G.R. No. 208936, April 17, 2017
HERMA SHIPYARD, INC. and MR. HERMINIO ESGUERRA, Petitioners, vs. DANILO OLIVEROS, et al., Respondents.
FACTS
The respondents were employees of Herma Shipyard, Inc., a domestic corporation engaged in shipbuilding and repair, performing tasks such as welding and pipe fitting. They filed a complaint for illegal dismissal and regularization, alleging they were regular employees continuously performing necessary and desirable tasks. They contended that the company made them sign fixed-term employment contracts, ranging from one to four months and labeled as project-based, as a scheme to circumvent their security of tenure. They argued there was never a cessation of work due to project completion and that the employer failed to report any project completion to the Department of Labor and Employment (DOLE).
Petitioners argued that respondents were legitimate project-based employees hired for specific shipbuilding projects that had been completed. In defense, they presented employment contracts, some denominated as “Kasunduang Paglilingkod (Pang-Proyektong Kawani).” The Labor Arbiter and the National Labor Relations Commission (NLRC) dismissed the complaint, upholding the validity of the project employment contracts and finding the termination lawful upon project completion.
ISSUE
Whether the respondents are project employees or regular employees of Herma Shipyard, Inc.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ ruling that the respondents are regular employees. The legal logic hinges on the application of Article 295 (formerly 280) of the Labor Code and established jurisprudence distinguishing project employment from regular employment. For an employee to be considered a project employee, the employer must prove that: (1) the employee was hired for a specific project or undertaking; and (2) the duration and scope of the project were made known to the employee at the time of engagement.
The Court found petitioners’ evidence insufficient. The employment contracts indicated uniform, short durations (e.g., one month) not genuinely tied to the lifespans of distinct, identifiable projects. The respondents performed tasks necessary and desirable to the company’s usual business of shipbuilding and repair. Their repeated and successive rehiring across different projects and assignments demonstrated that their services were indispensable to the employer’s regular business operations. Crucially, petitioners failed to submit reports of termination to the DOLE upon the completion of each alleged project, a procedural requirement for project employment that strongly indicates the work was actually continuous and not project-based. The contracts were therefore a subterfuge to deny the respondents’ right to security of tenure. Consequently, their dismissal without just or authorized cause was illegal.
