Herma Shipyard, Inc. vs. Oliveros

G.R. No. 208936. April 17, 2017.


Respondents were Herma Shipyard’s employees occupying various positions such as welder, leadman, pipe fitter, laborer, helper, etc. The respondents filed before the Regional Arbitration Branch III a Complaint for illegal dismissal, regularization, and non-payment of service incentive leave pay with prayer for the payment of full backwages and attorney’s fees against petitioners.

Respondents alleged that they are Herma Shipyard’s regular employees who have been continuously performing tasks usually necessary and desirable in its business, however, petitioners dismissed them from employment. They were also made them sign employment contracts for a fixed period ranging from one to four months to make it appear that they were project-based employees. Allegedly petitioners resorted to this scheme to defeat their right to security of tenure, but in truth there was never a time when they ceased working for Herma Shipyard.

Petitioners argued that respondents were its project-based employees in its shipbuilding projects and that the specific project for which they were hired had already been completed. In support thereof, Herma Shipyard presented contracts of employment.

The Labor Arbiter dismissed respondents’ Complaint. The NLRC rendered its Decision7 denying respondents’ appeal and affirming in toto the Decision of the Labor Arbiter. It sustained the finding of the Labor Arbiter that based on their employment contracts, respondents were project-based employees hired to do a particular project for a specific period of time.

The CA set aside the labor tribunals’ Decisions. It held that even if the contracts of employment indicated that respondents were hired as project-based workers, their employment status have become regular since: they were performing tasks that are necessary, desirable, and vital to the operation of petitioners’ business.


(a) WON the respondents were project-based employees

(b) WON respondents shall be considered regular employees on the ground that they were performing tasks necessary, desirable, and vital to Herma Shipyard’s business operation

(c) WON the repeated rehiring of project employees to different projects make them

regular employees.

(d) WON the employment contract allowing the extension of respondents’ employment violates the second requisite of project employment that the completion or termination of such project or undertaking be determined at the time of engagement of the employee.


(a) YES. A project employee under Article 280 (now Article 294) of the Labor Code, as amended, is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee.

The services of project-based employees are coterminous with the project and may be terminated upon the end or completion of the project or a phase thereof for which they were hired. The principal test in determining whether particular employees were engaged as project-based employees, as distinguished from regular employees, is whether they were assigned to carry out a specific project or undertaking, the duration and scope of which was specified at, and made known to them, at the time of their engagement. It is crucial that the employees were informed of their status as project employees at the time of hiring and that the period of their employment must be knowingly and voluntarily agreed upon by the parties, without any force, duress, or improper pressure being brought to bear upon the employees or any other circumstances vitiating their consent.

The records of this case reveal that for each and every project respondents were hired, they were adequately informed of their employment status as project­-based employees at least at the time they signed their employment contract. They were fully apprised of the nature and scope of their work whenever they affixed their signature to their employment contract.

There is no indication that respondents were coerced into signing their employment contracts or that they affixed their signature thereto against their will

(b) NO. It is settled, however, that project-based employees may or may not be performing tasks usually necessary or desirable in the usual business or trade of the employer. The fact that the job is usually necessary or desirable in the business operation of the employer does not automatically imply regular employment; neither does it impair the validity of the project employment contract stipulating fixed duration of employment

(c) NO. [T]he repeated and successive rehiring [of respondents as project-based employees] does not [also], by and of itself, qualify them as regular employees. Case law states that length of service (through rehiring) is not the controlling determinant of the employment tenure [of project-based employees but, as earlier mentioned], whether the employment has been fixed for a specific project or undertaking, with its completion having been determined at the time of [their] engagement.”

The rule that employees initially hired on a temporary basis may become permanent employees by reason of their length of service is not applicable to project-based employees.

The nature of Herma Shipyard’s business, only hires workers when it has existing contracts for shipbuilding and repair. It is not engaged in the business of building vessels for sale which would require it to continuously construct vessels for its inventory and consequently hire a number of permanent employees. Hence, Herma Shipyard should be allowed “to reduce [its] work force into a number suited for the remaining work to be done upon the completion or proximate accomplishment of [each particular] project.”

(d) No. It is enough that Herma Shipyard gave the approximate or target completion date in the project employment contract. Given the nature of its business and the scope of its projects which take months or even years to finish, we cannot expect Herma Shipyard to give a definite and exact completion date. What is important is that the respondents were apprised at the time of their engagement that their employment is coterminous with the specific project and that should their employment be extended by virtue of paragraph 10, the purpose of the extension is only to complete the same specific project, and not to keep them employed even after the completion thereof.

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