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G.R. No. 204406. February 26, 2014.*

MACARTHUR MALICDEM and HERMENIGILDO FLORES,
petitioners, vs. MARULAS INDUSTRIAL CORPORATION and
MIKE MANCILLA, respondents. 

Labor Law; Regular Employees; When an employer renews a contract

of employment after the lapse of the six-month probationary period, the
employee thereby becomes a regular employee. No employer is allowed to
determine indefinitely the fitness of its employees.—Under Article 281 of the
Labor Code, however, “an employee who is allowed to work after a
probationary period shall be considered a regular employee.” When an
employer renews a contract of employment after the lapse of the six-month
probationary period, the employee thereby becomes a regular employee. No
employer is allowed to determine indefinitely the fitness of its employees.
While length of time is not the controlling test for project employment, it is
vital in determining if the employee was hired for a specific undertaking or
tasked to perform functions vital, necessary and indispensable to the usual
business of trade of the employer. Thus, in the earlier case of Maraguinot,
Jr. v. NLRC, 284 SCRA 539 (1998), it was ruled that a project or work pool
employee, who has been: (1) continuously, as opposed to intermittently,
rehired by the same employer for the same tasks or nature of tasks; and (2)
those tasks are vital, necessary and indispensable to the usual business or
trade of the employer, must be deemed a regular employee.

Same; Same; The test to determine whether employment is regular or

not 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 to determine whether employment is regular or not is the
reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. 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

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* THIRD DIVISION.

564

need for its performance as sufficient evidence of the necessity, if not

indispensability of that activity to the business.
Same; Same; An employment ceases to be coterminous with specific
projects when the employee is continuously rehired due to the demands of
the employer’s business and re-engaged for many more projects without
interruption.—Granting that they were project employees, the petitioners
could only be considered as regular employees as the two factors

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enumerated in Maraguinot, Jr., are present in this case. It is undisputed that
the petitioners were continuously rehired by the same employer for the same
position as extruder operators. As such, they were responsible for the
operation of machines that produced the sacks. Hence, their work was vital,
necessary and indispensable to the usual business or trade of the employer.
In D.M. Consunji, Inc. v. Estelito Jamin, 670 SCRA 235 (2012), and
Liganza v. RBL Shipyard Corporation, 504 SCRA 678 (2006), the Court
reiterated the ruling that an employment ceases to be coterminous with
specific projects when the employee is continuously rehired due to the
demands of the employer’s business and re-engaged for many more projects
without interruption.
Same; Same; Project Employees; The project employment contracts
that the petitioners were made to sign every year since the start of their
employment were only a stratagem to violate their security of tenure in the
company.—The respondents cannot use the alleged expiration of the
employment contracts of the petitioners as a shield of their illegal acts. The
project employment contracts that the petitioners were made to sign every
year since the start of their employment were only a stratagem to violate
their security of tenure in the company. As restated in Poseidon Fishing v.
NLRC, 482 SCRA 717 (2006), “if from the circumstances it is apparent that
periods have been imposed to preclude acquisition of tenurial security by
the employee, they should be disregarded for being contrary to public
policy.”
Same; Project Employees; Construction Industry; It is widely known
that in the construction industry, a project employee’s work depends on the
availability of projects, necessarily the duration of his employment.—The
respondents’ invocation of William Uy Construction Corp. v. Trinidad, 615
SCRA 180 (2010), is misplaced because it is applicable only in cases
involving the tenure of project employees

565

in the construction industry. It is widely known that in the construction

industry, a project employee’s work depends on the availability of projects,
necessarily the duration of his employment. It is not permanent but
coterminous with the work to which he is assigned. It would be extremely
burdensome for the employer, who depends on the availability of projects,
to carry him as a permanent employee and pay him wages even if there are
no projects for him to work on. The rationale behind this is that once the
project is completed it would be unjust to require the employer to maintain
these employees in their payroll. To do so would make the employee a
privileged retainer who collects payment from his employer for work not
done. This is extremely unfair to the employers and amounts to labor
coddling at the expense of management.”
Same; Termination of Employment; Under Article 279 of the Labor
Code, 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.—Now that it has been
clearly established that the petitioners were regular employees, their
termination is considered illegal for lack of just or authorized causes. Under
Article 279 of the Labor Code, an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and

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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. The law intends the award of backwages and similar benefits
to accumulate past the date of the LA decision until the dismissed employee
is actually reinstated.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
  Urbano, Palamos & Fabros for petitioners.
  Fortun, Narvasa & Salazar for respondents. 

566

MENDOZA, J.:
This petition for review on certiorari[1] under Rule 45 of the
Rules of Court filed by Macarthur Malicdem (Malicdem) and
Hermenigildo Flores (Flores) assails the July 18, 2012 Decision[2]
and the November 12, 2012 Resolution[3] of the Court of Appeals
(CA) in CA-G.R. SP No. 124470, dismissing their petition for
certiorari under Rule 65 in an action for illegal dismissal.
 
The Facts:
A complaint[4] for illegal dismissal, separation pay, money
claims, moral and exemplary damages, and attorney’s fees was filed
by petitioners Malicdem and Flores against respondents Marulas
Industrial Corporation (Marulas) and Mike Mancilla (Mancilla),
who were engaged in the business of manufacturing sacks intended
for local and export markets.
Malicdem and Flores were first hired by Marulas as extruder
operators in 2006, as shown by their employment contracts. They
were responsible for the bagging of filament yarn, the quality of pp
yarn package and the cleanliness of the work place area. Their
employment contracts were for a period of one (1) year. Every year
thereafter, they would sign a Resignation/Quitclaim in favor of
Marulas a day after their contracts ended, and then sign another
contract for one (1) year. Until one day, on December 16, 2010,
Flores was told not to report for work anymore after being asked to
sign a

_______________
[1] Rollo, pp. 26-44.
[2] Id., at pp. 8-21; penned by Associate Justice Celia C. Librea-Leagogo with
Associate Justices Franchito N. Diamante and Abraham B. Borreta, concurring.
[3] Id., at pp. 23-24; penned by Associate Justice Celia C. Librea-Leagogo with
Associate Justices Franchito N. Diamante and Abraham B. Borreta, concurring.
[4] Id., at pp. 63-64.

567

paper by Marulas’ HR Head to the effect that he acknowledged the

completion of his contractual status. On February 1, 2011, Malicdem
was also terminated after signing a similar document. Thus, both
claimed to have been illegally dismissed.
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Marulas countered that their contracts showed that they were
fixed-term employees for a specific undertaking which was to work
on a particular order of a customer for a specific period. Their
severance from employment was due to the expiration of their
contracts.
On February 7, 2011, Malicdem and Flores lodged a complaint
against Marulas and Mancilla for illegal dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a decision[5]
in favor of the respondents, finding no illegal dismissal. He ruled
that Malicdem and Flores were not terminated and that their
employment naturally ceased when their contracts expired. The LA,
however, ordered Marulas to pay Malicdem and Flores their
respective wage differentials, to wit:

WHEREFORE, the complaints for illegal dismissal are dismissed for

lack of merit. Respondent Marulas Industrial Corporation is, however,
ordered to pay complainants wage differential in the following amounts:

1. Macarthur Malicdem P20,111.26

     

  2/2/07 – 6/13/08 = None  

  6/14/08 – 8/27/08 = 2.47 mos.  

  P377-P362 = P15  

  x 26 days x 2.47 mos. = 963.30

  8/28/08 – 6/30/10 = 22.06 mos.  

  P382-P362 = P20  

  x 26 days x 22.06 mos. = 11,471.20

_______________
[5] Id., at pp. 141-149. Penned by Labor Arbiter Raymund M. Celino.

568

  7/1/10 – 2/2/11 = 7.03 mos.  

  P404-P362 = P42  

  x 26 days x 7.03 mos. = 7,676.16

    20,111.26

     

; and    

     

2. Hermenigildo Flores P18,440.50

     

  2/2/08 – 6/13/08 = 4.36 mos. None  

  6/14/08 – 8/27/08 = 963.30

  8/28/08 – 6/30/10 = 11,471.20

  7/1/10 – 12/16/10 = 5.50 mos.  

  P404 – P362 = P42  

  x 26 days x 5.50 mos. = 6,006.00

    18,440.50

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All other claims are dismissed for lack of merit.

SO ORDERED.[6]

 
Malicdem and Flores appealed to the NLRC which partially
granted their appeal with the award of payment of 13th month pay,
service incentive leave and holiday pay for three (3) years. The
dispositive portion of its December 19, 2011 Decision[7] reads:

WHEREFORE, the appeal is GRANTED IN PART. The Decision of

Labor Arbiter Raymund M. Celino, dated July 13, 2011, is MODIFIED. In
addition to the award of salary differentials, complainants should also be
awarded 13th month pay, service incentive leave and holiday pay for three
years.
SO ORDERED.[8]

_______________
[6] Id., at p. 148.
[7] Id., at pp. 175-183. Penned by Commissioner Dolores M. Peralta-Beley.
[8] Id., at p. 182.

569

Still, petitioners filed a motion for reconsideration, but it was

denied by the NLRC on February 29, 2011.
Aggrieved, Malicdem and Flores filed a petition for certiorari
under Rule 65 with the CA.
On July 18, 2012, the CA denied the petition,[9] finding no grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of the NLRC. It ruled that the issue of whether or not the
petitioners were project employees or regular employees was factual
in nature and, thus, not within the ambit of a petition for certiorari.
Moreover, it accorded respect and due consideration to the factual
findings of the NLRC, affirming those of the LA, as they were
supported by substantial evidence.
On the substantive issue, the CA explained that “the repeated and
successive rehiring of project employees do not qualify them as
regular employees, as length of service is not the controlling
determinant of the employment tenure of a project employee, but
whether the employment has been fixed for a specific project or
undertaking, its completion has been determined at the time of the
engagement of the employee.”[10]
Corollarily, considering that there was no illegal dismissal, the
CA ruled that payment of backwages, separation pay, damages, and
attorney’s fees had no factual and legal bases. Hence, they could not
be awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for
reconsideration, but their pleas were denied in the CA Resolution,
dated November 12, 2012.
 
The Petition

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Malicdem and Flores now come before this Court by way of a
petition for review on certiorari under Rule 45 of the Rules of Court
praying for the reversal of the CA decision anchored

_______________
 [9] Id., at p. 56.
[10] Id., at p. 55.

570

on the principal argument that the appellate court erred in affirming

the NLRC decision that there was no illegal dismissal because the
petitioners’ contracts of employment with the respondents simply
expired. They claim that their continuous rehiring paved the way for
their regularization and, for said reason, they could not be
terminated from their jobs without just cause.
In their Comment,[11] the respondents averred that the petitioners
failed to show that the CA erred in affirming the NLRC decision.
They posit that the petitioners were contractual employees and their
rehiring did not amount to regularization. The CA cited William Uy
Construction Corp. v. Trinidad,[12] where it was held that the
repeated and successive rehiring of project employees did not
qualify them as regular employees, as length of service was not the
controlling determinant of the employment tenure of a project
employee, but whether the employment had been fixed for a specific
project or undertaking, its completion had been determined at the
time of the engagement of the employee. The respondents add that
for said reason, the petitioners were not entitled to full backwages,
separation pay, moral and exemplary damages, and attorney’s fees.
Now, the question is whether or not the CA erred in not finding
any grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC.
 
The Court’s Ruling:
The Court grants the petition.

_______________
[11] Id., at pp. 227-235.
[12]  G.R. No. 183250, March 10, 2010, 615 SCRA 180, citing Caseres v.
Universal Robina Sugar Milling Corporation, 560 Phil. 615; 534 SCRA 356 (2007).

571

The petitioners have convincingly shown that they should be

considered regular employees and, as such, entitled to full
backwages and other entitlements.
A reading of the 2008 employment contracts,[13] denominated as
“Project Employment Agreement,” reveals that there was a
stipulated probationary period of six (6) months from its
commencement. It was provided therein that in the event that they
would be able to comply with the company’s standards and criteria
within such period, they shall be reclassified as project employees
with respect to the remaining period of the effectivity of the
contract. Specifically, paragraph 3(b) of the agreement reads:

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The SECOND PARTY hereby acknowledges, agrees and understands
that the nature of his/her employment is probationary and on a project-basis.
The SECOND PARTY further acknowledges, agrees and understands that
within the effectivity of this Contract, his/her job performance will be
evaluated in accordance with the standards and criteria explained and
disclosed to him/her prior to signing of this Contract. In the event that the
SECOND PARTY is able to comply with the said standards and criteria
within the probationary period of six month/s from commencement of
this Contract, he/she shall be reclassified as a project employee (o)f the
FIRST PARTY with respect to the remaining period of the effectivity of
this Contract.

Under Article 281 of the Labor Code, however, “an employee

who is allowed to work after a probationary period shall be
considered a regular employee.” When an employer renews a
contract of employment after the lapse of the six-month
probationary period, the employee thereby becomes a regular
employee. No employer is allowed to determine indefi-

_______________
[13] Rollo, pp. 91-124.

572

nitely the fitness of its employees.[14] While length of time is not the
controlling test for project employment, it is vital in determining if
the employee was hired for a specific undertaking or tasked to
perform functions vital, necessary and indispensable to the usual
business of trade of the employer.[15] Thus, in the earlier case of
Maraguinot, Jr. v. NLRC,[16] it was ruled that a project or work pool
employee, who has been: (1) continuously, as opposed to
intermittently, rehired by the same employer for the same tasks or
nature of tasks; and (2) those tasks are vital, necessary and
indispensable to the usual business or trade of the employer, must be
deemed a regular employee. Thus:

x  x  x. Lest it be misunderstood, this ruling does not mean that simply

because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that
we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired 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, then the
employee must be deemed a regular employee, pursuant to Article 280 of
the Labor Code and jurisprudence. To rule otherwise would allow
circumvention of labor laws in industries not falling within the ambit of
Policy Instruction No. 20/Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by project or work pool
employees who have already gained the status of regular employees by the
employer’s conduct. 

_______________

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[14] Voyeur Visage Studio, Inc. v. Court of Appeals, 493 Phil. 831; 453 SCRA 721
(2005), citing CENECO v. NLRC, G.R. No. 106246, September 1, 1994, 236 SCRA
108.
[15] Liganza v. RBL Shipyard Corporation, 534 Phil. 662; 504 SCRA 678 (2006).
[16] 348 Phil. 580; 284 SCRA 539 (1998).

573

The test to determine whether employment is regular or not is the

reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the
employer. 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.[17]
Guided by the foregoing, the Court is of the considered view that
there was clearly a deliberate intent to prevent the regularization of
the petitioners.
To begin with, there is no actual project. The only stipulations in
the contracts were the dates of their effectivity, the duties and
responsibilities of the petitioners as extruder operators, the rights
and obligations of the parties, and the petitioners’ compensation and
allowances. As there was no specific project or undertaking to speak
of, the respondents cannot invoke the exception in Article 280 of the
Labor Code.[18] This is a clear attempt to frustrate the regularization
of the petitioners and to circumvent the law.
Next, granting that they were project employees, the petitioners
could only be considered as regular employees as the two factors
enumerated in Maraguinot, Jr., are present in this case. It is
undisputed that the petitioners were continuously rehired by the
same employer for the same position as extruder operators. As such,
they were responsible for the operation of machines that produced
the sacks. Hence, their work was vital, necessary and indispensable
to the usual business or trade of the employer.

_______________
[17] Integrated Contractor and Plumbing Works, Inc. vs. NLRC, 503 Phil. 875;
466 SCRA 265 (2005).
[18] 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.

574

In D.M. Consunji, Inc. v. Estelito Jamin[19] and Liganza v. RBL

Shipyard Corporation,[20] the Court reiterated the ruling that an
employment ceases to be coterminous with specific projects when
the employee is continuously rehired due to the demands of the
employer’s business and reengaged for many more projects without
interruption.
The respondents cannot use the alleged expiration of the
employment contracts of the petitioners as a shield of their illegal
acts. The project employment contracts that the petitioners were
made to sign every year since the start of their employment were
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only a stratagem to violate their security of tenure in the company.
As restated in Poseidon Fishing v. NLRC,[21] “if from the
circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they
should be disregarded for being contrary to public policy.”
The respondents’ invocation of William Uy Construction Corp. v.
Trinidad[22] is misplaced because it is applicable only in cases
involving the tenure of project employees in the construction
industry. It is widely known that in the construction industry, a
project employee’s work depends on the availability of projects,
necessarily the duration of his employment.[23] It is not permanent
but coterminous with the work to which he is assigned.[24] It would
be extremely burdensome for the employer, who depends on the
availability of projects, to carry him as a permanent employee and
pay him wages even if

_______________
[19] G.R. No. 192514, April 18, 2012, 670 SCRA 235.
[20] 534 Phil. 662; 504 SCRA 678 (2006).
[21] 518 Phil. 146; 482 SCRA 717 (2006).
[22] Supra note 12.
[23] Archbuild Masters and Construction, Inc. and Joaquin C. Regala v. NLRC
and Rogelio Cayanga, 321 Phil. 869; 251 SCRA 483 (1995).
[24] Mamansag v. NLRC, G.R. No. 97520, February 9, 1992, 218 SCRA 722.

575

there are no projects for him to work on.[25] The rationale behind
this is that once the project is completed it would be unjust to
require the employer to maintain these employees in their payroll.
To do so would make the employee a privileged retainer who
collects payment from his employer for work not done. This is
extremely unfair to the employers and amounts to labor coddling at
the expense of management.”[26]
Now that it has been clearly established that the petitioners were
regular employees, their termination is considered illegal for lack of
just or authorized causes. Under Article 279 of the Labor Code, 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. The law intends the award of backwages and similar
benefits to accumulate past the date of the LA decision until the
dismissed employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The assailed July
18, 2012 decision of the Court of Appeals and its November 12,
2012 Resolution in CA-G.R. SP No. 124470, are hereby
ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is
hereby ordered to reinstate petitioners Macarthur Malicdem and
Hermenigildo Flores to their former positions without loss of
seniority rights and other privileges and to pay their full backwages,
inclusive of allowances and their other benefits or their monetary
equivalent computed from the time their compensations were
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withheld from them up to the time of their actual reinstatement plus
the wage differentials stated in the July 13, 2011 decision of the
Labor Arbiter, as modified by the December 19, 2011 NLRC
decision.

_______________
[25] Cartagenas v. Romago, 258 Phil. 445; 177 SCRA 637 (1989).
[26] De Ocampo v. NLRC, 264 Phil. 728; 186 SCRA 360 (1990).

576

SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Bersamin** and Leonen,

JJ., concur.

Petition granted, judgment and resolution annulled and set

aside. 

Notes.—A project employee is one who is hired for a specific

project or undertaking, and the completion or termination of such
project or undertaking has been determined at the time of
engagement of the employee. (D.M. Consunji Corporation vs. Bello,
702 SCRA 347 [2013])
The extension of the employment of a project employee long
after the supposed project has been completed removes the
employee from the scope of a project employee and makes him a
regular employee. (Id.)
——o0o——

_______________
** Designated Acting Member in lieu of Associate Justice Roberto A. Abad, per
Special Order No. 1640 dated February 19, 2014.

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