular employee.
• Beta Electric Company vs. National Labor Relations Commission, G.R. No. 86408, February 15, 1990, 182 SCRA 384 — Cited for the rule that contract-to-contract employment cannot alter the character of the employee's employment, since contracts cannot override the mandate of law.
• Ruffy vs. NLRC, G.R. No. 84193, February 15, 1990, 182 SCRA 365 — Cited in support of the entitlement of an illegally dismissed employee to reinstatement with full backwages and the paramount value of security of tenure.
• Lim vs. NLRC, G.R. No. 79975, March 16, 1989, 171 SCRA 388 — Cited in connection with the computation of backwages from the time compensation was withheld up to actual reinstatement.
• Santos vs. NLRC, G.R. No. 76721, September 2, 1987, 154 SCRA — Cited for the distinction between backwages and separation pay as separate and distinct reliefs.
• Olacao, et al. vs. NLRC, G.R. No. 81390, August 29, 1989, 177 SCRA 38 — Cited for the holding that a quitclaim will not estop a dismissed employee from complaining to the authorities.
• Feati University Faculty Club vs. Feati University, No. L-31503, August 15, 1947, 58 SCRA 395 — Cited, as relied upon in Mariners Polytechnic School, for the Court's policy of awarding backwages equivalent to three years without qualification or deduction.
• Mariners Polytechnic School, et al. vs. Leogardo, Jr., et al., G.R. No. 74271, March 31, 1989, 171 SCRA 597 — Cited as the case reiterating the Feati University ruling on the three-year backwages policy.

• Article 279, Labor Code — Guarantees security of tenure to a regular employee, prohibits termination except for a just cause, and entitles an employee unjustly dismissed from work to reinstatement without loss of seniority rights and other privileges, to full backwages inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement. The Court applied it to strike down the NLRC's reduction of the backwages award and to order reinstatement with three years' backwages.
• Article 280, Labor Code — Provides that an employee who performs activities necessary and desirable in the usual business or trade of the employer is deemed a regular employee, the provisions of a written agreement to the contrary notwithstanding. The Court applied it to hold that Octaviano's work as a parts clerk, dealing in parts, sales, and services, made her a regular employee.
• Article 281, Labor Code — Provides that probationary employment shall not exceed six months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period; that the services of a probationary employee may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer at the time of employment; and that an employee allowed to work after a probationary period shall be considered a regular employee. The Court applied it to hold that Octaviano's successive probationary periods converted her to regular status, no apprenticeship agreement having covered her employment.
• 1987 Constitution (Security of Tenure) — The Court invoked the constitutional guarantee of security of tenure as a right of paramount value that should not be denied to workers through stratagems designed to circumvent the law on security of tenure.

Melencio-Herrera (Chairman), Paras, Padilla, and Regalado, JJ., concurred.