Employment & Labor - Philippines

Contractual Worker was Regular Employee

January 26 2005

Facts Ruling Comment The Supreme Court recently ruled that a production operator who was hired on a continuous basis under two-month and three-month contracts was a regular employee inasmuch as her services were necessary and desirable in the employer's business. The ruling confirms the conventional legal wisdom that fixed-term hiring for core function jobs is inherently risky. If the employee's contract expires and is not renewed, he or she can successfully sue for illegal dismissal. Facts Philips Semiconductors Inc is a corporation engaged in the production and assembly of semiconductors. It initially engaged the complainant for three months as a production operator. The contract was extended for two months, then renewed for another three months. After this, her contract was extended for another two months. The complainant was subsequently engaged again for another three months, working for Philips for 13 months in total. During her final contract, she incurred a total of 12 absences and her contract was not renewed, ostensibly for this reason. She filed a case for illegal dismissal, contending that she was a regular employee who could only be dismissed for legal cause, and after proper notice and a hearing. The labor tribunals dismissed the suit, ruling that the employee was a contractual employee. Thus, once her contract expired, her employment automatically ceased. The employee sought judicial review of these administrative rulings. The appeal court reversed the decisions, holding that the complainant was a regular employee who could be dismissed only for lawful cause, and not through the convenience of non-renewal. The company challenged this decision before the Supreme Court. Ruling Under Article 280 of the Labor Code, regardless of any written or oral agreement between an employee and his or her employer, the employee shall be deemed to have attained regular status when engaged to perform activities necessary and desirable in the usual trade or business of the employer. The Supreme Court rejected as illogical the company's contention that the employee was engaged as the need arose. The hiring of the employee on successive contracts showed that her position was regular, and it was evident that the employer had resorted to fixed-term hiring in order to circumvent regularization. Comment The courts are likely to view the re-employment of employees - whether designated as casual, contractual or temporary - under contracts ranging from two to three months over a certain period, with an express statement that the employment may be terminated at any time upon notice, being on an as-needed basis, as a subterfuge to prevent regularization. Such employment schemes run contrary to the letter and spirit of Articles 279 and 280 of the Labor Code. It is undeniable that the operation of every business establishment naturally depends on the law of supply and demand. However, this cannot be invoked as a reason why a person performing an activity which is desirable and necessary in

the usual business should be denied permanent employment status and regularization. Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral argument of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the 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 or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. Article 280 of the Labor Code of the Philippines was emplaced in our statute books to prevent the circumvention by unscrupulous employers of the employees right to be secure in his tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment defined therein. The language of the law manifests the intent to protect the tenurial interest of the worker who may be denied the rights and benefits due a regular employee because of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual or temporary status for as long as it is convenient to it.[18] In tandem with Article 281 of the Labor Code, Article 280 was designed to put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them temporary or probationary appointments, ad infinitum.[19] The two kinds of regular employees under the law are (1) those engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are employed.[20] The primary standard to determine a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer.[21] If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability of that activity to the business of the employer. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists.[22] The law does not provide the qualification that the employee must first be issued a regular appointment or must be declared as such before he can acquire a regular employee status.[23] Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of tenure and free them from the bondage of uncertainty of tenure woven by some employers into their contracts of employment. This was exactly the purpose of the legislators in drafting Article 280 of the Labor Code to prevent the circumvention by unscrupulous employers of the employees right to be secure in his tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment.
For further information on this topic please contact Ernesto Caluya or Paciano Fallar at JGLaw (Jimenez Gonzales Liwanag Bello Valdez Caluya & Fernandez) by telephone (+63 2 815 9071) or by fax (+63 2 817 3251) or by email (etcaluya@jglawph.com or pffallar@jglawph.com).

Philippine Labor Law and Jurisprudence

12. EMPLOYER-EMPLOYEE RELATIONS CASES. The POEA has original and exclusive jurisdiction to hear and decide all claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas employment, including seamen, such as, but not limited to: (a) Violation of terms and conditions of employment; (b) Disputes relating to the implementation and interpretation of employment contracts; (c) Money claims of workers against their employer and/or their duly authorized agents in the Philippines or vice versa; (d) Claims for death, disability and other benefits arising out of employment; and (e) Violations of, or non-compliance with, any compromise agreement entered into by and between the parties in an overseas employment contract. Decisions and orders of the POEA in these cases become final after the lapse of ten calendar days from receipt of a copy thereof if no appeal or motion for reconsideration is perfected or filed. Appeals are raised to the National Labor Relations Commission only on any of these grounds : a) if there is prima facie evidence of abuse of discretion on the part of the hearing officer or the administrator, b) if the decision or award was secured thru fraud or coercion; c) if made purely on questions of law; d) fraud or coercion, including graft and corruption, and/ore) if serious errors in the findings of fact are raised which, if not corrected, would cause grave and irreparable damage or injury to the appellant. (Book VII, Rule 5, Sec.2, POEA Rules) 13. LIABILITIES OF OVERSEAS EMPLOYMENT AGENCIES. A private employment agency may be sued jointly and solitarily with its foreign principal for violation of recruitment agreements and contracts of employment (Catan vs. NLRC, 160 SCRA 691). The liability of a private employment agency with the employer is joint and solitary (Alga Moher Int'l Placement Services vs. Atienza, 166 SCRA 174). By the same token, a local crewing agent is solidarily liable for all obligations arising from the crewman's shipboard contract. In this regard, a final settlement obtained through coercion is invalid.(Llobera vs. NLRC, 162 SCRA 788) A local crewing agent is also solidarily liable for damages due to the death of a seaman arising from an accident in a foreign port. (Eastern Shipping Lines vs. POEA, 166 SCRA 533). An overseas contract worker with one year of service is a regular employee. (Land Housing Development Corp. vs. NLRC, 166 SCRA 605)