CASE DIGEST: TOMAS LAO CONSTRUCTION ET AL., vs. NLRC. G.R. No. 116781 September 5, 1997

FACTS:

Private respondents were hired for various periods and alternatively worked for petitioners TLC, T&J and LVM Construction Corporation, altogether informally referred to as the "Lao Group of Companies" as construction workers. The three entities were controlled and managed by members of the Lao Family.

TLC, T&J and LVM are engaged in the construction of public roads and bridges. They entered joint ventures among each other and lease tools and equipment of one another. In 1989, petitioner corporations release the employment contracts of the private respondents to be signed and the documents will be used for alleged audit purposes. To secure the signatures and compliance of the employees, a memorandum was released requiring the employees to sign the documents, otherwise, their salaries will be withhold for non compliance. Notably, the contracts expressly describe the employees as project employees. Private respondents did not sign the documents because they believe that it is just a scheme to downgrade their status from regular employees to project employees. As a result, the private respondents were dismissed. Aggrieved, they then filed a case with the NLRC for illegal dismissal, which was granted and ordered the 3 corporations solidarily liable for backwages and separation pay of private respondents.

ISSUES:

1. Whether private respondents were regular employees. 

2. Whether private respondents were illegally dismissed by the petitioner.

3. Whether corporate veil may be pierced to hold 3 corporations liable to the private respondents.

RULING:

1. Yes. The court held that the principal test in determining whether the employee is a project employee distinguished from a regular employee, is that whether the project employee is assigned to carry out "specific project or undertaking", the duration and scope of which are specified at the time the employee is engaged for the project. It is true that the employees in this case were initially hired for specific project or undertakings of the company and can be classified as project employees. However, the court held that where the employment of project employees is extended long after the supposed project has been finished, the employees are removed from the scope of project employees and considered regular employees. Petitioners repeatedly hiring private respondents and continuously demanding and needing their services over a long period of time. 

Length of time of service can be a strong factor in determining whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual business or trade of the employer. In this case, the employment of private respondents became non-coterminous with specific projects when they started to be continuously re-hired due to the demands of petitioner's business and were re-engaged for many more projects without interruption.

2. Yes. The dismissal of private respondents did not go through the the mandatory requirements of substantive and procedural due process. They were just dismissed due to alleged insubordination or blatant refusal to comply with a lawful directive of their employer. The court held that for a willful disobedience of the employer's lawful order to be used as a just cause for dismissing employees, the following requirements must be present:

a. The employee's assailed conduct must have been willful or intentional, the willfulness being characterized by a  wrongful and perverse attitude; and

b. The order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he has been engaged to discharge.

These two requirements are not present because the disobedience of the private respondents are willful but not in a sense of plain and perverse insubordination. Their refusal to sign was dictated by necessity and justifiable reason. They believe that once they sign the contract, it would deny them their rightful status as a regular employment. It leaves them no option but to refuse and disobey the memorandum which seems to be used as a tool to hide their true status and downgrade the same.

3. Yes. It is rightful to disregard the veil of separate corporate personality of the 3 corporations and holding them jointly and severally liable for private respondent's back wages and separation pay. 

The 3 corporations are substantially owned and controlled by members of the Lao Family. The corporations are closed corporations collectively known as the Lao Group of Companies. They are engaged in the same line of business under one management, and use the same equipment including manpower services. 

Under the doctrine of Piercing the veil of corporate fiction, where it appears that the business enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third persons, disregard the legal fiction that the corporations are distinct entities, and treat them as identical.

In this case, the 3 corporations are indeed covered by the doctrine. It is undeniable that the private respondents were engaged by the 3 corporations in alternate periods and is in the same line of business which is construction. Records also shows that members of the Lao Family holds 100% of shares of stock of the corporations and declared as owners as reflected in the Articles of Incorporation. The incorporators and directors of the corporations are also belong to the Lao Family. 

Considering the foregoing, NLRC is not wrong in piercing the veil and extend the liabilities to the officers responsible for the interest of the corporations.