G.R. No. 162839 ; October 12, 2006
INNODATA PHILIPPINES, INC., petitioner, vs. JOCELYN L. QUEJADA-LOPEZ and ESTELLA G. NATIVIDAD-PASCUAL, respondents.

FACTS

Petitioner Innodata Philippines, Inc., a data encoding and conversion company, employed respondents Jocelyn Quejada-Lopez and Estella Natividad-Pascual as formatters under a contract stipulating a fixed term of one year from March 4, 1997, to March 3, 1998. Upon the contract’s expiration, their employment was terminated. Respondents filed a complaint for illegal dismissal, asserting they were regular employees performing tasks necessary and desirable to the company’s usual business, thus entitled to security of tenure under Article 280 of the Labor Code. They invoked prior jurisprudence involving the same petitioner where similar contracts were struck down.
The Labor Arbiter ruled in favor of respondents, declaring them regular employees illegally dismissed and ordering reinstatement with backwages. The National Labor Relations Commission (NLRC) reversed this decision, upholding the validity of the fixed-term contract and dismissing the complaint. The Court of Appeals reinstated the Labor Arbiter’s decision, finding the contract a subterfuge to circumvent the law on regular employment.

ISSUE

Whether the fixed-term employment contracts between petitioner and respondents are valid.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The fixed-term contracts were declared invalid. The Court reiterated that while fixed-term employment is permissible under certain circumstances, it cannot be used to defeat the constitutional right to security of tenure. The test for regular employment under Article 280 is whether the employee performs activities that are necessary or desirable in the usual business or trade of the employer. Respondents’ work as formatters was integral to petitioner’s data conversion business, making them regular employees.
The Court found that the contracts, despite petitioner’s claim of removing “double-bladed” provisions criticized in earlier cases, still constituted a deliberate scheme to prevent respondents from attaining regular status. The argument that the company’s work depended on client orders, thus justifying fixed terms, was rejected as an inherent entrepreneurial risk that cannot override labor standards. The contracts, being contrary to law, morals, good customs, public order, and public policy, were struck down. Consequently, respondents were illegally dismissed and entitled to reinstatement and backwages.