Mercado vs. National Labor Relations Commission

The proviso in the second paragraph of Article 280 of the Labor Code—that any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee—applies exclusively to casual employees and does not convert project or seasonal employees into regular employees. Seasonal employees, being engaged for work that is seasonal in nature and for the duration of the season, are not illegally dismissed when their employment ends upon the completion of the season.

Petitioners were agricultural workers who performed various phases of farm work on a 7½-hectare rice land and a 10-hectare sugar land in Pampanga. Private respondent Aurora L. Cruz engaged their services through spouses Fortunato Mercado, Sr. and Rosa Mercado as “mandarols”—persons who supplied workers for specific tasks in rice and sugar cane production. The other private respondents were registered landowners named as co-respondents. Petitioners claimed they had worked for many years, some since 1949, receiving daily wages that gradually increased from ₱1.50 to ₱7.00, and that they were dismissed in April 1979. They filed a complaint for illegal dismissal and money claims, asserting they were regular, permanent farm workers. Private respondents denied any employer‑employee relationship beyond that of a seasonal, “on‑and‑off” engagement, and petitioners related by consanguinity or affinity alleged that the real impetus for the complaint was a criminal theft case filed against the son of the lead petitioner.

• Nature of the Complaint: Sixteen agricultural workers—related to one another by consanguinity or affinity—filed a complaint for illegal dismissal, underpayment of wages, non‑payment of overtime pay, holiday pay, service incentive leave benefits, emergency cost‑of‑living allowances, and 13th‑month pay. They claimed to be regular and permanent employees of private respondents who were dismissed in April 1979.

• Petitioners’ Version of the Employment: Petitioners alleged they performed all phases of agricultural work year‑round on private respondents’ 7½‑hectare rice land and 10‑hectare sugar land. Fortunato Mercado, Sr. and Leon Santillan claimed to have worked there since 1949; Fortunato Mercado, Jr. and Antonio Mercado since 1972; and the remaining petitioners since 1960. They asserted they worked twelve hours daily and enumerated daily wages from 1962 to 1979, ranging from ₱1.50 to ₱7.00.

• Private Respondents’ Version: Aurora L. Cruz denied that petitioners were her regular employees. She maintained that she engaged their services through spouses Fortunato Mercado, Sr. and Rosa Mercado, who acted as “mandarols”—persons who supply the number of workers needed by farm owners—but only for a particular phase of agricultural work necessary in rice or sugar cane production. After completing that phase, petitioners were free to render services to other farm owners. The other private respondents denied any employment relationship, claiming they were merely registered owners of the land.

• Labor Arbiter’s Factual Findings: The Labor Arbiter found that the nature and conditions of petitioners’ hiring showed they were required to perform phases of agricultural work for a definite period, after which their services were available to any farm owner. The claim of continuous, year‑round work for twelve hours a day was characterized as an exaggeration; rice and sugar cane planting, given the relatively small area, did not entail year‑round operation—a finding corroborated by the Chief of the NLRC Special Task Force. The sworn statement of petitioner Fortunato Mercado, Jr. confirmed that petitioners were hired merely as “casuals” on an “on‑and‑off” basis. The Labor Arbiter also found that the filing of the complaint was triggered by the criminal complaint for theft filed by Aurora Cruz against Reynaldo Mercado, son of Fortunato Mercado, Sr. Zone Chairman Jesus David attested under oath that petitioners were never regularly employed but were hired on‑and‑off when needed.

• Prescription of Money Claims: The Labor Arbiter ruled that only money claims for the crop years 1976‑1977, 1977‑1978, and 1978‑1979 could be considered, as earlier claims had prescribed under the three‑year prescriptive period.

• Award of Financial Assistance: Despite dismissing the complaint, the Labor Arbiter, invoking equity, awarded petitioners ₱10,000.00 as financial assistance from Aurora Cruz, to be divided equally among all petitioners except Fortunato Mercado, Jr., who had manifested disinterest in the prosecution of his complaint.

• Application of Article 280 and the One‑Year Proviso: Petitioners contended that even assuming their employment was seasonal, its continuous duration over many years transformed them into regular and permanent employees by express provision of the second paragraph of Article 280 of the Labor Code. They relied on the proviso deeming any casual employee who has rendered at least one year of service, continuous or broken, a regular employee with respect to the activity in which employed, and argued this should apply to them.

• Policy Instruction No. 12: Petitioners invoked Policy Instruction No. 12 of the Department of Labor and Employment, which states that what determines regularity is the nature of the job—whether it is usually necessary or desirable to the employer’s main business—and that employment for a definite period exceeding one year shall be considered regular. They asserted their work was undeniably necessary, desirable, and indispensable to the rice and sugar cane production business of private respondents, so they could not be deemed casual workers.

• Sufficiency of Evidence and Finality of Administrative Findings: Private respondents argued that the Labor Arbiter’s conclusion that petitioners were hired only as casuals was based on solid evidence, including the parties’ submissions and the report of the Chief of the NLRC Special Task Force. They contended that the findings of fact of administrative agencies, when supported by substantial evidence, are entitled to great weight and should not be disturbed. They further pointed out that petitioners’ arguments relied on matters not offered as evidence in the NLRC proceedings but only in a separate case before the Social Security Commission.

• Seasonal Nature of Employment under Article 280: The Solicitor General, on behalf of the public respondent NLRC, maintained that petitioners could not be deemed permanent and regular employees because they fell squarely within the exception stated in the first paragraph of Article 280: their work was seasonal in nature and their employment was for the duration of the season.

• Standard of Review: Whether the Supreme Court may disturb the factual findings of the Labor Arbiter and the NLRC that petitioners were not regular and permanent employees.

• Interpretation of Article 280, Second Paragraph Proviso: Whether the proviso in the second paragraph of Article 280—deeming casual employees who have rendered at least one year of service as regular employees—applies to seasonal employees such as petitioners.

• Illegal Dismissal: Whether petitioners, as seasonal workers, were illegally dismissed upon completion of the agricultural season.

• Standard of Review: The findings of fact of the Labor Arbiter and the NLRC were accorded great weight and not disturbed. The settled rule is that administrative findings, supported by substantial evidence—even if not overwhelming or preponderant—are binding upon the reviewing court. The court may not substitute its own judgment for that of the administrative agency on the sufficiency of evidence or the credibility of witnesses, absent gross abuse of discretion, fraud, or error of law. The Labor Arbiter’s decision carefully detailed the evidence—the terms of hiring, the seasonal nature of rice and sugar cane cultivation, the sworn statement of a co‑petitioner, the report of the NLRC Special Task Force, and the testimony of the Zone Chairman—showing that petitioners were hired only on‑and‑off for definite phases of work. No circumstance warranted reversal.

• Interpretation of Article 280, Second Paragraph Proviso: The proviso applies solely to casual employees, not to project or seasonal employees. Article 280’s first paragraph defines regular employees as those engaged in activities usually necessary or desirable in the employer’s business, except for project employees—defined to include those whose work or service is seasonal in nature and whose employment is for the duration of the season. The second paragraph defines all other employees as casual, and only to these casual employees does the proviso attach, by which one year of service renders them regular. Applying the rule of statutory construction that a proviso qualifies or limits only the phrase immediately preceding it—absent clear legislative intent to the contrary—the phrase “the preceding paragraph” confines the proviso to casual employees. Policy Instruction No. 12 is harmonious with this reading: it aims to eliminate abuse in casual employment in regular jobs, not to convert seasonal agricultural engagements into permanent employment or to oppress small‑scale agricultural landowners. Thus, petitioners, being seasonal employees, could not be deemed regular by force of the proviso.

• Illegal Dismissal: Because petitioners were seasonal employees, their employment legally ended upon the completion of each season. The termination of their engagement at the close of the season did not constitute illegal dismissal. The Labor Arbiter correctly recognized that it was within private respondent Aurora Cruz’s prerogative whether to re‑engage them for a subsequent phase or season.

• Definition and Status of Seasonal Employees under Article 280, Labor Code — A seasonal employee is one whose work or services are seasonal in nature and whose employment is for the duration of the season. Seasonal employees fall within the exception to regular employment under the first paragraph of Article 280, along with specific project employees. Their employment legally ends upon the completion of the season; non‑re‑engagement thereafter is not illegal dismissal.
• Proviso of Article 280, Second Paragraph Applies Only to Casual Employees — The proviso stating that any employee who has rendered at least one year of service, continuous or broken, shall be considered a regular employee pertains exclusively to casual employees—those not covered by the first paragraph. It cannot be invoked to convert project or seasonal employees into regular employees.
• Rule of Statutory Construction: Office of a Proviso — A proviso is construed with reference to the immediately preceding part of the provision to which it is attached, and not to the statute as a whole or to other sections, unless the clear legislative intent is to restrain or qualify earlier provisions or the entire statute. The proviso in Article 280’s second paragraph therefore qualifies only the clause defining casual employment, not the first paragraph on regular and project/seasonal employment.
• Great Weight of Administrative Findings of Fact — The findings of fact of quasi‑judicial agencies, such as the Labor Arbiter and the NLRC, are respected and accorded great weight on review if supported by substantial evidence, even if not overwhelming or preponderant. The reviewing court will not weigh conflicting evidence, determine credibility, or substitute its judgment absent proof of gross abuse of discretion, fraud, or error of law.

• “The first paragraph answers the question of who are regular employees. It states that, regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual business or trade of the employer, except for project employees. A project employee has been defined to be one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee, or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season as in the present case.”
• “The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or restrain or limit the generality of the clause that it immediately follows. … The only exception to this rule is where the clear legislative intent is to restrain or qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute or even the statute itself as a whole. … Hence, the proviso is applicable only to the employees who are deemed ‘casuals’ but not to the ‘project’ employees nor the regular employees treated in paragraph one of Art. 280.”
• “Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees, their employment legally ends upon completion of the project or the season. The termination of their employment cannot and should not constitute an illegal dismissal.”

• Ang Tibay v. CIR, 69 Phil. 635 — Cited as the leading authority for the rule that findings of fact of administrative agencies, if supported by substantial evidence, are entitled to great weight and will not be disturbed.
• Lao Tang Bun v. Fabre, 81 Phil. 682 — Reiterated the principle that a reviewing court will not weigh conflicting evidence or substitute its judgment for that of the administrative agency on the sufficiency of evidence.
• Lovina v. Moreno, G.R. No. L‑17821, 29 November 1963, 9 SCRA 557 — Cited for the rule that an administrative decision can only be set aside upon proof of gross abuse of discretion, fraud, or error of law.
• Philippine National Construction Corporation v. NLRC, G.R. No. 85323, 20 June 1989, 174 SCRA 191 — Relied upon for the definition of a project employee, which includes seasonal workers.
• PNOC – Exploration Corporation v. NLRC, G.R. No. 71711, 18 August 1988, 164 SCRA 501 — Cited to support the conclusion that the employment of project or seasonal employees legally ends upon completion of the project or season, and termination does not constitute illegal dismissal.

• Article 280, Labor Code of the Philippines — Defines regular and casual employment. The first paragraph deems employment regular where the employee performs activities usually necessary or desirable in the employer’s business, except for project or seasonal engagements. The second paragraph defines casual employment and incorporates the proviso that any casual employee with at least one year of service is deemed regular. The Court applied the definitional structure of this article to classify petitioners as seasonal employees excluded from the proviso’s reach.
• Policy Instruction No. 12, Department of Labor and Employment — Elucidates the concept of regular and casual employment as designed to prevent abuses, stressing that the nature of the job determines regularity. The Court harmonized this instruction with Article 280, concluding it does not convert seasonal agricultural workers into regular employees.

Melencio-Herrera (Chairperson), Paras, and Regalado, JJ., concurred. Sarmiento, J., was on leave.