Viernes vs. NLRC

Employees initially engaged for a fixed term who are allowed to continue working in the same capacity after the term expires, without a new contract or a newly fixed term, attain regular employment status; their illegal dismissal entitles them to reinstatement as regular employees, full backwages, and indemnity for lack of procedural due process.

BENECO is an electric cooperative; petitioners were among its meter readers. The dispute required the SC to apply the Labor Code provisions on regular employment, probationary employment, backwages, procedural due process, attorney’s fees, and the finality of NLRC decisions.

On October 8, 1990, BENECO appointed fifteen individuals, including petitioners, as meter readers (apprentice) under BENECO-NEA Management with compensation at P66.75 per day from October 8 to 31, 1990. Their employment contracts were couched in identical terms.

Despite the stated term, petitioners were allowed to work beyond October 31, 1990, or until January 2, 1991. On January 3, 1991, each was served an identical notice of termination dated December 29, 1990, effective at the close of office hours of December 31, 1990. The notice stated that the termination had nothing to do with performance and was due to retrenchment because BENECO was already overstaffed. On the same date, petitioners filed separate complaints for illegal dismissal; after amending their complaints, they submitted their joint position paper on April 4, 1991, while BENECO filed its position paper on April 2, 1991.

Petitioners contended that they were not apprentices but regular employees whose services were illegally and unjustly terminated in a manner that was whimsical and capricious. BENECO invoked Article 283 of the Labor Code in defense of the questioned dismissal. During the preliminary hearing on February 4, 1991, BENECO offered to enter into another temporary employment contract with petitioners.

The Labor Arbiter found that the job of a meter reader is necessary to BENECO’s business because unless a meter reader records the electric consumption of the subscribing public, there could be no valid basis for billing BENECO’s customers. The Labor Arbiter also found that petitioners were never probationary employees; nothing in the appointment letter indicated that their employment as meter readers was on a probationary basis; they were not informed of the reasonable standards under which they could qualify as regular employees; and they were initially engaged for a definite period from October 8 to 31, 1990.

• Regular Employment and Reinstatement: Petitioners claimed that they should be reinstated to their former position as meter readers as regular employees, not on probationary status, because the NLRC itself found them regular employees under Article 280 of the Labor Code.
• Full Backwages: Petitioners claimed that the NLRC gravely abused its discretion in limiting their backwages to one year despite finding illegal dismissal, contrary to the mandate of full backwages until actual reinstatement but not to exceed three years.
• Indemnity and Attorney’s Fees: Petitioners claimed that the NLRC gravely abused its discretion in deleting the award of indemnity, which had become final because it was not appealed, and the award of attorney’s fees.
• Executory Nature of Reinstatement: Petitioners claimed that the mandate of immediate execution of the reinstatement aspect pending appeal in Labor Arbiter decisions equally applies to NLRC decisions pending a motion for reconsideration or certiorari.

• Retrenchment under Article 283: Respondent invoked Article 283 of the Labor Code in defense of the questioned dismissal.
• Fixed-Term Employment: Respondent relied on Brent School, Inc. vs. Zamora to support its position on fixed-term employment.

• Regular Employment and Reinstatement: Whether the NLRC committed grave abuse of discretion in ordering petitioners’ reinstatement to their former position as meter readers on probationary status despite its finding that they are regular employees under Article 280 of the Labor Code.
• Full Backwages: Whether the NLRC committed grave abuse of discretion in limiting petitioners’ backwages to one year despite its finding of illegal dismissal, contrary to the mandate of full backwages until actual reinstatement but not to exceed three years.
• Indemnity and Attorney’s Fees: Whether the NLRC committed grave abuse of discretion in deleting the award of indemnity pay, which had become final because it was not appealed, and in deleting the award of attorney’s fees because of the absence of a trial-type hearing.
• Executory Nature of Reinstatement: Whether the mandate of immediate execution of the reinstatement aspect pending appeal in Labor Arbiter decisions equally applies to NLRC decisions pending a motion for reconsideration or certiorari.

• Regular Employment and Reinstatement: Yes. Petitioners were regular employees, not probationary, because they continued working in the same capacity after their fixed-term contracts expired without a new contract or fixed term; they must be reinstated as regular employees.
• Full Backwages: Yes. Under Article 279 of the Labor Code, as amended by R.A. No. 6715, an illegally dismissed employee is entitled to full backwages from the time compensation was withheld until actual reinstatement; the one-year limitation was grave abuse of discretion.
• Indemnity and Attorney’s Fees: Yes. The indemnity is nominal damages for violation of procedural due process and is not incompatible with backwages; the retroactive notice violated Article 283, and attorney’s fees are justified under Article 111.
• Executory Nature of Reinstatement: No, insofar as petitioners sought immediate execution pending reconsideration. Article 223 and Section 2(b), Rule VIII of the NLRC Rules are consistent; the ten-day period runs from receipt of the resolution denying the motion for reconsideration, and the decision became executory on November 2, 1992.

• Regular Employment and Reinstatement: Reinstatement means restoration to a state or condition from which one had been removed or separated. For probationary employment, Article 281 requires the employer to make known to the employee at the time of engagement the reasonable standards under which the employee may qualify as a regular employee. The records showed no probationary employment: the appointment letter did not indicate probationary status; petitioners were not shown to have been informed of reasonable standards for regularization; and they were initially engaged for a limited duration from October 8 to 31, 1990. BENECO’s reliance on Brent School, Inc. vs. Zamora was misplaced because Brent applies only to fixed-term employment. While petitioners were initially fixed-term, after October 31, 1990 they were allowed to continue in the same capacity as meter readers without a new contract or a newly fixed term; their employment was no longer fixed-term and they attained regular status. Under Article 280, a regular employee is one engaged to perform activities necessary or desirable in the usual business or trade of the employer. The SC applied the test in De Leon vs. NLRC and Abasolo vs. NLRC: the work of a meter reader is necessary to BENECO’s business because recording electric consumption is the basis for billing customers. Continuation after the contract’s expiration and BENECO’s offer of another temporary contract proved the necessity of their services. The fact that they served for less than six months did not make their employment probationary. Thus, they were regular employees entitled to reinstatement as regular employees, not probationary.

• Full Backwages: Article 279 of the Labor Code, as amended by R.A. No. 6715, which took effect on March 21, 1989, provides that an illegally dismissed employee is entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time compensation was withheld up to actual reinstatement. Petitioners were employed on October 8, 1990, so the amended Article 279 applied. The NLRC’s limitation of backwages to one year was patently erroneous and amounted to grave abuse of discretion.

• Indemnity and Attorney’s Fees: An employer becomes liable to pay indemnity to an employee who has been dismissed if, in effecting the dismissal, the employer fails to comply with the requirements of due process. The indemnity is in the form of nominal damages intended not to penalize the employer but to vindicate or recognize the employee’s right to procedural due process. Under Article 2221 of the Civil Code, nominal damages are adjudicated to vindicate or recognize a violated right, not to indemnify for loss. The SC disagreed with the NLRC that indemnity is incompatible with backwages: backwages are granted on grounds of equity for earnings lost due to illegal dismissal, while indemnity vindicates the right to due process. BENECO failed to comply with Article 283, which requires a notice of dismissal to the employees and the Department of Labor at least one month before the intended date of termination. Petitioners were served notice on January 3, 1991 terminating their services effective December 29, 1990, or retroactively. This rendered BENECO liable for indemnity. Under Del Val vs. NLRC, the indemnity ranges from P1,000 to P10,000 depending on the circumstances; the labor arbiter’s award of P2,590.50, equivalent to one month’s salary, was just and reasonable. Attorney’s fees were justified under Article 111, which allows attorney’s fees equivalent to ten percent of the amount of wages recovered in cases of unlawful withholding of wages and prohibits fees exceeding ten percent.

• Executory Nature of Reinstatement: Article 223 of the Labor Code provides that the NLRC decision shall be final and executory after ten calendar days from receipt by the parties. Section 2(b), Rule VIII of the New Rules of Procedure of the NLRC provides that if a motion for reconsideration is entertained, the decision shall be executory after ten calendar days from receipt of the resolution on the motion. The SC found no inconsistency between Article 223 and Section 2(b), Rule VIII; the NLRC Rules merely provide for situations where a motion for reconsideration is filed. Since the Rules allow a motion for reconsideration, the ten-day period under Article 223 should be reckoned from receipt of the resolution on the motion. Petitioners received the NLRC resolution denying their motion for reconsideration on October 22, 1992, so the questioned decision became executory on November 2, 1992.

• Regular employment under Article 280 — A regular employee is one engaged to perform activities necessary or desirable in the usual business or trade of the employer, or a casual employee who has rendered at least one year of service, whether continuous or broken, with respect to the activity in which the employee is employed. The SC applied the first category: meter readers perform work necessary to BENECO’s billing of customers.
• Fixed-term employment and continuation beyond term — A fixed-term employment does not remain fixed-term when the employee is allowed to continue working in the same capacity after the term expires without a new contract or a newly fixed term; the employment relationship changes and the employee attains regular status. The SC held petitioners became regular after October 31, 1990.
• Probationary employment requisites — Under Article 281, the employer must make known to the employee at the time of engagement the reasonable standards under which the employee may qualify as a regular employee. Absence of such notice means the employee is not probationary; less than six months of service does not by itself make employment probationary. The SC found petitioners were never probationary.
• Indemnity as nominal damages for procedural due process — An employer is liable for indemnity when it dismisses an employee without complying with due process. The indemnity is nominal damages under Article 2221 of the Civil Code, intended to vindicate the employee’s right to procedural due process, not to penalize the employer, and is compatible with backwages. The SC reinstated the P2,590.50 indemnity.
• Full backwages under Article 279 — An illegally dismissed employee is entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time compensation was withheld until actual reinstatement. The SC held the NLRC’s one-year limitation was grave abuse of discretion.
• Attorney’s fees under Article 111 — In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered, and it is unlawful to demand or accept attorney’s fees exceeding ten percent. The SC ordered 10% of the total monetary award.
• Finality of NLRC decisions — Under Article 223 of the Labor Code, the NLRC decision is final and executory after ten calendar days from receipt; under Section 2(b), Rule VIII of the NLRC Rules, if a motion for reconsideration is filed, the ten-day period runs from receipt of the resolution on the motion. The SC held the decision became executory on November 2, 1992.

• "Reinstatement means restoration to a state or condition from which one had been removed or separated." — The SC uses this definition to hold that petitioners must be restored as regular employees, not probationary.
• "After October 31, 1990, the employment of petitioners is no longer on a fixed term basis. The complexion of the employment relationship of petitioners and private respondent is thereby totally changed. Petitioners have attained the status of regular employees." — The SC uses this to explain that continued employment beyond the fixed term changed petitioners’ status to regular employees.
• "We do not agree with the ruling of the NLRC that indemnity is incompatible with the award of backwages. These two awards are based on different considerations." — The SC distinguishes backwages from indemnity and restores the indemnity award.
• "Since petitioners were employed on October 8, 1990, the amended provisions of Article 279 of the Labor Code shall apply to the present case. Hence, it was patently erroneous, tantamount to grave abuse of discretion on the part of the public respondent in limiting to one year the backwages awarded to petitioners." — The SC applies the amended Article 279 and rejects the one-year cap on backwages.

• Brent School, Inc. vs. Zamora, 181 SCRA 702 (1990) — Distinguished; its fixed-term employment principle applies only to genuine fixed-term employment, not to employees allowed to continue after the term without a new contract.
• De Leon vs. NLRC, 176 SCRA 615 (1989) — Followed; cited for the test of regular employment.
• Abasolo vs. NLRC, 346 SCRA 293 (2000) — Followed; cited for the test of regular employment.
• Del Val vs. NLRC, 296 SCRA 283 (1998) — Followed; cited for the range of indemnity from P1,000 to P10,000 depending on the circumstances.
• Judy Philippines, Inc. vs. NLRC, 289 SCRA 755 (1998) — Cited for the definition of reinstatement as restoration to a state or condition from which one had been removed or separated.
• Kwikway Engineering Works vs. NLRC, 195 SCRA 526 (1991) — Cited for the rule that an employer becomes liable for indemnity when dismissal is effected without due process.
• Paguio vs. PLDT, G.R. No. 154072, December 3, 2002 — Cited for the rule that backwages are granted on grounds of equity for earnings lost due to illegal dismissal.
• Rural Bank of Alaminos Employees Union vs. NLRC, 317 SCRA 669 (1999) — Cited for the procedure allowing the SC to resolve the petition itself where the parties had filed their memoranda before the St. Martin ruling.

• Article 279, Labor Code, as amended by R.A. No. 6715 — Provides full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time compensation was withheld until actual reinstatement; applied because petitioners were employed on October 8, 1990, after the amendment took effect on March 21, 1989.
• Article 280, Labor Code — Defines a regular employee as one engaged to perform activities necessary or desirable in the usual business or trade of the employer, or a casual employee who has rendered at least one year of service; applied to hold meter readers regular.
• Article 281, Labor Code — Requires the employer to make known to the employee at the time of engagement the reasonable standards for regularization; applied to hold petitioners were not probationary.
• Article 283, Labor Code — Requires a notice of dismissal to the employees and the Department of Labor at least one month before the intended date of termination; applied to hold BENECO liable for indemnity because the notice was retroactive.
• Article 111, Labor Code — Allows attorney’s fees equivalent to ten percent of wages recovered in cases of unlawful withholding of wages and prohibits fees exceeding ten percent; applied to justify the award.
• Article 2221, Civil Code — Provides that nominal damages are adjudicated to vindicate or recognize a violated right, not to indemnify for loss; applied to characterize the indemnity.
• Article 223, Labor Code — Provides that the NLRC decision is final and executory after ten calendar days from receipt by the parties; applied with the NLRC Rules.
• Section 2(b), Rule VIII, New Rules of Procedure of the NLRC — Provides that if a motion for reconsideration is entertained, the decision is executory after ten calendar days from receipt of the resolution on the motion; reconciled with Article 223 and applied to reckon finality from October 22, 1992.