Philippine Supreme Court Jurisprudence

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the April 15, 2015 Decision¹ and the April 21, 2016 Resolution² of the Court of Appeals (CA) in CA-G.R. CEB-SP. No. 06909, which affirmed the May 30, 2012 Decision³ of the Voluntary Arbitrator, National Conciliation and Mediation Board, Region VII, Cebu City (VA).

Factual background

Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a duly registered domestic corporation engaged in sugar milling business. On the other hand, respondent Nagkahiusang Mamumuo sa URSUMCO-National Federation of Labor (NAMA-URSUMCO-NFL) is a legitimate labor organization acting as the sole and exclusive bargaining representative of all regular monthly paid and daily paid rank-and-file employees of URSUMCO.⁴

URSUMCO and NAMA-URSUMCO-NFL were able to successfully negotiate and enter into a Collective Bargaining Agreement (CBA) valid from January 1, 2010 to December 31, 2014. Article VI, Section 2 of the CBA enumerated the employment classification in URSUMCO, i.e., Permanent or Regular Employees and Regular Seasonal Employees.⁵

From August to September 2011, NAMA-URSUMCO-NFL filed several grievances on behalf of 78 URSUMCO regular seasonal employees. It sought for the change in the employment status of the concerned employees from regular seasonal to permanent regular and for the leveling of the salaries. After the grievance machinery failed to resolve the issue, NAMA-URSUMCO-NFL requested that the employees' concerns be submitted to voluntary arbitration. The VA required the parties to submit their respective position papers.⁶

In its Position Paper, NAMA-URSUMCO-NFL alleged that permanent or regular employees practically performed the same work as the regular seasonal employees during milling season; some regular seasonal employees would perform skilled jobs during the off-milling season, while regular or permanent employees would be assigned to utility jobs; regular seasonal employees acted as leadmen, while regular permanent or regular employees were the helpers; longer tenured employees were stuck as regular seasonal employees, while new hires were given regular or permanent status; and regular seasonal employees received lower salaries than regular or permanent employees even if they performed the same functions.⁷

On the other hand, URSUMCO countered in its Position Paper that NAMA-URSUMCO-NFL was estopped from questioning the classification of employees agreed upon by the parties in the CBA; regular seasonal employees only performed work during the milling season; there is no work done during the off-milling season as the period is devoted for repairs; it assigned regular seasonal employees to repair works during the off-milling season out of its own volition even if it could contract the same to third parties; it was a valid exercise of management prerogative to assign some of its regular seasonal employees as regular employees during off-milling season who would, in effect, be working as regular employees during the off-milling season; and to compel it to convert all of its regular seasonal employees as regular or permanent employees would give rise to a situation wherein employees are hired and classified as permanent or regular to do nothing but repair work.⁸

In its May 30, 2012 Decision, the VA sided with NAMA-URSUMCO-NFL. It held that URSUMCO's act of providing work to regular seasonal employees for several years is deemed a waiver on its part on the effects of Article VI, Section 2 of the CBA. The VA explained that URSUMCO's alleged generosity was immaterial as it should have informed the concerned regular seasonal employees that performing repair works during the off-milling season did not convert them to regular or permanent employees. It ruled:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Declaring the concerned regular seasonal employees as permanent or regular employees provided they have rendered an accumulated service of 300 days during the period they worked during off-season.

2. Denying the prayer of the Union in the standardization of pay of employees who are holding the same positions.⁹

Aggrieved, URSUMCO appealed before the CA.

CA Decision

In its April 15, 2015 Decision, the CA affirmed the VA Decision. The appellate court stated that the concerned regular seasonal employees were not temporarily laid off during the off-milling season as they were tasked to perform repair and up-keep works. It explained that the tasks assigned to them during the off-milling season were necessary to ensure the smooth and continuous operation of petitioner's machines and equipment during milling season. The CA added that there was no showing that the regular seasonal employees in question were allowed and were able to secure employment elsewhere during the off-milling season. The appellate court postulated that NAMA-URSUMCO-NFL was not estopped from questioning the CBA provisions because the nature of employment is determined by law, regardless of any contract expressing otherwise. Thus, it disposed:

WHEREFORE, the Petition is DENIED. The Decision dated 30 May 2012 rendered by the Office of the Voluntary Arbitrator, National Conciliation and Mediation Board, Region VII, Cebu City is hereby AFFIRMED.

SO ORDERED.¹⁰

URSUMCO moved for reconsideration, but it was denied by the CA in its April 21, 2016 Resolution.

Hence, this present petition raising:

ISSUE

WHETHER THE COURT OF APPEALS RULED IN A MANNER THAT IS CONTRARY TO LAW AND JURISPRUDENCE WHEN IT SUSTAINED THE VA DECISION THAT URSUMCO'S REGULAR SEASONAL EMPLOYEES ARE ALL PERMANENT/REGULAR EMPLOYEES.¹¹

URSUMCO argued that the CBA is the law between the parties and that they are bound to comply with its provisions. It pointed out that NAMA-URSUMCO-NFL's contention to regularize all its regular seasonal employees disregards the provisions of the CBA. URSUMCO explained that its act of magnanimity in assigning its regular seasonal employees to repair works during the off-milling season is in consonance with the express provision of the CBA that regular seasonal employees would be given preference in the performance of such repair jobs during the off-milling season. It also pointed out that the regular seasonal employees concerned are hired to perform repairs which are in the nature of specific projects or undertaking with a predetermined termination or completion at the time of the engagement.

Further, URSUMCO lamented that the VA's sweeping declaration that all regular seasonal employees are deemed regular or permanent employees violated its management prerogatives in determining its appropriate organizational structure. Lastly, it noted that the complaint for regularization had been mooted by the fact that most of the concerned employees had been regularized, while others had resigned, retired or died.

In its Comment¹² dated August 14, 2017, NAMA-URSUMCO-NFL countered that the VA never made a sweeping declaration that all regular seasonal employees of URSUMCO are now regular or permanent employees as the VA decision only referred to the 78 concerned employees. It elucidated that the concerned employees had been performing tasks related to the operation of URSUMCO for the entire year as they are engaged even during the off-milling season. NAMA-URSUMCO-NFL pointed out that the concerned employees do not fall within the purview of regular seasonal employees as defined in the CBA because they occupied the same positions and performed the same functions every off-milling season.

In its Reply¹³ dated September 11, 2017, URSUMCO rebutted that the regular seasonal employees do not perform work related to its regular operations during off-milling season as they are merely engaged in repairs of the machineries and equipment. It also reiterated that the case had been mooted by the regularization or the severance from service of the concerned employees.

The Court's Ruling

The petition is without merit.

A CBA is a negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work, and all other terms and conditions of employment in a bargaining unit � it is the law between the parties absent any ambiguity or uncertainty.¹⁴ Like any other contract, the parties agree on the terms and stipulations by which their relationship is to be governed. Thus, under the CBA, the employer and the employees' representative define the terms of employment, i.e., wages, work hours, and the like.

As defined above, the parties are given wide latitude on what may be negotiated and agreed upon in the CBA. Nevertheless, the employment status cannot be bargained away with as the same is defined by law.¹⁵ In other words, notwithstanding the stipulations in an employment contract or a duly negotiated CBA, the employment status of an employee is ultimately determined by law. Hence, URSUMCO errs in claiming that NAMA-URSUMCO-NFL is estopped from seeking regularization of the concerned employees because the CBA had already laid out the categories of employment in the company. It is true that the CBA between URSUMCO and NAMA-URSUMCO-NFL is binding between the parties such that they cannot disregard the terms of employment agreed upon � the employer cannot deny employees' benefits granted by the CBA and the employee cannot renege on the obligations imposed by it. Nonetheless, when it comes to the employment status itself of the concerned employees, the CBA is subservient to what the law says their employment status is.

Under Article 295 of the Labor Code, as amended, four types of employment status are enumerated: (a) regular employees; (b) project employees; (c) seasonal employees; and (d) casual employees. Meanwhile, the landmark case of Brent School, Inc. v. Zamora¹⁶ identified fixed-term employment as another valid type of employment.

In the present case, URSUMCO argues that the concerned employees are regular seasonal employees as they only perform work during the milling season, and the tasks assigned during the off-milling season are limited only to repairs. On the other hand, NAMA-URSUMCO-NFL believes that the employees in question are regular employees as they are not laid off during the off-milling season.

Article 295 of the Labor Code defines seasonal employees as those whose work or engagement is seasonal in nature and the employment is only for the duration of the season. Seasonal employment becomes regular seasonal employment when the employees are called to work from time to time.¹⁷ On the other hand, those who are employed only for a single season remain as seasonal employees.¹⁸ As a consequence of regular seasonal employment, the employees are not considered separated from service during the off-milling season, but are only temporarily laid off or on leave until re-employed.¹⁹ Nonetheless, in both regular seasonal employment and seasonal employment, the employee performs no work during the off-milling season.

Here, the concerned URSUMCO employees are performing work for URSUMCO even during the off-milling season as they are repeatedly engaged to conduct repairs on the machineries and equipment. Strictly speaking, they cannot be classified either as regular seasonal employees or seasonal employees as their work extended even beyond the milling season. The nature of the activities performed by the employees, considering the employer's nature of business, and the duration and scope of work to be done factor heavily in determining the nature of employment.²⁰

On the other hand, regular employees are those who are engaged to perform activities which are usually necessary or desirable in the usual trade or business of the employer.²¹ In Abasolo v. National Labor Relations Commission,²² the Court expounded on the standard observed in determining regular employment status, to wit:

The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists.

It cannot be gainsaid that the conduct of repairs on URSUMCO's machineries and equipment is reasonably necessary and desirable in its sugar milling business. It is unreasonable to limit only to activities pertaining to the actual milling process as those necessary in URSUMCO's usual trade or business. Without the constant repairs conducted during the off-milling season, the equipment used during the milling season would not have worked efficiently and productively.

URSUMCO does not deny that the concerned employees are engaged to work during the off-milling season to conduct repairs on the machineries and equipment used in sugar milling. It, however, claims that it hired them out of its own magnanimity as it could have outsourced the same at a cheaper cost. In addition, URSUMCO posits that the repairs conducted fall within the purview of a "project" as defined in ALU-TUCP v. National Labor Relations Commission²³ which is a particular job or undertaking that is not within the regular business of the corporation.

In ALU-TUCP, the Court agreed that the employees therein who were hired in connection with the Five Year Expansion Program of the National Steel Corporation (NSC) were project employees, to wit:

The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. The case at bar presents what appears to our mind as a typical example of this kind of "project."

NSC undertook the ambitious Five[-]Year Expansion Program I and II with the ultimate end in view of expanding the volume and increasing the kinds of products that it may offer for sale to the public. The Five[-] Year Expansion Program had a number of component projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet Steel-Making Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals Project." Instead of contracting out to an outside or independent contractor the tasks of constructing the buildings with related civil and electrical works that would house the new machinery and equipment, the installation of the newly acquired mill or plant machinery and equipment and the commissioning of such machinery and equipment, NSC opted to execute and carry out its Five[-] Year Expansion Projects "in house," as it were, by administration. The carrying out of the Five[-]Year Expansion Program (or more precisely, each of its component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC. Each component project, of course, begins and ends at specified times, which had already been determined by the time petitioners were engaged. We also note that NSC did the work here involved � the construction of buildings and civil and electrical works, installation of machinery and equipment and the commissioning of such machinery � only for itself. Private respondent NSC was not in the business of constructing buildings and installing plant machinery for the general business community, i.e., for unrelated, third party, corporations. NSC did not hold itself out to the public as a construction company or as an engineering corporation.²⁴

The repairs performed by the concerned URSUMCO employees cannot be treated similarly with the Five-Year Expansion Program of NSC. In ALU-TUCP, the employees engaged to work in the Five-Year Expansion Program was correctly categorized as project employees because the expansion program is separate and distinct from NSC's steel manufacturing business. It was a singular, predetermined project with the goal of increasing NSC's business capacity.

On the other hand, the repairs conducted by URSUMCO's regular seasonal employees during the off-milling season are closely intertwined with its sugar milling business as they were for the upkeep and maintenance of equipment and machineries to be used once the milling season commences anew. In addition, the concerned employees were repeatedly and continuously tasked to handle the repairs during the off-milling season. Their repeated engagement to conduct repairs during the off-milling season is a manifestation of the necessity and desirability of their work to URSUMCO's business.²⁵ Thus, it is erroneous to label the repairs as "projects" because they were done within URSUMCO's regular business.

Further, the fact that URSUMCO hired the regular seasonal employees to do the repairs during the off-milling season out of its own magnanimity is immaterial. To reiterate, employment status is primarily determined by the nature of the employer's business and the duration and connection of the tasks performed by the employee � not by the intent or motivations of the parties.

In fact, even a plain reading of the CBA between URSUMCO and NAMA-URSUMCO-NFL would lead to a conclusion that the concerned employees fall under the category of a regular or permanent employee and not a regular seasonal employee. It is axiomatic that in interpreting contracts, the words shall be given their natural and ordinary meaning unless a technical meaning was intended.²⁶ The CBA between URSUMCO and NAMA-URSUMCO-NFL defines a regular employee as one who has passed the probation requirement of a job or position which is connected with the regular operation of URSUMCO. On the other hand, a regular seasonal employee is defined as one who regularly works only during the milling season and may be laid off during the off-milling season or is given preference to work on tasks of variable duration.

URSUMCO, in its Reply, explained that the concerned employees cannot be considered regular employees as repairs are not part of its regular milling operation. It added that it merely complied with the provisions of the CBA that regular seasonal employees would be given preference for engagement for tasks of variable duration, such as repairs that are dependent on what machines are to be fixed.

A reading of the CBA between URSUMCO and NAMA-URSUMCO-NFL would show that the definition of a regular employee is not limited to those whose functions are related only to the milling operation of URSUMCO, but to its regular operation. As pointed out by the VA, the concerned employees were repeatedly hired in the off-milling season to conduct repairs on URSUMCO's machineries. Thus, it could readily be seen that the conduct of repairs is part of URSUMCO's regular operation � albeit done only after the milling season. URSUMCO's regular operations should not be confined to its milling operation because to do so would minimize an otherwise integral part of its business. The repairs made on the machineries and equipment used in the milling season are necessary for their upkeep and maintenance so that any damage or concern brought about by ordinary wear and tear of the machines will not be a problem once the milling season comes back.

Thus, the concerned employees cannot be categorized as regular seasonal employees as defined under the law, jurisprudence or even the parties' CBA. First, they perform work for URSUMCO even during the off-milling season and there is no showing that they were free to work for another during the same period. Second, the tasks done are reasonably necessary and desirable in URSUMCO's regular operation or business.

Further, URSUMCO errs in claiming that the VA Decision, as affirmed by the CA, has the effect of treating all of its regular seasonal employees as regular or permanent employees. The ruling of the courts a quo only had an impact to the 78 concerned employees and did not have a sweeping declaration that all of URSUMCO's regular seasonal employees are now regular or permanent employees. As discussed above, they were correctly treated as regular employees considering the nature and duration of the functions and tasks they performed for URSUMCO. In fact, URSUMCO recognized that the ruling of the VA, as affirmed by the CA, did not involve all of its regular seasonal employees when it claimed that the case had become moot and academic, since a majority of the employees had been converted to regular or permanent status while others were no longer connected with URSUMCO due to their voluntary retirement, resignation, or death.

WHEREFORE, the petition is DENIED.

SO ORDERED.

Leonen,^** (Acting Chairperson), Gesmundo, and Hernando, JJ., concur.
Peralta (Chairperson), J., on official leave.

February 19, 2019

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on November 28, 2018 a Decision, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on February 19, 2019 at 2:30 p.m.

Endnotes:

^* Identified as "Universal Robina Sugar Milling Company" in the petition.

^** Designated as Acting Chairperson of the Third Division per Special Order No. 2617 dated November 23, 2018

¹ Penned by Associate Justice Renato C. Francisco, with Associate Justices Marilyn B. Lagura-Yap and Germano Francisco D. Legaspi, concurring; rollo, pp. 33-43.

² Penned by Associate Justice Germano Francisco D. Legaspi, with Associate Justices Marilyn B. Lagura-Yap and Edward B. Contreras, concurring; id. at 45-46.

³ Not attached in the rollo.

⁴ Rollo, p. 10.

⁵ Id. at 34.

⁶ Id.

⁷ Id. at 34-35.

⁸ Id. at 35.

⁹ Id. at 36.

¹⁰ Id. at 42-43.

¹¹ Id. at 12.

¹² Id. at 62-71.

¹³ Id. at 78-85.

¹⁴Lepanto Ceramics, Inc. v. Lepanto Ceramics Employees Association, 627 Phil. 691, 700 (2010).

¹⁵Innodata Knowledge Services, Inc. v. Inting, G.R. No. 211892, December 6, 2017.

¹⁶ 260 Phil. 747 (1990).

¹⁷Hacienda Cataywa v. Lorezo, 756 Phil. 263, 273 (2015).

¹⁸Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade, 444 Phil. 587, 596 (2003).

¹⁹Universal Robina Sugar Milling Corporation v. Acibo, 724 Phil. 489, 505 (2014).

²⁰Abasolo v. National Labor Relations Commission, 400 Phil. 86, 103 (2000).

²¹ Article 295 of the Labor Code, as amended.

²² Supra note 20, citing De Leon v. National Labor Relations Commission, 257 Phil. 626, 632-633 (1989).

²³ 304 Phil. 844 (1994).

²⁴ Id. at 852-853.

²⁵ See Fuji Television Network, Inc. v. Espiritu, 749 Phil. 388, 438 (2014).

²⁶Spouses Serrano v. Caguiat, 545 Phil. 660, 667 (2007).