The Supreme Court ruled that maintenance personnel continuously working for L. Natividad Poultry Farms for an extended period, ranging from three to seventeen years, are considered regular employees. This is because their prolonged service indicates that their activities are essential to the company’s business. Therefore, the employees are entitled to reinstatement and backwages due to illegal dismissal.

From ‘Pakyaw’ to Permanent: How Poultry Farm Workers Won Regular Status

This case revolves around a labor dispute between Mario A. Abuda, et al. (the workers), and L. Natividad Poultry Farms, Juliana Natividad, and Merlinda Natividad (the poultry farm). The workers, employed as maintenance personnel, filed complaints for illegal dismissal and various labor law violations. The central legal question is whether these workers, who performed maintenance tasks, should be considered regular employees of the poultry farm, despite arguments that they were hired on a “pakyaw” (piece-rate) basis or through labor-only contractors.

The workers claimed that they were hired and then terminated after several years of service. L. Natividad countered that they engaged San Mateo General Services and Rodolfo Del Remedios as independent contractors, who then employed the workers. According to the poultry farm, the tasks performed by the workers were not directly related to their primary business. This defense hinges on the definition of **labor-only contracting**, which is prohibited under Philippine law. Article 106 of the Labor Code defines labor-only contracting as:

There is ‘labor-only’ contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

The Court of Appeals (CA) initially found that San Mateo and Del Remedios were indeed labor-only contractors, acting as agents of L. Natividad. However, the CA also held that the maintenance personnel could not be considered regular employees because their work was not directly related to the poultry farm’s main business. The Supreme Court disagreed with this assessment, emphasizing the importance of the duration of employment and the necessity of the work performed.

The Supreme Court emphasized that the manner of wage payment, whether on a “pakyaw” or task basis, does not define the employment relationship. Both the National Labor Relations Commission (NLRC) and the CA had already established that L. Natividad was the workers’ true employer. Thus, the court focused on whether the workers met the criteria for regular employment under Article 280 of the Labor Code, which states:

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.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, that any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

The Court highlighted that the workers had been continuously employed for periods ranging from three to seventeen years. This fact alone, according to the Court, should have been sufficient to classify them as regular employees. As such, length of service created a reasonable inference that their services were indispensable to L. Natividad’s business.

Moreover, the Supreme Court considered the nature of the tasks performed by the maintenance personnel. It acknowledged that while maintenance work might not immediately appear essential to poultry farming, the reality was that L. Natividad operated multiple farms, offices, and sales outlets that required constant upkeep and repair. The Court quoted the affidavit of Rodolfo Del Remedios, one of the workers, which detailed his responsibilities in maintaining the facilities of L. Natividad. This demonstrated a direct and necessary connection between the maintenance work and the overall operation of the poultry farm.

Having established that the workers were regular employees, the Supreme Court concluded that they were entitled to security of tenure. Therefore, the termination of their employment without just cause warranted reinstatement and the payment of full backwages and benefits. However, the Court denied the workers’ claim for moral and exemplary damages, stating that they failed to provide sufficient evidence of bad faith or malicious intent on the part of the employer. The Court referenced Philippine School of Business Administration v. National Labor Relations Commission, emphasizing that:

This Court however cannot sustain the award of moral and exemplary damages in favor of private respondents. Such an award cannot be justified solely upon the premise that the employer fired his employee without just cause or due process. Additional facts must be pleaded and proved to warrant the grant of moral damages under the Civil Code. The act of dismissal must be attended with bad faith, or fraud or was oppressive to labor or done in a manner contrary to morals, good customs or public policy and, of course, that social humiliation, wounded feelings, or grave anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when the dismissal was effected in a wanton, oppressive or malevolent manner.

The Supreme Court’s decision underscores the importance of both the nature of work and the length of service in determining regular employment status. Even if tasks are performed through contractors or on a piece-rate basis, long-term and continuous service can lead to the recognition of regular employment. Moreover, the decision illustrates that a broad interpretation of “necessary or desirable” work is often required, especially when considering the totality of an employer’s business operations. Consequently, this case serves as a reminder for employers to carefully assess the status of their workers, especially those who have been providing services for an extended period, to avoid potential labor disputes and ensure compliance with Philippine labor laws.

FAQs

What was the key issue in this case?	The central issue was whether maintenance personnel at L. Natividad Poultry Farms could be considered regular employees, entitling them to security of tenure and benefits. This hinged on the interpretation of Article 280 of the Labor Code regarding regular employment.
What is “labor-only contracting”?	Labor-only contracting occurs when a person supplies workers without substantial capital or control, essentially acting as an agent of the employer. This practice is prohibited under Philippine law, and the employer is responsible as if directly employing the workers.
What is a “pakyaw” arrangement?	A “pakyaw” arrangement refers to payment on a piece-rate or task basis, where workers are compensated for completed tasks rather than by the hour. The Supreme Court clarified that being paid on a “pakyaw” basis does not automatically preclude regular employment status.
How does length of service affect employment status?	Under Article 280 of the Labor Code, any employee who has rendered at least one year of service is considered a regular employee. This applies regardless of whether the service is continuous or broken, as long as the activity continues to exist.
What does ‘security of tenure’ mean for regular employees?	Security of tenure means that a regular employee cannot be terminated except for just cause or when authorized by law. If unjustly dismissed, the employee is entitled to reinstatement and full backwages.
Why were moral and exemplary damages denied in this case?	The Supreme Court denied moral and exemplary damages because the workers failed to provide sufficient evidence of bad faith or malicious intent on the part of the employer. Simply being dismissed without just cause is not enough to warrant such damages.
What is the significance of this ruling for employers?	This ruling emphasizes the importance of carefully assessing the employment status of long-term workers, even those hired through contractors or on a piece-rate basis. Employers must ensure compliance with labor laws to avoid potential disputes.
What factors determine if a job is “necessary or desirable” to the business?	The court considers the nature of the work performed in relation to the entirety of the business. Even if a task seems ancillary, its continuous performance and contribution to the overall operations can make it “necessary or desirable.”

In conclusion, the Supreme Court’s decision in Abuda v. L. Natividad Poultry Farms provides clarity on the factors that determine regular employment status, emphasizing the importance of length of service and the necessity of the work performed. The ruling serves as a guide for employers in assessing the status of their workers and ensuring compliance with Philippine labor laws, particularly in cases involving contracted labor or piece-rate arrangements.

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: MARIO A. ABUDA, RODOLFO DEL REMEDIOS, ET AL. v. L. NATIVIDAD POULTRY FARMS, ET AL., G.R. No. 200712, July 04, 2018