This Supreme Court decision clarifies the distinctions between fixed-term and regular employment, emphasizing the importance of employee rights and security of tenure under the Labor Code. The Court ruled that Errol O. Melivo was illegally dismissed, having attained the status of a regular employee due to the nature and duration of his work. The ruling highlights the employer’s responsibility to prove that an employee is indeed hired for a specific project or fixed term, and failure to do so results in the employee being considered regular, thus protected against arbitrary termination.

Oyster Plaza’s Employment Contract: Fixed-Term Façade or Regular Role?

The case of Oyster Plaza Hotel, Rolito Go, and Jennifer Ampel vs. Errol O. Melivo revolves around the contentious issue of whether an employee was validly hired for a fixed term or had, in fact, become a regular employee entitled to security of tenure. Errol O. Melivo filed a complaint for illegal dismissal against Oyster Plaza Hotel, its owner Rolito Go, and supervisor Jennifer Ampel, claiming he was unjustly terminated. The Labor Arbiter (LA) and the National Labor Relations Commission (NLRC) both ruled in Melivo’s favor, a decision Oyster Plaza appealed to the Court of Appeals (CA), which was eventually affirmed.

The core of the dispute lies in the nature of Melivo’s employment. Oyster Plaza contended that Melivo was hired for a fixed term, which had expired, justifying his termination. Melivo, on the other hand, argued that he had become a regular employee due to the repeated renewals of his employment and the absence of a specific project tied to his work. This is a crucial point because regular employees enjoy greater protection against termination under Philippine labor laws.

The Supreme Court, in its analysis, considered the circumstances surrounding Melivo’s employment. Melivo was initially hired as a trainee room boy, then as a probationary room boy. Subsequently, he was hired again without any written contract. The Court highlighted that an employee allowed to work beyond the probationary period is deemed a regular employee. The Labor Code defines a project employee as one whose employment is fixed for a specific project or undertaking, the completion of which has been determined at the time of engagement.

Article 280 of the Labor Code, as amended, a project employee is one whose 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.

In this case, the contract of employment did not specify any particular project or undertaking related to Melivo’s services. Additionally, Oyster Plaza failed to submit a report of Melivo’s termination to the nearest public employment office, a requirement under Department Order No. 19, series of 1993. The failure to comply with this requirement further weakened Oyster Plaza’s claim that Melivo was a project employee. As a regular employee, Melivo could only be dismissed for just or authorized causes, with due process of notice and hearing. Oyster Plaza failed to prove that Melivo’s dismissal was for just or authorized cause or that he was afforded due process.

The Court also addressed the issue of due process. Oyster Plaza argued that they were not properly served with summons, thus depriving them of their right to due process. The Court found that the summons and notices were served by registered mail at the petitioners’ place of business, thus, the person who received the same was presumed authorized to do so. Consequently, the summons and notices were presumed to be duly served. The essence of due process is simply an opportunity to be heard, which Oyster Plaza was afforded when it appealed to the NLRC, thereby arguing its case and submitting evidence.

A significant aspect of the case involved the liability of Rolito Go and Jennifer Ampel. The Court reiterated that a corporation, being a juridical entity, acts through its directors, officers, and employees. Obligations incurred by these corporate agents are the direct responsibilities of the corporation, not the individuals themselves. However, in labor cases, corporate directors and officers are held solidarity liable with the corporation only when the termination is done with malice or in bad faith.

In this instance, the Court found no substantial evidence to justify Go and Ampel’s solidary liability with Oyster Plaza. Ampel’s act of verbally informing Melivo of his termination was deemed insufficient to constitute malice. As for Go, there was no specific act related to Melivo’s illegal dismissal that could be attributed to him, thus, the Court ruled that only Oyster Plaza should be liable to Melivo.

The Supreme Court modified the Court of Appeals’ decision regarding interest rates on the monetary awards. Citing Nacar v. Gallery Frames, the Court ruled that the total monetary awards shall earn interest at the rate of 12% per annum from the date Melivo was terminated until June 30, 2013, and 6% per annum from July 1, 2013, until their full satisfaction. This adjustment ensures that the compensation awarded to Melivo reflects the time value of money and adequately compensates him for the illegal dismissal.

This case underscores the importance of clearly defining the terms of employment and adhering to the requirements of the Labor Code. Employers must ensure that if an employee is hired for a specific project or fixed term, it is clearly stated in the employment contract and that all necessary reports are submitted to the appropriate government agencies. Failure to do so can result in the employee being deemed a regular employee with security of tenure, making it more difficult to terminate their employment without just or authorized cause.

FAQs

What was the key issue in this case?	The central issue was whether Errol O. Melivo was illegally dismissed, focusing on whether he was a fixed-term employee or had attained regular employee status entitling him to security of tenure. The court determined that Melivo was a regular employee, making his termination illegal.
What is a project employee according to the Labor Code?	Under Article 280 of the Labor Code, a project employee is one whose 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. The contract should clearly state the specific project, and the employer must report the termination to the Department of Labor and Employment.
What happens when an employee is allowed to work beyond the probationary period?	If an employee is allowed to work beyond the probationary period, they are generally deemed to have attained regular employee status. This means they are entitled to security of tenure and can only be dismissed for just or authorized causes with due process.
What is the requirement for a valid dismissal of a regular employee?	A regular employee can only be dismissed for just or authorized causes as provided by the Labor Code, and they must be afforded due process. This includes being given notice of the charges against them and an opportunity to be heard.
When can corporate officers be held solidarily liable with the corporation in labor cases?	Corporate directors and officers are held solidarily liable with the corporation for the employee’s termination only when the dismissal is done with malice or in bad faith. There must be evidence that the officers acted with personal malice or gross negligence in terminating the employee.
What is the significance of Department Order No. 19 in determining employment status?	Department Order No. 19 requires employers to submit a report of an employee’s termination to the nearest public employment office. Failure to comply with this requirement can weaken an employer’s claim that the employee was a project or fixed-term employee.
How did the Supreme Court modify the interest rates on the monetary awards?	The Supreme Court modified the interest rates to 12% per annum from the date of illegal termination until June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction, in accordance with the ruling in Nacar v. Gallery Frames. This ensures the compensation reflects the time value of money.
What constitutes due process in the context of employee dismissal?	Due process in employee dismissal involves providing the employee with notice of the charges against them and an opportunity to be heard. The employee must be given a fair chance to present their side and defend themselves before a decision is made.

This case provides a clear illustration of the importance of adhering to labor laws and ensuring that employment contracts accurately reflect the nature of the employment relationship. Employers must be diligent in complying with all legal requirements to avoid potential liabilities arising from illegal dismissals.

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: Oyster Plaza Hotel, Rolito Go, and Jennifer Ampel vs. Errol O. Melivo, G.R. No. 217455, October 05, 2016