By Atty. Julius Gregory B. Delgado

“REGALA VS. MANILA HOTEL CORPORATION, G.R. NO. 204684 (05 OCTOBER 2020): REQUIREMENTS ON A VALID FIXED-TERM CONTRACTS

The Labor Code of the Philippines allows employment for a certain definite period. Among these are casual, seasonal and project employees. These employees are not regular employees, but they are entitled to basic labor benefits and should be accorded the minimum labor standards. This is a balancing act between the employers, who need workforce for a given time, and the laborers who need work. Because of the nature of employment, the law sets a strict standard and stringent requirements for the validity of these so-called “fixed-term contracts” in order to avoid this scheme being utilized to circumvent labor laws and to prevent a worker from being “regularized” and attaining security of tenure. 

In the case of Allan Regala vs. Manila Hotel Corporation, G.R. No. 204684 (05 October 2020), the petitioner, Allan Regala, was hired, according to respondent Manila Hotel Corporation, as a freelance waiter to augment the hotel’s workforce. Regala was hired sometime in February 2000 and was made to sign so-called “Service Agreements” only in March 2000. Sometime in December of 2009, his usual 5-day workweek was reduced to 2 days a week. Hence, Regala filed a case for constructive dismissal arguing he is a regular employee. Manila Hotel claims that Regala is not a regular employee but a “fixed-term employee” covered by a valid Service Agreements. The Labor Arbiter dismissed Regala’s complaint which was reversed by the National Labor Relations Commission (“NLRC”). On appeal, the Court of Appeals reversed and set aside the ruling of the NLRC. 

There were both procedural and substantive issues when the case reached the Supreme Court. On the procedural issue, the Supreme Court disallowed Manila Hotel to belatedly present Daily Time Record (DTRs) and change theory of the case. Manila Hotel attempted to submit these DTRs to argue that he was not dismissed since he continued with his duties despite filing a case. The Court held that it cannot change theory without impairing Regala’s right to due process who cannot anymore submit rebuttal evidence. In this case, the Supreme Court also held that exercising equity, it can examine the facts and evidence if there are conflicting findings by the Labor Arbiter, NLRC and the Court of Appeals. 

On the substantive matter, the Supreme Court held that Regala is a regular employee under the two (2) categories of a regular employee under the Labor Code, i.e. (a) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (b) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. The Supreme Court held that “being part of the hotel and food industry, MHC, as a service-oriented business enterprise depends largely on its manpower complement to carry out or perform services relating to food and beverage operations, event planning and hospitality. As such, it is essential, if at all necessary, that it retains its employ waiting staff, such as Regala, specifically tasked to attend to its guests at its various dining establishments.” The Court also added that “the fact alone that Regala was allowed to work for MHC on several occasions for several years under various Service Agreements is indicative of the regularity and necessity of his functions to its business.”

On the issue of the validity of the fixed-term agreements, in this case Service Agreements, the Supreme Court held that “the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain upon by the parties for the commencement and termination of their employment status. The Court held that “fixed-term employment contract which otherwise fails to specify the date of effectivity and the date of expiration of an employee’s engagement cannot, by virtue of jurisprudential pronouncement, be regarded as such despite its nomenclature or classification given by the parties.” In this case, the Court noted that the Service Agreements signed by Regala only bore the dates when he was engaged to work but bereft of the dates of effectivity and expiration.

Finally, the Court restated the requirements of a valid fixed-term employment: 1) The fixed period of employment was knowingly and voluntarily agreed upon 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; and 2) it satisfactorily appears that the employer and the employee dealt with ach other on more or less equal terms with no moral dominance exercised by the former or the latter. In this case, the Court held that these Service Agreements were deemed as “contract of adhesion”. Regala and the hotel were not on equal footing and the former had no power to negotiate the same. It was a “take-it-or-leave-it” contract. Hence, the Supreme Court reversed the ruling of the Court of Appeals and ruled in favor of Regala.