Santor vs. Arlo Aluminum Comp., Inc.

A project employee's dismissal is valid upon completion of the specific project where the employment contract, at the time of engagement, identifies both the project and the duration and scope of work; repeated rehiring for separate projects and noncompliance with the DOLE termination-report and completion-bonus indicators do not by themselves confer regular status.

Arlo Aluminum Company, Inc. is a domestic corporation engaged in fabricating customized aluminum moldings for construction companies. Its work depends on securing contracts with clients, so it engages workers on a per-project basis for distinct construction projects. Petitioners were workers engaged under that per-project arrangement, with written contracts identifying the project and the period of engagement. The dispute concerns whether that arrangement made them project employees rather than regular employees with security of tenure.

Arlo Aluminum hired Sangalang as a survey aide for the Sonata project from May 25, 2011 to January 27, 2014 and for the BDO project from May 28, 2014 to November 27, 2014. Santor was hired as a fabricator for the Texas Instruments project from September 5, 2008 to May 5, 2009; the Trag-3 project from August 6, 2009 to November 8, 2010; the Sonata project from February 9, 2011 to June 8, 2012; the 8 Adriatico project from December 9, 2012 to December 8, 2013; and The Grove project from March 9, 2014 to December 8, 2014. Giray was hired as a helper for the Texas Instruments project from September 6, 2008 to February 6, 2009; the East of Galleria project from July 7, 2009 to December 6, 2009; the Trag-3 project from May 6, 2010 to October 5, 2010; the One Rockwell project from March 6, 2011 to August 5, 2011; the Gateway project from January 6, 2012 to June 5, 2012; the RCBC project from November 6, 2012 to April 5, 2013; and the Richmonde Tower project from February 6, 2014 to December 5, 2014.

Ceñir was hired as a helper for the Entrata project from March 3, 2011 to August 2, 2011; the One Central project from January 3, 2012 to June 2, 2012; the RCBC project from November 3, 2012 to April 2, 2013; and the Richmonde Tower project from September 3, 2012 to December 2, 2014. Hadap was hired as a fabricator for the One Central project from January 3, 2012 to June 2, 2012; the RCBC project from September 3, 2012 to December 2, 2013; and the Unilab project from March 3, 2014 to December 2, 2014. Velasco was hired as a helper for the One Rockwell project from August 2, 2011 to November 1, 2011; the Belle Grande project from June 2, 2012 to November 1, 2012; the Fairview Terraces project from April 2, 2013 to September 1, 2013; and the Eton Centris project from February 2, 2014 to December 1, 2014.

The employment contracts stated the specific project to which each employee was assigned and the duration and scope of the engagement. They provided that employment was coterminous with the project or phase for which the employee was hired. The contracts were signed by the employees when they were hired, and Arlo Aluminum issued additional contracts on the same terms when it needed to extend an employee's employment because a project was delayed. The employees were informed of the termination of a project and the cessation of their project employment beforehand.

In November 2014, Sangalang was terminated. In December 2014, Santor, Giray, Ceñir, Velasco, and Hadap were dismissed. On January 7, 2015, the six employees filed a Complaint before the labor arbiter for unfair labor practice, union busting, reinstatement, illegal dismissal, nonpayment of service incentive leave and 13th month pay, regularization, moral and exemplary damages, and attorney's fees. They alleged that they were regular employees and had been working for Arlo Aluminum for over a year when they were removed. They claimed that they were illegally dismissed before their assigned projects expired because of their membership in a newly formed worker's union. Arlo Aluminum, in its Position Paper, stated that the employees were hired as project employees with the specific duration and nature of their employment made known to them, and that their employment was coterminous with the completion of the project or phase to which they were assigned. It also stated that the union-busting claim had no factual basis.

Labor Arbiter Lilia S. Savari found that the employees were project employees who were terminated because their project contracts had ended. The NLRC found that Arlo Aluminum failed to prove that the employees knew of the duration and scope of the projects for which they were engaged. The CA found that the employees knowingly entered into project employment contracts that substantially complied with the requisites of designation of a specific project or undertaking, duration of engagement, and nature of the job. The CA also found that Arlo Aluminum's submission of Employment Establishment Reports to the Department of Labor and Employment informing it of the employees' permanent termination indicated that they were project employees, that repeated rehiring did not transform the project employment to regular employment because they were rehired for separate and specific projects, and that nonpayment of a completion bonus was inconsequential.

• Regular Employment by Function and Length of Service: Petitioners argued that they should be considered regular employees because they performed functions necessary and desirable to respondents' business and had been connected with the company for more than a year.
• Work Pool: Petitioners maintained that they were part of the company's work pool and thus part of its operations.
• Defective Project Contracts: Petitioners argued that their contracts did not specify the exact duration of their assignments and merely mentioned the project they were to work on.
• Repeated Rehiring for Same Functions: Petitioners claimed that after termination from one project, they were rehired for a different project to perform the same function.
• Noncompliance with Department Order No. 19: Petitioners asserted that respondents submitted termination reports only upon expiration of their last project contract, and that failure to submit the required termination report indicated they were regular employees.

• Project-by-Project Engagement: Respondents countered that because Arlo Aluminum contracts with different clients on various projects, it engages project employees for each distinct project.
• Contract Terms and Explanation: Respondents argued that the nature and duration of the project employment are clear in the employee contracts and are explained thoroughly to employees upon engagement.
• No Union Busting: Respondents stated that the employees' claim of union busting had no factual basis.

• Project Employment and Validity of Dismissal: Whether the CA was correct in declaring petitioners Joseph M. Sangalang, Leonil M. Santor, Paul O. Giray, Rodolfo C. Ceñir, Sr., Jerson C. Velasco, and Leo C. Hadap as project employees of Arlo Aluminum Company, Inc., and consequently holding their dismissal valid.

• Project Employment and Validity of Dismissal: Yes. The CA correctly declared petitioners project employees and their dismissal valid. Their employment contracts specified the project and the duration and scope of work at the time of engagement, and their termination followed completion of the projects.

• Project Employment and Validity of Dismissal: The SC first addressed the procedural point that a Rule 45 petition is generally limited to pure questions of law, but it may review facts when the findings of the labor arbiter, the NLRC, and the CA conflict, as they did here. On the merits, Article 295 of the Labor Code distinguishes regular from project employment: an employee who performs activities usually necessary or desirable in the employer's business is regular, except where employment is fixed for a specific project or undertaking whose completion or termination was determined at the time of engagement. Under Gadia vs. Sykes Asia, Inc., project employment requires that (a) the employee was assigned to carry out a specific project or undertaking, and (b) the duration and scope of the project were specified at the time of engagement. Under Paragele vs. GMA Network, Inc., it is not enough that the employee was made aware of the duration and scope; there must be an actual project, which may be either a particular job within the regular or usual business of the employer but distinct, separate, and identifiable from its other undertakings, or a particular job not within the regular business of the employer. The SC applied these rules to Arlo Aluminum's business. Arlo Aluminum fabricates and installs aluminum for various clients on distinct, separate, and identifiable projects; petitioners' engagement depended on the availability of projects the company secured, and if there were no projects, there was no work for them. It was not feasible to employ them regularly and permanently when the existence of projects was not always certain. The SC also held that the functions performed by petitioners did not dictate their employment type; the fact that their jobs were within Arlo Aluminum's usual business did not automatically make them regular employees. Their contracts stated the specific project and the duration and scope of employment at the time of engagement, and they signed and were informed of those terms. The SC rejected the argument that the contracts merely mentioned the project without specifying duration, because the contracts stated the project and the exact period of engagement and made employment coterminous with the project or phase. As for repeated rehiring, the SC held that rehiring for several projects does not by itself regularize project employment, especially in the construction industry; length of service is not the controlling determinant where employment is fixed for a specific project. The intervals between petitioners' projects, at times reaching six months, showed that Arlo Aluminum had no pending project available. On Department Order No. 19, the SC held that failure to file a termination report is an indication that an employee is not a project employee, but it is not the only factor; the other indicators must be considered cumulatively. The absence of one or two indicators, such as the termination report or a completion bonus, did not transform petitioners' project-based employment into regular employment. While labor laws are construed in favor of the laborer, the interests of both employee and employer must be considered. The SC concluded that petitioners were project employees and that their termination after their work had been completed was not illegal dismissal.

• Project Employment Requisites — To establish project employment, the employer must show that (a) the employee was assigned to carry out a specific project or undertaking, and (b) the duration and scope of the project were specified at the time of engagement. The SC applied this in Gadia vs. Sykes Asia, Inc. and found both requisites present because the contracts identified each project and the exact period of engagement.
• Existence of a Project — It is not enough that the employee is informed of the duration and scope of employment; there must be an actual project. The project may be (1) a particular job within the regular or usual business of the employer but distinct, separate, and identifiable from its other undertakings, or (2) a particular job not within the regular business of the employer. The SC applied this in Paragele vs. GMA Network, Inc. and found Arlo Aluminum's client-based aluminum fabrication projects distinct, separate, and identifiable.
• Repeated Rehiring Does Not Regularize Project Employment — Repeated and successive rehiring of project employees does not by itself qualify them as regular employees; length of service is not the controlling determinant where employment is fixed for a specific project. The SC applied this in Dacles vs. Millennium Erectors Corporation and found that petitioners were rehired for separate projects with intermittent gaps, including intervals of up to six months.
• Department Order No. 19 Indicators — The indicators of project employment include: (a) the duration of the specific undertaking is reasonably determinable; (b) the duration and specific work are defined in the employment agreement and made clear at hiring; (c) the work is connected to the particular project; (d) the employee, while not employed and awaiting engagement, is free to offer services to other employers; (e) termination is reported to the DOLE Regional Office within 30 days; and (f) the contract undertakes a completion bonus. The absence of one or two indicators does not transform project employment into regular employment; the indicators are weighed cumulatively. The SC applied this despite the missing termination report and completion bonus because the other indicators were present.
• Functions Do Not Determine Employment Type — The fact that an employee performs functions usually necessary or desirable in the employer's business does not automatically make the employee regular; a project employee may perform such functions. The SC applied this to petitioners' work as fabricators, helpers, and survey aide.

• "the employer must show compliance with two (2) requisites, namely that: (a) the employee was assigned to carry out a specific project or undertaking; and (b) the duration and scope of which were specified at the time they were engaged for such project." — This is the Gadia formulation of the two requisites for project employment; the SC used it to test the contracts.
• "It is not enough that the employee is made aware of the duration and scope of employment at the time of engagement. To rule otherwise would be to allow employers to easily circumvent an employee's right to security of tenure through the convenient artifice of communicating a duration or scope." — This passage from Paragele prevents employers from merely labeling employment as project-based; the SC used it to require an actual project.
• "The absence of one or two of the indicators will not transform petitioners' project-based employment into regular employment. While labor laws are construed in favor of the laborer, the interests of the employee and the employer must both be considered." — This passage explains why the missing termination report and completion bonus did not regularize petitioners.
• "Accordingly, petitioners are project employees. Ultimately, their termination from employment, after their work had been completed, was not illegal dismissal." — This is the SC's conclusion on the ultimate issue.

• Gadia vs. Sykes Asia, Inc., 751 Phil. 413-423, 422 (2015) — Controlling precedent; laid down the two requisites for project employment.
• Paragele et al. vs. GMA Network, Inc., G.R. No. 235315, July 13, 2020 — Relied on; delineated the two types of project employment and required the existence of a project; cited GMA Network vs. Pabriga.
• GMA Network, Inc. vs. Pabriga, 722 Phil. 161-183, 172-173 (2013) — Cited in Paragele; distinguished a project employee performing functions necessary or desirable from a regular employee.
• Engineering & Construction Corporation of Asia vs. Segundino Palle, G.R. No. 201247, July 13, 2020 — Relied on; construction workers' employment is coterminous with the project, and length of service is not necessarily controlling.
• Dacles vs. Millennium Erectors Corporation, 763 Phil. 550, 560-561 (2015) — Relied on; repeated rehiring for several projects does not negate project employment, especially in the construction industry.
• San Miguel Corporation vs. National Labor Relations Commission, 357 Phil. 954, 962 (1998) — Cited; the true nature of employment is determined by the worker's functions vis-à-vis the employer's business and the duration and scope of the work.
• Carpio vs. Modair Manila Co. Ltd. Inc., G.R. No. 239622, June 21, 2021 — Cited; failure to file an establishment employment report is an indication that the employee is not a project employee, but it is not the only factor.

• Article 295, Labor Code — Defines regular and casual employment; an employee is regular where he performs activities usually necessary or desirable in the employer's usual business or trade, except where employment is fixed for a specific project or undertaking whose completion or termination was determined at engagement; casual if not covered; one year of service makes an employee regular with respect to the activity in which he is employed. The SC used it to distinguish regular from project employment.
• Department Order No. 19, Series of 1993, Section 2.2 — Lists indicators of project employment: duration of the specific undertaking reasonably determinable; duration and work defined in the employment agreement and clear at hiring; work connected to the particular project; employee free to offer services to other employers while awaiting engagement; termination reported to the DOLE within 30 days; and completion bonus undertaking. The SC held that absence of one or two indicators does not transform project employment into regular employment, and failure to file a report is not the sole factor.
• Rule 45, Section 1, Revised Rules of Civil Procedure — A petition for review on certiorari is generally limited to pure questions of law; the SC applied the exception because the factual findings of the labor arbiter, the NLRC, and the CA conflicted.
• Omnibus Rules Implementing the Labor Code, Book V, Rule XXIII, Section 1(c) — In project employment, no employee shall be dismissed prior to completion of the project or phase unless for just or authorized cause subject to due process or prior notice, or brought about by completion of the phase, project, or contract; cited in the decision's footnote on security of tenure.