THIRD DIVISION
GRANDSPAN DEVELOPMENT G.R. No. 141464
CORPORATION,
Petitioner,
Present:
PANGANIBAN, J., Chairman,
- versus -
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.
RICARDO BERNARDO,
ANTONINO CEIDOZA and
EDGARDO DEL PRADO,
surviving parent of EDGAR DEL Promulgated:
PRADO,
Respondents.
September 21, 2005
x -------------------------------------------------------------------------------------------------
-----------x
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, as amended, assailing the Decision[1] dated September 17,
1999 and Resolution[2] dated January 6, 2000 rendered by the Court of
Appeals in CA-G.R. SP No. 50610, entitled Ricardo Bernardo, Antonino Ceidoza
and Edgardo Del Prado, as surviving parent of Edgar Del Prado vs. National Labor
Relations Commission, Grandspan Development Corporation and Joaquin Narag doing
business under the name & style of J. Narag Construction.
The instant controversy stemmed from a complaint for illegal dismissal and non-payment of
benefits filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceidoza and Edgar Del
Prado, respondents, against Grandspan Development Corporation, petitioner, and/or its
warehouse manager, Manuel G. Lee, docketed as NLRC Case No. RAB-IV-11-4605-92-RI.
Respondents, in their complaint, alleged that sometime in 1990, they
were employed as truck scale monitors by petitioner with a daily salary of
P104.00 each. Eventually, they were assigned at its Truck Scale Section of the
Warehouse/Materials Department. They were issued identification cards
signed by Bonifacio Selmo, petitioners personnel manager. On October 28,
1992, petitioner sent them a notice terminating their services effective October
29, 1992 for using profane or offensive language, in violation of Article VI (2)
(a) of the companys Rules and Regulations.
Petitioner denied the allegations of respondents in their complaint, claiming that they are
employees of J. Narag Construction. Sometime in the third quarter of 1992, Canad Japan Co.,
Ltd. engaged petitioners services for fabrication works of several round and rectangular steel
tanks needed for the HCMG or Sogo project due for completion in September, 1992. As a
consequence, petitioner subcontracted the services of J. Narag Construction which, in turn,
assigned its 3 helpers (herein respondents) to work for petitioners project. Sometime in October,
1992, Manuel G. Lee, manager of petitioners Warehouse Department received a report from
supervisor Robert Ong that respondents vandalized the companys log book and chairs. This
prompted petitioner to send J. Narag Construction a memorandum terminating the services of
respondents for violation of the companys Rules and Regulations.
After the submission of the parties pleadings and position papers, the Labor Arbiter rendered a
Decision dated June 30, 1994 dismissing respondents complaint. In concluding that respondents
were validly dismissed from employment, the Labor Arbiter held that they were project
employees whose services were terminated upon completion of the project for which they were
hired.
Upon appeal, the National Labor Relations Commission (NLRC) issued
a Resolution dated March 7, 1995 remanding the case to the Labor Arbiter for
appropriate proceedings to determine whether there is an employer-employee
relationship between the parties.
Both parties filed their respective motions for reconsideration but were
denied by the NLRC in separate Resolutions dated April 28, 1995 and May 31,
1995.
Respondents then filed with this Court a petition for certiorari. Pursuant
to our ruling in St. Martins Funeral Home vs. NLRC,[3] we referred the petition
to the Court of Appeals for its appropriate action and disposition.
Meantime, respondent Del Prado died and was substituted by his
surviving parent, Edgardo Del Prado.
On September 17, 1999, the Appellate Court rendered a Decision setting
aside the NLRCs Resolutions and ordering petitioner (1) to reinstate
respondents Bernardo and Ceidoza to their former positions and pay, jointly
and severally with J. Narag Construction, their backwages and other benefits,
and (2) to pay respondent Del Prado his separation pay.
The Court of Appeals found that respondents are employees of
petitioner; that they were non-project workers; and that they were denied due
process, thus:
In the instant case, petitioners were assigned to the Truck Scaling
Materials Department of Grandspan. They worked in Grandspans
premises using the materials, supplies and equipment of Grandspan. They
were under the supervision of Grandspan as to the manner and results of
their work, and performed services directly connected to the usual
business of respondent Grandspan for the fabrication of heavy structural
components. The memorandum dated 28 October 1992 (p. 75 Rollo)
dismissing the petitioners in fact emanated from Grandspan Materials
Manager Manuel G. Lee and is addressed to the Personnel Department of
Grandspan, albeit containing the self-serving claim that the employees-
petitioners were J. Narag Construction personnel. Under the
circumstances, We rule that J. Narag was a labor-only contractor. While
petitioners were in J. Narag Constructions payroll, such fact does not per
se establish J. Narag Construction as an independent contractor, i.e., the
employer of the petitioners. x x x.
xxxxxx
The Office of the Solicitor General opines that petitioners were non-
project employees as they were assigned at Grandspans Materials
Department. We agree. Moreover, if petitioners were truly project
employees, private respondents should have presented proof that they
submitted to the nearest public employment office a report of termination
of service of their project employees upon completion of the construction
project, as required by Policy Instruction No. 20. x x x.
Going now to the issue of whether or not petitioners were illegally
dismissed, We rule in the affirmative. In the letter/memo dated 28 October
1992 (Rollo, p. 75), by which Grandspan ostensibly requested J. Narag to
terminate petitioners contract immediately, the reason cited for the
dismissal was violation of Article VI 2.a. of company Rules and
Regulations (the use of profane or offensive languages addressed to
company officers) committed, according to the petitioners, through the
vandalism of logbooks and office furniture at the Truck Scale Section of
the Warehouse/Materials Department with obscene drawings. x x x.
However, this is not supported by substantial evidence which is
necessary in order that petitioners may be dismissed for just cause.
Considering that private respondent failed to discharge the burden of proof
reposed on it to show that the dismissal was justified, the inevitable result
is a finding that the dismissal was unjustified (Uy vs. NLRC, 261 SCRA
505; Caurdanetaan Piece Workers Union vs. Laguesma, 296 SCRA 401).
Moreover, petitioners were not given ample opportunity to prepare
adequately for their defense, including legal representation (Abiera vs.
NLRC, supra; Pangasinan III Electric Cooperative, Inc. vs. NLRC, 215
SCRA 669), nor were they served notice of investigation, nor given an
opportunity to be heard. This violates the requirement of notice and
hearing in case of employee dismissal, thus petitioners dismissal was void
(Abiera vs. NLRC, 202 SCRA 7; Falguera vs. Lansangan, 251 SCRA
364).
As illegally dismissed employees, petitioners are protected by
Article 279 of the Labor Code, x x x.
In the case of petitioner Edgar del Prado, now deceased and
represented in this petition by his surviving parent Edgardo del Prado,
reinstatement is no longer possible, thus he should be paid separation pay
equivalent to one month salary for every year of service in addition to
backwages (International Phamaceuticals, Inc. vs. NLRC, 287 SCRA
228).
WHEREFORE, finding merit in the petition, the same is GRANTED.
The assailed NLRC resolutions dated 7 March 1995 and 28 April 1995 are
ANNULLED and SET ASIDE.
Private respondent Grandspan is ordered to reinstate petitioners
Ricardo Bernardo and Antonino Ceidoza to their former positions without
loss of seniority rights. Grandspan and J. Narag Construction are declared
jointly and severally liable to pay said petitioners full backwages and other
benefits and privileges enjoyed by respondent Grandspan employees.
Private respondents Grandspan and J. Narag Construction are
likewise ordered to pay petitioner Edgardo del Prado, surviving parent of
Edgar del Prado, the latters separation pay at the rate of one (1) month
salary for every year of service rendered by the deceased.
SO ORDERED.
On October 8, 1999, petitioner filed a motion for reconsideration. Respondents
also filed a motion for reconsideration and/or clarification praying that the
Appellate Courts Decision be modified by awarding respondent Del Prado his
backwages.
On January 6, 2000, the Court of Appeals promulgated its Resolution denying
petitioners motion for reconsideration but modifying its Decision in the sense
that petitioner and J. Narag Construction are ordered to pay respondent Del
Prado his separation pay and backwages.
Hence, this petition for review on certiorari.
The issue for our resolution is whether the Court of Appeals erred in
holding that respondents are employees of petitioner.
Petitioner argues that it has no employer-employee relationship with respondents since they are
employees of J. Narag Construction, an independent contractor.
In Miguel vs. JCT Group, Inc.,[4] we held:
The test for determining an employer-employee relationship hinges on
resolving who has the power to select employees, who pays for their
wages, who has the power to dismiss them, and who exercises control in
the methods and the results by which the work is accomplished.
The Court of Appeals found that J. Narag Construction assigned
respondents to perform activities directly related to the main business of
petitioner. They worked in petitioners premises, using its equipment, materials
and supplies. J. Narag Constructions payroll worksheets covering the period
from December 21, 1990 to July 31, 1991 show that the payment of their
salaries was approved by petitioner. The manager and supervisor of petitioners
Warehouse Department supervised the manner and results of their work. It
was petitioner who terminated their services after finding them guilty of using
profane or offensive language in violation of Article VI (2) (a) of the companys
Rules and Regulations. The Appellate Court then concluded that these
circumstances confirm the existence of an employer-employee relationship
between petitioner and respondents.
We agree.
Unswayed, petitioner insists that J. Narag Construction, being a legitimate independent
contractor, is the employer of respondents. On this point, the Court of Appeals held that J. Narag
Construction is a labor-only contractor.
Article 106 of the Labor Code, as amended, provides in part:
ART. 106. Contractor or subcontracting. x x x.
xxxxxx
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. x x x.
On the basis of the records, we have no reason to deviate from the
Appellate Courts finding that J. Narag Construction is indeed a labor-only
contractor. These are the reasons: (1) it is not registered as a building
contractor with the SEC; (2) it has no contract with petitioner; and (3) there is
no proof of its financial capability and has no list of equipment, tools,
machineries and implements used in the business.
Clearly, J. Narag Construction could not be respondents employer.
But petitioner maintains that respondents are project employees and as
such, their services ended in September, 1992 upon completion of its HCMG
or Sogo project.
In Kiamco vs. NLRC,[5] we held:
The principal test for determining whether particular employees are
properly characterized as project employees, as distinguished from
regular employees, is whether or not the project employees were assigned
to carry out a specific project or undertaking, the duration and scope of
which were specified at the time the employees were engaged for that
project. As defined, project employees are those workers hired (1) for a
specific project or undertaking, and (2) the completion or termination of
such project or undertaking has been determined at the time of
engagement of the employee.
Here, petitioner could not present employment contracts signed by
respondents showing that their employment was for the duration of the
HCMG or Sogo project.
Likewise, as correctly observed by the Court of Appeals, petitioner failed
to present any report terminating the services of respondents when its projects
were actually finished.
Section 2.2 (e) of the Labor Department Order No. 19 expressly provides
that the report of termination is one of the indications of project
employment.[6]
Time and again, we held that failure of the employer to file termination
reports after every project completion with the nearest public employment
office is an indication that respondents were
not project employees.[7]
We, therefore, uphold the finding of the Court of Appeals that
respondents are petitioners regular employees. As such, they are entitled to
security of tenure and can only be dismissed for a just or authorized cause, as
provided by Article 279 of the Labor Code, as amended, thus:
"ARTICLE 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement."
In Bolinao Security and Investigation Service, Inc. vs. Toston[8], we
emphasized that it is incumbent upon the employer to prove by the quantum of
evidence required by law that the dismissal of an employee is not illegal,
otherwise, the dismissal would be unjustified.
Here, petitioner failed to discharge its burden. In terminating respondents services, it merely
relied on the alleged completion of the HCMG or Sogo project and on the report that respondents
uttered profane or offensive language in violation of the companys Rules and Regulations. As
earlier mentioned, they are not project employees. And as found by the Court of Appeals, there is
no evidence to substantiate the charge of uttering profane or offensive language.
It also appears that petitioner violated respondents right to due process.
In Loadstar Shipping Co., Inc. vs. Mesano,[9] we held:
The law requires that an employee sought to be dismissed must be served
two written notices before termination of his employment. The first notice
is to apprise the employee of the particular acts or omissions by reason of
which his dismissal has been decided upon; and the second notice is to
inform the employee of the employers decision to dismiss him. Failure to
comply with the requirement of two notices makes the dismissal illegal.
The procedure is mandatory. Non-observance thereof renders the
dismissal of an employee illegal and void.
Records show that respondents were not served by petitioner with notices, verbal or written,
informing them of the particular acts for which their dismissal is sought. Neither were they
required to give their side regarding the alleged serious misconduct imputed against them.
We thus sustain the Court of Appeals ruling that respondents were deprived of both their
substantive and procedural rights to due process and, therefore, the termination of their
employment is illegal.
Since respondents were illegally dismissed from work, they are entitled
to reinstatement without loss of seniority rights, full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from
the time their compensation was withheld from them up to the time of their
actual reinstatement.[10]
However, the circumstances obtaining in this case do not warrant the
reinstatement of respondents. Antagonism caused a severe strain in the parties
employer-employee relationship. Thus, a more equitable disposition would be
an award of separation pay equivalent to at least one month pay, or one month
pay for every year of service, whichever is higher, (with a fraction of at least six
(6) months being considered as one (1) whole year),[11] in addition to their full
backwages, allowances and other benefits.[12]
Records show that respondents were employed by petitioner from 1990 to
October 29, 1992, or for two (2) years, with a daily salary of P104.00 each,
hence, entitled to a separation pay of P4,992.00.[13]
WHEREFORE, the assailed Decision dated September 17, 1999 and
Resolution dated January 6, 2000 of the Court of Appeals in CA-G.R. SP No.
50610 are hereby AFFIRMED with MODIFICATION in the sense that
petitioner is ordered to pay each respondent separation pay equivalent to
P4,992.00, plus their respective full backwages, and other privileges and
benefits, or their monetary equivalent, during the period of their dismissal up
to their supposed actual reinstatement.
Costs against petitioner.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Associate Justice
Chairman
RENATO C. CORONA CONCHITA CARPIO MORALES
Associate Justice Associate Justice
CANCIO C. GARCIA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.
ARTEMIO V. PANGANIBAN
Associate Justice
Chairman, Third Division
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the Division
Chairman's Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.
HILARIO G. DAVIDE, JR.
Chief Justice
[1] Penned by Justice Portia Alio-Hormachuelos, and concurred in by Justice Buenaventura J.
Guerrero (retired) and Justice Remedios A. Salazar-Fernando, Annex A of the Petition, Rollo
at 29-42.
[2] Annex B, id. at 43-45.
[3] G.R. No. 130866, September 16, 1998, 295 SCRA 494, holding that the appeal from the
NLRC should be initially filed with the Court of Appeals, no longer with this Court, pursuant
to the doctrine of hierarchy of courts.
[4] G.R. No. 157752, March 16, 2005, 453 SCRA 529, 543, citing Sonza vs. ABS-CBN
Broadcasting Corporation, 431 SCRA 583 (2004); Abante vs. Lamadrid Bearing & Parts
Corp., 430 SCRA 368 (2004); Traders Royal Bank vs. NLRC, 321 SCRA 467 (1999); and
Ruga vs. NLRC, 181 SCRA 266 (1990).
[5] G.R. No. 129449, June 29, 1999, 309 SCRA 424, 432, citing Violeta vs. NLRC, 280 SCRA
520 (1997).
[6] Superseded Policy Instruction No. 20, cited in Tomas Lao Construction vs. NLRC, 278 SCRA
716.
[7] Audion Electric Co. vs. NLRC, G.R. No. 106648, June 17, 1999, 308 SCRA 340, 350, citing
Ochoco vs. NLRC, 120 SCRA 774; Capitol Industrial Construction Corp. vs. NLRC, 221
SCRA 469; Phil. National Construction Corp. vs. NLRC, 174 SCRA 191; Philippine
National Construction Corporation vs. NLRC, 215 SCRA 204; Aurora Land Projects Corp.
vs. NLRC, 266 SCRA 48; and Tomas Lao Construction vs. NLRC, ibid.
[8] G.R. No. 139135, January 26, 2004, 421 SCRA 406, 407, cited in ACD Investigation Security
Agency, Inc. vs. Daquera, G.R. No. 147473, March 30, 2004, 426 SCRA 494, 499.
[9] G.R. No. 138956, August 6, 2003, 408 SCRA 478, 483, citing Cruz vs. NLRC, 324 SCRA
770 (2000).
[10] Hodieng Concrete Products vs. Emilia, G.R. No. 149180, February 14, 2005 at 7, see Article
27 of the Labor Code, as amended by Section 34, R.A. 6715 and citing Philtread Tire &
Rubber Corporation, G.R. No. 142759, November 10, 2004 at 8-9, Bolinao Security and
Investigation Service, Inc. vs. Toston, ibid., Cebu Marine Beach Resort vs. NLRC, 414 SCRA
173 (2003) and Damasco vs. NLRC, 346 SCRA 714 (2000).
[11] Ibid., citing Philtread Tire & Rubber Corporation, ibid., Bolinao Security and Investigation
Service, Inc. vs. Toston, ibid., Jardine Davies, Inc. vs. NLRC, 311 SCRA 289 (1999) and
Lopez vs. NLRC, 297 SCRA 508 (1998).
[12] Ibid., citing Cebu Marine Beach Resort vs. NLRC, supra., Samarca vs. Arc-Men Industries,
Inc., supra and Philippine Tobacco Flue-Curing and Redrying Corp. vs. NLRC, et al., 300
SCRA 37 (1998).
[13] 1990 October 29, 1992 = 2 yrs.
Daily Rate - P104.00
P104.00 x 6 days = P624.00 x 4 weeks
P2,496.00 per month x 2 yrs. = P4,992.00
