In Ramon E. Mirandilla, Ranil D. Atuli, and Edwin D. Atuli v. Jose Calma Development Corp. and Jose Gregorio Antonio C. Calma, Jr., the Supreme Court ruled that the employees were regular employees, not project employees, and were thus illegally dismissed. This decision underscores the importance of clearly defining the terms of employment at the time of hiring. Employers must provide substantial evidence of project-based employment to avoid regularizing employees who perform tasks necessary for the company’s usual business.

Navigating Employment Status: When is a Worker a Regular Employee?

This case revolves around the employment status of Ramon, Ranil, and Edwin, who claimed they were regular employees of Jose Calma Development Corp. (JCDC) and were illegally dismissed. JCDC, however, argued that they were project employees whose employment was coterminous with specific construction projects. The central legal question is whether JCDC provided enough evidence to prove that the workers were genuinely project employees, and not regular employees entitled to security of tenure. The Supreme Court (SC) reviewed the case to determine if the lower courts correctly assessed the evidence and applied the relevant labor laws.

The Labor Code distinguishes between regular and project employees to protect workers’ rights. Article 295 (formerly 280) defines a regular employee as someone performing tasks “usually necessary or desirable in the usual business or trade of the employer.” Conversely, a project employee’s work is “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.” This distinction is crucial because regular employees are entitled to greater job security, requiring just cause for termination.

The Supreme Court has established specific criteria for determining project employment status. Two key elements must be present: “(a) the employees were assigned to carry out a specific project or undertaking; and (b) the duration and scope of which were specified at the time the employees were engaged for that project.” These criteria ensure that employers cannot arbitrarily classify workers as project employees to avoid the obligations associated with regular employment.

In this case, the Court found that JCDC failed to provide sufficient evidence to prove that Ramon, Ranil, and Edwin were genuinely project employees. The evidence presented, such as Weekly Time Records (WTRs), did not demonstrate that the employees were informed of the specific projects they were hired for, or the duration and scope of those projects, at the time of their engagement. The WTRs primarily showed that Ramon was moved between different project sites on a regular basis, indicating that his work was integral to JCDC’s ongoing operations rather than tied to a specific, time-bound project.

Article 280. Regular and casual employment. – The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, 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.

The Court also highlighted JCDC’s failure to comply with reporting requirements for project employees. According to Policy Instruction No. 20, employers of project employees must submit a termination report to the nearest public employment office after each project’s completion. The Court emphasized that: “[The Court has] consistently held that failure of the employer to file termination reports after every project completion proves that the employees are not project employees.” JCDC’s limited submission of termination reports further weakened their claim that the employees were hired on a project basis.

The Supreme Court also noted that the absence of employment contracts detailing the project-based nature of the work raised further doubts about the validity of the project employment claims. The court has stated, “the absence of the employment contracts puts into serious question the issue of whether the employees were properly informed of their employment status as project employees at the time of their engagement, especially if there were no other evidence offered.” Without these contracts, it was difficult to ascertain whether the employees knowingly agreed to be hired for specific projects with defined durations.

Regarding Ranil and Edwin’s quitclaims, the Court found them invalid due to insufficient consideration. The amounts they received, P6,917.47 and P7,290.06 respectively, only covered their 13th-month pay for 2015, a statutory obligation of the employer. Such minimal compensation did not adequately compensate them for waiving their rights as illegally dismissed employees. The Court reiterated that “a quitclaim in which the consideration is scandalously low and inequitable cannot be an obstacle to the pursuit of a worker’s legitimate claim.”

The Court has set clear standards for valid quitclaims, as stated in the case of Arlo Aluminum, Inc. v. Piñon, Jr.:

To be valid, a deed of release, waiver or quitclaim must meet the following requirements: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is sufficient and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law. Courts have stepped in to invalidate questionable transactions, especially where there is clear proof that a waiver, for instance, was obtained from an unsuspecting or a gullible person, or where the agreement or settlement was unconscionable on its face. A quitclaim is ineffective in barring recovery of the full measure of a worker’s rights, and the acceptance of benefits therefrom does not amount to estoppel. Moreover, a quitclaim in which the consideration is scandalously low and inequitable cannot be an obstacle to the pursuit of a worker’s legitimate claim.

The court determined that the quitclaims signed by Ranil and Edwin, in consideration of their 13th-month pay alone, did not constitute reasonable consideration for waiving their rights to potential awards like backwages and separation pay. This underscores the principle that waivers must be voluntary, fully understood, and supported by credible consideration to be legally binding.

FAQs

What was the key issue in this case?	The central issue was whether the employees were project employees or regular employees, which determines their rights regarding termination. The Supreme Court examined if the employer sufficiently proved the employees were hired for specific projects.
What is the difference between a project employee and a regular employee?	A regular employee performs tasks necessary for the employer’s usual business and has greater job security. A project employee is hired for a specific project with a predetermined completion date.
What evidence is needed to prove project employment status?	Employers must show that employees were informed of the specific project and its duration at the time of hiring. Additionally, they must submit termination reports to the DOLE after each project’s completion.
Why were the quitclaims of Ranil and Edwin deemed invalid?	The quitclaims were considered invalid because the consideration (13th-month pay) was insufficient and did not adequately compensate them for waiving their rights as illegally dismissed employees. Valid quitclaims require reasonable and credible consideration.
What is the significance of filing termination reports with the DOLE?	Filing termination reports after each project completion is crucial to proving project employment status. Failure to do so suggests that the employees were not genuinely hired for specific projects.
What happens if an employer fails to prove project employment?	If an employer fails to prove project employment, the employees are considered regular employees and are entitled to the rights and benefits of regular employment, including security of tenure. Termination would require just cause.
What should an employee do if asked to sign a quitclaim?	An employee should carefully review the quitclaim and ensure that the consideration is fair and reasonable. If unsure, they should seek legal advice before signing to understand their rights.
Can an employer terminate a regular employee at any time?	No, regular employees can only be terminated for just or authorized causes as defined in the Labor Code. Illegal dismissal can lead to significant penalties for the employer, including backwages and separation pay.

This case serves as a reminder to employers to clearly define the terms of employment and to comply with all legal requirements when hiring project employees. Failure to do so can result in costly litigation and damage to the company’s reputation. The decision also highlights the importance of understanding employee rights and seeking legal advice when facing potential illegal dismissal.

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: Mirandilla, et al. vs. Jose Calma Development Corp., G.R. No. 242834, June 26, 2019