University of Santo Tomas vs. Samahang Manggagawa ng UST

Employees who have rendered at least one year of service, whether continuous or broken, are deemed regular employees with respect to the activity in which they are employed, even if that activity is not necessary or desirable to the employer's usual business or trade. Repeated rehiring for maintenance work under vaguely defined "project" contracts does not constitute valid project employment where the project descriptions are too general or broad and the employer's purpose is to preclude acquisition of tenurial security.

The University of Santo Tomas (UST) is an educational institution offering elementary, secondary, tertiary, and post-graduate education, with campus buildings, rooms, and facilities requiring ongoing maintenance. Respondents Samahang Manggagawa ng UST and individual workers Fernando Pontesor, Rodrigo Clacer, Santiago Buisa, Jr., and Jimmy Nazareth were engaged by UST across various periods from 1990 to 1999 to perform maintenance duties. The dispute centers on whether their repeated engagements under Contractual Employee Appointments constituted project employment, fixed-term employment, or regular employment under the Labor Code.

From 1990 to 1999, the University of Santo Tomas repeatedly hired Fernando Pontesor, Rodrigo Clacer, Santiago Buisa, Jr., and Jimmy Nazareth to perform various maintenance duties within its campus, including work as laborer, mason, tinsmith, painter, electrician, welder, and carpenter. Each engagement was documented under a Contractual Employee Appointment (CEA) signed by the individual worker. Petitioner maintained that these CEAs defined the nature and term of the specific project to which each worker was assigned, with each contract renewable if the project remained unfinished upon expiration of the specified term. Under the express provisions of the CEAs, employment was automatically terminated upon expiration of the specific term, upon early completion of the project, or upon completion of a project for which employment had been extended.

Respondents filed a complaint for regularization and illegal dismissal before the NLRC, contending that their performance of maintenance tasks throughout the years entitled them to regular employee status. They argued that for as long as UST continued to operate as an educational institution with rooms, buildings, and facilities to maintain, it could not dispense with their services, which were necessary and desirable to its business. Petitioner countered that the workers were hired on a per-project basis, as evidenced by the CEAs, and that their termination was validly made upon completion of the specific projects for which they were engaged.

The Labor Arbiter found in favor of respondents, noting that they had rendered at least one year of service, that their activities were vital to the maintenance of campus buildings, and that the CEAs were contrived to preclude security of tenure. The NLRC reversed, classifying them as fixed-term casual employees who could not have been illegally dismissed upon expiration of their contracts, while rejecting the project-employment characterization. The Court of Appeals in turn reversed the NLRC, finding that the project descriptions in the CEAs were either too general or too broad, that respondents' repeated rehiring evidenced continuous need for their services, and that they should be classified as regular employees.

• Project Employment Status: Petitioner argued that respondents were hired on a per-project basis, as evidenced by the CEAs signed by each worker, which defined the nature and term of the project to which they were assigned and provided for automatic termination upon completion of the project or expiration of the specified term.
• Validity of Termination: Petitioner maintained that the termination of respondents' employment was validly made due to the completion of the specific projects for which they were hired, in accordance with the express provisions of the CEAs.

• Regular Employment by Nature of Work: Respondents insisted that in view of their performance of maintenance tasks throughout the years, they should be deemed regular employees of petitioner, since petitioner could not dispense with their services so long as it continued to operate as an educational institution with buildings and facilities to maintain.
• Necessary and Desirable Services: Respondents argued that their maintenance services were necessary and desirable to the business of petitioner, entitling them to regular employment status and security of tenure.

• Regular Employment Classification: Whether the CA correctly ruled that respondents are regular employees and were consequently illegally dismissed by petitioner.

• Regular Employment Classification: Yes. The CA correctly ruled that respondents are regular employees under the second category of Article 295 of the Labor Code, having each rendered cumulative service exceeding one year, and were illegally dismissed.

• Regular Employment Classification: Article 295 (formerly Article 280) of the Labor Code provides two categories of regular employees: (a) those engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, and (b) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. Applying the test from Universal Robina Corporation vs. Catapang, the Court found that respondents' maintenance work was not necessary or desirable to UST's usual business of providing education, thus excluding them from the first category. However, a review of their respective CEAs revealed that their cumulative periods of employment each exceeded one year, placing them in the second category by operation of law, consistent with Kimberly Independent Labor Union vs. Drilon, where mechanics, electricians, painters, carpenters, and masons who worked for more than one year were deemed regular employees under the same category. Respondents were therefore regular employees but only with respect to the activities for which they were hired and for as long as such activities exist. The Court further rejected the project-employment characterization. Under Gadia vs. Sykes Asia, Inc., the principal test is whether employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time of engagement, and the employer must prove both the specified duration and scope and the actual existence of the project. The CEAs' project descriptions — stating that respondents were tasked "to assist" in various carpentry, electrical, and masonry work — were too vague and overbroad. When pieced together, the CEAs revealed that from 1990 to 1999 respondents were each engaged to perform all-around maintenance services throughout the campus, and petitioner merely attempted to compartmentalize their tasks into purported "projects." The Court refused to countenance this practice, as it would permit the employer to avoid hiring regular employees by hiring on a temporary basis, thereby violating security of tenure. While fixed-term or project employment may be valid when agreed upon knowingly and voluntarily without vitiation of consent, such contracts are disregarded as contrary to public policy when periods are imposed to preclude acquisition of tenurial security, as in this case. Having been terminated without just or authorized cause, respondents were entitled to reinstatement with full backwages and without loss of seniority rights.

• Two Categories of Regular Employment under Article 295 (formerly Article 280) of the Labor Code — The first category comprises employees engaged to perform activities usually necessary or desirable in the usual business or trade of the employer. The second category comprises employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed; their employment is considered regular but only with respect to such activity and while such activity exists. The Court applied this framework by excluding respondents from the first category (maintenance work not being necessary or desirable to education as a business) but including them in the second category (cumulative service exceeding one year).
• Test for Regular Employment — The primary standard is the reasonable connection between the particular activity performed by the employee and the usual trade or business of the employer. If the employee has performed the job for at least one year, even if intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. (From Universal Robina Corporation vs. Catapang, citing Abasolo vs. NLRC.)
• Requisites for Valid Project Employment — A project employee is assigned to a project which begins and ends at determined or determinable times. The principal test is whether the employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time of engagement. Employers claiming project employment must prove both the specified duration and scope and the actual existence of the project. (From Gadia vs. Sykes Asia, Inc., citing Omni Hauling Services vs. Bon.)
• Invalidation of Fixed-Term or Project Contracts Imposed to Evade Tenure — Project or fixed-term contracts are disregarded as contrary to public policy when it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee. Validity of such contracts requires that they were agreed upon knowingly and voluntarily, without force, duress, or improper pressure, and absent moral dominance by the employer over the employee.

• "if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists." — This passage articulates the doctrinal basis for the second category of regular employment, establishing that cumulative service of at least one year — even if intermittent — gives rise to regular employment status by operation of law.
• "the Court cannot countenance this practice as to do so would effectively permit petitioners to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis, thereby violating the employees' security of tenure relative to their jobs." — This statement defines the Court's refusal to sanction the compartmentalization of continuous maintenance work into purported "projects" as a device to evade regularization, reinforcing the protective policy of the Labor Code.
• "if it is apparent from the circumstances of the case 'that periods have been imposed to preclude acquisition of tenurial security by the employee,' such project or fixed term contracts are disregarded for being contrary to public policy, as in this case." — This formulation establishes the public-policy exception that invalidates fixed-term or project contracts used as a subterfuge to deny security of tenure.

• Universal Robina Corporation vs. Catapang, 509 Phil. 765 (2005) — Cited for the primary standard of determining regular employment: the reasonable connection between the employee's activity and the employer's usual trade or business. Followed and applied to distinguish the two categories of regular employment.
• Abasolo vs. NLRC, 400 Phil. 86 (2000) — Cited within Universal Robina Corporation vs. Catapang as the origin of the test for regular employment based on the necessity or desirability of the work to the employer's business.
• Kimberly Independent Labor Union for Solidarity, Activism, and Nationalism — Organized Labor Ass'n in Line Industries and Agriculture (KILUSAN-OLALIA) vs. Drilon, 263 Phil. 892 (1990) — Controlling precedent for the second category of regular employment. The Court found the respondents' situation analogous, as the employees in Kimberly (mechanics, electricians, painters, carpenters, masons) who worked for more than one year were deemed regular employees by operation of law.
• Gadia vs. Sykes Asia, Inc., G.R. No. 209499, Jan. 28, 2015, 748 SCRA 633 — Cited for the requisites of valid project employment and the principal test of whether employees were assigned to a specific project with determined duration and scope. Applied to reject the project-employment characterization of respondents.
• Omni Hauling Services vs. Bon, 742 Phil. 335 (2014) — Cited within Gadia for the requirement that employers prove both the specified duration and scope of the project and the actual existence of the project.
• Brent School, Inc. vs. Zamora, 260 Phil. 747 (1990) — Cited for the standard that fixed-term employment is valid when agreed upon knowingly and voluntarily, without vitiation of consent or moral dominance by the employer.
• Poseidon Fishing vs. NLRC, 518 Phil. 146 (2006) — Cited for the rule that project or fixed-term contracts are disregarded as contrary to public policy when periods are imposed to preclude acquisition of tenurial security.

• Article 295 (formerly Article 280), Labor Code of the Philippines (Presidential Decree No. 442) — Defines regular and casual employment. Provides that employment is deemed regular where the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, except where employment is fixed for a specific project or undertaking the completion of which is determined at the time of engagement, or where the work is seasonal. Also 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 employed, and employment shall continue while such activity exists. Applied to classify respondents as regular employees under the second category.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Mariano C. Del Castillo, and Associate Justice Alfredo Benjamin S. Caguioa concurred with the decision. No separate concurring opinions were rendered.