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., et al., respondents.

FACTS

Private respondents, construction workers, filed complaints for illegal dismissal against petitioners Tomas Lao Construction (TLC), LVM Construction, and Thomas and James Developers (T&J), collectively known as the “Lao Group of Companies.” They alleged continuous employment for various periods ranging from 1971 to 1990 in different capacities such as foremen, welders, drivers, and operators. The three corporations, engaged in public construction and controlled by the Lao family, operated as a single business unit through joint venture agreements, interchanging tools, equipment, and employees among projects. In 1989, management issued a memorandum requiring workers to sign employment contracts that designated them as project employees with fixed-term engagements. All but one worker refused, contending this was a scheme to downgrade their status from regular to project employees. Consequently, their salaries were withheld, and they were eventually terminated for insubordination.
The Labor Arbiter initially dismissed the complaints, ruling the workers were project employees whose employment ended with each project, but awarded separation pay. On appeal, the NLRC reversed this decision. It found the workers to be regular employees, illegally dismissed without just cause and due process. The NLRC pierced the corporate veil, treating the three entities as one single employer based on their admitted intermingling of resources and manpower. Petitioners elevated the case to the Supreme Court, arguing the NLRC erred in classifying the employees as regular, in finding illegal dismissal, in awarding excessive back wages, and in disregarding their separate corporate personalities.

ISSUE

The primary issue is whether the construction workers are regular employees or project employees. Corollary issues involve the legality of their dismissal, the propriety of the monetary awards, and the application of the doctrine of piercing the corporate veil.

RULING

The Supreme Court affirmed the NLRC decision, ruling the workers are regular employees. The legal logic hinges on the nature of their tasks and the employers’ business. Regular employees are those whose work is necessary and desirable to the usual business of the employer. The Court found that the construction of roads and bridges is the regular and continuous business of the petitioner corporations. The workers performed functions that were vital, necessary, and directly related to this core business. Their repeated rehiring and deployment across successive projects undertaken by the interrelated companies indicated that their employment was not coterminous with any single project but was characterized by continuity. The attempt to impose fixed-term contracts was a transparent maneuver to circumvent their security of tenure. The termination for refusing to sign these contracts constituted illegal dismissal without just or authorized cause and without procedural due process.
On the corporate veil, the Court upheld its piercing. The three corporations, while formally separate, operated as a single entity or business enterprise. They had a unity of ownership, control, and business operations, commingling resources and personnel. This arrangement was used to evade liability under labor laws. Treating them as one employer was justified to prevent injustice and ensure the workers’ valid claims were satisfied. The awarded benefits—full back wages from the time compensation was withheld until finality of the decision and separation pay in lieu of reinstatement—were deemed proper under the circumstances. The decision underscores that the status of employees is determined by the nature of the work and the employer’s business, not by the stipulations in a contrived contract.