University of St. La Salle vs. Glaraga

The non-renewal of a probationary teacher's fixed-term contract prior to the expiration of the three-year probationary period constitutes a dismissal for which the Labor Code provisions on just or authorized causes must apply.

Petitioner University of St. La Salle engaged respondents as probationary full-time faculty members with teaching loads of 24 to 25 units. Their engagements were covered by Documents of Agreement for fixed five-month periods, containing a standard clause on renewal based on performance and the requirement of a master's degree for permanency. Due to a decline in enrollment, respondents' teaching loads were reduced to 5 units, and they were eventually not offered any teaching load in the summer and first semester of 2011, prompting them to file a complaint for illegal dismissal.

Petitioner University of St. La Salle engaged respondents as probationary full-time faculty members, each with a teaching load of 24 to 25 units. From the first semester of 2008-2009 through the second semester of 2010-2011, respondents' engagements were covered by Documents of Agreement covering five-month periods at a time. These contracts contained a standard clause stating that the contract covers only the specific period stated and will not require any other written notice of expiry, and that renewal would be based on performance evaluation, behavioral conduct, and other considerations. To be eligible for permanency, a teacher must have earned a masteral degree within the three-year probationary period.

Beginning in the first semester of 2010-2011, respondents were engaged as probationary part-time faculty members, each with a teaching load of 5 units. The letter notifying them of the reduction in load and schedule cited a decline in enrollment as the underlying reason. Petitioner stated that this arrangement was only temporary, "until things would get better for the nursing course."

In the summer and first semester of 2011, respondents were not offered any teaching load and were not issued new documents of agreement. Consequently, they filed a complaint for illegal dismissal, salary differential due to diminution of benefits, damages, and attorney's fees. The Labor Arbiter found that they were dismissed for an authorized cause (redundancy) but without procedural due process, ordering separation pay and P10,000 nominal damages. The NLRC reversed this, declaring that their probationary period simply expired. The CA reversed the NLRC, reinstating the LA decision with a modification increasing the nominal damages to P50,000 each.

• Expiration of Contract: Petitioner argued that the CA erred in glossing over the express provision in respondents' contracts that their probationary period is for a "fixed period of five (5) months for every term or semester," as indicated in the standard clause that their contracts cover "only the specific period stated and will not require any other written notice of expiry."
• No Money Claim: Petitioner maintained that the termination of respondents' employment was due to the expiration of their probationary period, rather than a dismissal for just or authorized cause, and thus respondents are not entitled to any money claim.

• Expiration Not a Valid Ground: Respondents pointed to a long line of cases stating that expiration of contract is not a valid ground to terminate the probationary employment of teachers.

• Illegal Termination vs. Expiration of Term: Whether the CA erred in finding that respondents were illegally terminated from employment instead of declaring that their term merely expired.
• Monetary Awards: Whether the CA erred in awarding money claims and nominal damages to the respondents.

• Illegal Termination vs. Expiration of Term: No. The non-renewal of the fixed-term contracts during the three-year probationary period amounted to a dismissal, not a mere lapse of the probationary period.
• Monetary Awards: No. The monetary awards, including separation pay for redundancy and P50,000 nominal damages for failure to observe procedural due process, were proper.

• Illegal Termination vs. Expiration of Term: The Court clarified that the general probationary period of six months under the Labor Code does not apply to teachers. Instead, Department of Education regulations provide a maximum probationary period of three years for teachers, unless a shorter period is expressly adopted by the institution. The three-year probationary period is reconciled with the fixed short-terms of their employment contracts: if the fixed term is intended to run simultaneously with the probationary period, the fixed term is not considered the probationary period unless a shorter one is expressly adopted. If the non-renewal takes place prior to the expiration of the probationary period, the termination is characterized as a dismissal requiring just or authorized causes under the Labor Code. In this case, the vagueness in the parties' documents of agreement justified the CA's reliance on the presumption of a three-year probationary period. Since the non-renewal occurred during this period, it constituted a dismissal. The evidence indicated the dismissal was due to redundancy, an authorized cause, given the admitted financial difficulties and decline in enrollment.
• Monetary Awards: Because the dismissal was for the authorized cause of redundancy, the payment of separation benefits was valid. However, petitioner failed to comply with the procedural requirement of prior notice to the employees and the DOLE. The award of P50,000 nominal damages to each respondent was supported by jurisprudence as the proper sanction for failure to observe procedural due process in terminations for authorized causes. Petitioner's invocation of "honest mistake" did not warrant a departure from settled jurisprudence.

• Probationary Period of Teachers — The Labor Code provision on the general probationary period of six months does not apply to teachers; special regulations provide a maximum probationary period of three years, even if within that period they render service under fixed short-term contracts. The probationary period means full-time teaching for three consecutive academic years or six consecutive regular semesters or nine consecutive trimesters. While parties may agree to a shorter period, the decision must be unmistakable; otherwise, the presumption is a three-year period.
• Non-Renewal of Fixed-Term Contracts During Probationary Period — If the fixed term is intended to run simultaneously with the probationary period, the non-renewal of the contract prior to the expiration of the probationary period is characterized as a dismissal requiring just or authorized causes under the Labor Code. It is only when the non-renewal coincides with the expiration of the probationary period that the termination is deemed an exercise of management prerogative not to regularize the teacher.
• Procedural Due Process in Authorized Causes — Failure to comply with the procedural requirement of prior notice to the employees and the DOLE in a termination for authorized cause entitles the dismissed employees to nominal damages, currently pegged at P50,000.00.

• "The Court has held that the Labor Code provision on the general probationary period of six months does not apply to teachers; rather, special regulations of the Department of Education provide that, unless a shorter period is expressly adopted by their institution, the probationary period of teachers will be for a maximum of three years, even if within that period they render service under fixed short-term contracts." — This passage establishes the controlling rule for determining the probationary period of teachers in private educational institutions.
• "If the non-renewal of the fixed term employment contract takes place after the expiration of the probationary period, then the termination of employment can be characterized as a dismissal, for which the Labor Code provisions on just and authorized causes shall apply. Likewise, if the non-renewal takes place prior to the expiration of the probationary period, then the termination of employment is characterized as a dismissal for which the same provisions of the Labor Code on just and authorized causes shall apply." — This articulates the ratio decidendi on how the non-renewal of fixed-term contracts during the probationary period is treated as a dismissal.

• Mercado vs. AMA Computer College-Parañaque City, Inc., 632 Phil. 228 (2010) — Cited by the CA and sustained by the Court for the proposition that a teacher's probationary period is three years notwithstanding fixed short-term contracts, and that non-renewal during this period constitutes a dismissal.
• Brent School, Inc. vs. Ronaldo Zamora, 260 Phil. 747 (1990) — Cited for the resolution that the Labor Code's six-month probationary period does not apply to teachers.
• Espiritu Santo Parochial School vs. National Labor Relations Commission, 258 Phil. 600 (1989) — Cited for the rule that the probationary period of teachers is three years unless a shorter period is expressly adopted by the institution.
• Colegio del Santisimo Rosario vs. Rojo, 717 Phil. 265 (2013) — Cited for the rule that non-renewal of a fixed-term contract after the expiration of the probationary period constitutes a dismissal.
• Colegio San Agustin vs. National Labor Relations Commission, 278 Phil. 414 (1991) — Cited for the rule that non-renewal coinciding with the expiration of the probationary period is an exercise of management prerogative.
• Universidad de Sta. Isabel vs. Sambajon, Jr., 731 Phil. 235 (2014) — Cited for the rule that while parties may agree to a short probationary period, the decision must be unmistakable, otherwise the presumption is a three-year period.
• Mejila vs. Wrigley Philippines, Inc., G.R. Nos. 199469 & 199505, September 11, 2019 — Cited to support the award of P50,000.00 nominal damages for failure to observe procedural due process.

• Article 283, Labor Code of the Philippines — Applied by the Labor Arbiter and CA regarding termination for authorized causes (redundancy) and the requirement of prior notice to the employee and the DOLE.
• Article 24, 2008 Commission on Higher Education (CHED) Manual of Regulation for Private Higher Education — Referenced in relation to the three-year probationary period for teachers.

Peralta, C.J. (Chairperson), Caguioa, (Working Chairperson), Lazaro-Javier, and Lopez, JJ., concur.