Classification of Employment Status in the Philippines

The nature of the employment depends on the nature of the activities to be performed by the employee, considering the nature of the employer’s business, the duration and scope to be done, and, in some cases, even the length of time of the performance and its continued existence.

Further, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. Equally important to consider is that a contract of employment is impressed with public interest such that labor contracts must yield to the common good. Thus, provisions of applicable statutes are deemed written into the contract, and the parties are never at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply entering into contracts with each other (Innodata Knowledge Services, Inc. vs. Inting, et. al., G.R. No. 211892, December 6, 2017).

In the Philippines, there are six (6) common employee classification; to wit:

1. Regular or Permanent Employment

Three ways to attain regular employment

Under the Labor Code of the Philippines, it can be gleaned that there are three (3) ways in attaining regular employment:

a. By nature of their work, that is when the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.

b. By period of their service, that is when the employee has rendered at least one (1) year of service, whether such service is continuous or broken, with respect to the activity in which he is employed and his employment shall continue while such activity exists.

c. By their probationary employment, that is when the employee is allowed to work after a probationary period.   

Being a regular employee, aside from the fact that he or she cannot be terminated for causes other than those just and authorized causes provided by law and only after due process is given to them, he or she is likewise entitled to some benefits which other employee may not have like healthcare benefits and insurance.

Primary standard that determines regular employment

The primary standard that determines regular employment is the reasonable connection between the particular activity performed by the employee and the usual business or trade of the employer; the emphasis is on the necessity or desirability of the employee’s activity. Thus, when the employee performs activities considered necessary and desirable to the overall business scheme of the employer, the law regards the employee as regular.

Written or oral agreement is immaterial in the determination of regular employment (Association of Trade Unions vs. Abella, G.R. 100518, Jan. 24, 2000). Even the manner or mode of paying the wages of employees does not affect the regularity of his or her employment. So that, if an employee is paid on a per-piece basis (Labor Congress of the Philippines vs. NLRC, G.R. No. 123938, May 21, 1998) or on commission basis (Columbus Philippines Bus Corporation vs. NLRC, G.R. Nos. 114858-59, Sep. 7, 2001), his becoming a regular employee is not affected thereby.

Exception to the rule on regularity under Article 295

Fixed-term employment is however, an exception to the rule on regularity under Article 295 of the Labor Code. This means that an employee may validly enter into a fixed-term employment contract even if the nature of his work is directly related to the principal business or trade of his employer (Brent School vs. Zamora, G.R. No. L-48494, Feb. 5, 1990).

By period of their service

The Supreme Court has repeatedly held that if the employee has been performing the job for at least one (1) year, even if the performance is not continuous but 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 his employer. Hence, the employment is also considered regular, but only with respect to such activity, and while such activity exists. The law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular employee status. Obviously, where the law does not distinguish, no distinction should be drawn (Conti and Cruz vs. NLRC, G.R. No. 119253, April 10, 1997). Moreover, the repeated renewal of contract is an indication of regular employment (Bernardo vs. NLRC, G.R. No. 122917, July 12, 1999).

By their probationary employment

As a general rule, probationary employment cannot exceed six months. Otherwise, the employee concerned shall be regarded as a regular employee. Moreover, it is indispensable in probationary employment that the employer informs the employee of the reasonable standards that will be used as basis for his or her regularization at the time of his or her engagement. In the event that the employer fails to comply with the aforementioned, then the employee is considered a regular employee (Moral vs. Momentum Properties Management Corporation, G.R. No. 226240, March 06, 2019).

2. Casual Employment

Concept of casual employment

An employment shall be deemed to be casual, when an employee is engaged to perform a job, work or service which is not usually necessary or desirable or merely incidental to the business or trade of the employer and such job, work or service is for definite period made known to the employee at the time of his or her engagement.

Regularization of casual employees

Article 295 of the Labor Code of the Phillipines provides that any employee who has rendered at least 1 year of service, whether such service is continuous or not, 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. Hence, casual employee becomes regular after 1 year of service by operation of law (Capule vs. NLRC, G.R. No. 90653, Nov. 12, 1990). In other words, no regular appointment paper is necessary for casual employees to become regular (Kay Products, Inc. vs. CA, G.R. No. 162472, Jul. 28, 2005).

The purpose of the provision which considers as regular employees those casual employees who have rendered at least 1 year of service  whether such service is maybe continuous or broken is to put an end to casual employment in regular jobs which have been abused by many employers to prevent so-called casuals from enjoying the benefits of regular employees or to prevent casuals from joining unions. Its purpose is to give meaning to the constitutional guarantees of security of tenure and right to self-organization (Mercado vs. NLRC, G.R. No. 79869, Sep. 5, 1991).

Repeated rehiring of a casual employee makes him a regular employee. For this purpose, the 1-year period should be reckoned from the first time he or she was hired.

Security of tenure of casual employees

If a casual employee has rendered at least 1-year service in the same company, whether such service is continuous or intermittent, the casual employee shall be considered a regular employee with respect to the activity employed. Casual employee enjoys security of tenure while such activity continues and cannot be terminated for causes other than those just and authorized causes provided by law and only after due process is given to them.

3. Probationary Employment

Concept of probationary employment

A probationary employee is one who, for a given period of time, is under observation and evaluation to determine whether or not he is qualified for permanent employment. During the probationary period, the employer is given the opportunity to observe the skill, competence and attitude of the employee while the latter seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment (Dela Cruz vs. NLRC, G.R. No. 145417, Dec. 11, 2003).

Duration of probationary employment

As a general rule, the duration of probationary employment is limited to 6 months. However, there are exceptions to this rule such as when the employer and employee agree on a shorter or longer period; when the nature and work to be performed by the employee requires a longer period; when a longer period is required and established by company policy. If not one of the exceptional circumstances is proven, the employee whose employment exceeds 6 months is undoubtedly a regular employee (San Miguel Corp. vs. Del Rosario, G.R. Nos. 168194 and 168603, Dec. 13, 2005).

If the job is apprenticeable, the probationary employment is the apprenticeship period of not more than 6 months or less than 3 months, depending on the nature of the job. If the job is learnable (non-apprenticeable), the probationary employment is the learnership period which is not more than 3 months. Upon expiration of the training period, the apprentice or learner becomes a regular employee and does not anymore undergo a probationary period in the company that conducted the training program (Policy Instruction No. 11; Sec. 6a., Rule I, Book VI, Rules Implementing the Labor Code).

The employer and employee may extend by agreement the probationary period of employment beyond 6 months. If thus extended, the employee cannot later on claim regular status on the ground that the 6-month period had already elapsed. The extension of probation is ex gratia, an act of liberality on the part of the employer that cannot be used unjustly against him. By voluntarily agreeing to an extension of the probationary period, the employee waived any benefit attaching to the completion of the period if he still failed to make the grade during the period of extension. Voluntary agreements which reasonably extend the period of probation actually improve and further a probationary employee’s prospects of demonstrating his fitness for regular employment (Mariwasa Mfg., Inc. vs. Hon. Leogardo, G.R. No. 74246, Jan. 26, 1989).

Security of tenure of probationary employee

A probationary employee enjoys security of tenure, although it is not on the same plane as that of a permanent employee. Other than being terminated for a just or authorized cause, a probationary employee may also be dismissed due to his or her failure to qualify in accordance with the standards of the employer made known to him or her at the time of his or her engagement. Hence, the services of a probationary employee may be terminated for any of the following: (1) a just cause; (2) an authorized cause; and (3) when he or she fails to qualify as a regular employee in accordance with the reasonable standards prescribed by the employer (Moral vs. Momentum Properties Management Corporation, G.R. No. 226240, March 06, 2019).

Under Article 296 of the Labor Code, it provides that the services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement.

Due process on termination of probationary employment

For the first ground which is termination for a just cause or authorized cause, procedural due process is required. Otherwise, even though the dismissal is for a just cause but procedural due process was not followed, nominal damages of Php 30,000.00 maybe awarded to the employee based on the Agabon Doctrine (Agabon vs. NLRC, G.R. No. 158693, Nov. 17, 2004). If the dismissal is for an authorized cause but procedural process was not followed, nominal damages of Php 50,000.00 may be awarded to the employee based on the Jaka Doctrine (Jaka Food Processing Corporation vs. Pacot, G.R. No. 151378, Mar. 28, 2005).

For the second ground, termination of probationary employment does not require notice and hearing. Due process of law has already been observed if reasonable standards expected of the employee during his or her probationary period was made known to him or her at the time of his or her probationary employment.

To be valid, termination must be done prior to lapse of probationary period (Pasamba vs. NLRC, G.R. No. 168421, Jun. 8, 2007). In Mitsubishi Motors Phils. Corp vs. Phils. Labor Union, G.R. No. 148738, Jun. 29, 2004, the Court declared that when the the employee received the letter of termination on the 183^rd day or after the expiration of 6-month period of probation, the employee was already a regular employee under Article 281 (now 296) of the Labor Code.

4. Project Employment

Concept of project employment

Article 295 of the Labor Code provides that project employment is 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.

The services of a project employees are coterminous with the project or phase thereof and may be terminated upon the end or completion of the project or phase thereof for which they were hired. If the termination is brought about by the completion of the project or any phase thereof, due process is complied with even if no prior notice of termination is served.

The employees of a particular project are not terminated at the same time. Some phases of the project are completed ahead of others. For this reason, the completion of a phase of the project is the completion of the project for an employee employed in such phase. Employees terminated upon the completion of their phase of the project are not entitled to separation pay and exempt from the clearance requirement.

Length of service, not controlling

Length of service is not controlling for the determination of employment tenure (Fabela vs. San Miguel Corporation, G.R. No. 150658, Feb. 9, 2007). Hence, project to project basis of employment is held valid. Project employees, however, should be informed of their status as such at inception of the employment relationship. There must be a written contract of project employment stating the duration of the project employment as well as the particular work or service to be performed (Abesco Construction and Development Corp. vs. Ramirez, G.R. No. 141168, Apr. 10, 2006). Failure to present contract of employment means that employees are regular.

Work Pool Principle

As a general rule, employers may or may not form a work pool. A work pool refers to a group of workers from which an employer like a construction company draws the workers it deploys or assigns to its various projects or any phase/s thereof. Members of a work pool may consist of:

1. Non-project employees or employees for an indefinite period. If they are employed in a particular project, the completion of the project or of any phase thereof will not mean severance of employer-employee relationship.

2. Project employee are workers in a work pool who are employed in a particular project or any phase thereof are considered as such if they are free to leave anytime and offer their services to other employers.

Mere membership in a work pool does not result in the worker’s becoming regular employees by reason that fact alone. However, under established jurisprudence, a project employee who is a member of a work pool, may attain regular status as a project employee. This kind of employee is known as regular project employee.

Security of tenure of project employee

Project employees enjoys security of tenure during the term of project employment (Tomas Lao Construction vs. NLRC, G.R. No. 116781, Sep. 5, 1997). If the project or any phase thereof the project employee is working on has not yet been completed and his services are terminated without just or authorized caused and there is no showing that his services are unsatisfactory, such termination is considered illegal, hence, the project employee is entitled to reinstatement with backwages to his former position or substantially equivalent position. If reinstatement is no longer possible, the employee is entitled to his salaries for the unexpired portion of the agreement (Filipinas Pre-Fabricated Building Systems, Inc. vs. Puente, G.R. No. 153832, Mar. 18, 2005).

Not entitled to separation pay

Project employees are not, by law, entitled to separation pay if their services are terminated as a result of the completion of the project or any phase thereof in which they are employed. The reason is that their services are deemed coterminous with the project or phase thereof. And since its coterminous, advance notice of termination of project employment is not required.

Reportorial requirement, mandatory

The employer should have submitted or filed as many reports of termination as there were construction projects actually finished. The failure to submit reports of termination supports the claim of private respondent that he was indeed a regular employee (Audion Electric Co., Inc. vs. NLRC, G.R. No. 106648, Jun. 17, 1988) not a regular employee. Report to DOLE on termination of project employees is required. Report should be made after every completion of project of phase thereof (Dacuital vs. L.M. Camus Engineering Corp., G.R. No. 176748, Sep. 1, 2010).

5. Seasonal Employment

Concept of seasonal employment

Article 295 of the Labor Code provides that a seasonal employment is where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

It operates much in the same way as project employment, albeit it involves work or service that is seasonal in nature or lasting for the duration of the season. As with project employment, although the seasonal employment arrangement involves work that is seasonal or periodic in nature, the employment itself is not automatically considered seasonal so as to prevent the employee from attaining regular status. To exclude the asserted "seasonal" employee from those classified as regular employees, the employer must show that: (1) the employee must be performing work or services that are seasonal in nature; and (2) he had been employed for the duration of the season. Hence, when the "seasonal" workers are continuously and repeatedly hired to perform the same tasks or activities for several seasons or even after the cessation of the season, this length of time may likewise serve as badge of regular employment. In fact, even though denominated as "seasonal workers," if these workers are called to work from time to time and are only temporarily laid off during the off-season, the law does not consider them separated from the service during the off-season period. The law simply considers these seasonal workers on leave until re-employed (Universal Robina Sugar Milling Corp., et. al. vs. Acibo, et. al., G.R. No. 186439, January 15, 2014).

Regular seasonal employee

Thus, seasonal employees may attain regularity in their employment and they are properly to be called as regular seasonal employees. As such, they are called to work from time to time, mostly during certain season. The nature therefore of their relationship with the employer is such that during off-season, they are temporarily laid-off but they are reemployed during the season or when their services may be needed. They are not separated from the service but merely considered as on leave of absence without pay until they are re-employed. Their employment is never severed but only suspended.

The requisites in order that a seasonal employee may attain regularity of employment are: 1) the seasonal employee should perform work or services that are seasonal in nature; and 2) they have been employed for more than one (1) season. Both requisites should concur in order that the employee may be classified as regular seasonal employee (Hacienda Fatima vs. National Federation of Sugarcane Workers – Food and General Trade, G.R. No. 149440, Jan. 28, 2003).

6. Fixed-Term or Contractual Employment

Interestingly, the Labor Code does not mention another employment arrangement – contractual or fixed term employment (or employment for a term) – which, if not for the fixed term, should fall under the category of regular employment in view of the nature of the employee’s engagement, which is to perform an activity usually necessary or desirable in the employer’s business (Universal Robina Sugar Milling Corp., et. al. vs. Acibo, et. al., G.R. No. 186439, January 15, 2014).

Concept of fixed-term or contractual employment

Fixed-term or contractual employment is when the employee renders service for a definite period of time and the employment contract must be terminated after such period expires. This type of employment is determined not by the activities that the employee is expected to perform but by the commencement and termination of the employment relationship.

In Brent School, Inc. v. Zamora, G.R. No. L-48494, February 5, 1990 the Court, for the first time, recognized and resolved the anomaly created by a narrow and literal interpretation of Article 280 of the Labor Code that appears to restrict the employee’s right to freely stipulate with his employer on the duration of his engagement. In this case, the Court upheld the validity of the fixed-term employment agreed upon by the employer, Brent School, Inc., and the employee, Dorotio Alegre, declaring that the restrictive clause in Article 280 "should be construed to refer to the substantive evil that the Code itself x x x singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where [the] fixed period of employment was agreed upon knowingly and voluntarily by the parties x x x absent any x x x circumstances vitiating [the employee’s] consent, or where [the facts satisfactorily show] that the employer and [the] employee dealt with each other on more or less equal terms[.]" The indispensability or desirability of the activity performed by the employee will not preclude the parties from entering into an otherwise valid fixed term employment agreement; a definite period of employment does not essentially contradict the nature of the employees duties as necessary and desirable to the usual business or trade of the employer.

Requisites for a valid fixed-term or contractual employment

There are two requisites for the validity of a fixed-term contract of employment, they are: 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; and 2) it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former on the latter Labayog vs. M.Y. San Biscuits, Inc., G.R. No. 148102, Jul. 11, 2006). If the foregoing criteria are not present, the fixed-term contract of employment should be struck down for being illegal.

Some principles on fixed-term employment

Fixed-term is valid even if duties are usually necessary or desirable in the employer’s usual business or trade (Caparoso vs. CA, G.R. No. 155505, Feb. 15, 2007). The employee is deemed regular if contract failed to state the specific fixed period of employment (Poseidon Fising vs. NLRC, G.R. No. 168052, Feb. 20, 2006) and notice of termination is not necessary in fixed-term employment (New Sunrise Metal Construction vs. Pia, G.R. No. 171131, Jul 10, 2007).

Employee allowed to work beyond fixed-term become regular employees (Viernes vs. NLRC, G.R. No. 108405, Apr. 4, 2003). However, rendering work beyond 1 year would result to regular employment (Agusan del Norte Electric Cooperative vs. Cagampang and Garzon, G.R. No. 167627, Oct. 10, 2008).

Hiring of employees on a uniformly fixed 5-month basis and replacing them upon the expiration of their contracts with other workers with the same employment status circumvents their right to security of tenure (Pure Foods Corporation vs. NLRC, G.R. No. 122653, Dec. 12, 1997). Successive renewals of fixed-period contracts will result to regular employment (Philips Semiconductor, Inc. vs. Fadriquela, G.R. No. 141717, Apr. 14, 2004).

Charges for misconduct or other wrongful acts or omissions are relevant only in termination prior to expiration of the term. It is not relevant if termination is due to expiration of fixed period (AMA Computer College, Paranaque vs. Austria, G.R. No. 164078, Nov. 23, 2007).

References:

- Article 295. Regular and Casual Employment, PD No. 422, as amended and renumbered per DOLE Department Advisory No. 1, Series of 2015.

- Article 296. Probationary Employment, PD No. 422, as amended and renumbered per DOLE Department Advisory No. 1, Series of 2015.

- Poquiz, Labor Relations Law, 2005.

- Supreme Court Decisions