G.R. No. 116781 September 5, 1997
Tomas Lao Construction, LVM Construction Corporation, Thomas and James Developers (Phil.), Inc., petitioners, vs. National Labor Relations Commission, Mario O. Labendia, Sr., Roberto Labendia, Narciso Adan, Florencio Gomez, Ernesto Bagatsolon, Salvador Babon, Paterno Bisnar, Cipriano Bernales, Angel Mabulay, Sr., Leo Surigao, and Roque Morillo, respondents.

FACTS

From October to December 1990, private respondents individually filed complaints for illegal dismissal against petitioners. They were construction workers hired for various periods, alternately working for petitioners Tomas Lao Corporation (TLC), Thomas and James Developers (T&J), and LVM Construction Corporation, collectively referred to as the “Lao Group of Companies.” These three entities, exclusively controlled by the Lao family, were engaged in public roads and bridges construction under joint venture agreements, leasing tools and equipment to one another and allowing the utilization of each other’s employees. Workers were transferred or rehired among the companies’ successive or overlapping projects. In 1989, the companies issued a memorandum requiring workers to sign employment contract forms and clearances, antedated to January 10, 1989, describing them as project employees hired for a definite period. Except for one, private respondents refused to sign, contending this was a scheme to downgrade their status from regular to project employees. Consequently, their salaries were withheld, they were asked to explain their refusal, and their services were terminated. The Labor Arbiter dismissed the complaints, finding the workers to be project employees, but granted separation pay. The NLRC reversed this decision, finding the workers to be regular employees illegally dismissed and pierced the veil of corporate fiction among the three petitioner corporations.

ISSUE

The main issue is whether private respondents are project employees or regular employees. Subsidiary issues include: (1) whether they were terminated for a just cause; (2) the propriety of the back wages awarded; and (3) the correctness of piercing the corporate veil.

RULING

The Supreme Court ruled that private respondents are regular employees, not project employees. The principal test for project employment is whether employees are assigned to a specific project or undertaking with a specified duration at the time of engagement. Although the workers were initially hired for specific projects, their repeated re-hiring and continuous need for their services over a long span of time (the shortest being seven years) made them regular employees. The Court noted the petitioners’ admission that projects were prosecuted simultaneously or successively, with workers being transferred and rehired in another on-going project after completion of one. This continuous rehiring within the framework of the Lao Group of Companies indicated that the workers were part of a work pool from which petitioners drew workers for various projects, solidifying their status as regular employees. The Court also found the dismissal to be illegal, as the workers were coerced into signing contracts that would alter their employment status and were terminated for refusing. On piercing the corporate veil, the Court affirmed the NLRC’s decision, as petitioners themselves admitted the three corporations operated as one, intermingling resources and manpower. The awards for separation pay and back wages were sustained.