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SECOND DIVISION

VANESSA LAURA ARCILLA, G.R. No. 235863

Petitioner,
Present:

LEONEN, J., Chairperson,

LAZARO-JAVIER,
-versus-
LOPEZ, M.,
LOPEZ, J.,
KHO, JR., JJ.

SAN SEBASTIAN COLLEGE-

Promulgated:
RECOLETOS, MANILA,
Respondent. ·0- ·2022 -a-er 1
x-----------------------------------------------------------------------------x

DECISION

LEONEN,J.:

When a full-time employee's probationary status overlaps with a fixed-

term contract not specifically used for the fixed term it offers-as when the
fixed tenn is merely for a convenient arrangement to coincide with the
school's academic year-the probationary nature of the employment prevails.
The employer cannot simply invoke the expiration of the fixed term. The
employment may only be terminated for a just or authorized cause or due to
the employee's failure to meet the reasonable standards made known to the /
employee at the time of the engagement.' /1

1
See Mercado v. AMA Compuler Col/ege-Paraifr1que City, Inc., 632 Phil. 228 (1010) [Per .J. Brion,
Second Division].
 Decision 2 G.K No. 2358.63

... :. . This Court resolves a Petition for Review on Certiorari2 assailing the
Decision3 of the Court of Appeals, which nullified the Decision4 and
Resolution 5 of the National Labor Relations Commission and reinstated the
Labor Arbiter's Decision6 dismissing Vanessa Laura Arcilla (Arcilla)'s
Complaint for illegal dismissal.

Arcilla is a master's degree holder in counseling psychology, a certified

specialist in counseling psychology, a registered guidance counselor, and a
registered psychometrician. 7

San Sebastian College-Recoletos, Manila (San Sebastian) is a private

educational institution duly established and existing under the laws of the
Philippines, and duly authorized by the Commission on Higher Education. It
is operated by the Augustinian Recollect Fathers. 8

On December 17, 2014, San Sebastian appointed Arcilla as a full-time

probationary faculty member of the College of Arts and Sciences' Area of
Psychology for the second semester of School Year 2014 to ~015. The
employment contract stated that Arcilla's appointment commenced on
November 21, 2014 and would end on March 31, 2015, unless extended by
San Sebastian. It also stated, among others, that its renewal or extension was
discretionary upon San Sebastian, and that Arcilla's appointment could be
revoked before the expiration period if she would be found to have violated
the employment contract or committed acts inimical to San Sebastian's
interests, students, or moral values. 9

San Sebastian did not assign any classes to Arcilla for the summer
semester, but it reappointed her on April 24, 2015 for the first semester of
School Year 2015 to 2016. 10 Her contract for the period of June 1, 2015 until
October 3 1, 2015 had the same terms and conditions as the first contract. 11

San Sebastian did not reappoint Arcilla for the following semester. On
October 9, 2015, the college dean told her that she could not be given a
teaching load purportedly due to a low turnout of enrollees. In an October 21,

2
Rollo, pp. 3-29.
3
Id. at 30-48. The November 29, 2017 Decision was penned by Associate Justice Fernanda Lampas
Peralta, and concurrt:id in by Associate Justices Elihu A. Ybanez and Carmelita Salandanan Manahan of
the Fourth Division, Court of Appeals, Manila.
4
Id. at 196-205. The November 15, 2016 Decision was penned by Presiding Commissioner Grace E.
Maniquiz-Tari, and concurred in by Commissioner Dolores M. Peralta-Beley of the Fifth Division,
National Labor Relations Commission, Quezon City.
5
Id. at 213-217. The January 31, 2017 Resolution was penned by Presiding Commissioner Grace E.
Maniquiz-Tan, and concurred in by Commissioner Dolores M. Peralta-Beley of the Fifth Division,
National Labor Relations Commission, Quezon City.
6
Id. at 158--172. The Decision was penned by Labor Arbiter Marita V. Padolina.
7
Id. at 64.
8
Id. at 109.
'' Id. at 81.
10
Id. at 85.
11
Id. al 165--166.
 Decision 3 G.R. No. 235863

_ -~ r 2015 letter, Arcilla was informed that her probationary contract would not be
renewed. 12

Thus, on February 2, 2016, Arcilla filed before the National Labor

Relations Commission a Complaint for illegal dismissal, unpaid 13 th month
pay, and over-deduction from salary against San Sebastian and some of its
officers. 13 After undergoing conciliation-mediation conferences, San
Sebastian paid Arcilla PIS,278.21 as 13 th month pay for 2015 and returned
P3,750.00 as refund for the over-deduction from Arcilla's salary. 14 The other
claims were referred to the Labor Arbiter. 15

On March 16, 2016, Arcilla filed before the Labor Arbiter a Complaint
for illegal dismissal against San Sebastian and some of its officers. She prayed
for full backwages, separation pay in lieu of reinstatement, moral and
exemplary damages, and attorney's fees. 16

In the July 28, 2016 Decision, 17 the Labor Arbiter found that Arcilla
was not illegally dismissed from employment, 18 but her employment contract
merely expired. 19 Thus, the Labor Arbiter dismissed Arcilla's Complaint for
lack of merit. 20

On appeal, 21 the National Labor Relations Commission issued a

November 15, 2016 Decision22 reversing the Labor Arbiter's Decision:

WHEREFORE, premises considered, complainant's appeal is

GRANTED. The assailed Decision of the Labor Arbiter dated July 28, 2016
is VACATED and a new one is issued DECLARING complainant Vanessa
Laura S. Arcilla to have been illegally dismissed by respondent San
Sebastian College-Reco[l]etos, Manila.

In view of the illegal dismissal of complainant, respondent San .

Sebastian-Recoletos, Manila is hereby ORDERED to pay complainant
Vanessa Laura S. Arcilla the following:

I) Backwages form the time of her illegal dismissal on October 31,

2015 up to October 30, 2017;

2) Three-month salary as her separation pay;

[3)] Attorney's Fees equivalent to 10% of the monetary award[.] I

12 ld.at67.
13
Id. at 52.
14
Id. at 38.
15 Id. at 55.
16
Id. at 56-57.
17
Id.atl58-l72.
18
Id. at 169.
19
Id. at 169-171.
20
Id. at 172.
21
Id. at 173-189.
22
Id. at 196-205.
 Decision 4 G.R. No. 235863

.;.,

Attached is the computation which forms part of the Decision.

SO ORDERED. 23

In a January 31, 2017 Resolution, 24 the National Labor Relations

Commission denied San Sebastian's Motion for Reconsideration.

Thus, San Sebastian filed a Petition for Certiorari 25 before the Court of
Appeals. On November 29, 2017, the Court of Appeals issued its Decision26
granting San Sebastian's Petition and reinstating the Labor Arbiter's
Decision:

WHEREFORE, the Decision dated November 15, 2016 and

Resolution dated January 31, 2017 of public respondent National Labor
Relations Commission are NULLIFIED. Accordingly, the Decision dated
July 28, 2016 of the labor arbiter is REINSTATED.

SO ORDERED. 27

The Court of Appeals first agreed with the National Labor Relations
Commission that there was no merit to San Sebastian's claim that it did not
renew Arcilla's appointment due to a K to 12 program-related retrenchment
scheme. There was no evidence that the Department of Labor and
Employment was notified of such a retrenchment, and Arcilla was not paid
the required separation pay. 28

However, the Court of Appeals found that since Arcilla's employment

was probationary, her appointment could be validly terminated. It noted that
it was not only the Labor Code that governed the probationary employment
of teaching personnel. Under the Manual of Regulations for Private Higher
Education, as well as the Guidelines on Status of Employment of Teachers
and Academic Personnel of Private Educational Institutions, the maximum
probationary period for academic personnel in the tertiary level was three
years, or six consecutive semesters, or nine consecutive trimesters of
satisfactory service. A teaching employee's vested right to a permanent
position shall only accrue after the three-year period. Moreover, the mere
rendition of employment for three consecutive years did not automatically
ripen into permanent appointment since the employer may still determine if /
the employee has met its reasonable standards of competence and efficiency. 29

23
Id. at 204-205.
24
Id. at 214-217.
25 Id. at 2 I 9-239.
26
Id. at 30-48.
27
Id. at 47.
28
Id. at 41-42.
29
Id. at 43-44.
 Decision 5 G.R. No. 235863

., . Here, the Court of Appeals found that Arcilla completed her second
semester, or one year of service, when she received the notice of nonrenewal.
There was no illegal dismissal since she was still under probation and the fixed
period of her probationary contract had expired. Hence, it found that in
holding that Arcilla was illegally dismissed, the National Labor Relations
Commission gravely abused its discretion. 30

On December 21, 2017, Arcilla filed before this Court a Petition for
Review on Certiorari31 against San Sebastian.

First, petitioner argues that she was correct in filing a petition for review
before this Court instead of moving for reconsideration of the Court of
Appeals' Decision. She points out that a motion for reconsideration was not
a condition precedent for the filing of a petition for review. · Further, she
claims that the issue she brought before this Court is a pure question oflaw. 32

Second, petitioner claims that respondent's Petition for Certiorari with

the Court of Appeals was filed out of time. She claims that respondent's
counsel failed to report the date of actual receipt of the National Labor
Relations Commission's Resolution denying its Motion for Reconsideration.
She points out that respondent's counsel received a copy of the Resolution on
February 17,2017, such that respondent should have had until April 18, 2017
to file its Petition for Certiorari. However, it only did so on April 21, 2017 .33

Third, petitioner argues that respondent illegally dismissed her. She

argues that when an employee's probationary status overlaps with a fixed-
term contract not specifically used for the fixed term it offers, Article 281
(now Article 296) of the Labor Code should apply. 34 She cites Mercado v.
AMA Computer College-Paranaque City, Inc. ,35 where this Court held that the
probationary status of teachers should not be disregarded simply because their
contract terms were fixed. 36 She argues that her employment could only be
termiriated for a just cause, or for failing to qualify as a regular employee
based on her employer's reasonable standards made known to her at the time
of her engagement. She points out that the National Labor Relations
Commission found that there was only a bare allegation of just cause-dismal
performance-but no evidence to prove it. 37

In its Comments-Opposition, 38 respondent counters that the National

Labor Relations Commission's Resolution was improperly served on the
f
30
Id. at 45-47.
31
Id. at 3-29.
32
Id. at 13-15.
33
Id. at 15-17.
34
Id. at 17-19.
35
632 Phil. 228 (20 I0) [Per J. Brion, Second Division].
36
Rollo, p. 20.
37
Id. at21-25.
38
Id. at 332-351.
 Decision 6 G.R. No. 235863

. security guard of the building where respondent's counsel held office. It

argues that this did not constitute valid service under the 2011 NLRC Rules
of Procedure and the Rules of Court. 39 It also posits that petitioner should
have moved for reconsideration of the Court of Appeals' Decision before
filing a petition before this Court because she raises questions of fact. 40
Finally, it argues that it had full discretion not to renew petitioner's _contract
after the fixed term had expired. To it, petitioner's employment was
probationary and had not attained permanent status. 41

In her Reply ,42 petitioner argues that "the person receiving the .notices
and processes of the court at the address duly specified by -_the parties is
deemed to have been authorized to receive such."43 She points _put that there
is no conflict between the National Labor Relations Commission's and the
Court of Appeals' factual findings. She argues that the issue is a pure question
of law that does not require the filing of a motion for reconsideration. 44 On
the substantive aspect, petitioner asserts that respondent is attempting to
circumvent the law on probationary employment. 45 She claims that
respondent implemented an illegal dismissal, not a retrenchment. 46

The issue for this Court's resolution is whether or not the Court of
Appeals erred in ruling that the National Labor Relations Commission gravely
abused its discretion in finding that petitioner Vanessa Laura Arcilla was
illegally dismissed.

This Court grants the Petition.

For labor cases that originate from the National Labor Relations
Commission, the remedy is to file a petition for certiorari before the Court of
Appeals under Rule 65 of the Rules of Court. In it, the petitioner must
establish the National Labor Relations Commission's grave abuse of
discretion. 47 The remedy from the Court of Appeals' ruling is to file a petition
for review on certiorari before this Court under Rule 45 of the Rules of Court.
This Court explained in Montoya v. Transmed Manila Corporation48 the
parameters for its review of labor cases:

·In a Rule 45 review, we consider the correctness of the assailed CA decision,

in contrast with the review for jurisdictional error that we undertake under
Rule 65. Furthermore, Rule 45 limits us to the review of questions of law

3') Id. at 334-339.

40
Id. at 339-340.
41
Id. at 340-344.
42
Id. at 355-376. Entitled "Reply to Respondent's Comment."
43
Id. at 356.
44
Id. at 358-359.
45
Id. at 359-366.
46
Id. at 366.
47
Securities and Exchange Commission v. Price Richardson Corporation, 814 Phil. 589,610 (2017) [Per
J. Leonen, Second Division].
48
613 Phil. 696 (2009) [Per J. Brion, Second Division].
 Decision 7 G.R. No. 235863

.... . raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for
certiorari it ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision on the merits of the case was
correct. In other words, we have to be keenly aware that the CA undertook
a Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it. This is the approach that should be basic in a Rule 45 review of a
CA ruling in a labor case. In question form, the question to ask is: Did the
CA correctly determine whether the NLRC committed grave abuse of
discretion in ruling on the case?49 (Citations omitted)

The same procedural antecedents are present in this case. Thus, we

examine whether the Court of Appeals correctly ascribed grave abuse of
discretion to the National Labor Relations Commission.

As early as 1941, in Alafriz v. Nable, 50 this Court has characterized

grave abuse of discretion as:

... such capricious and whimsical exercise of judgment as is equivalent to

lack of jurisdiction, or, in other words, where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and
it must be so patent and gross as to amount to an evasion of positive duty or
to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. 51 (Citations omitted)

In Quebral v. Angbus Construction, Inc., 52 this Court applied the

definition to labor cases:

In labor cases, grave abuse of discretion may be ascribed to the

NLRC when its findings and conclusions are not supported by substantial
evidence, which refers to that amount of relevant evidence that a reasonable
mind might accept as adequate to justify a conclusion. Thus, if the NLRC's
ruling has basis in the evidence and the applicable law and jurisprudence,
then no grave abuse of discretion exists and the CA should so declare and,
accordingly, dismiss the petition. 53 (Citations omitted)

Using these parameters, this Court finds that the Court of Appeals erred
in finding that the National Labor Relations Commission gravely abused its
discretion in reversing the Labor Arbiter's dismissal of petitioner's Complaint /
for illegal dismissal.

49
Id. at 707.
50
72 Phil. 278 (1941) [Per J. Moran, First Division].
51
Id. at 280.
52
798 Phil. 179 (2016) [Per J. Perlas-Bernabe, First Division].
53
Id. at 188.
 Decision 8 G.R. No. 235863

·: . In resolving the Petition for Certiorari, the Court of Appeals' duty was
.. to determine the presence or absence of grave abuse of discretion in the
National Labor Relations Commission's Decision. 54 It was not for the Court
of Appeals to decide whether the National Labor Relations Commission's
Decision on the merits of the case was correct. 55 "[I]f the [National Labor
Relations Commission's] ruling has basis in the evidence and the applicable
law and jurisprudence, then no grave abuse of discretion exists and th~.[Court
of Appeals] should so declare and, accordingly, dismiss the petition. " 56

We recognize the need to strike a balance between the protection of

labor and the exercise of academic freedom-both of which are enshrined in
the Constitution. Article XIII, Section 3 of the Constitution provides:

SECTION 3. The State shall afford full protection to labor, local

and overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization,

collective bargaining and negotiations, and peaceful concerted activities,
including the right to strike in accordance with law. They shall be entitled
to security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility

between workers and employers and the preferential use of voluntary modes
in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and

employers, recognizing the right of labor to its just share in the fruits of
production and the right of enterprises to reasonable returns on investments,
and to expansion and growth.

On the other hand, Article XIV, Section 5(2) of the Constitution

guarantees that "[a]cademic freedom shall be enjoyed in all institutions of
higher learning."

In Garcia v. The Faculty Admission Committee, 57 this Court discussed

the academic freedom enjoyed by institutions of higher learning:

[l]t is to be noted that the reference is to the "institutions of higher learning" /J

as the recipients of this boon. It would follow then that the school or college /
itself is possessed of such a right. It decides for itself its aims and objectives
and how best to attain them. It is free from outside coercion or interference
save possibly when the overriding public welfare calls for some restraint. It

54
Montoya v. Transmed Manila Corporation, 613 Phil. 696, 707 (2009) [Per J. Brion, Second Division].
55 Id.
56
Quebral v. Angbus Construction, Inc., 798 Phil. 179, 188 (20 I 6) [Per J. Perlas-Bernabe, First Division].
57
160-A Phil. 929 (1975) [Per .J. Fernando, En Banc].
Decision 9 G.R. No. 235863

has a wide sphere of autonomy certainly extending to the choice of students.

This constitutional provision is not to be construed in a niggardly manner
or in a grudging fashion. That would be to frustrate its purpose, nullify its
intent. 58

This concept of academic freedom finds its roots in the fundamental

freedom of expression. In ancient Greece, philosophers and their students
were persecuted and silenced in their pursuit of knowledge:

Since Socrates, numberless individuals of the same heroic mold

have similarly defied the stifling strictures of authority, whether State,
Church, or various interest groups, to be able to give free rein to their ideas.
Particularly odious were the insidious and blatant attempts at thought
control during the time of the Inquisition until even the Medieval
universities, renowned as intellectual centers in Europe, gradually lost their
autonomy.

In time, such noble strivings, gathering libertarian encrustations

along the way, were gradually crystallized in the cluster of freedoms which
awaited the champions and martyrs of the dawning modem age. This was
exemplified by the professors of the new German universities in the 16th
and 17th centuries such as the Universities of Leiden (1575), Helmstadt
(1574) and Heidelberg (1652). The movement back to freedom of inquiry
gained adherents among the exponents of fundamental human rights of the
19th and 20th centuries. "Academic freedom", the term as it evolved to
describe the emerging rights related to intellectual liberty, has traditionally
been associated with freedom of thought, speech, expression and the press;
in other words, with the right of individuals in university communities, such
as professors, researchers and administrators, to investigate, pursue, discuss
and, in the immortal words of Socrates, "to follow the argument wherever
it may lead," free from internal and external interference or pressure. 59

The academic freedom enjoyed by institutions of higher learning

protects the unbridled pursuit of knowledge. More knowledge facilitates
better, more meaningful participation. As Constitutional Commissioner
Rosario Braid said, "[ c]ommunication and information provide the leverage
for power. They enable the people to act, to make decisions, to share
consciousness in the mobilization of the nation."60

Ultimately, better education fosters a better democracy. In Valmonte v.

Belmonte, Jr., 61 this Court stated:

An informed citizenry with access to the diverse currents in political,

moral and artistic thought and data relative to them, and the free exchange f
58
Id. at 943.
59
Ateneo de Manila University v. Capulong, 294 Phil. 654, 672-673 (1993) [Per J. Romero, En Banc].
60
Akbayan Citizens Action Party v. Aquino, 580 Phil. 422, 579 (2008) [Per J. Carpio Morales, En Banc]
citing V Record, Constitutional Commission 83 (September 25, 1986).
61
252 Phil. 264 (1989) [Per J. Cortes, En Banc].
 Decision 10 G.R. No. 235863

":' . of ideas and discussion of issues thereon, is vital to the democratic

government envisioned under our Constitution. 62

Institutional academic freedom carries with it the right to select who are
worthy ito take part in the education of its students. Therefore, relationships
betwee* institutions of higher learning and their faculty members should not
be viewed as simple employer-employee relationships. In evaluating them,
1

the cofrts must accord institutions of higher learning the prerogative to

determi e who may teach. This includes setting standards for their teachers
and detl rmining whether they have been met.
I

lthus, this Court has acknowledged that academic personnel may be

placed ~n probation pending the school's determination that they satisfy the
prescri ~ed standards:

I
I The standards by which the service of the probationary teacher may
b~ adjudged satisfactory so that he may acquire permanence in his
employment or security of tenure, are set by the school. The setting of those
standards, and the determination of whether or not they have been met, have
bben held by this Court to be the prerogative of the school, consistent with
abademic freedom and constitutional autonomy by which educational
i~stitutions have the right to choose who should teach. 63 (Citation omitted)
I
I
I
Nevertheless, the autonomy of institutions of higher learning to set
standartls for their faculties must be tempered with the protection.of l~bor. In
determ~ning who may teach, they cannot be arbitrary. One limitation is that
the per~od of probation cannot exceed, among others, six consecutive regular
semesters of satisfactory service for those in the tertiary level, or nine
consec4tive trimesters of satisfactory service for those in the tertiary level
where ~ollegiate courses are offered on a trimester basis. 64 Sections 92 and
93 of the
I
1992 Manual of Regulations for Private Schools state:
I

1
SECTION 92. Probationary Period. - Subject in all instances to
cbmpliance with Department and school requirements, the probationary
p:eriod for academic personnel shall not be more than three (3) consecutive
yiears of satisfactory service for those in the elementary and secondary
1+vels, six (6) consecutive regular semesters of satisfactory service for those
if the tertiary level, and nine (9) consecutive trimesters of satisfactory
sfrvice for those in the tertiary level where collegiate courses are offered on
a trimester basis.
I
I
I SECTION 93. Regular or Permanent Status. - Those who have
Sfrved the probationary period shall be made regular or permanent. FuH-
tfme teachers who have satisfactorily completed their probationary period
spall be considered regular or permanent. I
62
Id. at 270.
63
La Salette ofSantiago, Inc. v. National Labor Relations Commission, 272-A Phil. 33, 38 (1991) [Per J.
Narvasa, First Division]. ··
64
1992 Manual of Regulations for Private Schools 8th Edition ( 1992), sec. 92.
Decision 11 G.R. No. 235863

During this period, the standards imposed on the probationary .faculty

members must be reasonable, well laid, and properly communicated. 65 The
standards for regularization must be made known to the probationary faculty
members with some specificity and measurability at the time of engagement.
The employee must be clearly informed of the job's functions. 66 This·Court
only excuses the employer's failure to elaborate specific standards when the
job is self-descriptive in nature, as in the case of maids, cooks, drivers, or
messengers. 67

The timing of the notice is equally important:

In all cases of probationary employment, the employer shall make

known to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards ai:e
made known to the employee at the time of engagement, the employee shall
be deemed a regular employee. 68

Without having been previously informed of the standards to be applied

during the period of probation, the employee cannot be deemed to have been
on probation during that period. 69 The employee "is deemed to have been
hired from day one as a regular employee. " 70

Notice of the standards at the time of the employee's engagement

allows the employee the opportunity to decide whether to proceed with the
contract of employment. It is important that the faculty member fully
understands the standards, their rationale, and the measures that will be used
by the school. This is manifested by the faculty member's acceptance of the
contract's terms, giving rise to the special relationship between them and the
school.

Finally, the employee must be notified on how the established standards

have been applied to disqualify them from becoming a regular employee:

Labor, for its part, is given the protection during the probationary
period of knowing the company standards the new hires have to meet during
the probationary period, and to be judged on the basis of these standards,
aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards

65
Mercado v. AMA Computer College-Paranaque City, Inc., 632 Phil. 228, 257 (2010) [Per J. Brion,
Second Division].
66
See Philippine Daily Inquirer v. Magtibay, Jr., 555 Phil. 326 (2007) [Per J. Garcia, First Division].
61
Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez, 655 Phil. 133, 142 (2011) [Per J.
Nachura, Second Division].
68
LABOR CODE, Omnibus Rules Implementing the Labor Code (1974), Book VI, Rule I, sec. 6(d) ..
69
ATC/ Overseas Corporation v. Court ofAppeals, 4 I 4 Phil. 883, 892-893 (200 I) [Per J. Gonzaga-Reyes,
Third Division]. ·
70
Hacienda Primera Development Corporation v. Villegas, 663 Phil. 86, 93 (2011) [Per J. Nachura,
Second Division].
Decision 12 G.R.. No. 235863

should be made known to the teachers on probationary status at the start of

their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the
probationary standards are to be applied. Ofcritical importance in invoking
a failure to meet the probationary standards, is that the school should show
- as a matter of due process - how these standards have been applied.
This is effectively the second notice in a dismissal situation that the law
requires as a due process guarantee supporting the security of tenure
provision, and is in furtherance, too, ofthe basic rule in employee dismissal
that the employer carries the burden o,fjusti.fying a dismissal. These rules
ensure compliance with the limited security of tenure guarantee the law
extends to probationary employees. 71 (Emphasis supplied, citations
omitted)

This Court has likewise affirmed the validity of fixed-term contracts

between academic personnel and institutions of higher learning so long as they
do not circumvent the employee's right to security oftenure, 72 as where:

. . . a fixed period of employment was agreed upon knowingly and

voluntarily by the parties, without any force, duress or improper pressure
being brought to bear upon the employee and absent any other
circumstances vitiating his [or her] consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by th~
former over the latter. 73 · ·· · '

Here, the Labor Arbiter, 74 the National Labor Relations Commission,75

and the Court of Appeals 76 consistently found that the nature of petitioner's
employment was both probationary and for a fixed term. This is supported by
petitioner's employment contracts 77 annexed to her Position Paper.

In Mercado v. AMA Computer College-Paranaque City, Inc., 18 this

Court discussed the difference between probationary status and fixed-term
employment, and why the probationary character prevails in case of an
overlap:

The fixed-term character of employment essentially refers to tlte

period agreed upon between the employer and the employee; employment
exists only for the duration of the term and ends on its own when the term
expires. In a sense, employment on probationary status also refers to a
period because of the technical meaning "probation " carries in Philippine
labor law - a maximum period of six months, or in the academe, a period

71 Mercado v. AMA Computer College-Paranaque City, Inc., 632 Phil. 228, 255-256 (2010) [Per J. Brion,
Second Division].
72
Palgan v. Holy Name University, G.R. No. 219916, February 10, 2021,
<https://elibrary .judiciary .gov .ph/thebookshelf/showdocs/ I/67208> [Per J. Hernando~ Third Division].
73
Brent School, Inc. v. Zamora, 260 Phil. 747, 763 (1990) [Per J. Narvasa, En Banc].
14
Rollo, pp. 165-171.
75
Id. at 201-203.
76
Id. at 43-47.
77
Id. at 81 and 85.
78
632 Phil. 228 (2010) [Per J. Brion, Second Division].
Decision 13 G.R. No. 235863

of three years for those engaged in teaching jobs. Their similarity ends
there, however, because of the overriding meaning that being "on
probation" connotes, i.e., a process of testing and observing the character
or abilities of a person who is new to a role or job.

Understood in the above sense, the essentially protective character

ofprobationary status for management can readily be appreciated. But this
same protective character gives rise to the countervailing but equally
protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly
communicated standards. Otherwise stated, within the period of the
probation, any employer move based on the probationary standards· and
affecting the continuity of the employment must strictly conform to the
probationary rules.

Under the given facts where the school year is divided into
trimesters, the school apparently utilizes its fixed-term contracts as a
convenient arrangement dictated by the trimestral system and not because
the workplace parties really intended to limit the period of their relationship
to any fixed term and to finish this relationship at the end of that term. If
we pierce the veil, so to speak, of the parties' so-called fixed-term
employment contracts, what undeniably comes out at the core is a fixed-
term contract conveniently used by the school to define and regulate its.
relations with its teachers during their probationary period.

To be sure, nothing is illegitimate in defining the school-teacher

relationship in this manner. The school, however, cannot forget that its
system of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to the terms of Article 281
of the Labor Code. Unless tit is reconciliation is made, the requirements
of this Article on probationary status would befully negated as the scl,ool
may freely choose not to renew contracts simply because their terms have
expired. Tlte inevitable effect of course is to wreck tl,e scheme that the
Constitution and the Labor Code established to balance relationships
between labor and management.

Given the clear constitutional and statutory intents, we cannot but

conclude that in a situation where the probationary status overlaps with a
fixed-term contract not ~pecifically used for the fixed term it offers, Article
281 should assume primacy and the fixed-period character of the contract
must give way. This conclusion is immeasurably strengthened by the·
petitioners' and the AMACC's hardly concealed expectation that the.
employment on probation could lead to permanent status, and that the
contracts are renewable unless the petitioners fail to pass the school's
standards.

To highlight what we mean by a fixed-term contract specifically

used for the fixed term it offers, a replacement teacher, for example, may be
contracted for a period of one year to temporarily take the place of a
· permanent teacher on a one-year study leave. The expiration of the
replacement teacher's contracted term, under the circumstances, leads to no
probationary status implications as she was never employed on
probationary basis; her employment is for a specific purpose with particular
focus on the term and with every intent to end her teaching relationship with
the school upon expiration of this term.

If the school were to apply the probationary standards (as in fact it

 Decision 14 G.R. No. 235863

says it did in the present case), these standards must not only be reasonable
..
~ . but must have also been communicated to the teachers at the start of the
probationary period, or at the very least, at the start of the period when they
were to be applied. These terms, in addition to those expressly provided by
the Labor Code, would serve as the just cause for the termination of the
probationary contract. As explained above, the details of this finding ofjust
cause must be communicated to the affected teachers as a matter of due
process. 79 (Emphasis in the original, citation omitted)

In other words, when an employee's probationary status overlaps with

fixed-term employment not specifically used for a fixed te~m, the
probationary nature of the employment prevails. Thus, the employee may not
be dismissed solely because the fixed term expired. The employment may
only be terminated for a just or authorized cause or when the employee fails
to meet the reasonable standards made known to the employee at the time of
the engagement. 80

This rule in Mercado has been affirmed in Colegio Del Santisimo

Rosario v. Rojo, 81 Universidad de Sta. Isabel v. Sambajon, Jr., 82 De La Salle
Araneta University, Inc. v. Magdurulang, 83 and University of St. La Salle v.
Glaraga. 84

Here, petitioner's probationary status overlapped with a fixed-term

contract not specifically used for the fixed term offered. She was appointed
with a probationary status for a fixed-term contract of one semester, then
reappointed for another semester under the same terms and conditions. It is
not shown that her fixed-term contracts were specifically used for the fixed
terms they offer, but instead were adopted for convenience in accordance with
respondent's academic calendar. When the second contract expired,
petitioner was merely informed that her contract would not be renewed.

Pursuant to Mercado, between the probationary character and the fixed

term of petitioner's employment, the probationary character will ·prevail.
Thus, as the National Labor Relations Commission correctly did, Article 296
of the Labor Code should apply in this case:

ARTICLE 296. [281] Probationary Employment. - Probationary

employment shall not exceed six (6) months from the date the employee
started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated.for a just cause or when
he fails to qualify as a regular employee in accordance with reasonable

79
Id. at 256-258.
80 Id.
81
717 Phil. 265 (2013) [Per J. Del Castillo, Second Division].
82
731 Phil. 235 (2014) [Per J. Villarama, Jr., First Division].
83
820 Phil. 1133 (2017) [Per J. Perlas-Bernabe, Second Division].
84
G.R. No. 224170, June I 0, 2020, <https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/ I /66255>
[Per J. J. Reyes, Jr., First Division].
Decision 15 G.R. No. 235863

standards made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee. (Emphasis supplied)

Respondent may only terminate petitioner's employment for just or

authorized causes, or if petitioner failed to qualify as a regular employee per
respondent's reasonable standards set at the time of her engagement.
However, the Court of Appeals failed to point to any just or aut.ho~ize4 _cause
for petitioner's termination. It even affirmed the National Labor Relations
Commission's finding that respondent failed to satisfy the requirements for a
valid retrenchment. 85 Moreover, there is no allegation or proof that the
nonrenewal of petitioner's contract was due to her failure to meet respondent's
standards for regular employment. For merely invoking the expiration of the
fixed term to terminate petitioner's employment, respondent illegally
dismissed petitioner.

In finding that petitioner was not illegally dismissed, the Court of

Appeals cited Brent School v. Zamora, 86 which stated that an educational
institution may lawfully terminate the employment of a probationary
employee-teacher who was under a fixed-term contract:

Accordingly, and since the entire purpose behind the development

of legislation culminating in the present Article 280 of the Labor Code
clearly appears to have been, as already observed, to prevent circumvention
of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has
singled out: agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless thus limited in its
purview, the law would be made to apply to purposes other than. those
explicitly stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended conseq~~nces.

Such interpretation puts the seal on Bibiso upon the effect of the
expiry of an agreed period of employment as still good rule - a rule
reaffirmed in the recent case of Escudero vs. Office of the President where,
in the fairly analogous case of a teacher being served by her school a notice
of termination following the expiration of the last of three successive fixed-
term employment contracts, the Court held:

"Reyes' (the teacher's) argument is not persuasive. It

loses sight of the fact that her employment was probationary,

85
Rollo. pp. 41-42.
86
260 Phil. 747 (1990) [Per J. Narvasa. En Banc].
Decision 16 G.R. No. 235863

contractual in nature, and one with a definitive period. At

the expiration of the period stipulated in the contract, her
appointment was deemed terminated and the letter informing
her of the non-renewal of her contract is not a condition sine
qua non before Reyes may be deemed to have ceased in the
employ of petitioner UST. The notice is a mere reminder
that Reyes' contract of employment was due to expire and
that the contract would no longer be renewed. It is not a
letter of termination. The interpretation that the notice is
only a reminder is consistent with the court's finding in
Labajo, ... "

Paraphrasing Escudero, respondent Alegre 's employment was

terminated upon the expiration of his last contract with Brent School on July
16, 1976 without the necessity of any notice. The advance written advice
given the Department of Labor with copy to said petitioner was a mere
reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the
approval of the Department of Labor to make the termination of his services
effective. In any case, such clearance should properly have been given, not
denied. 87 (Citations omitted)

However, the rule in Brent has been qualified in Mercado, as cited by

petitioner. In Mercado, this Court noted that, while Brent settled the validity
of fixed-term contracts, courts should take care in applying the case since it
did not involve any issue of probationary employment. 88

The Labor Arbiter89 and the Court of Appeals90 also relied on Magis
Young Achievers' Learning Center v. Mana/0 91 to say that petitioner had no
vested right to a permanent position since she did not complete the three-year
probationary period.

This reliance on Magis was misplaced. In Magis, this Court ruled that
the teacher who was on probation may only be terminated for a just cause or
for failure to meet the reasonable standards set by the employer at the t,ime of
the employee's engagement:

As above discussed, probationary employees enjoy security of

tenure during the term of their probationary employment such that they may
only be terminated for cause as provided for by law, or if at the end of the
probationary period, the employee failed to meet the reasonable standards
set by the employer at the time of the employee's engagement. Undeniably,
respondent was hired as a probationary teacher and, as such, it was
incumbent upon petitioner to show by competent evidence that she did not
meet the standards set by the school. This requirement, petitioner failed to
discharge. To note, the termination ofrespondent was effected by that letter

87
88
Jd. at 763-764.
I
Mercado v. AMA Computer Col/ege-Paranaque City, Inc., 632 Phil. 228, 250-251 (20 I0) [Per J. Brion,
Second Division].
89
Rollo, p. 170.
90
Jd. at 44-45.
91
598 Phil. 886 (2009) [Per J. Nachura, Third Division].

~ :
Decision 17 G.R. No. 235863

stating that she was being relieved from employment because the school
authorities allegedly decided, as a cost-cutting measure, that the position of
"Principal" was to be abolished. Nowhere in that letter was respondent
informed that her performance as a school teacher was less than
satisfactory. 92

All told, the National Labor Relations Commission's findings had basis
in the evidence, the applicable law, and jurisprudence. Consequently, the
Court of Appeals erroneously ascribed grave abuse of discretion to the
National Labor Relations Commission.

ACCORDINGLY, the Petition for Review on Ce~iorari is

GRANTED. The Court of Appeals' November 29, 2017 Decision in CA-G.R.
SP No. 150537 is REVERSED and SET ASIDE. The National Labor
Relations Commission's November 15, 2016 Decision is REINSTATED.
Petitioner Vanessa Laura Arcilla is entitled to backwages from the time of her
illegal dismissal on October 31, 2015 up to October 30, 2017; her three
months' salary as her separation pay; and attorney's fees equivalent to 10% of the
monetary award.

All monetary awards shall be subject to 6% interest per annum from the
finality of this Decision until fully paid. 93

SO ORDERED.

Senior Associate Justice

WE CONCUR:

AM

JHOSE~OPEZ
Associate Justice

92
Id. at 907.
93
Nacar v. Gallery Frumes, 716 Phil. 267 (2013) [Per J. Peralta, En Banc].
 Decision 18 G.R. No. 235863
•

-~~KIi~
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

Senior Associate Justice

Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the Division

Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.

AL"~~
/7&ef Justice