Serrano v. Loxon Philippines
REITERATIONFacts
The Antecedents: Loxon Philippines Inc. (Loxon), a company engaged in building management, hired Armando N. Serrano (Armando) in 1994 as a Helper Service Technician. For 21 years, Armando was repeatedly hired for various projects to perform installation and maintenance of smoke detectors, fire alarms, and similar equipment. In December 2015, Loxon required its employees, including Armando, to sign new three-month contracts and undergo medical examinations and submit NBI clearances. Armando refused, believing he was a regular employee and that such requirements were unnecessary. Despite his refusal, he eventually submitted the required documents on January 12, 2016. However, he was not assigned any work and received no clear answers regarding his employment status, leading him to file a complaint for illegal dismissal, asserting his status as a regular employee. Procedural History: The Labor Arbiter (LA) dismissed Armando's complaint, finding that he was a project employee whose contract had expired and that the requirements for re-hiring were a valid exercise of management prerogative. The National Labor Relations Commission (NLRC) affirmed the LA's decision, concluding that Armando was a project employee based on his employment contracts and Loxon's compliance with DOLE regulations. The Court of Appeals (CA) further denied Armando's Petition for Certiorari, upholding the NLRC's findings and noting that Armando's refusal to sign a new contract disqualified him from further project employment. The CA also found the Quit Claim signed by Armando to be valid. The Petition: Armando filed a Petition for Review on Certiorari with the Supreme Court, arguing that he is a regular employee due to his continuous and repeated hiring for over two decades to perform tasks essential to Loxon's business. He seeks payment of backwages, separation pay, attorney's fees, and damages. Loxon maintains that Armando was engaged as a project employee for specific undertakings, evidenced by his signed project employment contracts. The core issue before the Supreme Court is whether Armando's employment status was that of a regular or a project employee.
Issue(s)
Whether Armando N. Serrano is a regular employee of Loxon Philippines, Inc. Whether Armando N. Serrano was illegally dismissed from employment.
Ruling
The Petition for Review on Certiorari is GRANTED. The Decision dated March 8, 2019 of the Court of Appeals is REVERSED and SET ASIDE. Loxon Philippines Inc. is ORDERED to pay Armando N. Serrano backwages, separation pay, moral damages, exemplary damages, and attorney's fees.
Ratio Decidendi
On the issue of whether Armando is a regular employee: The Court ruled that Armando is a regular employee and cannot be considered a project employee. For an employer to prove project employment, they must show the duration and scope of employment were specified, and the project is distinct and separate from the company's usual business. Armando's tasks of installing and maintaining devices were well within Loxon's regular business of building management. Loxon's own service department, where Armando was assigned, required technicians like him, indicating his work was indispensable to the regular business, not merely dependent on project availability. The continuous re-hiring for 21 years, with only short breaks, demonstrated that the periodic contracts were a scheme to prevent regularization. The Court cited Fuji Television Network v. Espiritu and Article 295 of the Labor Code, emphasizing that continuous renewal of contracts for the same position and duties without interruption leads to regular employment status, and that fixed-term contracts do not automatically preclude regularization. Furthermore, Loxon failed to present proof of compliance with DOLE Department Order No. 19 for all of Armando's project assignments, and Armando was not included in termination reports for specific periods. His inclusion in the 2014 payroll despite no project assignment also indicated his regular status. The Court reiterated that failure to report terminations for project completion signifies that workers are not project employees. On the issue of illegal dismissal: As a regular employee, Armando is entitled to security of tenure and can only be removed for just or authorized cause. His dismissal stemmed from his refusal to sign a new project employment contract, which is not a valid cause for termination. His employment as a regular employee subsisted despite project completions, rendering the requirement for a new project contract unnecessary. Therefore, Armando's dismissal was illegal. Consequently, he is entitled to reinstatement (or separation pay in lieu thereof), backwages, moral damages, exemplary damages, and attorney's fees due to Loxon's bad faith in treating him as a project employee for 21 years while performing vital and indispensable services.
Main Doctrine
An employee continuously and repeatedly hired for 21 years to perform tasks necessary and indispensable to the usual business of the employer, even if under project employment contracts, is considered a regular employee. The employer's failure to submit termination reports for all project assignments and inclusion in payroll despite no project assignment further supports regular employment status. Termination based on refusal to sign a new project contract is illegal dismissal.