[How to deal with doubts in employment contract interpretation] Innodata argued that it was constrained to hire new employees

strained to hire new employees for a fixed period

09 PRICE V. INNODATA of not more than one year.
September 30, 2008 | Chico-Nazaro, J. | G.R. No. 178505 ○ They asserted that the petitioners were not illegally dismissed since their
employment was terminated due to the expiration of their terms of
Petitioner/s: Cherry J. Price, Stephanie G. Domingo and Lolita Arbilera employment and that petitioners were estopped from asserting a position
Respondent/s: Innodata Phils., Inc.,/Innodata Corporation, Leo Rabang and Jane contrary to the contracts which they had entered into knowingly, voluntarily
Navarette and wilfully.
● The LA found the petitioners’ complaint for Illegal dismissal and damages
Doctrine: The employment status of a person is defined and prescribed by law and meritorious. It ordered full reinstatement and backwages.
not by what the parties say it should be. ○ The LA held that as formatters, the petitioners occupied jobs that were
necessary, desirable and indispensable to the business of Innodata and that
Equally important to consider is that a contract of employment is impressed with
by the very nature of their work, they should be considered regular
public interest such that labor contracts must yield to the common good. Thus, employees of Innodata who were entitled to security of tenure.
provisions of applicable statutes are deemed written into the contract, and the parties ● Upon appeal to the NLRC, the decision of the LA was reversed and Innodata
are not at liberty to insulate themselves and their relationships from the impact of was absolved of the charge of illegal dismissal.
labor laws and regulations by simply contracting with each other. ○ The NLRC found that petitioners were not regular employees, but were
fixed-term employees as stipulated in their respective contracts of
Under the Labor Code, the applicable test to determine whether an employment employment.1
○ The determining factor of such contracts is not the duty of the employee but
should be considered regular or non-regular is the reasonable connection between
the day certain agreed upon by the parties for the commencement and
the particular activity performed by the employee in relation to the usual business or termination of the employment relationship.
trade of the employer. ○ The NLRC observed that the petitioners freely and voluntarily entered into
the fixed-term contracts and, as such, Innodata was not guilty of illegal
Fixed-term employment contracts are the exception rather than the general rule. dismissal when it terminated employment upon their contracts’ expiration..
○ The petitioners’ MR was denied by the NLRC.
Facts: ● The case was brought before the CA under R65 and the CA sustained the ruling
● Innodata was a domestic corporation engaged in the data encoding and data of the NLRC that the petitioners were not illegally dismissed.
conversion business. It employed encoders, indexers, formatters, and others to ○ Petitioners admitted entering into contracts of employment with Innodata for
maintain its business and accomplish job orders of its clients. a term of only one year and for a project called Earthweb.
○ Resp. Leo Rabang was the HR Manager; Resp. Jane Navarette was Project ○ The CA also stated that there was no showing that they entered into the
Manager fixed-term contracts unknowingly or involuntarily and that the parties dealt
○ Innodata had since ceased operations due to business losses in 2002. with each other on more or less equal terms, with no moral dominance
● Pets. Price, Domingo and Arbilera were employed as formatters. exercised on the petitioners by Innodata.
○ The parties executed a “Contract of Employment for a Fixed Period” wherein ○ The CA expounded that in fixed-term contracts, the stipulated period of
it was stipulated that their employment would last for one year, until employment is governing and not the nature thereof. Even though the
February 16, 2000. petitioners were performing functions that are necessary and desirable, they
○ On such date, Rabang, as HR Manager, wrote a letter to petitioners, did not become regular employees due to the fixed term.
informing them of their last day of work as their employment had already ○ The contracts were also not imposed to preclude them from acquiring
ceased due to the end of their contract. security of tenure.
● Petitioners filed a Complaint for illegal dismissal and damages against Innodata, ○ MR denied.
Rabang and Navarette.
○ They claimed that they should be considered regular employees since their Ruling:
positions as formatters were necessary and desirable to the usual business W/N petitioners were hired under fixed-term employment contracts – NO. There
of Innodata as an encoding, conversion and data processing company. were no valid fixed-term contracts and petitioners were regular employees who could
○ They also argued that they could not be considered project employees not be dismissed except for just or authorized cause.
considering that their employment was not coterminous with any project or ● The employment status of a person is defined and prescribed by law and not by
undertaking, the termination of which was predetermined. what the parties say it should be.
● Innodata explained that the bulk of the work that the company was engaged in
involved data processing and encoding and that almost half of its employees did
1
data encoding work. Due to the wide range of services rendered to its clients, The NLRC applied Brent School, Inc. v. Zamora and St. Theresa’s
School of Novaliches Foundation v. National Labor Relations Commission, in which
this Court upheld the validity of fixed-term contracts.
 ○ Equally important to consider is that a contract of employment is impressed ○ “Project employees” as those workers hired (1) for a specific project or
with public interest such that labor contracts must yield to the common good. undertaking, and wherein (2) the completion or termination of such project
○ Thus, provisions of applicable statutes are deemed written into the contract, has been determined at the time of the engagement of the employee.
and the parties are not at liberty to insulate themselves and their ● Under Section 3, Article XVI of the Constitution, it is the policy of the State to
relationships from the impact of labor laws and regulations by simply assure the workers of security of tenure and free them from the bondage of
contracting with each other. uncertainty of tenure woven by some employers into their contracts of
● Under the Labor Code, the applicable test to determine whether an employment employment.
should be considered regular or non-regular is the reasonable connection ● Unless they have exceeded their authority, corporate officers are, as a general
between the particular activity performed by the employee in relation to the usual rule, not personally liable for their official acts, because a corporation, by legal
business or trade of the employer. fiction, has a personality separate and distinct from its officers, stockholders and
○ In the case at bar, the primary business of Innodata is data encoding, and members.
the formatting of the data entered into the computers is an essential part of ○ In the absence of evidence that they acted with malice or bad faith herein,
the process of data encoding. the Court exempts the individual respondents, Leo Rabang and Jane
○ Formatting organizes the data encoded, making it easier to understand for Navarette, from any personal liability for the illegal dismissal of petitioners.
the clients and/or the intended end users thereof. Undeniably, the work
performed by petitioners was necessary or desirable in the business or trade Dispositive
of Innodata. WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision
● Under the Civil Code, fixed-term employment contracts are not limited, as they dated 25 September 2006 and Resolution dated 15 June 2007 of the Court of
are under the present Labor Code, to those by nature seasonal or for specific Appeals in CA-G.R. SP No. 72795 are hereby REVERSED and SET ASIDE.
projects with predetermined dates of completion; they also include those to which Respondent Innodata Philippines, Inc./Innodata Corporation is ORDERED to pay
the parties by free choice have assigned a specific date o termination. petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera: (a) separation
○ The decisive determinant in term employment is the day certain agreed upon pay, in lieu of reinstatement, equivalent to one month pay for every year of service, to
by the parties for the commencement a termination of their employment be computed from the commencement of their employment up to the date respondent
relationship, a day certain being understood to be that which must Innodata Philippines, Inc./Innodata Corporation ceased operations; (b) full
necessarily come, although it may not be known when. backwages, computed from the time petitioners’ compensation was withheld from
○ Seasonal employment and employment for a particular project are instances them up to the time respondent Innodata Philippines, Inc./Innodata Corporation
of employment in which a period, where not expressly set down, is ceased operations; and (3) 10% of the total monetary award as attorney’s fees. Costs
necessarily implied. against respondent Innodata Philippines, Inc./Innodata Corporation.
● While this Court has recognized the validity of fixed-term employment contracts,
it has consistently held that this is the exception rather than the general rule. Notes
More importantly, a fixed-term employment is valid only under certain In Brent, the very same case invoked by respondents, the Court identified several
circumstances. [See Notes] circumstances wherein a fixed-term is an essential and natural appurtenance, to
● Even assuming that petitioners’ length of employment is material, given wit: Some familiar examples may be cited of employment contracts which may be
respondents’ muddled assertions, the SC adhered to its pronouncement in neither for seasonal work nor for specific projects, but to which a fixed term is an
Villanueva v. National Labor Relations Commission, 295 SCRA 326 (1998), to essential and natural appurtenance: overseas employment contracts, for one, to
the effect that where a contract of employment, being a contract of adhesion, is which, whatever the nature of the engagement, the concept of regular employment
ambiguous, any ambiguity therein should be construed strictly against the party with all that it implies does not appear ever to have been applied, Article 280 of the
who prepared it. Labor Code notwithstanding; also appointments to the positions of dean, assistant
○ The SC concluded that petitioners’ contracts of employment became dean, college secretary, principal, and other administrative offices in educational
effective on 16 February 1999, and that they were already working institutions, which are by practice or tradition rotated among the faculty members, and
continuously for Innodata for a year. where fixed terms are a necessity without which no reasonable
● Innodata’s contention that petitioners were project employees was also specious rotation would be possible.
and devoid of merit, according to the SC.