In FVR Skills and Services Exponents, Inc. v. Seva, the Supreme Court affirmed that employees performing tasks necessary to a company’s business are regular employees, regardless of fixed-term contracts designed to circumvent labor laws. The ruling protects workers in the service industry from unfair dismissals by clarifying that continuous service implies regular employment status, entitling employees to security of tenure and benefits. This decision reinforces the Labor Code’s intent to prevent employers from using fixed-term contracts to avoid the obligations of regular employment, ensuring greater job security and fair labor practices for Filipino workers.

Contracts Under Duress: Can Employers Evade Regular Employment Status?

This case revolves around a dispute between FVR Skills and Services Exponents, Inc. (SKILLEX), a company providing janitorial and manpower services, and its employees who were dismissed following the non-renewal of a service contract with Robinsons Land Corporation. The central legal question is whether these employees were regular employees entitled to security of tenure or project employees whose employment legitimately ended with the termination of the contract.

The respondents, initially hired between 1998 and 2007, performed various roles such as janitors, service crews, and sanitation aides. SKILLEX entered into a service contract with Robinsons, deploying these employees to Robinsons Place Ermita Mall. Halfway through this contract, SKILLEX required the employees to sign individual contracts stipulating their employment would end on December 31, 2008, coinciding with the service contract’s end date. After the contract was not renewed, the employees were dismissed, prompting them to file a complaint for illegal dismissal, asserting their status as regular employees.

The Labor Arbiter (LA) initially sided with SKILLEX, deeming the employees as project-based. However, the National Labor Relations Commission (NLRC) reversed this decision, a move affirmed by the Court of Appeals (CA), which held that the employees were regular, given their long tenures and the essential nature of their work to SKILLEX’s business. The CA also noted the suspicious timing of the fixed-term contracts, suggesting an attempt to circumvent labor laws. SKILLEX then elevated the case to the Supreme Court, arguing that the employees’ contracts were legitimately terminated due to the non-renewal of the service agreement.

At the heart of this case is Article 280 (now Article 294) of the Labor Code, which defines regular and casual employment:

Article 280. Regular and Casual Employment – The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

The Supreme Court emphasized that the primary standard for determining regular employment is the reasonable connection between the employee’s activities and the employer’s business. Given that the respondents’ roles as janitors, service crews, and sanitation aides were integral to SKILLEX’s business of providing manpower services, the Court concluded they were regular employees. Further, the Court noted that many employees had been with SKILLEX long before the Robinsons contract, reinforcing their status as regular employees.

The Court also addressed the validity of the fixed-term employment contracts. It found that these contracts were signed under duress, as SKILLEX threatened to withhold salaries if employees refused to sign. Additionally, the timing of the contracts—midway through the Robinsons service agreement—indicated an attempt to evade the employees’ right to security of tenure.

To us, the private respondent’s illegal intention became clearer from such acts. Its making the petitioners sign written employment contracts a few days before the purported end of their employment periods (as stated in such contracts) was a diaphanous ploy to set periods with a view for their possible severance from employment should the private respondent so willed it. If the term of the employment was truly determined at the beginning of the employment, why was there delay in the signing of the ready-made contracts that were entirely prepared by the employer?

The Supreme Court also cited Article 1390 of the Civil Code, which states that contracts where consent is vitiated by mistake, violence, intimidation, undue influence, or fraud are voidable. The threat of non-payment of salaries was considered intimidation, making the contracts voidable. Consequently, the employees’ dismissal was deemed illegal because it did not comply with the substantive and procedural requirements of due process. SKILLEX failed to establish a just or authorized cause for the dismissal and did not observe the twin notice and hearing requirements.

The Court affirmed the award of backwages and separation pay to the employees, recognizing that the litigation had strained the relationship between the parties, making reinstatement impractical. Regarding the liability of corporate officers, the Court modified the CA’s ruling, absolving Fulgencio V. Rana and Monina R. Burgos from personal liability. The Court clarified that corporate officers are generally not liable for the obligations of the corporation unless they acted with gross negligence, bad faith, or assented to patently unlawful acts, which was not sufficiently proven in this case.

FAQs

What was the key issue in this case?	The key issue was whether the employees of FVR Skills and Services Exponents, Inc. were regular employees entitled to security of tenure, or project employees whose employment legitimately ended with the termination of a service contract.
What is a regular employee according to the Labor Code?	A regular employee is one who performs activities necessary or desirable to the usual business of the employer, or a casual employee who has rendered at least one year of service. They are entitled to security of tenure and can only be dismissed for just or authorized causes.
What makes a contract voidable?	A contract is voidable if the consent of one party was obtained through mistake, violence, intimidation, undue influence, or fraud. In this case, the contracts were voidable because the employees were forced to sign them under threat of not receiving their salaries.
What is the significance of Article 280 of the Labor Code?	Article 280 is crucial as it defines regular employment, protecting employees from being unfairly classified as project-based or contractual to circumvent labor laws. It ensures that employees performing essential tasks are recognized as regular and entitled to corresponding rights and benefits.
What are the implications of being a regular employee?	Regular employees have the right to security of tenure, meaning they can only be dismissed for just or authorized causes with due process. They are also entitled to benefits such as service incentive leave, rest days, overtime pay, holiday pay, 13th-month pay, and separation pay.
What is backwages, and when is it awarded?	Backwages refer to the compensation an employee would have earned from the time of their illegal dismissal until the court orders their reinstatement. It aims to compensate for the lost income due to the employer’s unlawful actions.
When can corporate officers be held personally liable for the debts of the corporation?	Corporate officers can be held personally liable if it is proven that they acted with gross negligence, bad faith, or assented to patently unlawful acts of the corporation. This is an exception to the general rule that a corporation has a separate legal personality from its officers.
What are the requirements for a valid dismissal?	A valid dismissal must comply with both substantive and procedural due process. Substantively, there must be a just or authorized cause for termination. Procedurally, the employer must provide the employee with two notices and an opportunity to be heard.

This case serves as a reminder of the importance of upholding the rights of employees and preventing employers from circumventing labor laws through dubious contractual arrangements. The Supreme Court’s decision reinforces the principle that employees performing essential tasks are entitled to the security and benefits of regular employment. This ruling protects vulnerable workers from unfair labor practices and ensures that employers adhere to the provisions of the Labor Code.

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: FVR Skills and Services Exponents, Inc. v. Seva, G.R. No. 200857, October 22, 2014