FACTS:

In December 1978, Pakistan International Airlines Corporation (PIA) entered into separate employment contracts with Ethelynne Farrales and Ma. Mamasig. The contracts provided for a duration of three years but could be extended by mutual consent, and allowed PIA to terminate the agreement with one month's notice or payment equivalent to one month's salary. Disputes were to be resolved in Pakistan. On August 2, 1980, PIA informed Farrales and Mamasig that their services would be terminated effective September 1, 1980, as per the termination clause. Farrales and Mamasig filed a complaint for illegal dismissal and non-payment of benefits with the Ministry of Labor and Employment (MOLE). The Regional Director of the MOLE ruled in favor of Farrales and Mamasig, ordering their reinstatement with back wages. PIA appealed, asserting that the NLRC had jurisdiction over the termination cases.

Another case involved the termination of employees by Philippine Airlines, Inc. (PIA) without the required prior written authority. The Regional Director asserted jurisdiction over the case, ordering the immediate reinstatement of the employees and payment of back wages. PIA argued that its right to procedural due process was violated and that the employment contract, not the general provisions of the Labor Code, governed the relationship with the terminated employees.

The court concluded that the Regional Director had jurisdiction over termination cases, as affirmed by relevant rules and policy instructions. PIA had an opportunity to present its side through its position paper and could have appealed to the MOLE. The court also noted that at the time, dismissal without prior clearance was presumed to be without just cause, warranting immediate reinstatement and payment of wages until reinstatement. As for PIA's argument on the employment contract, the court did not delve into it.

ISSUES:

1. Whether the termination of the employees without previous clearance from the Ministry of Labor is presumed to be without just cause.

2. Whether the provisions in the contract of employment between the parties are inconsistent with the provisions of the Labor Code.

3. Whether the provisions of the employment agreement between petitioner and private respondents were intended to circumvent the security of tenure of regular employees as provided for in the Labor Code.

4. Whether the choice-of-law and venue clauses in the employment agreement can prevent the application of Philippine labor laws and regulations.

5. Whether the Philippine courts have jurisdiction over the dispute between the parties, despite the provision in the employment agreement stating that any dispute should be resolved through arbitration in Pakistan.

6. Whether the private respondents were illegally dismissed.

7. Whether the private respondents are entitled to backwages and separation pay.

RULING:

1. The termination of employees without previous clearance from the Ministry of Labor is conclusively presumed to be without just cause. This presumption cannot be overturned by any contrary proof.

2. The provisions in the contract of employment between the parties are inconsistent with the provisions of the Labor Code. Provisions in a contract may be disregarded if they are contrary to law, morals, good customs, public order, or public policy. The provisions of the Labor Code relating to labor and employment are deemed written into the contract. Parties cannot contract away applicable provisions of law, especially peremptory provisions dealing with matters heavily impressed with public interest.

3. The provisions of the employment agreement were intended to prevent any security of tenure from accruing in favor of private respondents, even during the limited period of three years. The provisions effectively rendered the employment at the pleasure of the petitioner, thereby escaping the thrust of Articles 280 and 281 of the Labor Code.

4. The choice-of-law clause specifying the law of Pakistan as the applicable law of the agreement cannot prevent the application of Philippine labor laws and regulations, considering that the employer-employee relationship between the parties is significantly affected by public interest. Likewise, the venue clause designating the Karachi courts as the sole venue for dispute settlement cannot prevent Philippine courts from assuming jurisdiction, given the substantial contacts between Philippine law and the relationship between the parties.

5. The Philippine courts have jurisdiction over the dispute between the parties. The provision in the employment agreement stating that any dispute should be resolved through arbitration in Pakistan cannot be given effect, as it would oust the jurisdiction of Philippine agencies and courts. Furthermore, the petitioner did not provide evidence of the applicable provisions of Pakistan law, so it must be presumed that the applicable provisions of Philippine law apply.

6. The private respondents were illegally dismissed.

7. The private respondents are entitled to three years of backwages without deduction or qualification. If reinstatement to their former positions or substantially equivalent positions is not feasible due to the length of time since their services were unlawfully terminated, the petitioner should be required to pay separation pay amounting to one month's salary for every year of service rendered by the private respondents, including the three years of service putatively rendered.

PRINCIPLES:

• The termination of employees without previous clearance from the Ministry of Labor is conclusively presumed to be without just cause.

• Provisions in a contract may be disregarded if they are contrary to law, morals, good customs, public order, or public policy.

• Parties cannot contract away applicable provisions of law, especially peremptory provisions dealing with matters heavily impressed with public interest.

• The presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees is a critical consideration in determining the validity of fixed-term employment agreements.

• The principle of freedom of contract allows parties to freely stipulate the duration of their engagement, but the literal interpretation of a provision of law should be avoided to prevent absurdity in its application.

• The anti-circumvention provisions of the Labor Code should be construed to refer to agreements entered into to circumvent security of tenure and should not apply to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties.

• Choice-of-law and venue clauses in an employment agreement cannot prevent the application of Philippine labor laws and regulations when the employer-employee relationship is significantly affected by public interest and when there are substantial contacts between Philippine law and the relationship between the parties.

• Paragraphs in employment agreements that seek to oust Philippine courts of their jurisdiction are not valid.

• In cases of illegal dismissal, the affected employee is entitled to backwages without deduction or qualification.

• If reinstatement is not feasible, the employer may be required to pay separation pay to the illegally dismissed employee, amounting to one month's salary for every year of service rendered.