This Supreme Court decision clarifies the rights of ‘pakyaw’ or piece-rate workers, emphasizing that regular employees, regardless of payment scheme, are entitled to security of tenure and due process. The Court affirmed that A. Nate Casket Maker illegally dismissed its employees when they refused to sign a new, less favorable employment contract. The ruling underscores that employers cannot circumvent labor laws by imposing unfair agreements and that ‘pakyaw’ workers are entitled to holiday pay, service incentive leave pay, and backwages upon illegal dismissal, though not 13th-month pay.

Beyond Piecework: When ‘Pakyaw’ Workers Deserve Regular Protection

The case of A. Nate Casket Maker vs. Elias V. Arango (G.R. No. 192282, October 5, 2016) revolves around a labor dispute concerning the alleged illegal dismissal of several employees. These employees, working as carpenters, mascilladors, and painters, were employed by A. Nate Casket Maker, a business engaged in the manufacture of caskets. The central issue is whether these workers, considered pakyaw or piece-rate employees, were illegally dismissed and if they are entitled to the same rights and benefits as regular employees.

The petitioners, Armando and Anely Nate, argued that the respondents were pakyaw workers paid per job order and not entitled to regular employee benefits. Conversely, the respondents claimed that they were regular employees, working long hours without proper compensation, and were ultimately dismissed for refusing to sign a contract that would diminish their rights. The Court of Appeals (CA) sided with the employees, reversing the National Labor Relations Commission (NLRC) decision and declaring that the employees were illegally dismissed.

At the heart of this case is the interpretation and application of Article 280 of the Labor Code, which defines regular employment. This article states that an employment is deemed regular if the employee performs activities that are usually necessary or desirable in the employer’s business, regardless of any written or oral agreement to the contrary. Here’s how Article 280 frames the concept:

Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer…

Building on this principle, the Supreme Court emphasized the importance of the “control test” in determining employment status. This test examines whether the employer has the power to control not only the result of the work but also the means and methods by which the work is accomplished. In this case, the Court found that A. Nate Casket Maker exercised control over the respondents, instructing them on the casket-making process and monitoring their work through signed notebooks, thereby establishing an employer-employee relationship.

A key element of the Court’s decision was the finding that the employees were illegally dismissed. The Court noted that the employer presented the employees with a new employment contract containing less favorable terms, and when the employees refused to sign, they were told to go home. This was viewed as a termination of employment without just cause or due process, violating the employees’ right to security of tenure guaranteed by Article XIII, Section 3 of the 1987 Constitution, which states:

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.

Furthermore, Article 279 of the Labor Code reinforces this right:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

The Court underscored that employers cannot use employment agreements to circumvent labor laws and deprive employees of their rights. Due to the length of time that had passed since the illegal dismissal, the Court upheld the CA’s decision to award separation pay in lieu of reinstatement. The separation pay was set at one month’s salary for every year of service.

Regarding monetary benefits, the Supreme Court addressed the respondents’ claims for holiday pay, 13th-month pay, service incentive leave pay, and overtime pay. Citing the case of David v. Macasio, the Court clarified that pakyaw workers are entitled to holiday pay and service incentive leave pay if they are not considered field personnel. In this case, the employees worked within the employer’s premises and were subject to supervision, thus they were not considered field personnel and were entitled to these benefits.

However, the Court ruled that the respondents were not entitled to 13th-month pay. Referring to Presidential Decree No. 851 and its implementing rules, the Court noted that employees paid on a task basis are specifically exempted from receiving 13th-month pay, irrespective of whether they are field personnel or not.

This decision offers important lessons for both employers and employees. It reinforces the principle that employers must adhere to labor laws and respect the rights of their employees, regardless of their payment scheme. Furthermore, it clarifies the rights of pakyaw workers, ensuring they receive fair treatment and protection under the law.

FAQs

What was the key issue in this case?	The main issue was whether the employees of A. Nate Casket Maker, who were paid on a piece-rate basis (pakyaw), were illegally dismissed and entitled to the same rights as regular employees.
What is a ‘pakyaw’ worker?	A ‘pakyaw’ worker is an employee who is paid per piece or task completed, rather than on a fixed salary or hourly basis. Despite this payment method, they may still be considered regular employees under the law.
What is the “control test”?	The “control test” is used to determine employment status. It examines whether the employer has the power to control not only the result of the work but also the means and methods by which the work is accomplished.
What benefits are ‘pakyaw’ workers entitled to?	‘Pakyaw’ workers who are considered regular employees are entitled to security of tenure, holiday pay, and service incentive leave pay. However, they are not entitled to 13th-month pay.
What is illegal dismissal?	Illegal dismissal occurs when an employee is terminated without just cause or without following due process. It violates the employee’s right to security of tenure.
What are the remedies for illegal dismissal?	Remedies for illegal dismissal include reinstatement to the former position without loss of seniority, payment of backwages, and other benefits. If reinstatement is not feasible, separation pay may be awarded instead.
What is security of tenure?	Security of tenure is the right of an employee to continue working for an employer unless there is a just cause for termination and due process is followed. It is protected by the Constitution and the Labor Code.
Are employers allowed to change employment contracts to reduce employee benefits?	No, employers cannot unilaterally change employment contracts to reduce employee benefits if it violates labor laws and deprives employees of their rights. The law prioritizes the protection of labor.

This case serves as a reminder of the importance of upholding labor rights in the Philippines. By protecting vulnerable workers from unfair labor practices, the Supreme Court reinforces the constitutional mandate to provide full protection to labor. This ruling underscores the necessity for employers to respect the law and ensure that all employees, regardless of their payment scheme, receive the rights and benefits they are entitled to.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: A. Nate Casket Maker vs. Elias V. Arango, G.R. No. 192282, October 5, 2016