FACTS:

Oliver Alvia, an employee of Convoy Marketing Corporation, filed a complaint for illegal dismissal and non-payment of wage benefits. He claimed that despite his diligent work, he was not given holiday pay, vacation leave with pay, service incentive leave pay, and 13th-month pay. Alvia's employment was terminated after he was found to smell of liquor. The respondents argued that Alvia was an independent contractor and presented delivery agency agreements to support their claim. They also presented quitclaims and releases signed by Alvia as evidence that his claims had already been settled. The Labor Arbiter initially dismissed Alvia's complaint, citing his previous signing of quitclaims and releases. However, the Court of Appeals later reversed the decision, ruling that Alvia was a regular employee and the quitclaims and releases were invalid. The case was brought to the Supreme Court, which upheld the rulings of the labor tribunals and declared the quitclaims and releases as invalid.

ISSUES:

1. Whether Albia is a regular employee or a casual employee.

2. Whether Albia is an independent contractor or an employee.

3. Whether Albia can be considered a fixed-term contractual employee.

4. Whether the fixed period of employment is in circumvention of the law on security of tenure.

5. Whether the dismissal of the employee is justified.

6. Whether the employee committed gross misconduct justifying his termination

7. Whether the employee was given due process in his termination

8. Whether the quitclaims and releases executed by the employee are valid

9. Whether the execution of a quitclaim bars an employee from demanding benefits to which he is legally entitled.

10. Whether the employee is entitled to reinstatement without loss of seniority rights, full backwages, and other benefits or their monetary equivalent.

RULING:

1. Albia is a regular employee. Any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed. It is evident from the Delivery Agency Agreements that Albia had rendered at least one year of broken service with respect to the same activity in which he was employed.

2. Albia is not an independent contractor. The test of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except as to the results of the work. In this case, Convoy engaged Albia directly, paid him on a per trip basis, and had control over his conduct and work methods. Albia cannot be considered an independent contractor based on the criteria set forth.

3. Albia cannot be deemed a fixed-term contractual employee. The Delivery Agency Agreements executed between Albia and Convoy do not meet the requisites for valid fixed-term contracts. Fixed-term employment contracts terminate by their own terms at the end of a definite period, and the decisive determinant is the day certain agreed upon by the parties for the commencement and termination of their employment relationship.

4. The fixed period of employment is in circumvention of the law on security of tenure. The Supreme Court held that if the period of employment is imposed to preclude the acquisition of tenurial security by the employee, it should be struck down as contrary to public policy or morals. The court established two indications or criteria under which the term "employment" cannot be deemed in circumvention of the law on security of tenure. These indications are: (1) the fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure on the employee, and the employee's consent is not vitiated; or (2) it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance being exercised by either party.

5. The dismissal of the employee is not justified. The court agreed with the Court of Appeals that the employee was dismissed without a just cause. The burden of proof rests upon the employer to show that the dismissal is for a just and valid cause. Failure to do so would mean that the dismissal is illegal. The court emphasized that employment is not merely a contractual relationship and that it assumes the nature of a property right for workers. Thus, the dismissal of an employee must comply with both procedural and substantive due process. Procedural due process requires notice and hearing, and substantive due process requires that dismissal be made under a just or authorized cause. In this case, the employer failed to comply with both procedural and substantive due process. The employee's alleged misconduct did not meet the requisites necessary to justify dismissal.

6. The Supreme Court found no valid grounds for the termination of the employee and ruled that his misconduct was not gross. The penalty of dismissal was not commensurate to the infraction committed. The employee was not guilty of any seriously offensive conduct and there were no untoward incidents. Thus, the termination was not justified.

7. The Supreme Court held that the employee was not afforded his right to procedural due process. The employer failed to give the employee a written notice specifying the causes or grounds for termination and did not provide an opportunity for the employee to submit a written explanation. Additionally, the employer did not conduct a hearing or conference where the employee could present his defenses. Therefore, the termination was also in violation of the employee's right to procedural due process.

8. The Supreme Court declared that the quitclaims and releases executed by the employee are invalid. The considerations for the quitclaims were not credible and reasonable compared to what the employee should have received as a regular employee. Moreover, the quitclaims and releases prevented the employee from becoming a regular employee and acquiring tenurial security, which is contrary to law and public policy.

9. The execution of a quitclaim does not bar an employee from demanding benefits to which he is legally entitled. Acceptance of separation pay does not amount to estoppel.

10. The employee is entitled to reinstatement without loss of seniority rights, full backwages, and other benefits or their monetary equivalent from the date of termination until actual reinstatement.

PRINCIPLES:

• An employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee.

• The test of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except as to the results of the work.

• Fixed-term employment contracts terminate by their own terms at the end of a definite period, and the activities performed by the employee will not impair the validity of such contracts.

• Misconduct must be gross in nature in order to justify termination of an employee.

• Employees are entitled to substantive and procedural due process before they can be terminated.

• The requirements of procedural due process in termination cases include a written notice specifying the grounds for termination, an opportunity for the employee to submit a written explanation, and a hearing or conference where the employee can present his defenses.

• Quitclaims and releases executed by employees may only be valid if certain requisites are met, including voluntariness, absence of fraud or deceit, credibility and reasonableness of consideration, and absence of conflict with laws, public order, public policy, morals, or good customs. Quitclaims that preclude employees from becoming regular employees and acquiring tenurial security are contrary to law and public policy.

• Acceptance of separation pay does not bar an employee from demanding benefits.

• An illegally dismissed employee is entitled to reinstatement without loss of seniority, full backwages, and other benefits.

• Backwages include salaries, benefits, bonuses, and general increases the employee would have been entitled to if not illegally dismissed.

• Attorney's fees can be awarded to an employee who had to litigate to protect their rights and interests.