The Supreme Court ruled that an employee under a fixed-term contract, who is continuously re-hired to perform tasks necessary for the employer’s business, can attain the status of a regular employee with security of tenure. Consequently, the employer cannot terminate the services of such an employee without just or authorized cause and due process. This decision underscores that employers must comply with labor laws even when employing individuals under fixed-term contracts, preventing the circumvention of employee rights and ensuring fair labor practices. The ruling affirms the constitutional right to security of tenure, providing protection against illegal dismissal.

From News Stringer to Regular Employee: Can Fixed-Term Contracts Guarantee Job Security?

The case of Fuji Television Network, Inc. vs. Arlene S. Espiritu revolves around the employment status of Arlene Espiritu, who was engaged by Fuji Television as a news correspondent/producer in its Manila Bureau. Initially hired on a one-year contract basis, her employment was successively renewed annually. The central legal question was whether Espiritu was a regular employee with security of tenure or an independent contractor under a fixed-term contract. This determination would ultimately decide whether she was illegally dismissed when Fuji chose not to renew her contract after she was diagnosed with lung cancer.

The facts of the case reveal that Arlene Espiritu was hired in 2005 to report Philippine news to Fuji through its Manila Bureau. Her contract was renewed yearly, with salary adjustments upon each renewal. However, in January 2009, Espiritu was diagnosed with lung cancer. Upon learning of her condition, Fuji expressed concerns about renewing her contract. Subsequently, Espiritu and Fuji signed a non-renewal contract on May 5, 2009, stipulating that her contract would not be renewed after its expiration on May 31, 2009, and releasing both parties from liabilities. Espiritu, however, signed the contract with the initials “U.P.” for “under protest.”

The day after signing the non-renewal contract, Espiritu filed a complaint for illegal dismissal and attorney’s fees, alleging that she was forced to sign due to her illness and that Fuji had withheld her salaries and benefits for March and April 2009 when she refused to sign. The Labor Arbiter initially dismissed her complaint, citing Sonza v. ABS-CBN and applying the four-fold test to conclude that Espiritu was an independent contractor. The National Labor Relations Commission (NLRC) reversed this decision, holding that Espiritu was a regular employee due to the continuous nature of her services, which were deemed necessary and desirable to Fuji’s business. The Court of Appeals affirmed the NLRC’s decision with modifications, ordering Fuji to reinstate Espiritu and pay her backwages, bonuses, damages, attorney’s fees, and legal interest.

The Supreme Court (SC) addressed procedural and substantive issues. Procedurally, the SC tackled the validity of the verification and certification against forum shopping, signed by Corazon E. Acerden on behalf of Fuji. Acerden’s authority to sign was questioned by Espiritu, arguing that no board resolution authorized Acerden to file a petition for review on certiorari with the SC. Fuji countered that Shuji Yano, empowered under the secretary’s certificate, delegated his authority to Acerden. Despite initial concerns, the Court found that Fuji substantially complied with the procedural requirements, considering that the board resolution authorized Yano to participate in subsequent proceedings, including appeals, and to perform acts aiding the prompt resolution of the action.

Substantively, the SC delved into the critical issue of whether Espiritu was a regular employee or an independent contractor. To resolve this, the SC applied the four-fold test, which examines the selection and engagement of the employee, the payment of wages, the power of dismissal, and the power of control, with the latter being the most critical element. The SC considered that Espiritu’s tasks included news gathering, reporting, and interviewing subjects, and that she was required to work fixed hours at Fuji’s Manila office. Moreover, the SC determined that Fuji exercised control over her work, including instructions on what to report and the mode of transportation. These factors weighed against Fuji’s claim that Espiritu was an independent contractor, reinforcing the NLRC and Court of Appeals’ findings that an employer-employee relationship existed.

Building on this principle, the SC then determined the status of Espiritu’s employment. The Court examined whether the nature of Espiritu’s work was necessary and desirable to Fuji’s business. Article 280 of the Labor Code defines regular employment as activities which are usually necessary or desirable in the usual business or trade of the employer. The SC found that Espiritu’s successive contract renewals indicated the necessity and desirability of her work in Fuji’s broadcasting business. The Court also distinguished the case from Sonza v. ABS-CBN, where the employee was hired for unique skills and celebrity status not possessed by ordinary employees. In contrast, Espiritu was a news producer whose tasks were integral to Fuji’s operations.

The SC also addressed the issue of whether Espiritu was illegally dismissed. As a regular employee, Espiritu was entitled to security of tenure and could only be dismissed for just or authorized causes with due process. The Court found that Fuji had failed to comply with due process. Upon learning of Espiritu’s lung cancer diagnosis, Fuji immediately concluded that she could no longer perform her duties without providing an opportunity to present medical certificates or suggesting a leave of absence. Fuji did not present a certificate from a competent public health authority, as required by Article 284 of the Labor Code, to justify the termination based on her health condition.

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

The SC also examined the validity of the non-renewal contract signed by Espiritu. The Court noted that Espiritu signed the contract “under protest” and found that it was a mere subterfuge to secure Fuji’s position that it was Espiritu’s choice not to renew her contract. The Court reasoned that the expiration of Espiritu’s contract did not negate the finding of illegal dismissal because Fuji did not observe due process and constructively dismissed her. The Court emphasized that fixed-term contracts should not circumvent the right to security of tenure and that due process must still be observed in the pre-termination of such contracts.

Finally, the SC addressed the Court of Appeals’ decision to award reinstatement, damages, and attorney’s fees. Article 279 of the Labor Code provides that illegally dismissed employees are entitled to reinstatement, backwages, allowances, and other benefits. The SC upheld the Court of Appeals’ decision to order reinstatement, reasoning that separation pay in lieu of reinstatement was not warranted in this case because Fuji did not cease operations, Espiritu’s position was still available, and no evidence of strained relations was presented. The SC further affirmed the award of moral and exemplary damages and attorney’s fees, finding that Fuji’s dismissal of Espiritu was attended by bad faith and oppression.

FAQs

What was the key issue in this case?	The key issue was whether Arlene Espiritu was a regular employee or an independent contractor and whether she was illegally dismissed by Fuji Television Network. The determination hinged on whether Fuji complied with labor laws regarding security of tenure and due process.
What is the four-fold test used to determine employment status?	The four-fold test examines the selection and engagement of the employee, the payment of wages, the power of dismissal, and the power of control. The power of control, which refers to the employer’s right to control the means and methods of performing the work, is the most crucial element.
How does Article 280 of the Labor Code define regular employment?	Article 280 of the Labor Code defines regular employment as activities that are usually necessary or desirable in the usual business or trade of the employer. This provision distinguishes regular employees from project, seasonal, and casual employees.
What are the requirements for a valid termination due to disease under Article 284 of the Labor Code?	For a valid termination due to disease, the employer must prove that the employee’s disease cannot be cured within six months and that continued employment is prohibited by law or prejudicial to health. A certificate from a competent public health authority is also required, stating that the disease cannot be cured within six months even with proper medical treatment.
What is constructive dismissal?	Constructive dismissal occurs when an employer’s act of clear discrimination, insensibility, or disdain becomes so unbearable on the employee’s part that it could foreclose any choice by him except to forego his continued employment. It is considered an involuntary resignation because of the harsh, hostile, and unfavorable conditions set by the employer.
What is security of tenure?	Security of tenure is the right of an employee to continue in their job unless there is a just or authorized cause for termination. Regular employees are entitled to security of tenure, meaning they cannot be dismissed without due process.
Can an employee be a regular employee under a fixed-term contract?	Yes, an employee can be a regular employee under a fixed-term contract if the contract is continuously renewed and the employee performs tasks necessary for the employer’s business. The Court may rule that these fixed-term contracts are actually designed to prevent the employee from becoming regularized.
What remedies are available to an illegally dismissed employee?	An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges, full backwages, allowances, and other benefits. They may also be awarded moral and exemplary damages and attorney’s fees in certain circumstances.
Are quitclaims valid in labor cases?	Quitclaims in labor cases are often frowned upon as contrary to public policy because employers and employees do not stand on equal footing. They are generally ineffective to bar claims for the full measure of the workers’ legal rights, especially if signed out of necessity rather than genuine choice.

In conclusion, the Supreme Court’s decision in Fuji Television Network, Inc. vs. Arlene S. Espiritu reaffirms the importance of protecting employees’ rights, particularly security of tenure. This case serves as a reminder to employers that fixed-term contracts should not be used to circumvent labor laws and that due process must be observed in all termination cases. The ruling also highlights the significance of providing a safe and equitable working environment, ensuring employees are not discriminated against based on health conditions.

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: Fuji Television Network, Inc. vs. Arlene S. Espiritu, G.R. No. 204944-45, December 03, 2014