Almirante: Contract adhesion

Dominador A. Almirante
·4 min read

(Second sequel to the April 17, 2021 issue’s “Extra Waters Are Regular Employees”)

Petitioner Allan Regala was hired by respondent Manila Hotel Corp. (MHC) sometime in 2000 as one of its waiters assigned to the Food and Beverage Department. He was later assigned as cook helper at MHC’s chocolate room/cookies kitchen during the period from Oct. 18, 2004 to June 26, 2006. He alleged that he was not recognized as a regular rank-and-file employee despite having rendered services to MHC for several years. Thus, he filed a complaint for regularization, constructive dismissal and money claims against respondent MHC.

On the part of MHC, it contended that service agreements including fixed-term service contracts were from time to time entered into between it and Regala. He freely signed the contracts and the terms thereof were determined and made known to him at the time of his engagement. There was no showing that he was forced, coerced or manipulated into signing them.

The Court of Appeals (CA) gave credence to the arguments of MHC and quoting a Supreme Court decision ruled that “an examination of the employment contracts between the parties shows no indication that Regala was forced or coerced to execute the same.”

Did the CA err?

Ruling: Yes.

We thus laid down in Brent School Inc. v. Zamora, 260 Phil. 747, 756-757 (1990), parameters or criteria under which a “term employment” cannot be said to be in circumvention of the law on security of tenure, namely: 1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or 2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.

As to the first guideline, the Service Agreements signed by Regala do not even prove that he knowingly agreed to be hired by MHC for a fixed-term way back in February 2000. At best, they only account for Regala’s supposed fixed-term status from March 1 to 3, 2009.

It is worth noting at this point that MHC persistently asserted that Regala agreed upon a fixed-term employment while making reference to his fixed-term service contracts. Concomitantly, it failed to disprove the allegations of Regala that he was made to sign various fixed-term service contracts prepared by MHC before he can be given work assignments. Indeed, MHC’s failure to furnish copies thereof gives rise to the presumption that their presentation is prejudicial to its cause.

At any rate, the sample fixed-term service contract presented by MHC, including the Service Agreements of Regala, readily show that they were entirely prepared by its Personnel Department. On this premise, it appears that the Service Agreements and/or the fixed-term service contracts are contracts of adhesion whose terms must be strictly construed against its unilateral crafter, MHC.

A contract of adhesion is one wherein a party, such as MHC in this case, prepares the stipulations in the contract and the other party, like Regala, merely affixes his signature or his “adhesion” thereto. It is an agreement in which the parties bargaining are not on equal footing, the weaker party’s participation being reduced to the alternative “to take it or leave it.” Clearly, the Service Agreements and fixed-term service contracts were contracts of adhesion, which evidently gave Regala no realistic chance to negotiate the terms and conditions of his employment, or at best, bargain for his job at MHC. Hence, it cannot be gainsaid that Regala signed the Service Agreements and the fixed-term service contracts willingly and with full knowledge of their impact.

As to the second guideline, this Court is inclined to believe that Regala can hardly be on equal terms with MHC insofar as negotiating the terms and conditions of his employment is concerned. To be clear, a fixed-term employment agreement should result from bona fide negotiations between the employer and the employee. As such, they must have dealt with each other on an arm’s length basis where neither of the parties have undue ascendancy and influence over the other. As a waiter, a rank-and-file employee, Regala can hardly stand on equal terms with MHC. Moreover, no particulars in the Service Agreements or the fixed-term service contract regarding the terms and conditions of employment indicate that Regala and MHC were on equal footing in negotiating them.

Considering that the foregoing criteria were not met, the Service Agreements and the fixed-term service contracts which MHC had Regala execute should be struck down for being illegal. (Allan Regala vs. Manila Hotel Corp., G.R. 204684, Oct. 5, 2020).