Pasos vs. Philippine National Construction Corporation

A project employee who is continuously rehired and whose services are extended indefinitely beyond the determinable duration of the original project attains regular employment status, and the employer's failure to file termination reports with the DOLE after each project completion constitutes proof that the employee is not a project employee. Dismissal of such regular employee on the ground of project completion is illegal, entitling the employee to reinstatement and full back wages.

Petitioner Roy D. Pasos was employed by respondent Philippine National Construction Corporation (PNCC), a government-owned and controlled corporation engaged in construction projects. Pasos was initially engaged as a project employee under successive appointments tied to specific construction undertakings — the NAIA-II Project, PCSO-Q.I. Project, and SM Project (Packages I and II). The legal framework governing project employment in the construction industry is found in Article 280 of the Labor Code, as amended, and Department Order No. 19, the "Guidelines Governing the Employment of Workers in the Construction Industry," which requires employers to submit termination reports to the nearest public employment office every time a project employee's employment is terminated due to completion of a project.

Petitioner Roy D. Pasos began working for respondent PNCC on April 26, 1996, as "Clerk II (Accounting)" assigned to the NAIA-II Project under a Personnel Action Form for project employment dated April 30, 1996. The appointment specified that his employment would run from April 26, 1996 to July 25, 1996, with a proviso that the company could extend his services if still needed beyond the contract's validity. Despite the stated end date, Pasos's employment did not terminate on July 25, 1996; instead, it was extended until August 4, 1998 — more than two years beyond the original three-month term — as reflected in a Personnel Action Form dated July 7, 1998. No subsequent contract or appointment specified a particular duration for this extended period; his services were simply prolonged indefinitely until the July 7, 1998 form was issued setting August 4, 1998 as the end date.

On November 11, 1998, Pasos was rehired as "Accounting Clerk (Reliever)" for the PCSO-Q.I. Project under an Appointment for Project Employment, with employment set to end on February 11, 1999. This term was likewise extended, to February 19, 1999, per a Personnel Action Form dated February 17, 1999. On February 23, 1999, Pasos was again hired as "Accounting Clerk" for the "SM-Project" under an appointment dated February 18, 1999. This appointment did not specify a particular end date but stated that employment would be "co-terminus with the completion of the project." The employment supposedly ended on August 19, 1999 per a Personnel Action Form dated August 18, 1999, which stated that termination was due to completion of the assigned phase of work. However, Pasos was again appointed as "Accounting Clerk" for "SM Project (Package II)" under an appointment dated August 20, 1999, again providing that employment would be "co-terminus with the project" without specifying a date. This extension eventually ended on October 19, 2000 per a Personnel Action Form dated October 17, 2000.

Despite the termination on October 19, 2000, Pasos claims his superior instructed him to report for work the following day, intimating reemployment for succeeding SM projects. For purposes of reemployment, he underwent a medical examination which allegedly revealed pneumonitis, and PNCC's physician, Dr. Arthur C. Obena, advised him to take a 14-day sick leave. After serving that leave, Pasos was again referred for medical examination on November 27, 2000, which revealed Koch's disease, requiring a 60-day leave of absence. The following day, he submitted his application for sick leave, but PNCC's Project Personnel Officer, Mr. R.S. Sanchez, informed him he was not entitled to sick leave because he was not a regular employee. Pasos served the 60-day leave nonetheless and underwent another medical examination on February 16, 2001, after which Dr. Obena issued a medical clearance certifying him fit to work.

When Pasos presented his medical clearance on February 16, 2001, he was informed that his services had already been terminated on October 19, 2000 and that he had been replaced due to expiration of his contract. On February 18, 2003, Pasos filed a complaint for illegal dismissal against PNCC, praying for reinstatement and back wages. He argued that he had become a regular employee due to his prolonged employment and PNCC's failure to report his termination after every project completion, and that his termination without administrative investigation constituted illegal dismissal. PNCC countered that Pasos was hired as a project employee with full knowledge that his appointment was only for the duration of each project, and that it had complied with reportorial requirements by submitting termination reports to the DOLE. Pasos disputed this, presenting DOLE NCR certifications verifying that he was not among the affected employees listed in the termination reports filed by PNCC for August 1998, February 1999, August 1999, and October 2000. The Labor Arbiter found that Pasos had attained regular employment status through repeated hiring and rehiring, noting that his services were extended beyond stated completion dates and that subsequent contracts no longer indicated specific completion dates. The NLRC reversed, finding Pasos to be a project employee based on Personnel Action Forms and termination reports submitted to the DOLE. The Court of Appeals affirmed the NLRC.

• Insufficiency of Appeal Bond: Petitioner argued that PNCC's appeal from the Labor Arbiter's decision should not have been allowed because the appeal bond filed amounted to only P422,630.41, which was less than the total monetary award of P460,292.41.
• Unauthorized Verification: Petitioner contended that Felix M. Erece, Jr., PNCC's Personnel Services Department Head, had no authority to sign the verification and certification on behalf of PNCC absent any board resolution or secretary's certificate, distinguishing this from Cagayan Valley Drug Corporation vs. Commissioner of Internal Revenue where a board resolution was at least belatedly submitted.
• Regular Employment Status: Petitioner submitted that he was not a project employee, pointing out that his employment for the NAIA II Project was extended more than two years beyond its stated duration, that DOLE certifications showed he was not listed in PNCC's termination reports, that the termination reports attached by PNCC were mere uncertified photocopies, and that his SM Project contracts did not specify a determinable completion date in violation of Department Order No. 19.
• Reinstatement and Full Back Wages: Petitioner argued that reinstatement should have been ordered because there was no allegation or proof of strained relations, that the six-month deduction from back wages was erroneous since he was not dismissed on the ground of disease, and that he was entitled to damages and attorney's fees.

• Project Employment Status: Respondent argued that documentary evidence showed Pasos was clearly a project employee who remained as such until his last engagement, and that repeated rehiring as an accounting clerk in different projects did not make him a regular employee.
• Compliance with Reportorial Requirements: Respondent insisted that it complied with the reportorial requirements by filing and reporting the termination of Pasos upon every completion of the project to which he was employed, submitting photocopies of termination reports listing Pasos among affected employees.

• Appeal Bond: Whether an appeal should be dismissed outright if the appeal bond filed is less than the adjudged amount.
• Verification and Certification: Whether the head of the personnel department can sign the verification and certification on behalf of a corporation without any board resolution or secretary's certificate authorizing such officer to do so.
• Employment Status: Whether petitioner is a regular employee and not a mere project employee, and thus can only be dismissed for cause.

• Appeal Bond: No. The appeal bond requirement may be relaxed where there is substantial compliance, and PNCC's bond of P422,630.41 constituted at least 90% of the adjudged amount of P460,292.41, satisfying the substantial compliance standard.
• Verification and Certification: Yes. The head of the Personnel Services Department was in a position to verify the truthfulness and correctness of the allegations in the pleading, and the requirement of verification is merely formal, not jurisdictional, and may be relaxed in labor cases pursuant to Article 221 of the Labor Code.
• Employment Status: Yes. Petitioner attained regular employment status because his services were extended indefinitely beyond the determinable duration of his original project employment, and PNCC failed to file termination reports with the DOLE after project completions, which failure proves that an employee is not a project employee. His dismissal for project completion was thus illegal.

• Appeal Bond: While the perfection of an appeal within the reglementary period and in the manner prescribed by law is jurisdictional, and Article 223 of the Labor Code requires an employer to post a bond equivalent to the monetary award, the Court has relaxed this requirement in cases of substantial compliance. In Quiambao vs. NLRC and Ong vs. Court of Appeals, the Court allowed relaxation when the appellant exhibited willingness to pay by posting a partial bond. PNCC's bond of P422,630.41 represented at least 90% of the total adjudged amount of P460,292.41, constituting substantial compliance that justified relaxation of the rule.

• Verification and Certification: Although Section 23 of the Corporation Code requires board authorization for the exercise of corporate powers, the Court has recognized the authority of certain corporate officers to sign verification and certification without a board resolution, including a Personnel Officer and an Employment Specialist in labor cases. The rationale is that such officers are in a position to verify the truthfulness and correctness of the allegations in the pleading. As in Pfizer, Inc. vs. Galan, where an employment specialist was allowed to sign without any board resolution ever submitted, Mr. Erece, Jr. as head of PNCC's Personnel Services Department was similarly positioned. Even assuming the verification was defective, the requirement is merely formal and not jurisdictional; under Article 221 of the Labor Code, rules of procedure in labor cases may be relaxed in the interest of due process, as held in Pacquing vs. Coca-Cola Philippines, Inc.

• Employment Status: Under Article 280 of the Labor Code, a project employee is one whose employment is fixed for a specific project or undertaking, the completion or termination of which was determined at the time of engagement. The principal test is whether the employee was assigned to carry out a specific project whose duration or scope was specified at the time of engagement. While Pasos was initially a project employee for the first three months of the NAIA II Project, his services were thereafter extended without any specification of duration, making him a regular employee. His status as a regular employee was not affected by subsequent assignments to other projects or intervals between them, as he enjoyed security of tenure. Furthermore, PNCC failed to file termination reports with the DOLE after each project completion, as required by Department Order No. 19. DOLE NCR certifications confirmed that Pasos was not listed among affected workers in PNCC's termination reports, and this certification was not refuted by PNCC. As held in Tomas Lao Construction vs. NLRC, failure of the employer to file termination reports after every project completion proves that the employees are not project employees. Since Pasos was a regular employee, his dismissal for contract expiration or project completion — neither of which is a just or authorized cause under the Labor Code — constituted illegal dismissal. The Labor Arbiter's finding of strained relations was unsupported, as it was neither alleged nor proved; the doctrine of strained relations must be strictly applied so as not to deprive an illegally dismissed employee of reinstatement. The six-month deduction from back wages was likewise without basis, as Pasos was not dismissed on the ground of disease. Moral and exemplary damages were not warranted because Pasos presented no evidence of bad faith or oppressive conduct in the dismissal. Attorney's fees of 10% were awarded under Article 111 of the Labor Code, Pasos having been forced to litigate to seek redress.

• Substantial Compliance with Appeal Bond Requirement — While posting of an appeal bond equivalent to the monetary award is jurisdictional under Article 223 of the Labor Code, the requirement may be relaxed where there is substantial compliance or where the appellant exhibits willingness to pay by posting a partial bond. A bond constituting at least 90% of the adjudged amount qualifies as substantial compliance.

• Authority of Corporate Officers to Sign Verification and Certification — The following officials or employees may sign the verification and certification against forum shopping without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4) a Personnel Officer, and (5) an Employment Specialist in a labor case. The rationale is that such officers are in a position to verify the truthfulness and correctness of the allegations in the pleading. The list is not exhaustive, and determination is made on a case-to-case basis.

• Project Employment vs. Regular Employment — Under Article 280 of the Labor Code, a project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which was determined at the time of engagement. The principal test is whether the employees were assigned to carry out a specific project whose duration or scope was specified at the time of engagement. When a project employee's services are extended indefinitely beyond the determinable duration without a subsequent contract specifying a new duration, the employee attains regular employment status. Reassignment to other projects or intervals between projects do not affect regular status, as the employee enjoys security of tenure.

• Reportorial Requirement as Indicator of Project Employment — Under Department Order No. 19, employers of project employees must submit a report of termination to the nearest public employment office every time an employee's employment is terminated due to completion of a project. Failure of the employer to file termination reports after every project completion proves that the employees are not project employees. The reportorial requirement is one of the indicators of project employment and is not dispensed with under the Labor Code.

• Doctrine of Strained Relations — The doctrine of strained relations should be strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. It cannot be applied indiscriminately, as hostility is invariably engendered between parties as a result of litigation. No strained relations should arise from a valid and legal act of asserting one's right.

• Damages in Illegal Dismissal — Moral damages are recoverable only where the dismissal was attended by 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 if the dismissal was effected in a wanton, oppressive, or malevolent manner. Absent evidence of such circumstances, neither is recoverable.

• "While for first three months, petitioner can be considered a project employee of PNCC, his employment thereafter, when his services were extended without any specification of as to the duration, made him a regular employee of PNCC. And his status as a regular employee was not affected by the fact that he was assigned to several other projects and there were intervals in between said projects since he enjoys security of tenure." — This passage articulates the ratio decidendi on when a project employee attains regular employment status through indefinite extension of services beyond the determinable project duration.

• "We have consistently held that failure of the employer to file termination reports after every project completion proves that the employees are not project employees." — This quotation, drawn from Tomas Lao Construction vs. NLRC and applied in this decision, states the canonical formulation of the rule that non-compliance with the reportorial requirement is proof that the employee is not a project employee.

• "Obviously, the principle of 'strained relations' cannot be applied indiscriminately. Otherwise, reinstatement can never be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That is human nature." — This passage from Globe-Mackay Cable and Radio Corporation vs. NLRC defines the proper scope and limitation of the strained relations doctrine, explaining why it must be strictly applied to protect the right to reinstatement.

• Quiambao vs. NLRC, G.R. No. 91935, March 4, 1996 — Followed. Established that the appeal bond requirement may be relaxed when there is substantial compliance with the rule.
• Ong vs. Court of Appeals, G.R. No. 152494, September 22, 2004 — Followed. Held that the bond requirement may be relaxed when the appellant exhibits willingness to pay by posting a partial bond.
• Cagayan Valley Drug Corporation vs. Commissioner of Internal Revenue, G.R. No. 151413, February 13, 2008 — Followed and distinguished. Enumerated corporate officers authorized to sign verification and certification without a board resolution; distinguished on the ground that a board resolution was belatedly submitted in that case, whereas none was ever submitted here, but the Court still recognized the personnel head's authority under Pfizer.
• Pfizer, Inc. vs. Galan, G.R. No. 143389, May 25, 2001 — Followed. Upheld the validity of a verification signed by an employment specialist without any board resolution, on the rationale that the signatory was in a position to verify the truthfulness of the allegations.
• Pacquing vs. Coca-Cola Philippines, Inc., G.R. No. 157966, January 31, 2008 — Followed. Held that the requirement of verification is merely formal and not jurisdictional, and may be dispensed with in the interest of justice.
• Tomas Lao Construction vs. NLRC, G.R. No. 116781, September 5, 1997 — Followed. Emphasized the indispensability of the reportorial requirement and held that failure to file termination reports after every project completion proves that employees are not project employees.
• Globe-Mackay Cable and Radio Corporation vs. NLRC, G.R. No. 82511, March 3, 1992 — Followed. Held that the doctrine of strained relations cannot be applied indiscriminately and must be strictly applied to protect the right to reinstatement.
• Exodus International Construction Corporation vs. Biscocho, G.R. No. 166109, February 23, 2011 — Followed. Basis for awarding attorney's fees of 10% where the employee was forced to litigate to seek redress.
• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994 — Followed. Provided the guidelines for the award of legal interest on monetary awards: 6% per annum from finality of decision until full payment.

• Article 223, Labor Code — Governs the appeal bond requirement in labor cases involving monetary awards, requiring employers to post a cash or surety bond equivalent to the monetary award. Applied to determine that PNCC's bond, constituting at least 90% of the adjudged amount, met the substantial compliance standard.
• Article 221, Labor Code — Provides that rules of evidence and procedure in labor cases shall not be controlling and that the NLRC and Labor Arbiters shall use all reasonable means to ascertain facts speedily and objectively without regard to technicalities, in the interest of due process. Applied to justify relaxation of the verification requirement.
• Article 280, Labor Code — Defines project employment as employment fixed for a specific project or undertaking whose completion or termination was determined at the time of engagement. Applied as the principal test for distinguishing project from regular employment.
• Article 279, Labor Code — Provides that an illegally dismissed employee is entitled to reinstatement, full back wages inclusive of allowances, and other benefits from the time compensation was withheld up to actual reinstatement. Applied to award full back wages and reinstatement.
• Article 111, Labor Code — Authorizes the award of attorney's fees of 10% in cases where the employee is forced to litigate to seek redress. Applied to award attorney's fees to Pasos.
• Section 23, Corporation Code — Provides that all corporate powers are exercised by the board of directors. Cited in connection with the requirement of board authorization for corporate actions, but relaxed in the context of verification in labor cases.
• Department Order No. 19 — The "Guidelines Governing the Employment of Workers in the Construction Industry," requiring employers to submit termination reports to the nearest public employment office every time a project employee's employment is terminated due to project completion. Applied as a key indicator of project employment, with PNCC's non-compliance proving Pasos was not a project employee.

Sereno, C.J. (Chairperson), Leonardo-De Castro, Bersamin, and Reyes, JJ., concurred.