The Supreme Court has affirmed that continuous employment beyond a specified project duration can lead to regular employee status, granting security of tenure. This ruling underscores the importance of clearly defining project employment terms and adhering to labor regulations, ensuring that employees are not deprived of their rights through indefinite extensions of project-based work.

Construction Crossroads: When Does Project-Based Work End and Regular Employment Begin?

Roy D. Pasos filed a complaint for illegal dismissal against Philippine National Construction Corporation (PNCC), claiming regular employee status due to prolonged project employment. PNCC argued that Pasos was hired as a project employee with specific engagement and termination dates. The Labor Arbiter initially ruled in favor of Pasos, but the National Labor Relations Commission (NLRC) reversed this decision, leading Pasos to appeal to the Court of Appeals (CA), which dismissed his petition. The central question before the Supreme Court was whether Pasos had attained regular employee status, thereby entitling him to security of tenure and protection against illegal dismissal.

The Supreme Court addressed the issue of the appeal bond, finding that PNCC had substantially complied with the requirement by posting a bond amounting to at least 90% of the adjudged amount. This compliance allowed for relaxation of the rules to ensure resolution on the merits. Additionally, the Court recognized that the head of the Personnel Services Department could sign the verification and certification on behalf of the corporation, even without a specific board resolution. This recognition aligns with previous rulings that prioritize the ability of corporate officers to verify the truthfulness of allegations in petitions.

Building on this principle, the Court examined Pasos’ employment history, noting that he was initially hired for a specific project with a defined duration. However, his employment was extended beyond this period without a clear specification of its duration. According to Article 280 of the Labor Code, a project employee’s employment is fixed for a specific project, the completion of which is determined at the time of engagement. The Court found that after the initial three-month period, the indefinite extension of Pasos’ services transformed his status from a project employee to a regular employee.

The failure of PNCC to file termination reports with the Department of Labor and Employment (DOLE) after each project completion further supported Pasos’ claim of regular employment. Department Order No. 19 requires employers to submit termination reports for project employees upon completion of their projects. The Court referenced Tomas Lao Construction v. NLRC, emphasizing the importance of this reportorial requirement.

“Moreover, if private respondents were indeed employed as “project employees,” petitioners should have submitted a report of termination to the nearest public employment office every time their employment was terminated due to completion of each construction project. The records show that they did not. Policy Instruction No. 20 is explicit that employers of project employees are exempted from the clearance requirement but not from the submission of termination report. We have consistently held that failure of the employer to file termination reports after every project completion proves that the employees are not project employees.”

Because Pasos was a regular employee, his termination due to contract expiration or project completion was deemed illegal, as these are not just or authorized causes for dismissing a regular employee under the Labor Code. The Court cited Article 279 of the Labor Code, which provides remedies for illegally dismissed employees, including reinstatement and full back wages. The Labor Code states:

“An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

The Court found no basis for the Labor Arbiter’s finding of strained relations and the order of separation pay in lieu of reinstatement, as this was neither alleged nor proved.

The Court also addressed the matter of damages and attorney’s fees. While moral and exemplary damages were denied due to lack of evidence of bad faith or oppressive conduct, attorney’s fees were awarded to Pasos. This decision aligns with Article 111 of the Labor Code, which allows for attorney’s fees when an employee is forced to litigate to seek redress. In line with current jurisprudence, the Court ordered that the award of back wages should earn legal interest at 6% per annum from the date of dismissal until the finality of the decision, and 12% legal interest thereafter until fully paid, following the guidelines in Eastern Shipping Lines, Inc. v. Court of Appeals.

FAQs

What was the key issue in this case?	The key issue was whether Roy D. Pasos was a project employee or a regular employee of PNCC, and whether his termination was legal. The court determined that Pasos had become a regular employee due to the continuous extension of his project-based employment.
What is a project employee under the Labor Code?	Under Article 280 of the Labor Code, a project employee is someone hired for a specific project, with the completion or termination of employment determined at the time of engagement. This definition requires that the scope and duration of the project are clearly defined.
What happens if a project employee’s work is continuously extended?	If a project employee’s work is continuously extended beyond the initially specified project duration without clear terms, they may be considered a regular employee. This status grants them security of tenure and protection against illegal dismissal.
Why is the filing of termination reports important for project employees?	Filing termination reports with the DOLE after each project completion is crucial to prove that an employee is indeed a project employee. Failure to do so can indicate that the employee has become a regular employee, as highlighted in the Tomas Lao Construction v. NLRC case.
What are the rights of an illegally dismissed regular employee?	An illegally dismissed regular employee is entitled to reinstatement to their former position without loss of seniority, full back wages from the time of dismissal until actual reinstatement, and other benefits. This is provided under Article 279 of the Labor Code.
What is the significance of strained relations in illegal dismissal cases?	The doctrine of strained relations, which allows separation pay in lieu of reinstatement, is strictly applied to avoid depriving illegally dismissed employees of their right to reinstatement. It must be proven and not merely alleged.
When can an illegally dismissed employee be awarded damages?	Moral and exemplary damages may be awarded if the dismissal was attended by bad faith, fraud, or constituted an act oppressive to labor. However, the employee must provide evidence to support these claims.
Is an illegally dismissed employee entitled to attorney’s fees?	Yes, an illegally dismissed employee is typically entitled to attorney’s fees, usually around 10% of the total monetary award. This is especially true when they are forced to litigate to seek redress for their grievances.

In conclusion, the Supreme Court’s decision in this case serves as a reminder of the importance of adhering to labor laws and regulations regarding project employment. Employers must clearly define the terms of project employment and comply with reportorial requirements to avoid disputes over employee status. For employees, understanding their rights and the conditions under which they can transition to regular employment is crucial for protecting their security of tenure.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Roy D. Pasos vs. Philippine National Construction Corporation, G.R. No. 192394, July 03, 2013