Servidad v. National Labor Relations Commission
REITERATIONFacts
1. The Antecedents: Petitioner Joaquin T. Servidad was employed by respondent INNODATA as a "Data Control Clerk" on May 9, 1994. His contract of employment stipulated an initial six-month contractual period, followed by a probationary period, with the possibility of becoming a regular employee. During his employment, petitioner received high ratings in work evaluations. However, on May 9, 1995, he was dismissed from service on the grounds of alleged termination of his contract of employment. 2. Procedural History: Following his dismissal, petitioner instituted a case for illegal dismissal against respondent INNODATA. The Labor Arbiter ruled in favor of the petitioner, finding him illegally dismissed and ordering reinstatement with full backwages. Respondent INNODATA appealed this decision to the National Labor Relations Commission (NLRC). The NLRC reversed the Labor Arbiter's ruling, declaring the contract of employment to be for a fixed term and thus deeming petitioner's dismissal valid at the end of the agreed term. 3. The Petition: Petitioner filed a special civil action for Certiorari with the Supreme Court, seeking to annul the NLRC's decision. He argued that the NLRC gravely abused its discretion in construing his contract of employment as one for a definite or fixed period. Petitioner contended that the contract was a scheme to circumvent his constitutionally guaranteed right to security of tenure, asserting that he should have been considered a regular employee from the outset or at least after the probationary period, given his satisfactory performance and the nature of his work.
Issue(s)
Whether the contract of employment between petitioner and respondent was for a fixed term or a regular employment, and whether the dismissal of the petitioner was valid. Whether the NLRC committed grave abuse of discretion in reversing the Labor Arbiter's decision regarding the failure to meet standards. Whether the petitioner is entitled to moral damages and the proper computation of backwages.
Ruling
The petition is GRANTED. The questioned decision of the NLRC is SET ASIDE, and the decision of the Labor Arbiter, dated August 20, 1996, is REINSTATED, with the modification that the award of backwages be computed from the time of the dismissal of petitioner to his actual or payroll reinstatement. Costs against the private respondent.
Ratio Decidendi
On the nature of the employment contract and the validity of the dismissal: The Supreme Court found the petition impressed with merit, characterizing the contract as another scheme to defeat the constitutionally guaranteed right to security of tenure. The Court noted that the contract provided for two periods: an initial six-month period terminable at the employer's option, and a subsequent six-month probationary period. Crucially, the contract did not specify criteria for termination or retention, granting the employer wide discretion, which violates the employee's right against unwarranted dismissal. The Court invoked Article 1377 of the Civil Code, stating that the interpretation of obscure stipulations should not favor the party who caused the obscurity, thus favoring the petitioner. If the contract were truly for a fixed term, the employer should not have had the discretion to dismiss the petitioner except for just or authorized causes under the Labor Code. The Court emphasized that an employer can only terminate services for valid causes shown by clear and convincing evidence. The employer's argument that the one-year term was for the petitioner to acquire skills was deemed an attempt to frame it as probationary, but even then, it fell short of Article 281 of the Labor Code, as the petitioner was not informed of the standards for regularization. The contract's language was seen as a "double-bladed scheme" to block tenurial security, allowing termination either by expiration or by "failure to meet work standards," both jeopardizing the constitutional right to security of tenure. The Court reiterated the principle from Brent School, Inc. vs. Zamora that periods imposed to preclude acquisition of tenurial security should be disregarded as contrary to public policy. Therefore, the agreement was deemed a nullity. Furthermore, the petitioner's work as a "Data Control Clerk" was directly related to the employer's business, making him a regular employee under Article 280 of the Labor Code. Even if considered probationary, having been allowed to work beyond the initial six months, he was deemed a regular employee under Article 281. The NLRC's reliance on Mariwasa Manufacturing, Inc. vs. Leogardo Jr. was misplaced because, unlike that case, the employment here was not expressly agreed upon as probationary, and the employer sought to alternatively use probationary and fixed-term employment to prevent regularization. The Court stressed that private agreements cannot prevail over Article 1700 of the Civil Code, which states that labor contracts are impressed with public interest and must yield to the common good, and that applicable laws, especially those affecting public policy, are deemed written into the contract, as held in Pakistan Airlines Corporation vs. Pole. On the NLRC's finding of failure to meet standards: The Court found that the NLRC gravely abused its discretion in ruling that the petitioner failed to meet the company's standards. The NLRC's decision lacked a specific factual basis and overlooked the petitioner's satisfactory performance ratings in two evaluations. Even if the contract were valid, the petitioner, having worked beyond six months, could not be dismissed for failing to meet standards, as he had become a regular employee according to the contract's own stipulation. The Court also noted that the case was similar to Villanueva vs. NLRC, where a similar contract prepared by INNODATA was deemed a "devious, but crude, attempt to circumvent petitioner's right to security of tenure." The NLRC's interpretation of the contract as fixed-term was thus a grave abuse of discretion, allowing the respondent to gain an advantage from its own "mistake." On moral damages and backwages: The Court ruled for the private respondent on the issue of moral damages, stating that mere allegations of besmirched reputation, embarrassment, and sleepless nights are insufficient without showing that the unlawful act or omission of the respondent was the proximate cause. The petitioner's claim was based on mere allegations without detailing the cause. The Court modified the award of backwages to be computed from the time of illegal dismissal to the time of actual or payroll reinstatement, without any deduction.
Main Doctrine
A contract of employment that contains schemes to preclude the acquisition of tenurial security by the employee is considered contrary to public policy and shall be disregarded. An employee permitted to work beyond the probationary period is deemed a regular employee.