In Douglas Millares and Rogelio Lagda v. National Labor Relations Commission, Trans-Global Maritime Agency, Inc. and Esso International Shipping Co., Ltd., the Supreme Court addressed the employment status of Filipino seafarers, clarifying that they are contractual, not regular, employees. This ruling is rooted in the nature of overseas employment, which is governed by fixed-term contracts. The decision impacts the rights and benefits of seafarers, aligning their employment terms with international maritime practices and the specific regulations set forth by the Philippine Overseas Employment Administration (POEA). This ensures that the unique aspects of seafaring, such as fixed durations and specific project-based engagements, are appropriately considered under Philippine labor law.

Navigating the Seas of Employment: Are Seafarers Entitled to Regular Status?

The case originated from a dispute involving Douglas Millares and Rogelio Lagda, who were employed by Esso International Shipping Company LTD through its local manning agency, Trans-Global Maritime Agency, Inc. Millares and Lagda sought optional retirement benefits under the Consecutive Enlistment Incentive Plan (CEIP) after many years of service. Esso International denied their request, arguing that their employment was contractual and did not provide for retirement before the age of 60. Subsequently, the company dropped them from the roster of crew members due to alleged abandonment and unavailability. Aggrieved, Millares and Lagda filed a complaint for illegal dismissal and non-payment of employee benefits.

Initially, the POEA dismissed the complaint, a decision that was affirmed by the NLRC, which stated that as seamen and overseas contract workers, Millares and Lagda were not covered by the term “regular employment” as defined under Article 280 of the Labor Code. The NLRC relied on the POEA’s standard employment contract for seamen and the Supreme Court’s ruling in Brent School, Inc. vs. Zamora, which held that fixed-term contracts are essential for overseas employment. However, the Supreme Court initially reversed these decisions, ruling in favor of Millares and Lagda, only to reconsider its stance following motions for reconsideration from the respondents and the Filipino Association for Mariners Employment, Inc. (FAME).

The central issue revolved around whether Filipino seafarers should be considered regular employees under Article 280 of the Labor Code, which defines regular employment as work that is usually necessary or desirable in the usual business or trade of the employer. Private respondents and FAME argued that applying this provision to seafarers would disrupt the maritime industry, as it contradicts international maritime practices and the POEA’s regulatory framework. The Supreme Court re-evaluated its position, taking into account the potential adverse effects on the manning industry and the employment of Filipino seafarers overseas. The Court ultimately acknowledged the need to align its ruling with established precedents and the unique nature of maritime employment.

The Supreme Court’s reconsideration was grounded in several key legal principles. First, the Court cited Brent School Inc. v. Zamora, emphasizing that Article 280 of the Labor Code does not apply to overseas employment contracts. The Court highlighted that fixed-term employment contracts are common and necessary in various contexts, including overseas employment, appointments to administrative positions in educational institutions, and certain company official roles. The court recognized that a strict interpretation of Article 280 would unduly restrict the freedom of parties to agree on fixed terms of employment, especially in situations where there is no intention to circumvent the employee’s right to security of tenure.

Building on this principle, the Court referenced Pablo Coyoca v. NLRC, which explicitly states that a seafarer is not a regular employee and is not entitled to separation pay, as their employment is governed by the POEA Standard Employment Contract for Filipino Seamen. The Court underscored that the POEA rules and regulations do not provide for separation or termination pay for seafarers, but rather focus on compensation for work-related injuries or disabilities. This approach contrasts with the typical rights afforded to regular employees under the Labor Code, thereby reinforcing the contractual nature of seafarers’ employment.

“As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment and the said Rules do not provide for separation or termination pay.”

The Court emphasized that seafarers’ employment is governed by the contracts they sign each time they are rehired and that their employment is contractually fixed for a certain period. This aligns with the exception in Article 280, which excludes employment fixed for a specific project or undertaking or seasonal work. The decision reinforces the principle of stare decisis, adhering to established precedents regarding the employment status of seafarers. The Court also acknowledged the practical considerations that drive the continuous re-hiring of experienced crew members, emphasizing that this preference does not transform contractual employees into regular ones.

“The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the parties.”

Ultimately, the Supreme Court concluded that Millares and Lagda were not regular employees under Article 280 of the Labor Code. Consequently, they were not entitled to reinstatement or payment of separation pay or backwages. However, the Court affirmed their entitlement to 100% of their total credited contributions under the Consecutive Enlistment Incentive Plan (CEIP). The Court reasoned that the CEIP benefits were part and parcel of their employment contracts and that the petitioners had met the eligibility requirements for these benefits, having served the company for many years without any misconduct or poor performance.

The decision carries significant implications for the maritime industry and Filipino seafarers. By reaffirming the contractual nature of seafarers’ employment, the Supreme Court provides clarity and stability for manning agencies and foreign principals. The ruling helps to maintain the competitiveness of Filipino seafarers in the global market by aligning employment terms with international practices. It also protects the rights of seafarers to receive benefits and incentives stipulated in their contracts, such as the CEIP, ensuring that their long service and loyalty are duly recognized and compensated.

FAQs

What was the key issue in this case?	The key issue was whether Filipino seafarers should be considered regular employees under Article 280 of the Labor Code, which would entitle them to greater employment security and benefits.
What did the Supreme Court decide?	The Supreme Court decided that Filipino seafarers are contractual employees, not regular employees, and their employment is governed by fixed-term contracts. They are not entitled to the same benefits as regular employees, such as separation pay and reinstatement, but are entitled to benefits stipulated in their contracts.
Why are seafarers considered contractual employees?	Seafarers are considered contractual employees due to the nature of overseas employment, which is typically for a fixed period, as specified in their contracts and regulated by the POEA. This aligns with international maritime practices and the need for fixed-term engagements.
What is the Consecutive Enlistment Incentive Plan (CEIP)?	The CEIP is a benefit plan that provides incentives to seafarers who renew their contracts with the same company for an extended period. It rewards loyalty and long service with additional remuneration.
Are seafarers entitled to benefits under the CEIP?	Yes, seafarers are entitled to benefits under the CEIP if they meet the eligibility requirements, such as completing a certain number of months of credited service and fulfilling the terms of their contracts.
What happens when a seafarer’s contract expires?	When a seafarer’s contract expires, their employment automatically ceases, and they are not entitled to reinstatement or separation pay unless otherwise provided in their contract.
Does continuous re-hiring make a seafarer a regular employee?	No, continuous re-hiring does not make a seafarer a regular employee. It is often due to practical considerations such as experience and qualifications, but the employment remains contractual.
What is the role of the POEA in seafarers’ employment?	The POEA prescribes a standard employment contract for seafarers, ensuring fair recruitment and employment practices. It also regulates the terms and conditions of overseas employment for Filipino seafarers.

In conclusion, the Supreme Court’s decision in Millares and Lagda v. NLRC clarifies the employment status of Filipino seafarers, affirming their contractual nature and aligning their rights and benefits with international maritime practices and POEA regulations. This ruling provides stability for the maritime industry while ensuring that seafarers receive the benefits they are entitled to under their contracts.

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: Douglas Millares and Rogelio Lagda vs. National Labor Relations Commission, Trans-Global Maritime Agency, Inc. and ESSO International Shipping Co., Ltd., G.R. No. 110524, July 29, 2002