Pines City Educational Center and Eugenio Baltao vs. NLRC

A fixed-term employment contract is valid where the period was knowingly and voluntarily agreed upon by the parties, without force, duress, or improper pressure, and absent any circumstance vitiating consent; Article 280 of the Labor Code voids only agreements entered into precisely to prevent security of tenure. Probationary employees who did not sign such contracts cannot be dismissed except for cause, and the employer bears the burden of proving the legality of the termination.

Pines City Educational Center, an educational institution represented by its President Eugenio Baltao, employed the ten private respondents as probationary teachers — one in the grade school and the rest as college instructors. The dispute implicated Article 280 of the Labor Code, which governs regular and casual employment and limits agreements fixing definite employment periods, and the Court's earlier ruling in Brent School vs. Zamora construing that provision. The case also raised the application of Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, which took effect on March 21, 1989 and governs the backwages recoverable by an illegally dismissed employee.

Pines City Educational Center, an educational institution represented in the proceedings by its President Eugenio Baltao, employed ten teachers on a probationary basis: Dangwa Bentrez, Roland Picart, Apollo Ribaya, Sr., Ruperta Ribaya, Virginia Boado, Cecilia Emocling, Jane Bentrez, Leila Dominguez, Rose Ann Bermudez, and Lucia Chan. Jane Bentrez was hired as a grade school teacher, while the remaining private respondents were engaged as college instructors. All of them, except Roland Picart and Lucia Chan, signed contracts of employment with petitioner for a fixed duration. Dangwa Bentrez's contract ran for one year, from June 1988 to March 1989, while the contracts of the other respondents ran for one semester, from November 1988 to March 1989. Except for Leila Dominguez, who served for only one semester, the private respondents had been employed for one to two years.

On March 31, 1989, petitioners notified the private respondents, through Chancellor Dra. Nimia R. Concepcion, of the decision not to renew their contracts, citing the expiration of the contract periods and the private respondents' poor performance as teachers. According to the private respondents, they were never informed in writing of the standards or criteria of evaluation that would have enabled them to qualify for appointment as regular employees; they received only written notice of the termination of their services as of March 31, 1989, on account of below-par performance.

On April 10, 1989, the private respondents filed a complaint for illegal dismissal before the Labor Arbiter, alleging that their dismissals were without cause and in violation of due process. Petitioners, for their part, contended that the separation was due not only to poor performance but also to the expiration of the periods stipulated in the respondents' respective contracts, which they characterized as the laws governing the employment relationship and as containing nothing contrary to law, morals, good customs, and public policy. Petitioners maintained that they could not be compelled to enter into new contracts with the private respondents.

The Labor Arbiter found that the teachers' contracts were vague and did not include a specific description of duties and assignments; that they did not categorically state that there would be no renewal because the appointments automatically terminated at the end of the semester; and that petitioners had presented no written evidence to substantiate the allegation that the Academic Committee had evaluated the private respondents' performance during their one-semester employment. There was nothing in the record, the Labor Arbiter observed, to show that the private respondents were afforded even an iota of chance to refute the allegations that they did not meet the reasonable standards and criteria set by the school. The private respondents, he concluded, had been hastily dismissed.

• Validity of Fixed-Term Contracts: Petitioners argued that the private respondents' separation from employment, apart from their poor performance, was due to the expiration of the periods stipulated in their respective contracts, and that these stipulations were the laws that governed their relationships, containing nothing contrary to law, morals, good customs, and public policy.
• No Compulsion to Renew: Petitioners maintained that they could not be compelled to enter into new contracts with the private respondents, and concluded that the separation of the private respondents from the service was justified.
• Grave Abuse of Discretion: Petitioners contended that there was prima facie evidence of grave abuse of discretion on the part of the Labor Arbiter in wantonly, capriciously, and maliciously disregarding provisions of law and jurisprudence laid down in decisions of the Supreme Court, relying heavily on Brent School, Inc. et al. vs. Zamora, et al.

• Grave Abuse of Discretion — Fixed-Term Contracts: Whether the National Labor Relations Commission committed grave abuse of discretion in affirming the Labor Arbiter's decision ordering the reinstatement and payment of full backwages and other benefits to all private respondents notwithstanding the fixed-term employment contracts they had signed.
• Illegal Dismissal of Non-Contracting Probationary Employees: Whether private respondents Roland Picart and Lucia Chan, who did not sign any contract fixing the periods of their employment, were illegally dismissed and entitled to reinstatement and backwages.

• Grave Abuse of Discretion — Fixed-Term Contracts: Yes. The NLRC committed grave abuse of discretion in disregarding Brent School vs. Zamora; the services of the private respondents who knowingly and voluntarily agreed upon fixed periods of employment were lawfully terminated by reason of the expiration of their respective contracts.
• Illegal Dismissal of Non-Contracting Probationary Employees: Yes. Roland Picart and Lucia Chan, as probationary employees protected by the security of tenure provision of the Constitution, could not be removed except for cause, and petitioners failed to discharge the burden of proving that the termination of their services was legal.

• Grave Abuse of Discretion — Fixed-Term Contracts: The Brent case supplied the controlling rule. The clause in Article 280 of the Labor Code indiscriminately and completely ruling out all written and oral agreements conflicting with the concept of regular employment should be construed to refer to the substantive evil that the Code itself singled out: agreements entered into precisely to prevent security of tenure. It has no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress, or improper pressure brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. The ruling was reiterated in Pakistan International Airlines Corporation vs. Ople and La Sallete of Santiago, Inc. vs. NLRC. Applying that rule, the services of Dangwa Bentrez, Apollo Ribaya, Sr., Ruperta Ribaya, Virginia Boado, Cecilia Emocling, Jane Bentrez, Leila Dominguez, and Rose Ann Bermudez — who knowingly and voluntarily agreed upon fixed periods of employment — were lawfully terminated by reason of the expiration of the periods of their respective contracts. The NLRC therefore committed grave abuse of discretion in affirming the Labor Arbiter's order of reinstatement and payment of full backwages and other benefits as to them. The NLRC could not claim ignorance of the Brent ruling, which petitioners had invoked on appeal; it disregarded the ruling without any reason and expressed the erroneous view that an agreement fixing a definite date for the termination of employment relations is contrary to Article 280 and cannot be legitimized. Under the principle of stare decisis et non quieta movere, once a case has been decided one way, another case involving exactly the same point at issue should be decided in the same manner; the NLRC had no choice but to obey this Tribunal's ruling in Brent.

• Illegal Dismissal of Non-Contracting Probationary Employees: As to Roland Picart and Lucia Chan, who did not sign any contract fixing the periods of their employment and did not knowingly and voluntarily agree upon fixed periods of employment, petitioners bore the burden of proving that the termination of their services was legal. As probationary employees, they are likewise protected by the security of tenure provision of the Constitution and cannot be removed from their positions unless for cause. Petitioners contended that, based on the evaluation of the Academic Committee, their performance as teachers was poor, but the Labor Arbiter was not convinced, finding that petitioners did not present any written proofs or evidence to support the allegation and that there was absolutely nothing in the record to show that the complainants were afforded even an iota of chance to refute the respondents' allegations that they did not meet the reasonable standards and criteria set by the school. The Court concurred with these factual findings, there being no showing that they were resolved arbitrarily. The order for their reinstatement and payment of full backwages and other benefits and privileges from the time they were dismissed up to their actual reinstatement was therefore proper, conformably with Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, which took effect on March 21, 1989. Since Roland Picart and Lucia Chan were dismissed illegally on March 31, 1989, or after the effectivity of the amendatory law, the amended provision applied. In ascertaining the total amount of backwages payable to them, however, the Court reverted to the rule prior to the Mercury Drug rule: the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted from the backwages. The underlying reason is that employees should not be permitted to enrich themselves at the expense of their employer, and the law abhors double compensation. To this extent, the ruling in Alex Ferrer, et al. vs. NLRC, et al. was modified.

• Brent Doctrine on Fixed-Term Employment — Under Article 280 of the Labor Code, the clause indiscriminately and completely ruling out all written and oral agreements conflicting with the concept of regular employment is construed to refer only to the substantive evil the Code singled out: agreements entered into precisely to prevent security of tenure. It has no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress, or improper pressure brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer or employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. In this case, the Court applied the doctrine to uphold the lawful termination of the eight private respondents who had knowingly and voluntarily signed fixed-term contracts, their services having ended upon expiration of the stipulated periods.
• Security of Tenure of Probationary Employees — Probationary employees are protected by the security of tenure provision of the Constitution and cannot be removed from their positions except for cause. The employer bears the burden of proving that the termination of their services was legal. In this case, Roland Picart and Lucia Chan, who signed no fixed-term contracts, were illegally dismissed because petitioners presented no written proof of the Academic Committee's evaluation of their performance and afforded them no opportunity to refute the allegations against them.
• Stare Decisis et Non Quieta Movere — Once a case has been decided one way, another case involving exactly the same point at issue should be decided in the same manner. The NLRC, having been apprised of Brent School vs. Zamora on appeal, was bound to follow that ruling and could not disregard it without reason; to defy the Court's decisions is to court contempt.
• Backwages and the Deduction of Income Earned Elsewhere — While Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, entitles an illegally dismissed employee to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement, the Court reverted to the rule prior to the Mercury Drug rule: the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted from the backwages. The underlying reasons are that employees should not be permitted to enrich themselves at the expense of their employer, and that the law abhors double compensation.

• "Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written and oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to prevent security of tenure." — Quoted from Brent School vs. Zamora, this passage states the ratio decidendi: Article 280 voids only fixed-term agreements designed to circumvent security of tenure, not all fixed-term contracts.
• "It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer or employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter." — This defines the exception under which fixed-term employment contracts are valid, the rule the Court applied to uphold the termination of the eight contracting teachers.
• "Insofar as the private respondents who knowingly and voluntarily agreed upon fixed periods of employment are concerned, their services were lawfully terminated by reason of the expiration of the periods of their respective contracts." — This is the Court's application of the Brent doctrine to the facts, distinguishing the eight contracting teachers from the two who did not sign any contract.
• "Stare decisis et no quieta movere. Once a case ha been decided one way, then another case, involving exactly the same point at issue, should be decided in the same manner." — This articulates the stare decisis principle applied against the NLRC for disregarding the Brent ruling without reason.

• Brent School, Inc. vs. Zamora, G.R. No. L-48494, 181 SCRA 702 (1990) — Controlling precedent; the Court adopted its construction of Article 280 and applied it to uphold the fixed-term contracts of the eight private respondents.
• Pakistan International Airlines Corporation vs. Ople, G.R. No. 61594, 190 SCRA 90 (1990) — Cited as reiterating the Brent ruling.
• La Sallete of Santiago, Inc. vs. NLRC, G.R. No. 82918, 195 SCRA 80 (1991) — Cited as reiterating the Brent ruling.
• Colegio San Agustin vs. NLRC, G.R. No. 87333, 201 SCRA 398 (1991) — Cited for the proposition that probationary employees are protected by the security of tenure provision of the Constitution and cannot be removed except for cause.
• Mercury Drug Co., Inc. vs. Court of Industrial Relations, G.R. No. L-23357, 56 SCRA 694 (1974) — The rule from which the Court departed; it had allowed backwages for a fixed period without further qualifications and without deducting earnings during the period.
• Feati University Faculty Club (PAFLU) vs. Feati University, G.R. No. L-31503, 58 SCRA 395 (1974) — Cited for the three-year base period for backwages considered just and reasonable.
• Itogon-Suyoc Mines, Inc. vs. Sangilo-Itogon Workers' Union, G.R. No. L-24189, 24 SCRA 873 (1968) — Cited for the rule deducting income earned elsewhere from backwages and for the principle that the law abhors double compensation.
• Philippine Air Lines, Inc. vs. Philippine Air Lines Employees Association, 108 Phil. 1129 — Cited for the principle that employees should not be permitted to enrich themselves at the expense of their employer.
• Alex Ferrer vs. NLRC, G.R. No. 100898, July 5, 1993 — Modified by the Court's ruling on the deduction of income earned elsewhere during the dismissal period.
• Ang Ping vs. RTC of Manila, G.R. No. 75860, 154 SCRA 77 (1987) — Cited for the stare decisis principle that once a case has been decided one way, another case involving the same point at issue should be decided in the same manner.
• Philippine Veterans Affairs Office vs. Segundo, G.R. No. 51570, 164 SCRA 365 (1988) — Cited for the warning that to defy the Court's decisions is to court contempt.
• De Vera vs. NLRC, G.R. No. 93212, 191 SCRA 632 (1990) — Cited in support of concurring with the Labor Arbiter's factual findings absent a showing that they were resolved arbitrarily.
• Sealand Service, Inc. vs. NLRC, G.R. No. 90500, 190 SCRA 347 (1990) — Cited on the effectivity of Republic Act No. 6715.
• Maranaw Hotels and Resorts Corporation vs. Court of Appeals, G.R. No. 103215, November 6, 1992 — Cited on the effectivity of Republic Act No. 6715.
• Arms Taxi and/or Dorothea Tanongon vs. NLRC, G.R. No. 104523, March 8, 1993 — Cited on the effectivity of Republic Act No. 6715.

• Article 280, Labor Code — Regular and Casual Employment. Provides that written or oral agreements to the contrary notwithstanding, an employment is deemed regular where the employee performs activities usually necessary or desirable in the usual business or trade of the employer, except where the employment is fixed for a specific project or undertaking, or where the work is seasonal. The Court construed the clause voiding agreements conflicting with regular employment as limited to agreements entered into to prevent security of tenure, and held that the fixed-term contracts of the eight private respondents were valid.
• Article 279, Labor Code, as amended by Section 34, Republic Act No. 6715 — Security of Tenure. Provides that an employee unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges, and to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement. Applied to Roland Picart and Lucia Chan, who were dismissed on March 31, 1989, after the amendatory law took effect on March 21, 1989.

Narvasa, C.J., Cruz, Feliciano, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason and Vitug, JJ., concurred.

Justice Padilla filed a separate concurring opinion. He concurred in the Court's decision except that he could not allow deductions from the full backwages prescribed by law, given the language and evident intention of Republic Act No. 6715. In his view, the amendment to Article 279 inserted the qualification "full" to the word "backwages," and the plain words of the statute provide that an employee who is unjustly dismissed is entitled to full backwages from the time of his dismissal to actual reinstatement, with no qualification and no provision that income earned during the period between unjust dismissal and reinstatement should be deducted. When the law does not provide, the court should not improvise. He further opined that the principle of unjust enrichment does not apply because (1) the applicable provision of the law should be construed in favor of labor; (2) the Labor Code is a special law which should prevail over the Civil Code provisions on unjust enrichment; and (3) the language employed by the statute and, therefore, its intent are clear. The statutory formula was crafted not only for convenience and expediency in executing monetary judgments in favor of employees but also to prevent the employer from resorting to delaying tactics by pleading income earned by the employee before reinstatement as proper deductions from backwages. He voted to award Roland Picart and Lucia Chan full backwages from the time of their unjust dismissal to their actual reinstatement, without deduction or qualification, in accordance with the mandate of Republic Act No. 6715.