Seasonal But Not Second-Class: Regular Seasonal Employees and Separation Pay in the Philippines

Seasonal workers often face precarious employment, but Philippine law recognizes that long-term seasonal employees who are repeatedly hired for tasks essential to the business are considered regular employees. This landmark case clarifies that these regular seasonal employees are entitled to separation pay when their employment is terminated due to business changes, such as a company takeover. It underscores the principle that consistent, seasonal work, integral to the business, establishes regular employment status and its corresponding rights under the Labor Code, including separation pay.

G.R. No. 118475, November 29, 2000

INTRODUCTION

Imagine working for the same company, year after year, reliably returning each season to perform the same crucial tasks. Then, one day, without warning, the company is sold, and you’re told to re-apply for your job with the new owners, with no guarantee of being rehired or recognition of your years of service. This was the reality faced by hundreds of seasonal workers at La Union Tobacco Redrying Corporation (LUTORCO). This Supreme Court case addresses a critical question: Are these long-term seasonal workers entitled to separation pay when the company changes hands, effectively terminating their employment?

The case of *Elvira Abasolo, et al. v. National Labor Relations Commission (NLRC) and La Union Tobacco Redrying Corporation* delves into the employment status of seasonal workers in the Philippines. Specifically, it tackles whether employees repeatedly hired for seasonal work, year after year, performing tasks vital to the company’s operations, should be considered regular employees entitled to separation pay when their employment ends due to a business sale.

LEGAL CONTEXT: REGULAR VS. SEASONAL EMPLOYMENT AND SEPARATION PAY

Philippine labor law distinguishes between regular and seasonal employees, and this distinction is crucial in determining employee rights, especially concerning separation pay. Regular employees, as defined under Article 295 (formerly Article 280) of the Labor Code, are those engaged to perform tasks that are “usually necessary or desirable in the usual business or trade of the employer,” excluding specific project or fixed-term employees.

Article 296 (formerly Article 281) further clarifies regular employment, stating that employees who have rendered at least one year of service, regardless of whether such service is continuous or broken, are considered regular with respect to the activity they perform as long as it exists. This “one-year rule” is a key element in determining regular employment, even for seasonal workers.

On the other hand, seasonal employees are traditionally understood as those hired for work that is only available during a specific season or part of the year. However, the Supreme Court has consistently held that seasonal workers who are repeatedly hired for the same tasks each season, year after year, and whose work is integral to the employer’s business, can attain the status of regular employees.

The right to separation pay is enshrined in Article 298 (formerly Article 283) of the Labor Code, which states:

“In case of closure of establishment and reduction of personnel or of installation of labor-saving devices, the employer may terminate the employment of the employee by reason thereof. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, or in case of employees on authorized indefinite lay-off as a result of installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.”

This provision mandates separation pay for employees terminated due to business closure or cessation of operations not caused by serious financial losses. The central question in *Abasolo v. NLRC* is whether the takeover of LUTORCO by TABACALERA constituted a closure or cessation of operations concerning the petitioners’ employment, and if so, whether they, as seasonal workers, qualified for separation pay under Article 283.

CASE BREAKDOWN: FROM LABOR ARBITER TO THE SUPREME COURT

The case began when over 200 employees of LUTORCO, a tobacco redrying company, were abruptly informed of the company’s takeover by Compania General de Tabaccos de Filipinas (TABACALERA). These employees, many with decades of service at LUTORCO, were told to apply for new positions with TABACALERA. Feeling their jobs were terminated without just cause or compensation, they filed complaints for separation pay with the NLRC.

Here’s a breakdown of the case’s procedural journey:

1. Labor Arbiter Level: The Labor Arbiter initially dismissed the employees’ complaints. He sided with LUTORCO, arguing that the company’s operations ceased due to financial losses and that TABACALERA would supposedly honor the employees’ seniority rights. The Labor Arbiter concluded that separation pay was not warranted under Article 283.
2. NLRC Level: The employees appealed to the NLRC. On appeal, LUTORCO changed its defense, claiming it hadn’t closed down entirely but only sold its redrying operations. LUTORCO argued the employees were seasonal and had refused to work for TABACALERA, therefore not entitled to separation pay. The NLRC affirmed the Labor Arbiter’s decision, agreeing that there was no termination but rather a “non-hiring due mainly to [petitioners] own volition” and that seasonal workers were not covered by Article 283.
3. Supreme Court Level: Undeterred, the employees elevated the case to the Supreme Court, arguing grave abuse of discretion by the NLRC.

The Supreme Court reversed the NLRC’s decision, siding with the petitioners. The Court found several critical errors in the NLRC’s and Labor Arbiter’s rulings. Firstly, the Court determined that the sale of LUTORCO’s tobacco redrying operations to TABACALERA effectively terminated the employees’ employment with LUTORCO. The Court noted:

“Thus, under those circumstances, the employment of petitioners with respondent LUTORCO was technically terminated when TABACALERA took over LUTORCO’s tobacco re-drying operations in 1993.”

Secondly, the Supreme Court debunked LUTORCO’s claim that the employees voluntarily severed ties. The Court emphasized that the offer for employees to return to work at a different plant was an afterthought and not a genuine offer of continued employment in their original roles. Furthermore, the Court highlighted that resignation must be voluntary, which was not the case here.

Most importantly, the Supreme Court addressed the core issue of the employees’ employment status. It reiterated the “primary standard” for determining regular employment:

“The primary standard, therefore, of determining regular employment is the reasonable  connection between the particular activity performed by the employee in relation to the usual trade or business of the employer.  The test is whether the former is usually necessary or desirable in the usual business or trade of the employer.”

Applying this standard, the Court concluded that despite being seasonal workers in name, the petitioners were in fact regular employees because they were repeatedly hired for many years (some over 20 years), performing tasks essential to LUTORCO’s tobacco redrying business. The Court emphasized that consistent seasonal work integral to the business equates to regular employment for the duration of that seasonal activity.

PRACTICAL IMPLICATIONS: WHAT THIS MEANS FOR EMPLOYERS AND EMPLOYEES

This case has significant implications for both employers and employees, especially in industries relying on seasonal labor. It reinforces the principle that employers cannot simply label long-term, consistently rehired workers as “seasonal” to evade labor obligations, particularly separation pay.

For employers, the key takeaway is to recognize that repeated seasonal hiring for essential business functions can lead to regular employment status for workers. When restructuring or selling operations, employers must consider the rights of these regular seasonal employees, including separation pay if their employment is terminated due to such changes.

For employees, particularly seasonal workers, this case provides crucial legal reinforcement. It clarifies that longevity and the essential nature of their work can grant them regular employee status, even if hired on a seasonal basis. This status comes with the protection of labor laws, including the right to separation pay in cases of business closure or takeover.

Key Lessons from Abasolo v. NLRC:

• Regular Seasonal Employment: Workers repeatedly hired for seasonal jobs that are essential to the employer’s business can be considered regular employees.
• Length of Service Matters: Years of continuous seasonal employment strengthens the claim for regular employee status.
• Separation Pay for Regular Seasonal Employees: Regular seasonal employees are entitled to separation pay if their employment is terminated due to business closure or takeover, similar to regular employees in year-round positions.
• Substance Over Form: Courts will look at the actual nature of the work and the duration of employment, not just the label given to the employment arrangement.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q: What makes a seasonal employee a “regular seasonal employee”?

A: A seasonal employee becomes a “regular seasonal employee” when they are repeatedly hired for the same seasonal work, year after year, and their work is considered necessary or desirable to the employer’s main business. Longevity of service is a significant factor.

Q: Are all seasonal workers entitled to separation pay?

A: Not all seasonal workers are automatically entitled to separation pay. Only “regular seasonal employees,” as defined above, are entitled to separation pay under Article 283 of the Labor Code if their employment is terminated due to business closure or cessation not due to serious financial losses.

Q: How is separation pay calculated for regular seasonal employees?

A: Separation pay is calculated similarly to regular employees: one month’s pay or one-half month’s pay for every year of service, whichever is higher. For seasonal employees, “monthly pay” is typically interpreted as the average monthly pay during their last working season.

Q: What if a company sells its operations? Is that considered a termination of employment for seasonal workers?

A: Yes, as clarified in *Abasolo v. NLRC*, the sale or takeover of a company’s operations can be considered a termination of employment for existing employees, including regular seasonal workers, especially if they are required to re-apply for their positions with the new company.

Q: What should seasonal workers do if they believe they are regular employees and are denied separation pay?

A: Seasonal workers who believe they are regular employees and have been unjustly denied separation pay should consult with a labor lawyer. They can file a complaint with the NLRC to assert their rights and claim separation pay and other benefits.

Q: Can employers avoid separation pay by claiming financial losses?

A: Employers can avoid paying the higher separation pay (one-month pay per year of service) if the closure is due to proven “serious business losses or financial reverses.” However, this must be substantiated with evidence. If the closure is for other reasons, such as a sale or restructuring without proven losses, the separation pay obligation applies.

Q: Does TABACALERA have to absorb employees from LUTORCO in this case?

A: The Supreme Court clarified there is no legal obligation for a purchasing company (TABACALERA) to automatically absorb employees of the selling company (LUTORCO). However, best practices and social justice principles suggest giving preference to qualified separated employees.

Q: What is the role of the NLRC in labor disputes like this?

A: The NLRC (National Labor Relations Commission) is a quasi-judicial body that handles labor disputes in the Philippines. It hears appeals from decisions of Labor Arbiters and its decisions can be further appealed to the Supreme Court on questions of grave abuse of discretion.

ASG Law specializes in Labor Law and Employment Disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.