G.R. Nos. L-68393-94 July 23, 1985
Sandoval Shipyards, Inc., petitioner, vs. Vicente Leogardo, Jr., as Deputy Minister of Labor and Employment; Isidro Ibale, Jose Ibale, Narciso Ibale, Sixto Ibale, Felix Tumulak, Pantaleon Malunjao, Hipolito Guinaging and Fermin Guinaging, respondents.

FACTS

The eight respondents, who worked as cutters, carpenters, and mechanics, filed complaints against Sandoval Shipyards, Inc., claiming they were regular employees and seeking separation pay after their alleged termination on May 30, 1981. They asserted they had rendered service for periods ranging from over two years to as long as fourteen years. The Labor Arbiter ruled in their favor, awarding separation pay totaling P30,410.75, a decision affirmed by Deputy Minister of Labor Vicente Leogardo, Jr.
Sandoval Shipyards countered that the respondents were project employees, hired on a “project-to-project” basis corresponding to its specific ship-building or repair contracts from third parties. The company argued it was not engaged in the continuous production of vessels for sale but operated by undertaking discrete projects, each with a defined completion point.

ISSUE

Whether the eight respondents are regular employees entitled to separation pay or project employees whose employment is coterminous with specific projects.

RULING

The Supreme Court reversed the orders of the Labor Arbiter and the Deputy Minister, ruling that the eight workers were project employees not entitled to separation pay. The legal logic hinges on the nature of the employer’s business and the specific character of the employees’ engagement. The Court, citing its recent analogous decisions and existing labor policy, emphasized that Sandoval Shipyards’ operations were project-based, as it did not construct vessels for inventory or sale but only accepted specific contracts from third parties.
Consequently, the employment of workers hired for such projects is inherently fixed for the duration of the specific undertaking. Their work is coterminous with the project’s completion, regardless of the number of successive projects they may have worked on. This classification as project employees is governed by Policy Instructions No. 20 of the Secretary of Labor, which stipulates that such employees are not entitled to separation pay upon the termination of their employment coinciding with the project’s end. The Court found support in a prior ruling by Deputy Minister Inciong, which explicitly recognized the project-based nature of the petitioner’s business and the corresponding status of its workers. Therefore, the termination of the respondents’ employment required no clearance and incurred no liability for separation pay. The complaints were dismissed.