Site for Eyes, Inc. vs. Daming

An employee engaged under repeatedly renewed fixed-term contracts to perform activities necessary or desirable to the employer's business is a regular employee, and the fixed-term arrangement is an invalid circumvention of the law on regularization where the contracts were unilaterally prepared by the employer and the employee did not deal with the employer on equal terms.

Petitioner Site for Eyes, Inc. (formerly Delos Reyes Optical City, Inc.) is a domestic corporation engaged in dispensing optical lenses, solutions, and equipment. On November 20, 2012, petitioner hired respondent Dr. Amor F. Daming as an optometrist for its shop at the Ayala Centro Mall in Cagayan de Oro City. The dispute centers on whether respondent's repeated one-year employment contracts constituted valid fixed-term employment or a circumvention of the regularization provisions under Article 280 of the Labor Code, and whether barring her from the workplace during a labor dispute constituted constructive dismissal.

Petitioner Site for Eyes, Inc. is a domestic corporation engaged in dispensing optical lenses, solutions, and equipment. On November 20, 2012, it hired respondent Dr. Amor F. Daming as an optometrist for its shop at the Ayala Centro Mall in Cagayan de Oro City. She worked there until October 15, 2013. On April 8, 2014, she was rehired under a one-year employment contract with a monthly salary of ₱28,000.00. Her employment was renewed on April 20, 2015, for a term ending April 20, 2016, with an increased monthly salary of ₱33,000.00. However, the ₱5,000.00 salary increase was not given despite repeated demands.

On March 22, 2016, respondent, together with two co-employees, filed a request for assistance before the Department of Labor and Employment under the Single Entry Approach (SEnA) to recover unpaid salary, salary differential, overtime pay, 13th month pay, separation pay, damages, attorney's fees, and cost of suit. Subsequently, petitioner conducted an audit of its optical shops and discovered missing items. During the SEnA hearing scheduled on April 20, 2016, petitioner gave respondent a show cause notice threatening to file a lawsuit should she fail to account for the allegedly missing items. Respondent accepted the notice on the condition that she would be able to examine the store receipts covered by the audit. However, respondent was forbidden entry into the shop, effectively terminating her employment. She then filed a complaint for illegal dismissal with money claims.

Petitioner denied having granted respondent a salary increase and argued that even if one had been granted, her claim was barred by laches. Petitioner also alleged that respondent was a fixed-term employee who had signed fixed-term contracts, and that she was not dismissed from employment but rather her contract had merely expired. Respondent countered that she could not be guilty of laches as she had text messages proving the pursuit of her claim, and she presented a contract of employment containing, inter alia, the duration of her employment, probationary status, and standards for regularization.

The Labor Arbiter found respondent to be a regular employee, noting that she was continuously hired as an optometrist and performed activities necessary and desirable to petitioner's optical business. The Labor Arbiter also concluded that barring respondent from the shop premises amounted to constructive dismissal. The NLRC affirmed this ruling, observing that the yearly contracts were actually contracts of employment for regular employees and that petitioner circumvented the law on regularization. The Court of Appeals likewise affirmed, recognizing respondent's regular employment status under the four-fold test.

• No Constructive Dismissal: Petitioner argued that there was no constructive dismissal and that the execution of the fixed-period employment contract was not resorted to in order to circumvent the law on regularization.
• Fixed-Term Employment Status: Petitioner maintained that respondent was a fixed-term employee, that respondent herself did not raise her status as a fixed-period employee as an issue, and that all elements of a valid fixed-period employment were present.
• Improper Monetary Awards: Petitioner argued that the monetary awards including backwages and separation pay were erroneous because backwages were not among the reliefs prayed for by respondent and the awards had no basis since respondent was not illegally dismissed.
• Salary Increase and Laches: Petitioner denied having granted respondent a salary increase and contended that even if one were granted, her claim was already barred by laches.

• No Laches: Respondent countered that she could not be guilty of laches as she had text messages to prove the pursuit of her claim.
• Employment Contract Terms: Respondent presented a contract of employment which contained, inter alia, the duration of her employment, probationary status, and standards for regularization.

• Constructive Dismissal: Whether respondent was illegally or constructively dismissed from employment.
• Employment Status: Whether respondent was a fixed-term employee or a regular employee.
• Monetary Awards: Whether the awards of backwages and separation pay were proper.

• Constructive Dismissal: Yes. Respondent was constructively dismissed when petitioner barred her entry into the optical shop, deliberately placing her in a precarious situation that coerced her into severing her employment.
• Employment Status: Respondent was a regular employee, not a fixed-term employee. The repeated renewal of her contracts for the same position, the necessity and desirability of her functions to petitioner's business, and petitioner's control over the means and method of her work established regular employment status under Article 280 of the Labor Code.
• Monetary Awards: Yes. Backwages and separation pay were properly awarded, including all guaranteed salary increases and benefits respondent would have been entitled to had she not been illegally dismissed, excluding contingent benefits.

• Constructive Dismissal: Applying the definition from Al-Masiya Overseas Placement Agency, Inc. vs. Viernes, constructive dismissal occurs when an employer's act of clear discrimination, insensibility, or disdain becomes so unbearable that the employee is left with no option but to forego continued employment. The only conceivable reason for barring respondent from the shop was to restrict her access to files that could aid her defense against the audit findings. Petitioner deliberately employed this strategy to place respondent in a precarious situation, which eventually led her to end her employment. The CA therefore did not err in declaring respondent constructively and illegally dismissed.

• Employment Status: Article 280 of the Labor Code deems employment regular where the employee is engaged to perform activities usually necessary or desirable in the employer's business, notwithstanding any written agreement to the contrary. While fixed-term employment was first recognized in Brent School, Inc. vs. Zamora, the criteria for its validity, laid down in Tuppil vs. LBP Service Corporation citing Pure Foods Corporation vs. NLRC, require that the fixed period was knowingly and voluntarily agreed upon without force, duress, or improper pressure, or that the parties dealt with each other on more or less equal terms with no moral dominance exercised by either. Here, three factors established regular employment: first, respondent performed activities necessary and desirable to petitioner's optical business, as without optometrists the enterprise could hardly dispense its products; second, the repeated renewal of her contract signified a continuing need for her services; and third, petitioner exercised control over the means and method of her work, providing equipment and requiring overtime even on rest days. Moreover, a dearth of evidence showed that respondent dealt with petitioner on an arm's length basis. The contracts were unilaterally prepared by petitioner and contained provisions typical of regular employment contracts, appearing devised to preclude respondent from acquiring tenurial security. Such an arrangement is contrary to law, public policy, and morals, and the general restrictive rule under Article 280 applies.

• Monetary Awards: Pursuant to Dumapis vs. Lepanto Consolidated Mining Company, backwages and separation pay due to illegally dismissed employees include all salary increases and benefits granted under the law, government issuances, collective bargaining agreements, employment contracts, established company policies and practices, and analogous sources which the employees would have been entitled to had they not been illegally dismissed. Salary increases and benefits contingent on variables such as merit, performance, longevity, or company financial status are excluded. The monetary award is subject to legal interest of six percent (6%) per annum from finality of the decision until full satisfaction, pursuant to Nacar vs. Gallery Frames. This conforms to the constitutional command that the State shall afford full protection to labor and to the purpose of restoring illegally dismissed employees to the same status as if their employment had not been severed.

• Regular Employment under Article 280 — Employment is deemed regular when the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, regardless of any written or oral agreement to the contrary. The decisive inquiry is the nature of the work performed, not the label the parties attach to the arrangement. Applied here: respondent's work as an optometrist was indispensable to petitioner's optical business, establishing regular employment notwithstanding the fixed-term labels on her contracts.

• Validity of Fixed-Term Employment — A fixed-term employment arrangement is valid only if: (1) the fixed period was knowingly and voluntarily agreed upon by the parties without force, duress, or improper pressure and absent any circumstances vitiating consent; or (2) the employer and employee dealt with each other on more or less equal terms with no moral dominance exercised by either. Applied here: the contracts were unilaterally prepared by petitioner, respondent did not deal on equal terms, and the arrangement was designed to preclude tenurial security, rendering the fixed-term contracts invalid.

• Repeated Renewal as Indicator of Regular Employment — Where an employee's contract has been continuously extended or renewed for the same position, with the same duties, and the employee remained in the employ without interruption, the repeated engagement is indicative of the necessity and desirability of the work, and the employee is a regular employee. Applied here: respondent's contracts were renewed twice for the same optometrist position, signifying a continuing need for her services.

• Constructive Dismissal — An employee is constructively dismissed when an act of clear discrimination, insensibility, or disdain by the employer becomes so unbearable that the employee is left with no option but to forego continued employment. Applied here: barring respondent from the shop to restrict her access to files needed for her defense constituted a deliberate strategy to coerce her into ending her employment.

• Computation of Backwages and Separation Pay — Awards to illegally dismissed employees include all guaranteed salary increases and benefits from law, government issuances, collective bargaining agreements, employment contracts, established company policies and practices, and analogous sources, excluding contingent benefits dependent on merit, performance, longevity, or company financial status. Legal interest of 6% per annum applies from finality until full satisfaction.

• "The employment status of a person is prescribed by law and not by what the parties say it should be." — This passage articulates the fundamental principle that the parties' contractual label does not control employment status; the nature of the work and the circumstances of engagement govern.

• "In question form, the question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the case?" — This formulation from The Heritage Hotel vs. Sio, as adopted here, defines the proper scope of judicial review in Rule 45 petitions elevating CA Rule 65 decisions in labor cases.

• "This Court will not hesitate to strike down or disregard this arrangement as contrary to law, public policy, and morals. In such a case, the general restrictive rule under Article 280 of the Labor Code will apply and the employee shall be deemed regular." — This passage establishes the Court's willingness to invalidate fixed-term arrangements designed to circumvent regularization and to apply Article 280's protective rule.

• The Heritage Hotel vs. Sio, G.R. No. 217896, June 26, 2019 — Controlling authority on the proper standard of review in Rule 45 petitions of CA Rule 65 decisions in labor cases; the Court must determine whether the CA correctly found the presence or absence of grave abuse of discretion by the NLRC, not whether the NLRC decision was correct on the merits.
• Brent School, Inc. vs. Zamora, 260 Phil. 747 (1990) — First recognition by the Court of the existence of a fixed-term employment arrangement; the decisive factor is the day certain agreed upon for commencement and termination, not the activities performed.
• Tuppil vs. LBP Service Corporation, G.R. No. 228407, June 10, 2020 — Laid down the two criteria for a valid fixed-term employment: knowing and voluntary agreement without vitiated consent, or dealings on more or less equal terms with no moral dominance.
• Fuji Network Television, Inc. vs. Espiritu, 749 Phil. 388 (2014) — Clarified that repeated engagement under contract of hire is indicative of the necessity and desirability of the employee's work, and continuous renewal for the same position establishes regular employment.
• Al-Masiya Overseas Placement Agency, Inc. vs. Viernes, 680 Phil. 112 (2012) — Defined constructive dismissal as an act of clear discrimination, insensibility, or disdain by the employer so unbearable that the employee is left with no option but to forego continued employment.
• Dumapis vs. Lepanto Consolidated Mining Company, G.R. No. 204060, September 15, 2020 — Established the scope of backwages and separation pay: all guaranteed salary increases and benefits are included, while contingent benefits are excluded.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Applied to impose legal interest of six percent (6%) per annum on the total monetary award from finality of the decision until full satisfaction.

• Article 280, Labor Code — Classifies employees into regular, project, seasonal, and casual. Deems employment regular where the employee performs activities usually necessary or desirable in the employer's business, notwithstanding written or oral agreements to the contrary. Applied as the controlling provision to determine respondent's regular employment status and to invalidate the fixed-term arrangement.
• Article 3, Chapter I, Labor Code — Declares the State's basic policy to afford protection to labor, promote full employment, ensure equal work opportunities, and assure workers' rights to security of tenure and just and humane conditions of work. Cited as the statutory foundation for the protective orientation of the ruling.
• Section 3, Article XII, 1987 Constitution — Provides that the State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. Cited as the constitutional mandate underpinning the award of full backwages and separation pay.

Leonen (Chairperson), Hernando, Inting, and Rosario, JJ., concurred.