049 Fuji Television Network Inc. v. Arlene S. Espiritu

FUJI TELEVISION NETWORK v. ARLENE S. ESPIRITU Dec. 3, 2014 | Leonen, J. | Legitimate contracting or subcontracting: 4 Conditions; Fixed-term employees v Independent Contractors v. Regular employees Digester: Santiago, Senando Angelo SUMMARY: Fuji Television Network hired Arlene Espiritu as a news correspondent/producer to report Philippine news to Japan, with her contract renewed annually. However, when she got diagnosed with lung cancer, she informs Fuji, who then disclosed that they will have a hard time renewing the contract, considering her situation. Both parties sign a contract for non-renewal, which stipulates that she would not renew and that she would receive $18,050 as compensation for services, etc. Arlene filed a complaint against Fuji for illegally dismissing her. SC decides in her favor. DOCTRINE: It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee with or without a fixed term. That a person has a disease does not per se entitle the employer to terminate his or her services. Termination is the last resort. At the very least, a competent public health authority must certify that the disease cannot be cured within 6 months, even with appropriate treatment. FACTS (Skip? Go to second issue. Ma’am wants to focus on that.):  2005: Petitioner Fuji Television Network, Inc. engaged Arlene S. Espiritu as a news correspondent/producer to report Philippine news to Fuji through its Manila Bureau field office. Her contract, initially good for 1 year, was renewed annually with salary adjustment.  January 2009: Arlene is diagnosed with lung cancer. o She informs Fuji, and the chief of News Agency told her “that the company will have a hard time renewing her contract” since it would be difficult for her to perform her job, even if her physician certifies that she is still fit for work.  2009, May 5: Both Arlene and Fuji sign a non-renewal contract, which stipulates that her contract will no longer be renewed after its expiration on May 31, 2009. It also provided that the parties release each other from liabilities and responsibilities under the contract. o In consideration of the contract, she acknowledges receiving $18,050:

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 Her monthly salary from March-May 2009,  Year-end bonus,  mid-year bonus, and  separation pay. o In her signature, however, she affixes “U.P.”—she is under protest. [LA] May 6: Arlene files a complaint for illegal dismissal and attorney’s fees with the LA, alleging that she was forced to sign the non-renewal contract when Fuji came to know of her illness. o She says her salaries and other benefits for March and April 2009 were withheld when she refused to sign. o She claims she had no other choice but to sign. It was only when she signed that the above amount was given. September 10: LA dismisses Arlene’s complaint, concluding that Arlene was not Fuji’s employee but an independent contractor, after applying the four-fold test (see note #1). She appeals to the NLRC. [NLRC] 2010, March 5: NLRC holds that Arlene was a “regular employee with respect to the activities for which she was employed since she continuously rendered services that were deemed necessary and desirable to Fuji’s business.” o NLRC reverses LA decision and orders payment of backwages. o Both parties file separate MRs, but NLRC denies, finding no merit. [CA] Both file separate petitions for certiorari to CA, which are later consolidated. o Disposition: NLRC decision affirmed, also ordering reinstatement, in addition to payment of backwages and benefits, moral and exemplary damages, attorney’s fees, and legal interest of 12% per year. o Held: Arlene is a regular employee, and the successive renewals of her fixed-term contract resulted in regular employment. She is not an independent contractor because “she was not contracted on account of any peculiar ability, special talent, or skill.” Since Fuji owned everything Arlene used in her work, she could not be an independent contractor.

Held: She was illegally dismissed as Fuji failed to observe due process for her dismissal since she was a regular employee. o Held: Arlene did not sign the non-renewal contract voluntarily and that Fuji made it appear that she chose not to renew her contract. An MR was filed, but was denied for failure to raise new matters. [SC] Fuji files petition for review, assailing CA’s decision which held Arlene to be a regular employee and awarding her claims, benefits, and damages and arguing: Rebuttal to CA Reasoning findings Arlene was  Arlene was hired as a stringer and hired as an informed her she would remain independent one. contractor, not  She insisted that her contract be as a regular renewed annually because she had employee; Fuji skills that distinguished her from had no control ordinary employees. over her work.  Both parties dealt on equal terms (Focus on this.) upon negotiating and entering into the contracts. There was no  The non-renewal contract is unneeded illegal dismissal. as the employment automatically terminated upon expiration of her contract.  Notwithstanding, she agreed not to renew her contract. In an email to Fuji, she consented to it, but refused to sign anything.  (She sent an email of the non-renewal agreement that she agreed to sign, which further stipulated that Fuji shall re-hire her if she was still interested to work for them.) No damages  They dealt with her in good good faith. should be  Even if Fuji was not bound to pay sick awarded. leaves in excess of 30 days, they still paid her full salary for March-May even if she only reported for work for a total of 9 days. o

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RULING: Petition denied. CA decision affirmed with modification that backwages be computed from June 2009. Legal interest at 6% per annum. Whether the petition for review should be dismissed as the signatory of the verification and certification of non-forum shopping of the petition had no authority to sign the same on behalf of Fuji. – NO.  Fuji complied substantially with the requirements of verification and certification against forum shopping. Whether CA was correct in holding NLRC to properly rule that Arlene was a regular employee, not an independent contractor, and that she was illegally dismissed – YES ******* start of the part of the case where Ma’am asked us to focus *******  Art. 280, LC classifies employees into four: o Regular (further classified into two)  those engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer;  casual employees who have rendered at least one year of service, whether such is continuous or broken. o Project o Seasonal and o casual.  Brent School, Inc. v Zamora, introduces a new classification: employees with fixed-term contracts, where the decisive determinant in the employment is the day certain agreed upon for the start and end of employment. o “Fixed term is an essential and natural appurtenance” in overseas employment contracts and officers in educational institutions. o Some employers might abuse such contracts in that periods are imposed to prevent the employee from getting tenured.  Void contracts—contrary to public policy or morals. o Criteria to determine the validity of such contracts:  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

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upon the employee and absent any other circumstances vitiating his consent; or  2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter. o Rationale: when the employee, on account of special skills or market forces, is in a position to make demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required for the protection of the employee. o The Court cited two cases wherein fixed-term contracts were upheld as valid. (See notes 3 and 4) Art. 106, LC recognizes independent contractors (See note 5). o Definition: one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. (Orozco v. CA)  No employer-employee relationship exists. o DOLE Department Order No. 18-A, Series of 2011 defines a contractor as having “an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.” (Sec. 3(c))  Same Order states: A trilateral relationship in legitimate job contracting and subcontracting arrangement exists among:  Principal (P)  Contractor (C)  Employees of contractor hired to accomplish principal’s work (E)

Employer-employee relationship existent only between C,E.  But where an independent C is an individual with unique skills and talents that set them apart from ordinary E, the contractor him/herself performs the work for the P—not trilateral but a bilateral relationship. o Two kinds of independent contractors exist:  Those engaged in legitimate job contracting  Those who have unique skills and talents that set them apart from ordinary employees. ******* end of the part of the case where Ma’am asked us to focus *******  Arlene Espiritu was a regular employee with a fixed term contract. o Test for determining regular employment: is whether there is a reasonable connection between the employee’s activities and the usual business of the employer. o Art. 280, LC provides that the nature of work must be “necessary or desirable in the usual business or trade of the employer” as the test for determining regular employment.  This repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioner’s work in private respondent ABC’s business.  Philips Semiconductors, Inc. v. Fadriquela: Where an employee’s contract “had been continuously extended or renewed to the same position, with the same duties and remained in the employ without any interruption,” then such employee is a regular employee. o An employee can be a regular employee with a fixed-term contract.  As long as the employee is the one requesting, or bargaining, that the contract have a “definite date of termination,” or that the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-term contract will be upheld. 

Whether the CA properly modified the NLRC decision when it awarded reinstatement, damages, and attorney’s fees – YES.  Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an oppressive approach with her salary and other benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal contract. Thus, there was legal basis for the Court of Appeals to modify the National Labor Relations Commission’s decision. NOTES:  Four-fold o o o o

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test (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on the means and methods by which the work is accomplished.  If this control test is satisfied, then the person is an employee; else, independent contractor. Stringer: news correspondent who is retained on a part-time basis to report on events in a particular place. Labayog v. MY San Biscuits: fixed-term contracts valid as the employees knew they were being hired as mixers, packers, and machine operators only for a specific period. Caparoso v. Court of Appeals: fixed-term contracts upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan claimed they were dismissed illegally but there

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was no evidence of vitiation of consent. Also, there was no proof that the employers used such contracts to prevent workers’ regularization. Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code. X x x The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.