G.R. No. 48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE, respondents.

FACTS

Petitioner Brent School, Inc. engaged respondent Doroteo R. Alegre as its athletic director under a contract dated July 18, 1971, stipulating a fixed term of five years ending July 17, 1976. Subsequent subsidiary agreements reiterated this expiry date. On April 20, 1976, the school advised Alegre of the termination of his services effective July 16, 1976, citing “completion of contract, expiration of the definite period of employment.” Alegre accepted final payment in May 1976 but later protested the termination, arguing before a Labor Conciliator that having rendered necessary service for five years, he had attained regular status and could only be dismissed for cause.
The Regional Director refused to grant clearance for termination, ordering Alegre’s reinstatement as a permanent employee with back wages, ruling that expiration of a contract was not a sanctioned ground under the Labor Code. This decision was affirmed by the Secretary of Labor and, on appeal, by the Office of the President. The latter held that Alegre was a permanent employee dismissible only for just cause, and contract expiry was not among such causes under the Code.

ISSUE

Whether the provisions of the Labor Code have rendered illegal employment contracts with a fixed or definite period.

RULING

No. The Supreme Court reversed the rulings of the labor authorities and upheld the validity of the fixed-term employment contract. The Court clarified that Article 280 of the Labor Code, which defines regular and casual employment, was designed to prevent the circumvention of security of tenure by indiscriminately classifying employees as casual. It was not intended to outlaw employment for a specified term. The contract in question was executed in 1971, prior to the Labor Code’s effectivity in 1974, under a legal regime that expressly recognized term employment through statutes like the Termination Pay Law (R.A. 1052, as amended). The Court emphasized that where the employment contract is fixed-term, and the period arrives, the employment ceases by its own terms. No dismissal occurs, as the contract simply expires. The essence of a fixed-period agreement is that the employee knows the duration of the engagement from the outset, and both parties are bound by that stipulation. The Labor Code does not anathematize such agreements. Therefore, Alegre’s employment legally terminated upon the expiration of the stipulated five-year period, and Brent School incurred no liability. The Court reinstated the principle that not all employment is permanently ordained; fixed-term contracts remain valid where the period is agreed upon knowingly and voluntarily by the parties, without any sign of circumvention of the law.