PLDT vs. Arceo

A casual employee who has rendered at least one year of service — whether continuous or broken — becomes a regular employee by operation of law under Article 280 of the Labor Code, with respect to the activity in which he or she is employed, and the employment shall continue while such activity exists. The abolition of a specific position does not preclude regularization in an equivalent position, nor does failure to qualify for a different position defeat regular status where the employee's actual work is necessary or desirable to the employer's business.

Respondent Rosalina Arceo sought employment with petitioner Philippine Long Distance Telephone Company, Inc. (PLDT) at its Tarlac Exchange but repeatedly failed the pre-employment qualifying examination for the position of telephone operator. She nonetheless volunteered to work without pay, and PLDT accommodated her in its commercial section performing clerical tasks. After an initial dismissal and subsequent reinstatement ordered by a labor arbiter, the dispute centered on whether her continued engagement as a casual employee for more than one year entitled her to regular employee status and corresponding benefits under Article 280 of the Labor Code.

In May 1990, Rosalina Arceo applied for the position of telephone operator with Philippine Long Distance Telephone Company, Inc. (PLDT) at its Tarlac Exchange but failed the pre-employment qualifying examination. She then requested PLDT to allow her to work at its office even without pay, and PLDT agreed, assigning her to its commercial section where she performed tasks such as photocopying documents, sorting out telephone bills and notices of disconnection, and other minor assignments. After two weeks, PLDT decided to pay her the minimum wage.

On February 15, 1991, PLDT saw no further need for Arceo's services and decided to fire her, but through the intervention of PLDT's commercial section supervisor, Mrs. Beatriz Mataguihan, she was recommended for on-the-job training on minor traffic work. When she failed to assimilate traffic procedures, the company transferred her to auxiliary services, a minor facility. Arceo subsequently took the pre-qualifying exams for the position of telephone operator two more times but again failed in both attempts. Finally, on October 13, 1991, PLDT discharged Arceo from employment, prompting her to file a case for illegal dismissal before the labor arbiter.

On May 11, 1993, Labor Arbiter Quintin Mendoza ruled in Arceo's favor, ordering PLDT to reinstate her to her "former position or to an equivalent position." This decision became final and executory. On June 9, 1993, Arceo was reinstated as a casual employee with a minimum wage of ₱106 per day, assigned to photocopy documents and sort out telephone bills. More than three years later, on September 3, 1996, Arceo filed a complaint for unfair labor practice, underpayment of salary, underpayment of overtime pay, holiday pay, rest day pay, and other monetary claims, alleging that since her reinstatement she had yet to be regularized and had yet to receive the benefits due to a regular employee.

• Abolition of Position: Petitioner argued that while Article 280 of the Labor Code regularizes a casual employee who has rendered at least one year of service, the proviso is subject to the condition that the employment subsists or the position still exists. Even if Arceo had rendered more than one year of service as a casual employee, this fact alone would not automatically make her a regular employee since her position had long been abolished.
• Failure to Qualify as Telephone Operator: Petitioner also argued that it would be an even greater error if Arceo were to be "regularized" as a telephone operator since she repeatedly failed the qualifying exams for that position.

• Regular Employment Status: Whether Arceo is eligible to become a regular employee of PLDT under Article 280 of the Labor Code, notwithstanding the alleged abolition of her position and her failure to pass the qualifying exams for telephone operator.

• Regular Employment Status: Yes. Arceo satisfied both criteria for regular employment under Article 280: her work was necessary or desirable to PLDT's business, and she had rendered more than one year of service as a casual employee. The abolition of a specific position did not preclude regularization in an equivalent position, and her failure to qualify as a telephone operator was irrelevant to the activity she actually performed.

• Regular Employment Status: Article 280 of the Labor Code establishes two criteria for regular employment: first, an employee engaged to perform activities necessary or desirable in the usual business or trade of the employer is a regular employee; second, any casual employee who has rendered at least one year of service — whether continuous or broken — shall be considered a regular employee with respect to the activity in which he or she is employed, and the employment shall continue while such activity exists. Under the first criterion, Arceo's work consisting mainly of photocopying documents, sorting out telephone bills and disconnection notices was "necessary or desirable" to PLDT's business. Even assuming arguendo that her work was casual or temporary, the uncontested fact that she rendered service for more than one year as a casual employee brought her within the second criterion. Petitioner's argument that Arceo's position had been abolished did not preclude regularization, because the reinstatement order included the alternative of reinstatement to "a position equivalent thereto." Moreover, PLDT failed to present proof that the activity in which Arceo was engaged — photocopying of documents and sorting of telephone bills — no longer subsisted. Absent such proof, her regularization in that position was confirmed. The contention that she could not be regularized as a telephone operator because she failed three qualifying exams was untenable, as she was to be regularized in the position she held prior to filing her complaint, or in an equivalent position if that position had been abolished; the position of telephone operator was never considered in any of the assailed decisions of the labor arbiter, the NLRC, or the CA. Considering that Arceo had already worked at PLDT for more than one year at the time of her reinstatement, she was entitled to all benefits of a regular employee from June 9, 1993 — the day of her actual reinstatement.

• Regular Employment by Operation of Law (Article 280, Labor Code) — An employment shall be deemed regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. A casual employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which he or she is employed, and the employment shall continue while such activity exists. The conferment of regular status is by operation of law, not by the employer's volition. In this case, Arceo satisfied both criteria: her clerical tasks were necessary or desirable to PLDT's business, and she had rendered more than one year of service as a casual employee. The Court confirmed her regularization effective from the date of her actual reinstatement, June 9, 1993.
• Abolition of Position Does Not Preclude Regularization — Where a reinstatement order provides for reinstatement to the former position "or to an equivalent position," the employer's claim that a specific position has been abolished does not defeat the employee's right to regular status. The employer may regularize the employee in an equivalent position. Furthermore, the employer bears the burden of proving that the activity in which the employee was engaged has been discontinued; absent such proof, the employee's regularization in that activity stands.

• "It is evidently a facetious averment emanating from the respondent that the complainant should forever remain a casual employee. Not only is such argument wanting in merit, it clearly goes against the principle that the conferment of regular status to an employee is by operation of law." — This passage, quoted from the NLRC decision, articulates the principle that regular status is conferred by operation of law and cannot be withheld by the employer's unilateral characterization of the employment as casual.
• "Under Article 280, any employee who has rendered at least one year of service 'shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.'" — This formulation defines the controlling rule for casual-to-regular conversion and underscores that the continuation of employment is tied to the existence of the activity, not the position title.
• "For PLDT's failure to show that the activity undertaken by Arceo has been discontinued, we are constrained to confirm her 'regularization' in that position." — This statement places the burden of proof on the employer to demonstrate that the activity has ceased, failing which the employee's regular status is confirmed.

• Article 280, Labor Code (as amended) — Defines regular and casual employment. The first paragraph provides that an employment shall be deemed regular where the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, except for project or seasonal employment. The second paragraph provides that any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which he or she is employed, and the employment shall continue while such activity exists. The Court applied both criteria to Arceo's circumstances, finding her eligible for regular employment under either standard.

Reynato S. Puno (on leave), Angelina Sandoval-Gutierrez (Acting Chairperson), Adolfo S. Azcuna, and Cancio C. Garcia concurred.