G.R. No. 105033 February 28, 1994
PHILIPPINE VILLAGE HOTEL, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) AND TUPAS LOCAL CHAPTER NO. 1362, JUANITO ACUIN, MAMERTA MANGUBAT, RAUL SONON, ELGAR PEMIS, ORLANDO PARAGUISON, FERDINAND VELASCO, MIKE ASTULERO, MAGNO DECALSO, NENITA OROSEA, JOSE TIMING, ANTONIO MANALILI, RODELIO QUERIA and REYNALDO SANTOS, respondents.

FACTS

Private respondents were employees of petitioner Philippine Village Hotel. On May 19, 1986, petitioner closed and totally discontinued its operations due to serious financial and business reverses, resulting in the termination of its employees. The NLRC affirmed the validity of this closure and ordered petitioner to pay separation pay. On February 1, 1989, petitioner decided to have a one-month dry-run operation to ascertain the feasibility of resuming business. To carry this out, petitioner hired casual workers, including private respondents, for a one-month period from February 1, 1989, to March 1, 1989, as evidenced by their Contracts of Employment. After evaluating performance and upon the lapse of the contractual one-month period on March 2, 1989, petitioner terminated the services of private respondents. Private respondents filed a complaint for illegal dismissal and unfair labor practice. The Labor Arbiter dismissed the complaint. On appeal, the NLRC reversed the Labor Arbiter’s decision and ordered the reinstatement of private respondents with backwages.

ISSUE

Whether the NLRC committed grave abuse of discretion in finding that private respondents were regular employees illegally dismissed, considering their previous termination in 1986 and their subsequent rehiring under a one-month employment contract.

RULING

The Supreme Court granted the petition and set aside the NLRC decision, thereby dismissing the complaint against the petitioner. The Court held that the private respondents’ contracts of employment categorically provided for a fixed period of one month, which was knowingly and voluntarily agreed upon. The fact that they performed activities usually necessary in the hotel’s operation during that period did not impair the validity of the contractual stipulation for a specific term. The previous termination in 1986 due to the valid closure of the business completely severed the employer-employee relationship. Their rehiring in 1989 under a new, fixed-term contract for a dry-run operation did not revive their former regular employment status; they were considered new casual employees for that specific period. The NLRC committed grave abuse of discretion in modifying its own final decision on the 1986 termination and in ignoring the valid fixed-period employment contracts. Private respondents’ remedy was to seek execution of the unenforced 1986 decision for separation pay, not to claim illegal dismissal from the 1989 dry-run employment.