G.R. No. L-65689 and G.R. No. L-66119, May 31, 1985
Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. and Sandoval Shipyards, Inc. vs. Vicente Leogardo, Jr., et al.

FACTS

In G.R. No. L-65689, the private respondents were five workers assigned to the construction of a specific vessel, LCT Catarman, Project No. 7511. Upon the project’s completion in July 1979, their services were terminated, and the termination was reported to the Ministry of Labor. They subsequently filed a complaint for illegal dismissal. The National Labor Relations Commission affirmed a Labor Arbiter’s decision ordering their reinstatement with backwages. In G.R. No. L-66119, seventeen workers were assigned to Project No. 7901 for the construction of a tanker. Their employment was terminated upon the vessel’s launching in February 1980, and the termination was likewise reported. Although twenty-seven workers from the same project were later hired for a new project, the seventeen respondents had already filed a complaint. The Director of the Ministry’s Capital Region and the Deputy Minister of Labor ordered their reinstatement.

ISSUE

The core issue is whether the private respondents are project employees, whose employment is legally terminated upon completion of the specific project for which they were hired, or regular employees entitled to security of tenure.

RULING

The Supreme Court ruled that the private respondents were project employees. The legal logic hinges on the definition and treatment of project employment under the Labor Code and pertinent labor policies. Section 281 of the Labor Code defines project employees as those whose employment is fixed for a specific project, the completion of which is determined at the time of engagement. This principle was specifically applied to the construction industry under Policy Instructions No. 20 of the Secretary of Labor, which states that project employees are those employed in connection with a particular construction project and are not entitled to termination pay upon the project’s completion.
The Court found the nature of Sandoval Shipyards’ business decisive. The company does not build vessels for continuous sale or stock but accepts specific ship-building or repair contracts from third parties. Consequently, it hires workers for the duration of each distinct project. The completion of the project automatically terminates the employment, obliging the employer only to report such termination. The Court noted that this interpretation was consistent with several prior rulings involving the same petitioner, where the NLRC and the Deputy Minister of Labor had previously upheld the lawful dismissal of workers upon project completion. Therefore, the public respondents in these two cases committed grave abuse of discretion by disregarding these established precedents and ordering reinstatement. The complaints for illegal dismissal were dismissed.