1. The Case
⦁ This is the case of a P.E. Director who was not renewed his 5-year employment contract with an international school.
a. Background
⦁ The Complainant was a former athletic director.
⦁ The Respondent-Company was an international school.
⦁ They entered into a five-year fixed-term employment contract from July 18, 1971 to July 17, 1976. Subsequently, they executed subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974, which reiterated the same terms and conditions, including the original expiry date.
• Three months before the expiration, the complainant was notified of the termination of his employment due to the expiration of the contract.
• The complainant filed a labor complaint challenging his dismissal.
1) Complainant’s position
• Complainant argued that he acquired the status of a regular employee because:
1) His services were necessary and desirable in the usual business of his employer; and
2) He has been employed for five years.
• As a regular employee, Complainant asserted that he cannot be dismissed except for valid cause.
2) Company’s position
• The Company/School argued on the validity and legality of the five-year employment contract.
b. Resolution
• The fixed-term employment contract was valid resulting likewise in the legality of the dismissal.
1) Unique circumstances
• The employment contract was entered into in 1971 or a year before the Labor Code was promulgated in 1972.
• “At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787.”
• “Prior, thereto, it was [Article 302 of] the Code of Commerce which governed employment without a fixed period, and also implicitly acknowledged the propriety of employment with a fixed period.”
• “Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is otherwise deducible therefrom.”
• “It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term were explicitly recognized as valid by this Court…”
2) Fixed-term under the Labor Code
• “The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained explicit references to fixed period employment, or employment with a fixed or definite period. Nevertheless, obscuration of the principle of licitness of term employment began to take place at about this time.”
• “From the premise — that the duties of an employee entail “activities which are usually necessary or desirable in the usual business or trade of the employer the” — conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee’s duties set down in that contract as being “usually necessary or desirable in the usual business or trade of the employer.” The concept of the employee’s duties as being “usually necessary or desirable in the usual business or trade of the employer” is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be “that which must necessarily come, although it may not be known when.” 19 Seasonal employment, and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied.”
3) Fixed-term under the Civil Code
• “[T]he Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with pre-determined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination.”
• “Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fixed periods, at the expiration of which they would have to stand down, in providing that these officials, ‘…may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not re-elect them.’”
4) Freedom to contract
• “There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted “to prevent the circumvention of the right of the employee to be secured in… (his) employment?”
• “As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer’s using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head.”
5) Safeguards
• “Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee’s right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences.” (Emphasis supplied.)
2. Commentary
Author’s Notes:
1) The safeguards will turn into the two-fold requirements for the validity of a fixed-term employment contract, to wit:
Fixed-term employment contracts are valid:
(a) Where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or
(b) Where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter.
2) Jurisprudence on fixed-term employment contract will continue to evolve, with focus and emphasis on the second requirement – i.e. bargain on equal footing. Where it shown that the employee was not able to bargain or that it was a take-it-or-leave it arrangement with the employer, the fixed-term employment contract is often invalidated resulting in the acquisition of regular employment of the complainant. Often, the finding of regular employment results in illegal dismissal as a regular employee may only be dismissed for just or authorized causes following due process, and not via expiration of a fixed-term or period.
Citation
⦁ Brent School, Inc. v. Zamora, En Banc, G.R. No. L-48494, 05 February 1990
/Updated: December 27, 2022
