G.R. No. 192282 . October 05, 2016.
A. NATE CASKET MAKER AND/OR ARMANDO AND ANELY NATE, PETITIONERS, VS. ELIAS V. ARANGO, EDWIN M. MAPUSAO, JORGE C. CARIÑO, JERMIE MAPUSAO, WILSON A. NATE, EDGAR A. NATE, MICHAEL A. MONTALES, CELSO A. NATE, BENJES A. LLONA AND ALLAN A. MONTALES, RESPONDENTS.

FACTS

Petitioners Armando and Anely Nate, owners of A. Nate Casket Maker, employed respondents as carpenters, mascilladors, and painters from 1998. Petitioners claimed respondents were “pakyaw” workers paid per job order, were “stay-in” with free board and lodging, and often quarreled and drank, causing delays. On February 3, 2007, petitioners presented a proposed employment agreement to change the system to “contractual basis” with benefits. Respondents alleged they worked Monday to Saturday, 7:00 a.m. to 10:00 p.m., without overtime pay or benefits. On March 15, 2007, petitioners called respondents and made them sign a Contract of Employment with terms including a five-month contractual period, piece-rate wages, and ineligibility for leaves, 13th month pay, or other regular employee benefits. When respondents refused to sign, petitioners told them to go home as their employment was terminated. Respondents filed a complaint for illegal dismissal and monetary claims on February 8, 2007, later amended on March 15, 2007. The Labor Arbiter dismissed the complaint, finding no termination and that as pakyaw workers, respondents were not entitled to overtime, holiday, service incentive leave, and 13th month pay. The NLRC affirmed. The Court of Appeals reversed, declaring respondents illegally dismissed and entitled to backwages, separation pay, and other benefits.

ISSUE

1. Whether the Court of Appeals committed grave abuse of discretion in declaring that respondents were illegally dismissed.
2. Whether there are serious errors in the findings of facts.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals Decision. On the first issue, the Court found respondents were illegally dismissed. Petitioners’ act of presenting a new contract with terms vastly inferior to the existing arrangement (e.g., fixed term, no benefits, piece-rate) and dismissing respondents upon their refusal constituted constructive dismissal. The change was not merely a modification but a severance of the existing employment relationship. Petitioners admitted respondents were regular employees; thus, they could not be placed on a fixed-term contractual basis without a valid reason. The dismissal was without just or authorized cause and without due process.
On the second issue, the Court held that while pakyaw workers are regular employees, they are not automatically exempt from monetary benefits. The exemption under the Labor Code and its implementing rules for employees paid on task or contract basis applies only to field personnel and those whose time and performance are unsupervised by the employer. Here, respondents were not field personnel; they worked on petitioners’ premises under petitioners’ supervision and control, following set work schedules. Therefore, the exemptions did not apply. Respondents were entitled to overtime pay, holiday pay, service incentive leave pay, and 13th month pay, subject to proof during computation proceedings. The case was remanded to the Labor Arbiter for computation of full monetary awards.