Illegal Dismissal: When Is an Employee Considered Terminated

The question of when an employee is considered terminated is central to many labor disputes. The Supreme Court case of National Power Corporation v. National Labor Relations Commission (G.R. Nos. 90933-61, May 29, 1997) clarifies this issue, particularly for project employees in the construction industry. The case also addresses important procedural rules on appeals and due process that affect both workers and employers.

The Facts of the Case

The National Power Corporation (NAPOCOR) owned the Philippine Nuclear Power Plant Unit I in Morong, Bataan. NAPOCOR contracted Westinghouse International Projects Company as principal contractor and Power Contractors, Inc. (PCI) as sub-contractor. PCI hired over six thousand workers for the civil works of the plant.

After certain phases of work were completed, PCI terminated the services of these workers without giving them separation pay. Between 1982 and 1985, twenty-seven cases for illegal dismissal and non-payment of benefits were filed against PCI. These were consolidated into one proceeding.

During the case, a Memorandum of Understanding was executed among NAPOCOR, Westinghouse, and PCI regarding the workers' claims. The Labor Arbiter eventually ruled that the workers were regular employees, not project employees, and ordered the three companies to pay separation pay and other monetary benefits.

The Issue on Appeal

NAPOCOR appealed the decision, but the NLRC dismissed its appeal for being filed out of time. NAPOCOR argued that its counsel, the Office of the Solicitor General (OSG), was never served a copy of the Labor Arbiter's decision. Instead, the decision was served only on a deputized "special attorney" from NAPOCOR. The Supreme Court had to determine whether the appeal period should be counted from service on the special attorney or on the OSG.

The Ruling on Service of Decisions

The Supreme Court ruled in favor of NAPOCOR. The Court held that the OSG, as the principal counsel for government agencies and corporations, must be served copies of decisions. A deputized special attorney is merely a representative of the OSG, which retains supervision and control over the deputized lawyer.

The Court emphasized that service of a decision on the deputized attorney is not binding until the OSG actually receives it. Therefore, the period to appeal should be reckoned from the date the OSG received the decision. Since the OSG was never served, the appeal period did not begin to run, and NAPOCOR's appeal was filed on time.

The Rule on Project Employees and Separation Pay

The case also touched on Policy Instruction No. 20, which governed the employment of project employees in the construction industry. Under this policy, project employees are those hired for a particular construction project. They are not entitled to termination pay if their employment ends due to the completion of the project or any phase of it.

The Labor Arbiter had declared this policy as an undue exercise of legislative power. However, the Supreme Court did not rule on this issue directly. Instead, it remanded the case to the NLRC for resolution on the merits, allowing the Commission to determine whether the workers were project employees or regular employees.

Due Process and Jurisdiction Over Parties

The Court also addressed Westinghouse's claim that the Labor Arbiter never acquired jurisdiction over it. The Court agreed, noting that no summons was served on Westinghouse and that it did not voluntarily appear in the case. A law firm that received some orders had immediately manifested that it was not representing Westinghouse.

The Court held that service of summons is a vital and indispensable ingredient of due process. Without proper service, a decision cannot be enforced against a party. The decision against Westinghouse was therefore null and void.

Practical Takeaways

• Service on the OSG matters. If a government agency or corporation is involved in a labor case, decisions must be served on the OSG, not just on a deputized attorney. The appeal period starts only upon receipt by the OSG.
• Project employees may not receive separation pay. Under Policy Instruction No. 20, project employees terminated due to project completion are generally not entitled to termination pay. However, this depends on the nature of their employment.
• Proper service of summons is required. A party cannot be bound by a decision if it was not properly served with summons and did not voluntarily appear. This is a fundamental requirement of due process.
• The Labor Arbiter's role in appeals. Under the old rules, a Labor Arbiter could rule on appeals, but under the Revised Rules of the NLRC, only the Commission has that authority.
• Remand for factual determination. When the issue involves factual questions, such as whether workers are project or regular employees, the case may be remanded to the NLRC for proper adjudication.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.