The Supreme Court held that an employee initially hired as a project employee can attain regular status if continuously rehired for tasks essential to the employer’s business. This decision underscores the importance of consistent application of labor laws to protect workers’ rights and ensure security of tenure. It clarifies that employers cannot circumvent labor laws by repeatedly rehiring employees on a project basis when the work is actually permanent in nature.

The Warehouse Supervisor’s Tenure: Project-Based or Regular Employment?

In this case, Freyssinet Filipinas Corporation (FFC) contested the status of Amado R. Lapuz, a warehouse supervisor, claiming he was a project employee whose contract ended with each project’s completion. Lapuz, however, argued he was a regular employee, having worked for the company and its predecessors since 1977. The central legal question revolves around whether Lapuz’s repeated hiring for successive projects transformed his status from project-based to regular employment, thus entitling him to security of tenure and protection against illegal dismissal.

The distinction between regular and project employment is critical in Philippine labor law. Regular employment, under Article 295 of the Labor Code, exists when an employee performs tasks usually necessary or desirable in the employer’s business, or when a casual employee renders at least one year of service. In contrast, project employment is tied to a specific undertaking, with the employment’s duration determined at the outset. For an employee to be legitimately considered project-based, the employer must prove that the employee was assigned to a specific project and that the project’s duration and scope were clearly defined at the time of engagement.

The Supreme Court examined the facts, noting that FFC had engaged Lapuz for several projects. However, for the initial projects, FFC failed to provide evidence of project-based hiring or clearly defined durations. The absence of written contracts for these projects further weakened FFC’s claim. It is crucial for employers to maintain proper documentation to support their classification of employees as project-based. This lack of documentation can be interpreted as an indication that the employment was not, in fact, project-based.

Regarding Lapuz’s final assignment at the Wharton Parksuite project, FFC presented project employment contracts specifying the project and its duration. Yet, the Court observed that Lapuz was repeatedly rehired for short periods, sometimes only for one month at a time, to perform the same tasks. This pattern of rehiring raised concerns about FFC’s intent to circumvent labor laws on tenure security. The Court has consistently held that imposing short, repeated contracts to prevent employees from acquiring tenure is against public policy.

Moreover, the court emphasized the significance of submitting termination reports to the Department of Labor and Employment (DOLE) upon project completion. Failure to do so indicates that the employees were not truly project employees. As stated in Tomas Lao Construction v. NLRC:

The report of termination is one of the indicators of project employment.

In this instance, FFC only complied with this requirement during Lapuz’s final assignment, further casting doubt on his project employee status throughout his tenure. The Court then considered the broader implications of Lapuz’s role as a warehouse supervisor. This position is undoubtedly vital and necessary for a construction company like FFC. Since Lapuz had continuously performed this function for various projects since 2007, the Court concluded that he had effectively become a regular employee.

This aligns with the precedent set in Maraguinot, Jr. v. NLRC, which states that a project or work pool employee must be deemed a regular employee if:

(1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary, and indispensable to the usual business or trade of the employer.

The Court, however, corrected the CA’s finding that Lapuz’s employment began in 1977. It clarified that FFC, FPTSPI, and Filsystems Tower 1, Inc. are separate entities with distinct corporate personalities, as evidenced by their separate SEC registrations. The Court acknowledged that:

The mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.

And that, in the absence of clear and convincing evidence of fraud or other public policy considerations, the veil of corporate fiction cannot be pierced. Lapuz himself admitted his employment with FPTSPI ceased in 1999, and he was rehired by FFC in 2007. Thus, the Court determined that Lapuz’s regular employment with FFC commenced on April 11, 2007, not earlier as claimed by the CA.

The Court also absolved the corporate officers from personal liability. To hold a director or officer personally liable, it must be proven that they assented to patently unlawful acts of the corporation or acted with gross negligence or bad faith. In this case, such proof was lacking. The awards for moral and exemplary damages were also removed, as there was no evidence that Lapuz’s dismissal was attended by bad faith or oppression.

In summary, the Supreme Court affirmed that Lapuz was illegally dismissed but adjusted the computation of separation pay to reflect his actual tenure with FFC starting in 2007. This ruling highlights the importance of correctly classifying employees and adhering to labor laws to avoid disputes and protect workers’ rights.

FAQs

What was the key issue in this case?	The key issue was whether Amado R. Lapuz was a regular employee or a project employee of Freyssinet Filipinas Corporation (FFC), and whether his dismissal was legal. The Supreme Court ruled he was a regular employee, making his dismissal illegal.
What is the difference between regular and project employment?	Regular employment involves tasks necessary for the employer’s usual business, while project employment is tied to a specific undertaking with a predetermined duration. Regular employees have greater job security compared to project employees.
What factors determine if an employee is a project employee?	Factors include assignment to a specific project, clearly defined project duration and scope, and submission of termination reports to the DOLE upon project completion. The absence of these factors can suggest regular employment status.
What is the significance of filing termination reports with the DOLE?	Filing termination reports with the DOLE is an indicator of project employment. Failure to file these reports suggests that the employees were not hired on a project basis, supporting a claim for regular employment.
Can repeated rehiring affect an employee’s status?	Yes, repeated rehiring for the same tasks can transform a project employee into a regular employee, especially if the tasks are vital to the employer’s business. This is a key factor in determining whether an employee has acquired regular status.
When can corporate officers be held personally liable for corporate obligations?	Corporate officers can be held personally liable if they assented to unlawful acts of the corporation or acted with gross negligence or bad faith. This requires specific allegations and proof of such actions.
What evidence is needed to prove illegal dismissal?	To prove illegal dismissal, an employee must show they were dismissed without just or authorized cause. Regular employees have security of tenure and can only be dismissed for valid reasons.
What remedies are available to an illegally dismissed employee?	An illegally dismissed employee is entitled to reinstatement, backwages, and other benefits. If reinstatement is not feasible, the employee may be awarded separation pay in lieu of reinstatement.

This case serves as a reminder for employers to accurately classify their employees and comply with labor laws to avoid legal disputes and protect workers’ rights. The decision reinforces the principle that repeated rehiring for essential tasks can lead to regular employment status, entitling employees to greater job security.

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: Freyssinet Filipinas Corporation v. Amado R. Lapuz, G.R. No. 226722, March 18, 2019