PRICE v. INNODATA PHILS. INC.

September 30, 2008| CHICO-NAZARIO

By: Justin
SUMMARY: Price were hired as formatters by Innodata. Under their
employment contract they were hired only for a fixed period. When last
day of said period came, innodata informed them of the termination of
their services. Employees filed a complaint for illegal dismissal. They
argued that they are regular employees due to the fact that their work was
necessary and desirable for the business of Innodata. SC held that the
fixed-term contract was invalid. An employee may be considered a regular
employee if his work was necessary and desirable to the usual business of
the employer or if s/he already worked for more than a year. In this case
the court found that their job as formatters was necessary for the data
encoding business of Innodata. Court also found that the fixed term in the
contract was a way for Innodata to deprive the employees of security of
tenure. SC held that they are regular employees, entitled to security of
tenure and could not be removed except for just or authorized cause.
Entitled to backwages and separation pay, instead of reinstatement since
Innodata ceased its operations already.

DOCTRINE:
Regular employees:
o (1) those who are engaged to perform activities
which are necessary or desirable in the usual
business or trade of the employer regardless of
length of their employment
o (2) those who were initially hired as casual
employees, but have rendered at least 1 year
service, whether continuous or broken, with respect
to the activity in which they are employed.
test to determine whether an employment should be
considered regular or non-regular is the reasonable
connection between the particular activity performed by the
employee in relation to the usual business or trade of the
employer

FACTS:
Innodata, a company that deals with data encoding and
data conversion hired the Price and the others as
formatters.
1

CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA

ARBILERA, v. INNODATA PHILS. INC.,/ INNODATA
CORPORATION, LEO RABANG AND JANE NAVARETTE

Under the employment contract they were hired for a fixed

period (one year) which would end on Feb 16, 2000
On Feb 16, 2000 the HR Manager informed them of their last
day of work due to the end of their contract
Price et al filed a complaint for illegal dismissal and
damages against Innodata. That they should be considered
regular employees since their positions as formatters were
necessary and desirable to the usual business of
Innodata. That they could not be considered project
employees since there employment was not coterminous
with any project or undertaking.
Innodata argued that almost half of the employees was
engaged in data encoding. Due to the wide range of
services rendered to its clients, it was constrained to hire
new employees for a fixed period of not more than one year
(started on Sept 1999 and ended on feb 16 2000). That
Price and the others were not illegally dismissed for their
employment was merely terminated. That Price et al are
estopped from a position contrary to the contracts which
they signed knowingly, voluntarily and willfully.
LA ruled in favor of Price. That their jobs were necessary,
desirable, and indispensable to the data processing and
encoding business of INNODATA. They were entitled to
security of tenure and thus should only be terminated for
just or authorized cause.
NLRC reversed. They were not regular employees but fixedterm employees. The determining factor of such
contracts(fixed term contracts) is not the duty of the
employee but the day certain agreed upon by the parties for
the commencement and termination of the employment
relationship. Price entered into the contract freely hence
there was no illegal dismissal.
CA sustained NLRC ruling. Only employed for a year and for
a project called earthweb. That there was no showing that
they entered into the contracts unknowingly and
involuntarily or that innodata forced them into it.
ISSUES/HELD:
1. Whether petitioners were hired by INNODATA under valid fixedterm employment contracts. NO
RATIO:
1. NO. They were regular employees of Innodata who could
not be dismissed except for just or authorized cause.
employment status of a person is defined and prescribed by
law and not by what the parties say it should be. A contract

of employment is impressed with public interest such that

labor contracts must yield to the common good.

they were hired as formatters. The primary business of

Innodata is data encoding, and the formatting of the data
entered into the computers is an essential part of the
process of data encoding. They make it easier for clients to
understand the data. The work performed by petitioners was
necessary or desirable.

But there are also forms of employment which although

necessary and desirable, and exceed one year would still
not result in regular employment. Fixed-term employment
contracts: seasonal or for specific projects with
predetermined dates of completion AND wherein parties by
free choice have assigned a specific date of termination

The decisive determinant in term employment is the day

certain agreed upon by the parties for the commencement
and termination of their employment relationship, day
certain: that which must necessarily come, although it may
not be known when (ex. Seasonal employment and
employment for a particular project)

Fixed-term contracts: exception rather than the general rule.

Some examples wherein a fixed-term is essential and

natural: overseas employment contracts; dean, assistant
dean, college secretary, principal, and other administrative
offices in educational institutions; certain company officials
may be elected for what would amount to fixed periods,
they may lose their jobs as president, executive vicepresident or vice president, etc. because the stockholders or
the board of directors for one reason or another did not reelect them

In Brent School v. Zamora: the court issued an admonition

that where, from the circumstances, it is apparent that the
period was imposed to preclude the acquisition of tenurial
security by the employee, then it should be struck down as
being contrary to law, morals, good customs, public order
and public policy

In this case, the court is convinced that the term was meant
only to circumvent the rights of Price et al to security of
tenure and is therefore invalid. The contracts of employment
were ambiguous and tampered with

Regular employment has been defined by Article 280 of the

Labor Code
o

Art. 280. Regular and Casual Employment. The

provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform
activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or
undertaking the completion or termination of which has
been determined at the time of engagement of the
employee or where the work or services to be performed is
seasonal in nature and employment is for the duration of
the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph. Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity
in which he is employed and his employment shall continue
while such activity exists

Regular employees:
o

(1) those who are engaged to perform activities

which are necessary or desirable in the usual
business or trade of the employer regardless of
length of their employment

(2) those who were initially hired as casual

employees, but have rendered at least 1 year
service, whether continuous or broken, with respect
to the activity in which they are employed.

Price et al belong to the first type.

test to determine whether an employment should be

considered regular or non-regular is the reasonable
connection between the particular activity performed by the
employee in relation to the usual business or trade of the
employer

The date of their employment was originally Feb 17,

1999 but was crossed out and replaced with sept. 6
1999. Innodata alleged that the original project for
which they were hired in Feb, was completed earlier
than expected and that the sept employment was for
a new project.
SC: if these were truly fixed term contracts then a
change in the term or period would already
constitute a novation of the original contract.

Innodata wanted to make it appear that petitioners worked

for less than a year to preclude them from gaining regular
status. But the SC already ruled that they are regular
employees under the first type of regular employees. Even if
we assume otherwise, the fact that the contract of
employment was ambiguous it would be construed strictly
against the party who prepared it. \

Innodata also argued that they are project employees

Project employees: those workers hired (1)for a

specific project or undertaking and wherein (2) the
completion or termination of such project has been
determined at the time of the engagement of the
employee.

SC; Innodata failed to name nor describe the project.

Also there was no evidence to prove that such
project has already been completed or terminated to
justify dismissal.

SC also noted the provisions in the contract wherein

petitioners have no right at all to expect security of tenure,
even for the supposedly one-year period of employment
provided in their contracts, because they can still be preterminated (1) upon the completion of an unspecified
project; or (2) with or without cause, for as long as they are
given a three-day notice. Such contract provisions are
repugnant to the basic tenet in labor law that no employee
may be terminated except for just or authorized cause
o

This would be against the state policy to assure

workers of security of tenure and free them from the
bondage of uncertainty of tenure woven by some

employers into their contracts of employment. This

was the purpose of Art. 280 of the Labor Code

Petitioners have security of tenure. Illegally dismissed

employees are entitled to reinstatement without loss of
seniority rights and other privileges with full backwages. In
this case since Innodata ceased its operations, separation
pay equivalent to 1 month pay for every year of service
instead.

The Petition for Review on Certiorari is GRANTED