The Supreme Court clarified the distinction between project employees and regular employees in the construction industry. The Court held that an employee hired under a project employment contract, with the understanding that their tenure is tied to a specific project, does not automatically become a regular employee even with repeated rehiring. This ruling emphasizes the importance of clearly defined project terms and informed consent in employment contracts, protecting employers from being unjustly burdened with maintaining employees beyond project completion. This balance ensures fairness for both employers and employees within the unique context of the construction sector.

From Project to Permanent? Examining Employment Status in the Construction Industry

This case, E. Ganzon, Inc. (EGI) v. Fortunato B. Ando, Jr., revolves around determining whether Fortunato Ando, Jr. was illegally dismissed by E. Ganzon, Inc. The core issue is whether Ando was a project employee, as EGI claimed, or a regular employee, as Ando argued. This distinction is crucial because it dictates the conditions under which an employee can be terminated and the benefits they are entitled to. The Supreme Court’s decision hinged on interpreting Article 280 of the Labor Code, which defines regular and project employment.

EGI contended that Ando was hired as a project worker for specific construction projects, presenting three project employment contracts as evidence. These contracts stipulated that Ando’s services would end upon the completion of the phase of work for which he was hired. Ando, however, argued that he was repeatedly hired over a period, making his work necessary and desirable to EGI’s business. He claimed that his termination without prior notice and hearing was illegal, entitling him to back wages and other benefits.

The Labor Arbiter initially ruled that Ando was a project employee but granted some of his money claims. Both parties appealed to the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiter’s decision. Ando then filed a petition with the Court of Appeals (CA), which reversed the NLRC’s ruling on the illegal dismissal issue, declaring Ando a regular employee and ordering EGI to pay back wages and separation pay. This CA decision prompted EGI to elevate the case to the Supreme Court.

The Supreme Court emphasized that its power of review in labor cases is limited to determining whether the CA correctly assessed if the NLRC committed grave abuse of discretion. The Court cited Montoya v. Transmed Manila Corporation, stating that the focus is on whether the CA correctly determined the presence or absence of grave abuse of discretion in the NLRC decision, not on whether the NLRC’s decision on the merits was correct.

The Court then delved into the definitions of different types of employment under Article 280 of the Labor Code. Project employment is defined as employment “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.” The employer bears the burden of proving that the employee was assigned to a specific project and that the duration and scope were specified at the time of engagement.

The Supreme Court acknowledged two categories of project employees, as distinguished in ALU-TUCP v. National Labor Relations Commission:

Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Secondly, a ‘project’ could also refer to a particular job or undertaking that is not within the regular business of the corporation.

The Court found that Ando’s contracts explicitly stated his engagement as a project worker and that his services would end upon the completion of the phase of work for which he was hired. While the contracts included a clause that the duration “could be extended or shortened depending on the work phasing,” the Court clarified that this did not negate the essence of project employment.

The CA argued that the possibility of extension or shortening made the tenure indefinite, contradicting the certainty required in project employment. However, the Supreme Court disagreed, noting that the extensions and shortenings of Ando’s contracts did not alter his status as a project employee. The Court emphasized that a project employment contract is valid, provided that the period was agreed upon knowingly and voluntarily by the parties.

The Supreme Court reiterated that, by entering into a project employment contract, an employee understands that their employment is coterminous with the project. This expectation is reasonable and does not automatically equate to an unfair labor practice. The Court referenced Villa v. NLRC, which underscores the importance of balancing the interests of both employers and employees in project-based employment.

The Court also addressed the argument that Ando’s repeated rehiring and the necessity of his work to EGI’s business should qualify him as a regular employee. The Supreme Court stated that the length of service through repeated rehiring is not the controlling determinant of employment tenure for a project employee. Practical considerations often dictate the rehiring of experienced construction workers on a project-to-project basis.

The Supreme Court distinguished project employment from fixed-term employment, noting that the decisive determinant in project employment is the activity the employee is called upon to perform, not the day certain agreed upon for the commencement and termination of the employment relationship. In Filsystems, Inc. v. Puente, the Court ruled that the absence of specific dates does not preclude one’s classification as a project employee.

The Supreme Court concluded that Ando was adequately notified of his employment status and that his consent to be engaged as a project worker was informed and not vitiated. There was no attempt to frustrate Ando’s security of tenure, and his employment was for a specific project or undertaking. The Court also pointed out that EGI’s business nature as a construction company necessitated project-based employment due to the fluctuating availability of projects.

The Supreme Court noted that requiring EGI to maintain workers as permanent employees even when there are no projects would be unduly burdensome. The Court also cited Article 280 of the Labor Code, clarifying that the provision regarding an employee who has rendered at least one year of service being considered a regular employee applies only to casual employees, not project employees.

Finally, the Supreme Court held that EGI did not violate procedural due process by failing to give Ando advance notice of his termination, as prior notice is not required when termination results from the completion of the project for which the employee was engaged. EGI fulfilled its obligation by submitting the required Establishment Employment Reports to the Department of Labor and Employment (DOLE).

FAQs

What was the key issue in this case?	The key issue was whether Fortunato Ando, Jr. was a project employee or a regular employee of E. Ganzon, Inc., which determined the legality of his dismissal. The Supreme Court had to determine if the Court of Appeals correctly assessed whether the NLRC committed grave abuse of discretion in its ruling.
What is project employment?	Project employment is when an employee is hired for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement. The employee’s tenure is tied to the duration of the project.
What is the difference between project employment and regular employment?	Regular employment involves tasks that are usually necessary or desirable in the employer’s business, whereas project employment is for a specific, defined project. Regular employees have greater job security and benefits.
What is the significance of the employment contract in this case?	The employment contract explicitly stated that Ando was engaged as a project worker and that his services would end upon the completion of the phase of work for which he was hired. This was a key factor in the Supreme Court’s decision.
Did the repeated rehiring of the employee affect his employment status?	No, the Supreme Court held that the length of service through repeated rehiring does not automatically convert a project employee into a regular employee. The nature of the employment remained project-based.
What is the employer’s responsibility upon completion of the project?	Upon completion of the project, the employer is required to submit a report to the Department of Labor and Employment (DOLE) regarding the termination of employment. Prior notice to the employee is not required.
What was the Court’s basis for reversing the Court of Appeals’ decision?	The Supreme Court reversed the CA because the appellate court erred in finding grave abuse of discretion on the part of the NLRC. The NLRC correctly affirmed the Labor Arbiter’s finding that Ando was a project employee.
What is the relevance of Article 280 of the Labor Code in this case?	Article 280 defines regular and casual employment and is central to determining the employment status of an employee. The Supreme Court clarified that the one-year service provision applies only to casual employees, not project employees.

In conclusion, the Supreme Court’s decision in E. Ganzon, Inc. v. Fortunato B. Ando, Jr. reinforces the importance of clearly defined project employment contracts in the construction industry. This ruling balances the protection of workers’ rights with the practical realities of project-based work, ensuring fairness for both employers and employees.

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: E. GANZON, INC. VS. ANDO, JR., G.R. No. 214183, February 20, 2017