INNODATA PHILIPPINES, INC., G.R. No. 162839
Petitioner,
Present:
Panganiban, CJ, Chairperson,
- versus
- Ynares-Santiago,
Austria-Martinez,
Callejo,
Sr., and
Chico-Nazario, JJ
JOCELYN L. QUEJADA-LOPEZ
and ESTELLA G. NATIVIDAD- Promulgated:
PASCUAL,
Respondents. October 12, 2006
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PANGANIBAN, CJ:
A contract that misuses a
purported fixed-term employment to block the acquisition of tenure by the
employees deserves to be struck down for being contrary to law, morals, good
customs, public order and public policy.
The
Case
Before us is a Petition for Review[1]
under Rule 45 of the Rules of Court, seeking to reverse the September 18, 2003
Decision[2]
of the Court of Appeals (CA) in CA-GR SP No. 73416, as well as its March 15,
2004 Resolution[3]
denying petitioner’s Motion for Reconsideration. The decretal
portion of the Decision states:
“WHEREFORE, the challenged decision of
The
Facts
The factual antecedents are narrated
by the CA as follows:
“Innodata
Philippines, Inc., is engaged in the encoding/data
conversion business. It employs
encoders, indexers, formatters, programmers, quality/quantity staff, and
others, to maintain its business and do the job orders of its clients.
“Estrella G. Natividad
and Jocelyn L. Quejada were employed as formatters by
Innodata Philippines, Inc. They [worked] from
“Claiming that their job was necessary and desirable to the
usual business of the company which is data processing/conversion and that
their employment is regular pursuant to Article 280 of the Labor Code,
[respondents] filed a complaint for illegal dismissal and for damages as well
as for attorney’s fees against Innodata Phils.,
Incorporated, Innodata Processing Corporation and
Todd Solomon. [Respondents] further
invoke the stare decicis doctrine in the case of Juanito Villanueva vs. National Labor Relations Commission,
et al., G.R. No. 127448 dated
“On the other hand, [petitioner] contends that
[respondents’] employment contracts expired, for [these were] only for a fixed
period of one (1) year. [Petitioner]
company further invoked the
“After examination of the pleadings filed, Labor Arbiter Donato G. Quinto rendered a
judgment in favor of complainants, the dispositive
portion of which reads:
‘WHEREFORE, foregoing premises
considered, judgment is hereby rendered:
(1)
Holding
complainants Estella G. Natividad and Jocelyn Quejada to have been illegally dismissed by [Petitioners] Innodata Philippines Incorporated and Innodata
Processing Corporation and ordering said [petitioners] to reinstate them to
their former position without los[s] of seniority
rights, or to a substantially equivalent position, and to pay them jointly and
severally, backwages computed from the time they were
illegally dismissed on March 3, 1998 up to the date of this decision in the
amount of P112,535.28 EACH, or in the total amount of P225,070.56
for the two of them;
(2)
Further,
[petitioners] are ordered to pay, jointly and severally, [respondents]
attorney’s fees in the amount equivalent to 10% of their respective awards; and
(3)
All other claims
are hereby dismissed for lack of merit.
‘SO ORDERED.’
“Not satisfied, [petitioner] corporation interposed an
appeal in the National Labor Relations Commission, which reversed and set aside
the Labor Arbiter’s decision and dismissed [respondents’] complaint for lack of
merit. It declared that the contract
between [respondents] and [petitioner] company was for a fixed term and
therefore, the dismissal of [respondents], at the end of their one year term
agreed upon, was valid.
“A motion for reconsideration was filed but was denied in
an order dated
Ruling
of the Court of Appeals
The CA ruled that respondents were
regular employees in accordance with Section 280 of the Labor Code. It said that the fixed-term contract prepared
by petitioner was a crude attempt to circumvent respondents’ right to security
of tenure.
Hence, this
Petition.[6]
Issues
Petitioner raises the followings
issues for the Court’s consideration:
I
“Whether or not the Court of
Appeals committed serious reversible error when it did not take into consideration
that fixed-term employment contracts are valid under the law and prevailing
jurisprudence.
II
“Whether or not the Court of
Appeals committed serious reversible error when it failed to take into
consideration the nature of the business of petitioner vis-à-vis its resort to
fixed-term employment contracts.
III
“Whether or not the Court of
Appeals seriously erred when it failed to consider the fixed-term employment
contracts between petitioner and respondents as valid.
IV
“Whether or not the Court of
Appeals seriously erred when it held that regularity of employment is always
premised on the fact that it is directly related to the business of the
employer.
V
“Whether or not the Court of
Appeals committed serious reversible error in setting aside the Decision of the
National Labor Relations Commission, dated 27 November 2001 and Resolution of
22 July 2002, respectively[,] and reinstated the decision of the Labor Arbiter
dated 29 December 1999.”[7]
The foregoing issues may be reduced
into one question: whether the alleged fixed-term employment contracts entered
into by petitioner and respondents are valid.
The
Court’s Ruling
The Petition has no merit.
Sole Issue:
Validity of the
Fixed-Term Contract
Petitioner contends that the
regularity of the employment of respondents does not depend on whether their
task may be necessary or desirable in the usual business of the employer. It argues that the use of fixed-term
employment contracts has long been recognized by this Court.
Petitioner adds that Villanueva v. NLRC[8]
and Servidad v. NLRC[9]
do not apply to the present factual circumstances. These earlier cases struck down the
employment contracts prepared by herein Petitioner Innodata
for being “devious, but crude, attempts to circumvent [the employee’s] right to
security of tenure x x x.” Petitioner avers that the present employment
contracts it entered into with respondents no longer contain the so-called
“double-bladed” provisions previously found objectionable by the Court.
Petitioner’s contentions have no
merit.
While this Court has recognized the
validity of fixed-term employment contracts in a number of cases,[10]
it has consistently emphasized that when the circumstances of a case show that
the periods were imposed to block the acquisition of security of tenure, they
should be struck down for being contrary to law, morals, good customs, public
order or public policy.[11]
In a feeble attempt to conform to the
earlier rulings of this Court in Villanueva[12] and Servidad,[13]
petitioner has reworded its present employment contracts. A close scrutiny of the provisions, however,
show that the double-bladed scheme to block the acquisition of tenurial security still exists.
To stress, Servidad struck down the
following objectionable contract provisions:
“Section 2. This Contract shall be effective for a period
of 1
[year] commencing on May 10, 1994, until May 10, 1995
unless sooner terminated pursuant to the provisions hereof.
“From
In comparison, the
pertinent portions of the present employment contracts in dispute read as
follows:
“TERM/DURATION
1.
The EMPLOYER hereby employs, engages and hires the
EMPLOYEE, and the EMPLOYEE hereby accepts such appointment as FORMATTER
effective
x x x x x
x x
x x
“TERMINATION
7.1 This Contract shall automatically terminate on
x x x x x
x x
x x
7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this
Contract upon his express representation that he/she is qualified and possesses
the skills necessary and desirable for the position indicated herein. Thus, the
EMPLOYER is hereby granted the right to pre-terminate this Contract within the
first three (3) months of its duration upon failure of the EMPLOYEE to meet and
pass the qualifications and standards set by the EMPLOYER and made known to the
EMPLOYEE prior to execution hereof. Failure of the
EMPLOYER to exercise its right hereunder shall be without prejudice to the
automatic termination of the EMPLOYEE’s employment
upon the expiration of this Contract or cancellation thereof for other causes
provided herein and by law.”[15] (Emphasis supplied)
Like those in Villanueva and Servidad, the present contracts also provide for two
periods. Aside from the fixed one-year
term set in paragraph 1, paragraph 7.4 provides for a three-month period during
which petitioner has the right to pre-terminate the employment for the “failure
of the employees to meet and pass the qualifications and standards set by the
employer and made known to the employee prior to” their employment. Thus, although couched in ambiguous language,
paragraph 7.4 refers in reality to a probationary period.
Clearly, to avoid regularization,
petitioner has again sought to resort alternatively to probationary employment
and employment for a fixed term.
Noteworthy is the following pronouncement of this Court in Servidad:
“If the contract was really for a fixed term, the
[employer] should not have been given the discretion to dismiss the [employee]
during the one year period of employment for reasons other than the just and
authorized causes under the Labor Code.
Settled is the rule that an employer can terminate the services of an
employee only for valid and just causes which must be shown by clear and
convincing evidence.
x x x x x
x x
x x
“The language of the contract in dispute is truly a
double-bladed scheme to block the acquisition of the employee of tenurial security. Thereunder, [the employer] has two options. It can terminate the employee by reason of
expiration of contract, or it may use ‘failure to meet work standards’ as the
ground for the employee’s dismissal. In
either case, the tenor of the contract jeopardizes the right of the worker to security
of tenure guaranteed by the Constitution.”[16]
In
the interpretation of contracts, obscure words and provisions shall not favor
the party that caused the obscurity.[17] Consequently, the terms of the present
contract should be construed strictly against petitioner, which prepared it.[18]
Article 1700 of the Civil Code
declares:
“Art. 1700. The relations
between capital and labor are not merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.”
Indeed, a contract of
employment is impressed with public interest.
For this reason, provisions of applicable statutes are deemed written
into the contract. Hence, the “parties
are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each other.”[19] Moreover, in case of doubt, the terms of a
contract should be construed in favor of labor.[20]
Lastly, petitioner claims that it was
constrained by the nature of its business to enter into fixed-term employment
contracts with employees assigned to job orders. It argues that inasmuch as its business is
that of a mere service contractor, it relies on the availability of job orders
or undertakings from its clients. Hence,
the continuity of work cannot be ascertained.
Petitioner’s contentions deserve
little consideration.
By their very nature, businesses exist
and thrive depending on the continued patronage of their clients. Thus, to some degree, they are subject to the
whims of clients who may decide to discontinue patronizing their products or
services for a variety of reasons. Being
inherent in any enterprise, this entrepreneurial risk may not be used as an
excuse to circumvent labor laws; otherwise, no worker could ever attain regular
employment status.
Finally, it is worth noting that after
its past employment contracts had been declared void by this Court, petitioner
was expected to ensure that the subsequent contracts would already comply with
the standards set by law and by this Court.
Regrettably, petitioner failed to do so.
WHEREFORE, the Petition is DENIED, and the assailed
Decision and Resolution are AFFIRMED. Costs against petitioner.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Chairperson,
First Division
W
E C O N C U R:
CONSUELO YNARES-SANTIAGO MA. ALICIA
AUSTRIA-MARTINEZ
Associate Justice Associate Justice
ROMEO J. CALLEJO, SR.
MINITA V. CHICO-NAZARIO
Associate Justice Associate Justice
Pursuant
to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Rollo, pp. 3-27.
[2]
[3]
[4]
[5] CA Decision, pp. 1-3; rollo, pp. 32-34.
[6] The case was deemed submitted for decision on
[7] Petitioner’s Memorandum, pp. 6-7; rollo,
pp. 654-655. (Uppercase in the original)
[8] 356 Phil. 638,
[9] 364 Phil. 518,
[10] St. Theresa’s School of
Novaliches Foundation v. NLRC, 351 Phil. 1038,
April 15, 1998; Philippine Village Hotel
v. NLRC, 230 SCRA 423, February 28, 1994; Philippine National Oil Co.-Energy Development Corporation v. NLRC,
220 SCRA 695, March 31, 1993; Brent School, Inc. v. Zamora, 181 SCRA
702, February 5, 1990.
[11] Poseidon Fishing v.
NLRC, GR No. 168052, February 20,
2006; Philips Semiconductors, Inc.
v. Fadriquela, 427 SCRA 408, April 14, 2004; Pakistan International Airlines Corporation
v. Ople, 190 SCRA 90, September 28, 1990; Brent School, Inc. v. Zamora, supra.
[12] Supra note 8.
[13] Supra note 9.
[14] Servidad v. NLRC, supra, pp. 521-522.
[15] Rollo, pp.
67-70.
[16]
[17] Civil
Code, Art. 1377.
[18] Philippine Federation
of Credit Cooperatives, Inc. v. NLRC, 360 Phil. 254, 261,
[19] Pakistan Airlines
Corporation v. Ople, supra, p. 99, per Feliciano,
J. See also Magsalin v. National Organization of Working Men, 451 Phil. 254, May 9,
2003; Bernardo v. NLRC, 369 Phil.
443, July 12, 1999.
[20] Philippine Federation
of Credit Cooperatives, Inc. v. NLRC, supra.