Philippine Village Hotel v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Private respondents were employees of petitioner Philippine Village Hotel. On May 19, 1986, petitioner ceased operations due to serious financial reverses, terminating the services of its employees. A complaint for separation pay, unfair labor practice, and illegal lock-out was filed. The Labor Arbiter found the closure valid but directed priority hiring upon resumption of business. The NLRC affirmed the closure's validity but ordered separation pay, which remained unenforced. Procedural History: Petitioner decided to conduct a one-month dry-run operation from February 1, 1989, to March 1, 1989, and hired casual workers, including private respondents, through one-month employment contracts. Upon the lapse of this period, their services were terminated. Private respondents filed a complaint for illegal dismissal and unfair labor practice. The Labor Arbiter dismissed the complaint. The NLRC reversed the Labor Arbiter's decision, ordering reinstatement with backwages, finding the private respondents to be regular employees. The Petition: Petitioner filed a petition for certiorari alleging grave abuse of discretion by the NLRC in finding private respondents to be regular employees, considering their prior termination in 1986 and the specific one-month duration of their subsequent employment contracts.
Issue(s)
Whether the NLRC committed grave abuse of discretion in finding private respondents to be regular employees despite their employment contracts stipulating a fixed one-month period. Whether the prior termination of employment due to business closure and subsequent re-hiring under fixed-term contracts severed the employer-employee relationship for purposes of security of tenure.
Ruling
The petition is impressed with merit. The questioned decision of the National Labor Relations Commission is SET ASIDE, thereby dismissing the complaint against petitioner.
Ratio Decidendi
On the issue of whether the NLRC committed grave abuse of discretion in finding private respondents to be regular employees despite their employment contracts stipulating a fixed one-month period: The Supreme Court held that the employment contracts of the private respondents clearly stipulated a fixed period of one month, from February 1, 1989, to March 1, 1989. The Court reiterated its ruling that the decisive determinant in term employment should not be the activities performed but the 'day certain' agreed upon by the parties for the commencement and termination of their employment relationship. A 'day certain' is understood to be that which must necessarily come, although it may not be known when. The Court emphasized that the validity of a contract of employment with a fixed or specific period is upheld when the fixed period was knowingly and voluntarily agreed upon by the parties, without force, duress, or improper pressure, and absent any other circumstances vitiating consent. In this case, the private respondents knowingly and voluntarily agreed to the one-month employment period for the dry-run operation. The fact that they performed services usually necessary or desirable in the operation of the business for that duration did not impair the validity of the contractual nature of their employment. Therefore, their employment was one with a specific period or day certain agreed upon by the parties, and the NLRC committed grave abuse of discretion in disregarding this contractual stipulation. On the issue of whether the prior termination of employment due to business closure and subsequent re-hiring under fixed-term contracts severed the employer-employee relationship for purposes of security of tenure: The Supreme Court affirmed the Labor Arbiter's finding that when the complainants were first terminated as a result of the company's cessation from operation in May 1986, the employer-employee relationship between the parties was totally and completely severed. Consequently, the respondent acted well within its discretion when, in rehiring the complainants, it made them casual employees for a specific period. The Court reasoned that the complainants were no better than new employees of the respondent, and the status or designation to be given them exclusively rested in the discretion of management. Furthermore, the previous decision of the NLRC in Case No. 8-3277-86, which found the termination of private respondents' employment to be valid, had long become final and executory. The public respondent NLRC could not argue that the temporary cessation of petitioner's operation merely suspended the employment; the employer-employee relationship had ended when the employer closed its business. The hiring of new employees upon re-opening after three years was valid and expected. The prior employment, which was terminated, could not be joined or tacked to the new employment for purposes of security of tenure. The Court also clarified that while security of tenure is a constitutionally guaranteed right, it does not mean perpetual employment, and the law does not authorize oppression or destruction of an employer.
Main Doctrine
The Supreme Court held that employment contracts with a fixed or specific period, knowingly and voluntarily agreed upon by the parties without vitiated consent, are valid and do not circumvent security of tenure. The decisive determinant in term employment is the 'day certain' agreed upon for the commencement and termination of the employment relationship, not merely the nature of the activities performed.