G.R. No. 119253 . April 10, 1997.
AMOR CONTI and LEOPOLDO CRUZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, CORFARM HOLDINGS CORPORATION, CARLITO J. RABANG and CIPRIANO Q. BARAYANG, respondents.

FACTS

Petitioners Amor Conti and Leopoldo Cruz were employed by respondent Corfarm Holdings Corporation, which managed the MERALCO commissary. Their employment contracts stipulated that their tenure was coterminous with the management contract between Corfarm and MERALCO. This management contract expired on December 31, 1992. Despite the expiration, Corfarm continued operations. On January 13, 1993, petitioners received a memorandum dated January 12 terminating their services effective immediately. The cited grounds were the expiration of their contracts and an ongoing evaluation and investigation into alleged anomalous transactions involving them.
Petitioners filed a complaint for illegal dismissal. The Labor Arbiter ruled in their favor, declaring the dismissal illegal and ordering reinstatement with backwages and attorney’s fees. On appeal, the National Labor Relations Commission (NLRC) reversed this decision and dismissed the complaint. The NLRC held that the dismissal was valid due to the expiration of the employment contracts, which were coterminous with the management agreement.

ISSUE

Whether the NLRC committed grave abuse of discretion in reversing the Labor Arbiter’s finding that petitioners were illegally dismissed without due process and just cause.

RULING

Yes. The Supreme Court granted the petition, annulled the NLRC decision, and reinstated the Labor Arbiter’s ruling with modification on backwages. The Court found that petitioners were illegally dismissed for failure to comply with procedural and substantive due process.
On procedural due process, the employer failed to furnish the two required written notices. The memorandum of dismissal itself served as the only notice, and it did not specify the particular acts constituting the alleged negligence. The audit report containing the charges was finalized only on the date of dismissal, January 13, 1993. Respondent’s own testimony admitted that petitioners were only orally informed of the charges. This violated the twin-notice rule and the opportunity to be heard.
On substantive due process, the expiration of the management contract did not automatically terminate petitioners’ employment. The stipulation making their employment coterminous with the management contract created a contractual period, not a fixed-term employment. Critically, Corfarm continued the commissary operation after the management contract lapsed. By continuing the same activity for which petitioners were hired, and by retaining them in service, petitioners became regular employees with respect to that continuing activity. Their security of tenure thus attached, and dismissal could only be for a just or authorized cause. The alleged negligence was unsubstantiated, as the investigation was concluded only upon their termination. Therefore, the dismissal was without valid cause.