Fixed-Term Employment Contract

Summary

⦁ A fixed-term employment contract is an employment arrangement between an employer and a fixed-term employee wherein the latter will perform work for a term or a certain period of time.

⦁ Fixed term employees should have willfully and voluntarily entered into the fixed term employment contract.

⦁ Fixed term employees should have bargained on equal footing on the terms and conditions of employment.

⦁ Non-compliance of the requirements may result in the employee being reclassified as a regular employee.

⦁ Burden of proof is on the employer when a non-regular employment is challenged.

1. Legal basis

Not in the labor Code, but in Case Law

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 Corporation v. Acibo, G.R. No. 186439, 15 January 2019, Per Brion, J.)

In Brent School, Inc. v. Zamora, 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… 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… absent any… 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. (Universal Robina Sugar Milling Corporation v. Acibo [2019], supra.)

Nevertheless, “where the circumstances evidently show that the employer imposed the period precisely to preclude the employee from acquiring tenurial security, the law and this Court will not hesitate to strike down or disregard the period as contrary to public policy, morals, etc.” In such a case, the general restrictive rule under Article 280 of the Labor Code will apply and the employee shall be deemed regular.” (Universal Robina Sugar Milling Corporation v. Acibo [2019], supra.)

a. Concepts

Fixed-term employment contract – refers to an employment arrangement wherein the employer and the employee voluntarily entered into a fixed-term, period, or duration of employment.

Fixed-term employees – refers to employees who are hired for a fixed-term, period, or duration of employment.

Fixed-term, period, duration refers to the length of time of the fixed-term employment contract.

2. Requirements

The following are the requirements:

1) The employee must have willfully and voluntarily entered into the fixed-term employment contract without any duress, force, intimidation, or undue influence from the employer; and,

2) The employer and the employee must have bargained on equal footing on the terms and conditions of employment.

(Brent School, Inc. v. Zamora, En Banc, G.R. No. L-48494, February 5, 1990; Tuppil, Jr. v. LBP Service Corporation, G.R. No. 228407, June 10, 2020)

a. Voluntary agreement

Brent School, Inc. v. Zamora, En Banc, G.R. No. L-48494, February 5, 1990, Per Quisumbing, J.:

• [S]ince the entire purpose behind the development of legislation culminating in the present Article 280 [now 295] of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee’s right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily 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 where 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 over the latter.

• For a case digest, see: Brent School, Inc. v. Zamora (1990)

b. Bargained on equal footing

For the 2nd requirement, the employer and the employee should have bargained on equal footing. This means that the employee was free to negotiate the terms and conditions of employment with the employer, and not just be provided with a take-it-or-leave-it contract.

Dumpit-Murillo v. CA, Associated Broadcasting Company, G.R. No. 164652, June 8, 2007, Per Quisumbing, J.:

In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms. Understandably, the petitioner could not object to the terms of her employment contract because she did not want to lose the job that she loved and the workplace that she had grown accustomed to, which is exactly what happened when she finally manifested her intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting practitioner, petitioner was left with no choice but to affix her signature of conformity on each renewal of her contract as already prepared by private respondents; otherwise, private respondents would have simply refused to renew her contract. Patently, the petitioner occupied a position of weakness vis-à-vis the employer. Moreover, [the Company’s] practice of repeatedly extending [the Complainant’s] 3-month contract for four years is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term employment between [the Complainant] and [the Company]. (Emphasis supplied.)

• For a case digest, see: Dumpit-Murillo v. CA, Associated Broadcasting Company (2007)

3. Test for fixed-term employment

The principal test is the existence of a fixed term or period.

a. Fixed term

There is no limitation on the fixed term or period.

The period may be for months or years.

In the landmark and first case on the matter, Brent School v. Zamora (1991), the fixed-term employment was for a period of five (5) years. It was held to be valid.

However, there is jurisprudence applying the Labor Code provision on any employment contract that exceeds for a year results in regular employment, with the exception of project employment contract.

b. Start and end

A fixed term should have a start and an end.

The very essence of a fixed term employment is that the engagement is for a limited period of time only. Accordingly, the starting date and the ending date should be specified in the fixed term employment contract.

4. Distinguished

The following are distinguished.

a. Fixed-term employees v. Regular employees

 Fixed-term employeesRegular employees
Requirements(1) Voluntary agreement; and (2) Bargained on equal footing(1) Performs activities which are usually necessary or desirable in the usual business or trade of the employer; or (2) Deemed a regular employee by operation of law; or (3) Offered regular employment by the employer
ActivitiesMay perform any activityPerforms activities which are usually necessary or desirable in the usual business or trade of the employer
Employment expirationUntil end of fixed-term, period, or durationNone.
Security of tenureYes, they have security of tenure. During and within the fixed-term, period or duration, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.Yes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of due process.

b. Fixed-term employees v. Probationary employees

 Fixed-term employeesProbationary employees
Requirements(1) Voluntary agreement; and (2) Bargained on equal footing(1) Probationary period not exceeding 180 calendar days; and (2) Standards/criteria for regular employment made known on/before engagement or Day 1
ActivitiesMay perform any activityMay perform any activity
Employment expirationUntil end of fixed-term, period, or durationUntil end of probation, unless they pass/qualify for regular employment
Security of tenureYes, they have security of tenure. During and within the fixed-term, period or duration, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.Yes, they have security of tenure. During and within the probationary period, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.

c. Fixed-term employees v. Casual employees

 Fixed-term employeesCasual employees
Requirements(1) Voluntary agreement; and (2) Bargained on equal footing 
ActivitiesMay perform any activityPerforms activities that are incidental to the usual business or trade of the employer
Employment expirationUntil end of fixed-term, period, or durationUntil end of casual employment period, which should not exceed 12 months
Security of tenureYes, they have security of tenure. During and within the fixed-term, period or duration, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.Yes, they have security of tenure. During and within the casual employment period, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.

d. Fixed-term employees v. Project employees

 Fixed-term employeesProject employees
Requirements(1) Voluntary agreement; and (2) Bargained on equal footing(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable
ActivitiesMay perform any activityMay perform any activity
Employment expirationUntil end of fixed-term, period, or durationUntil end of probation, unless they pass/qualify for regular employment
Security of tenureYes, they have security of tenure. During and within the fixed-term, period or duration, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.Yes, they have security of tenure. During and within the probationary period, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.

e. Fixed-term employees v. Seasonal employees

 Fixed-term employeesSeasonal employees
Requirements(1) Voluntary agreement; and (2) Bargained on equal footing(1) Performs work/services that are seasonal in nature; and (2) Employed for duration of a season
ActivitiesMay perform any activityPerforms work/services that are seasonal in nature
Employment expirationUntil end of fixed-term, period, or durationUntil end of the season
Security of tenureYes, they have security of tenure. During and within the fixed-term, period or duration, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.Yes, they have security of tenure. During and within the season, they may only be dismissed for just causes or authorized causes and after observance of due process. However, they may be let go after the expiration of their employment v via advance notice prior to the last day, without need for due process.

5. Non-compliance with requirements

If any of the above requirements are not complied, the employee may be reclassified as a regular employee.

These may include:

1) The employee was constrained or forced to agree to a fixed-term employment contract due to duress, force, intimidation, or undue influence by the employer; and

2) The employer and the employee did not bargain on equal footing on the terms and conditions of employment.

6. Burden of proof on the employer

When the validity of the employment arrangement is challenged, the burden of proof is on the employer.

7. When in doubt, interpreted in favor of the employee

In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. (Article 1702, Civil Code)

References

Book VI, Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

Book VI, Omnibus Rules Implementing the Labor Code

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