Project Employment Contract

Summary

⦁ A project employment contract is an employment arrangement between an employer and a project employee wherein the latter’s employment has been fixed for a specific project or undertaking.

⦁ The project’s completion or termination should be determined or determinable at the time of the engagement of the project employee.

⦁ The existence of a project is vital to the validity of the project employment.

⦁ Project employment is co-terminus with the project.

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

1. Legal basis

Labor Code
ART. 295. [280] Regular and Casual Employment.  The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement 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…

a. Concepts

Project employment contract – refers to an employment arrangement wherein a project employee’s 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, as defined under the Labor Code.

Project employees – refers to employees whose employment is connected to a project or a phase/stage of a project.

2. Requirements

The requirements for valid project employment contracts:

1) The employee was assigned to carry out a specific project or undertaking; and

2) The duration and scope of which were specified at the time they were engaged for such project. (Gadia v. Sykes Asia, Inc., G.R. No. 209499, 28 January 2015.)

a. 1st requisite: Specific project or undertaking

In order to safeguard the rights of workers against the arbitrary use of the word “project” to prevent employees from attaining a regular status, employers claiming that their workers are project(-based) employees should not only prove that the duration and scope of the employment was specified at the time they were engaged, but also, that there was indeed a project. (Omni Hauling Services, Inc. v. Bon, G.R. No. 199388, 03 September 2014)

Poseidon Fishing/Terry De Jesus v. NLRC, Estoquia, G.R. No. 168052, 20 February 2006, Per Chico-Nazario, J.:

• In this case, (the employers) have not shown that (the employee – a Boat Captain) was informed that he will be assigned to a “specific project or undertaking.” As earlier noted, neither has it been established that he was informed of the duration and scope of such project or undertaking at the time of their engagement.

• For a case digest, see: Poseidon Fishing/Terry De Jesus v. NLRC, Estoquia (2006)

University of Santo Tomas (UST) v. Samahang Manggagawa ng UST (2017), G.R. No. 184262, April 24, 2017, Perlas-Bernabe, J.:

• Pontesor, et al. could not be considered as project employees because the specific undertakings or projects for which they were employed were not clearly delineated. This is evidenced by the vagueness of the project descriptions set forth in their respective CEAs, which states that they were tasked “to assist” in various carpentry, electrical, and masonry work. In fact, when the aforesaid CEAs are pieced together, it appears that during the years 1990 to 1999, Pontesor, et al. were each engaged to perform all-around maintenance services throughout the various facilities/installations in [the Company]’s campus. Thus, it seems that [the Company], through the CEAs, merely attempted to compartmentalize Pontesor, et al.’ s various tasks into purported “projects” so as to make it appear that they were hired on a per-project basis. Verily, the Court cannot countenance this practice as to do so would effectively permit [the Company]s to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis, thereby violating the employees’ security of tenure relative to their jobs.

• For a case digest, see: University of Santo Tomas (UST) v. Samahang Manggagawa ng UST (2017)

1) The 2 kinds of projects

There are two (2) kinds of projects:

1) A particular job within the regular or usual business of the employer, but which is distinct and separate, and identifiable as such, from the other undertakings of the company; or

2) A particular job not within the regular business of the company. (Paragele v. GMA Network, Inc., G.R. No. 235315, July 13, 2020, Per Leonen, J.)

It is evidently important to become clear about the meaning and scope of the term “project” in the present context. The “project” for the carrying out of which “project employees” are hired would ordinarily have some relationship to the usual business of the employer. Exceptionally, the “project” undertaking might not have an ordinary or normal relationship to the usual business of the employer. In this latter case, the determination of the scope and parameters of the “project” becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely no relationship to the usual business of the company; thus, for instance, it would be an unusual steel-making company which would undertake the breeding and production of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization problem here presented to the Court, there should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the production of vegetables as “project employees,” as distinguished from ordinary or “regular employees,” so long as the duration and scope of the project were determined or specified at the time of engagement of the “project employees.” For, as is evident from the provisions of Article 295 of the Labor Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as “project employees” as distinguished from “regular employees,” is whether or not the “project employees” were assigned to carry out a “specific project or undertaking,” the duration (and scope) of which were specified at the time the employees were engaged for that project. (Paragele v. GMA Network, Inc. [2020], supra.)

a) Within the regular/usual business

In the realm of business and industry, we note that ‘project’ could refer to one or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertaking of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this first type of project is a particular construction job or project of a construction company. A construction company ordinarily carries out two or more discrete identifiable construction projects: e,g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment are properly treated as ‘project employees’ and their services may be lawfully terminated at completion of the project. (Herma Shipyard, Inc. v. Oliveros, G.R. No. 208936, 17 April 2017)

b) Not within the regular/usual business

The term “project” could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. (Herma Shipyard, Inc. v. Oliveros [2017], supra.)

2) Co-terminus employment with project

The services of project-based employees are co-terminous with the project and may be terminated upon the end or completion of the project or a phase thereof for which they were hired. (Herma Shipyard, Inc. v. Oliveros [2017], supra.)

Project employment contracts, which fix the employment for a specific project or undertaking, are valid under the law. By entering into such a contract, an employee is deemed to understand that his employment is coterminous with the project. He may no longer be employed after the completion of the project for which he was hired. But project employment contracts are not lopsided agreements in favor of only one party. The employer’s interest is equally important as that of the employees’. While it may be true that it is the employer who drafts project employment contracts with its business interest as overriding consideration, such contracts must not prejudice the employee. (Innodata Knowledge Services, Inc. v. Inting, G.R. No. 211892, 06 December 2017)

A project employee is assigned to a project which begins and ends at determined or determinable times. Unlike regular employees who may only be dismissed for just and/or authorized causes under the Labor Code, the services of employees who are hired as ‘project(-based) employees’ may be lawfully terminated at the completion of the project. (Omni Hauling Services, Inc. v. Bon, supra.)

A project employment terminates as soon as the project is completed. Thus, an employer is allowed by law to reduce the work force into a number suited for the remaining work to be done upon the completion or proximate accomplishment of the project. However, the law requires that, upon completion of the project, the employer must present proof of termination of the services of the project employees at the nearest public employment office. This is specially provided for as regards construction workers obviously to obviate indiscriminate termination of employment in derogation of the workers’ right to security of tenure. After the termination of the project, an employer may wind up its operations only to complete the project. In such a case, the remaining employees do not necessarily lose their status as project employees. However, if the employees’ services are extended long after the supposed project had been completed, the employees are removed from the scope of project employees and they shall be considered regular employees. (Villa v. NLRC, National Steel Corporation, G.R. No. 117043, 14 January 1998)

a) Notice re project employment status

Inocentes v. R. Syjuco Construction, Inc., G.R. No. 237020, July 28, 2019, Per Inting, J.:

• In this case, to ascertain whether petitioners were project employees, as claimed by [the Company], it is primordial to determine whether notice was given them that they were being engaged just for a specific project, which notice must be made at the time of hiring. However, no such prior notice was given by the Company].

3) Project may extend more than a year

A project employment, on the other hand, contemplates on arrangement whereby “the employment has been fixed for a specific project or undertaking whose completion or termination has been determined at the time of the engagement of the employee(.)” (Universal Robina Sugar Milling Corporation v. Acibo, G.R. No. 186439, 15 January 2019.)

Two requirements, therefore, clearly need to be satisfied to remove the engagement from the presumption of regularity of employment, namely: (1) designation of a specific project or undertaking for which the employee is hired; and (2) clear determination of the completion or termination of the project at the time of the employee’s engagement. (Universal Robina Sugar Milling Corporation v. Acibo [2019], supra.)

The services of the project employees are legally and automatically terminated upon the end or completion of the project as the employee’s services are coterminous with the project. (Universal Robina Sugar Milling Corporation v. Acibo [2019], supra.)

Unlike in a regular employment under Article 280 of the Labor Code, however, the length of time of the asserted ‘project’ employee’s engagement is not controlling as the employment may, in fact, last for more than a year, depending on the needs or circumstances of the project. Nevertheless, this length of time (or the continuous rehiring of the employee even after the cessation of the project) may serve as a badge of regular employment when the activities performed by the purported “project” employee are necessary and indispensable to the usual business or trade of the employer. In this latter case, the law will regard the arrangement as regular employment. (Universal Robina Sugar Milling Corporation v. Acibo [2019], supra.)

4) Extension of project employment

Herma Shipyward, Inc. v. Oliveros,G.R. No. 208936, 17 April 2017

⦁ The CA likewise erred in holding that paragraph 10 of the employment contract allowing the extension of respondents’’ employment violates the second requisite of project employment that the completion or tem1ination of such project or undertaking be determined at the time of engagement of the employee. It reads:

10 Ang knsunduang ito maaaring palawigin ng mas mababang panahon na maaaring kailanganin para sa matagumpay na pagtatapos ng mga gawn o proyektong pinagkasunduan;

⦁ To our mind, paragraph 10 is in harmony with the agreement of the parties that respondents’ employment is coterminous with the particular project stated in their contact. It was placed therein to ensure the successful completion of the specific work fur which respondents were hired. Thus, in case of delay or where said work is not finished within the estimated completion, respondents’ period of employment can be extended until it is completed. In which case, the duration and nature of their employment remains the same as previously determined in the project employment contract; it is still coterminous with the particular project for which they were fully apprised of at the time of their engagement.

⦁ As to the requirement that the completion or termination of the specific project or undertaking for which respondents were hired should be determined at the time of their engagement, we rule and so hold that it is enough that (the Company) gave the approximate or target completion date in the project employment contract. Given the nature of its business and the scope of its projects which take months or even years to finish, we camnot expect (the Company) to give a definite and exact completion date. It can only approximate or estimate the completion date. What is important is that the respondents were apprised at the time of their engagement that their employment is coterminous with the specific project and that should their employment be extended by virtue of paragraph 10 the purpose of the extension is only to complete the same specific project, and not to keep them employed even after the completion thereof. Put differently, paragraph l 0 does not allow the parties to extend the period of respondents’ employment after the completion of the specific project for which they were hired. Their employment can only be extended if that particular project, to which their employment depends, remains unfinished.

5) Failure to inform project employment

Absent any other proof that the project employees were informed of their status as such, it will be presumed that they are regular employees. (Dacquital v. L.M. Camus Engineering Corporation, G.R. No. 176748, September 01, 2010, Per Nachura, J.)

Hanjin Heavy Industries and Construction Co. Ltd. v. Ibañez, G.R. No. 170181, June 26, 2008, Per Chico-Nazario, J.:

• Absent any other proof that the project employees were informed of their status as such, it will be presumed that they are regular employees in accordance with Clause 3.3(a) of Department Order No. 19, Series of 1993, which states that:

a) Project employees whose aggregate period of continuous employment in a construction company is at least one year shall be considered regular employees, in the absence of a “day certain” agreed upon by the parties for the termination of their relationship. Project employees who have become regular shall be entitled to separation pay.

NB: While D.O. No. 19 covers project employees in the construction industry, the provisions thereof have been extended to other projects employees in other industries as well. Observe:

Policy Instruction No. 20/Department Order No. 19 regarding work pools specifically applies [to the Construction Industry], there seems to be no impediment to applying the underlying principles to industries other than the construction industry. Neither may it be argued that a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d’ etre of both industries concern projects with a foreseeable suspension of work. (Maraguinot, Jr. v. NLRC [1998], supra.)

b. 2nd requisite: Specified duration and scope

A project employee is assigned to a project which begins and ends at determined or determinable times. (University of Santo Tomas v. Samahang Manggagawa ng UST, G.R. No. 184262, April 24, 2017, Per Perlas-Bernabe, J.)

[T]he law and jurisprudence dictate that “the duration of the undertaking begins and ends at determined or determinable times” while clarifying that “(t)he phrase ‘determinable times’ simply means capable of being determined or fixed.” (Gadia v. Sykes Asia, Inc., G.R. No. 209499, 28 January 2015)

Gadia v. Sykes Asia, Inc., G.R. No. 209499, 28 January 2015, Per Perlas-Bernabe, J.:

• In this case, [the Company] substantially complied with this requisite when it expressly indicated in [the Complainants’] employment contracts that their positions were “co-terminus with the project.” To the mind of the Court, this caveat sufficiently apprised [the Complainants] that their security of tenure with [the Company] would only last as long as the Alltel Project was subsisting. In other words, when the Alltel Project was terminated, [the Complainants] no longer had any project to work on, and hence, [the Company] may validly terminate them from employment. Further, the Court likewise notes the fact that [the Company] duly submitted an Establishment Employment Report and an Establishment Termination Report to the Department of Labor and Employment Makati-Pasay Field Office regarding the cessation of the Alltel Project and the list of employees that would be affected by such cessation… [C]ase law deems such submission as an indication that the employment was indeed project-based.

1) Determined vs Determinable

The completion of the project or phase thereof to which the employee must have been determined on/before the start of the engagement or, at the very least, determinable.

When a completion date is determined, it means that there is already an identified and specific date as to when the project is expected to be finished or completed.

On the other hand, a completion date that is determinable means that there is some other way to know when the project will be completed other than identify a specific date. For example, it may be after a completing a specific task or the happening of an event.

3. Test for project employment

The principal test in determining whether particular employees were engaged as project-based employees, as distinguished from regular employees, is whether they were assigned to carry out a specific project or undertaking, the duration and scope of which was specified at, and made known to them, at the time of their engagement. It is crucial that the employees were informed of their status as project employees at the time of hiring and that the period of their employment must be knowingly and voluntarily agreed upon by the parties, without any force, duress, or improper pressure being brought to bear upon the employees or any other circumstances vitiating their consent. (Herma Shipyard, Inc. v. Oliveros [2017], supra.)

Paragele v. GMA Network, Inc., G.R. No. 235315, July 13, 2020, Per Leonen, J.:

• In this case, GMA repeatedly engaged petitioners as camera operators for its television programs. As camera operators, petitioners performed activities which are: (1) within the regular and usual business of GMA; and (2) not identifiably distinct or separate from the other undertakings of GMA. It would be absurd to consider the nature of their work of operating cameras as distinct or separate from the business of GMA, a broadcasting company that produces, records, and airs television programs. From this alone, the petitioners cannot be considered project employees for there is no distinctive “project” to even speak of.

• For a case digest, see: Paragele v. GMA Network (2020)

4. Deemed regular employees

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project; and

2) The tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or trade of the employer. (Maraguinot, Jr. v. NLRC, G.R. No. 120969, January 22, 1998, Per Davide, Jr., J.)

However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment. (Maraguinot, Jr. v. NLRC [1998], citing Tomas Lao Construction v. NLRC, G.R. No. 116781, September 5, 1997)

Maraguinot, Jr. v. NLRC, G.R. No. 120969, January 22, 1998, Per Davide, Jr., J.:

• In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) projects. Moreover, as petitioners’ tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to the Viva Films’ warehouse, and assisting in the “fixing” of the lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety.

• For a case digest, see: Maraguinot, Jr. v. NLRC (1998)

Tomas Lao Construction v. NLRC, G.R. No. 116781, September 5, 1997, Per Bellosillo, J.:

• While length of time may not be a controlling test for project employment, it 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 the case at bar, private respondents had already gone through the status of project employees. But their employments became non-coterminous with specific projects when they started to be continuously re-hired due to the demands of petitioners’ business and were re-engaged for many more projects without interruption.

5. Construction industry

The following are additional things to note.

a. DOLE DO 19-1993 regulation

In the construction industry, project employment is regulated by DOLE Department Order No. 19, Series of 1993 (DO 19-1993) or the “Guidelines Governing the Employment of Workers in the Construction Industry.”

1) DO-19 applies to other industries as well

While it is true that DO 19-1993 was originally meant to apply only to project employment in the construction industry,56 its rules and principles have nevertheless been applied to other industries where project employment is practiced. The rationale for such broadened application of the Department Order was explained in Maraguinot, Jr. v. NLRC, where this Court applied DO 19-1993 and regularized the employment of the petitioning work pool employees who have rendered necessary and essential services for a movie production company in more than twenty company projects for a continuous period of three years. (Toyo Seat Philippines Corporation v. Velasco, G.R. No. 240774, March 03, 2021, Per Gaerlan, J.)

Maraguinot, Jr. v. NLRC, G.R. No. 120969, January 22, 1998, Per Davide, Jr., J.:

• While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No. 19 regarding work pools specifically applies, there seems to be no impediment to applying the underlying principles to industries other than the construction industry. Neither may it be argued that a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d’ etre of both industries concern projects with a foreseeable suspension of work.

• For a case digest, see: Maraguinot, Jr. v. NLRC (1998)

2) The 2 employment categories

D.O. 19-93 provides for two employment categories:

1) Project-based – “those employed in connection with a particular construction project or phase thereof and whose employment is co-terminus with each project or phase of the project to which they are assigned”; and

2) Non-project based – “those employed without reference to any particular construction project or phase of a project,” particularly, probationary, casual, and regular employees.

(Carpio v. Modair Manila Co. Ltd. Inc., G.R. No. 239622, June 21, 2021, Per Lopez, J., J.)

3) Indicators of project employment

Section 2.2 of D.O. 19-93 lays down indicators of project employment, which, while phrased in permissive language, must still be read in relation to Article 295 of the Labor Code. (Carpio v. Modair Manila Co. Ltd. Inc. [2021], supra.)

DOLE DO 19-1993
2.2. Indicators of project employment. – Either one or more of the following circumstances, among others, may be considered as indicators that an employee is a project employee.
(a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable.
(b) Such duration, as well as the specific work/service to be performed, is defined in an employment agreement and is made clear to the employee at the time of hiring.
(c) The work/service performed by the employee is in connection with the particular project/undertaking for which he is engaged.
(d) The employee, while not employed and awaiting engagement, is free to offer his services to any other employer.
(e) The termination of his employment in the particular project/undertaking is reported to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the workplace within 30 days following the date of his separation from work, using the prescribed form on employees’ terminations/dismissals/suspensions.
(f) An undertaking in the employment contract by the employer to pay completion bonus to the project employee as practiced by most construction companies.

4) Termination reports

Department Order No. 19, or the “Guidelines Governing the Employment of Workers in the Construction Industry,” requires employers to submit a report of an employee’s termination to the nearest public employment office every time an employee’s employment is terminated due to a completion of a project. (Pasos v. Philippine National Construction Corporation, G.R. No. 192394, July 03, 2013, Per Villarama, Jr., J.)

Tomas Lao Construction v. NLRC, G.R. No. 116781, September 5, 1997, Per Bellosillo, J.:

• Moreover, if private respondents were indeed employed as “project employees,” petitioners should have submitted a report of termination to the nearest public employment office every time their employment was terminated due to completion of each construction project. The records show that they did not. Policy Instruction No. 20 is explicit that employers of project employees are exempted from the clearance requirement but not from the submission of termination report. We have consistently held that failure of the employer to file termination reports after every project completion proves that the employees are not project employees. Nowhere in the New Labor Code is it provided that the reportorial requirement is dispensed with. The fact is that Department Order No. 19 superseding Policy Instruction No. 20 expressly provides that the report of termination is one of the indicators of project employment.

Pasos v. Philippine National Construction Corporation, G.R. No. 192394, July 03, 2013, Per Villarama, Jr., J.:

• PNCC submitted as evidence of its compliance with the requirement supposed photocopies of its termination reports, each listing [the Complainants] as among the employees affected. Unfortunately, none of the reports submitted pertain to the NAIA II Project. Moreover, DOLE NCR verified that petitioner is not included in the list of affected workers based on the termination reports filed by PNCC on August 11, 17, 20 and 24, 1998 for petitioner’s supposed dismissal from the NAIA II Project effective August 4, 1998. This certification from DOLE was not refuted by PNCC.

5) Work pool

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business, provided that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of “coddling labor at the expense of capital” and at the same time enables the workers to attain the status of regular employees. (Tomas Lao Construction v. NLRC [1997], supra.)

Policy Instruction No. 20/Department Order No. 19 regarding work pools specifically applies [to the Construction Industry], there seems to be no impediment to applying the underlying principles to industries other than the construction industry. Neither may it be argued that a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d’ etre of both industries concern projects with a foreseeable suspension of work. (Maraguinot, Jr. v. NLRC [1998], supra.)

b. May perform tasks of a regular employee

It is settled, however, that project-based employees may or may not be performing tasks usually necessary or desirable in the usual business or trade of the employer. The fact that the job is usually necessary or desirable in the business operation of the employer does not automatically imply regular employment; neither does it impair the validity of the project employment contract stipulating a fixed duration of employment. (Herma Shipyard, Inc. v. Oliveros [2017], supra.)

(T)he repeated and successive rehiring (of respondents as project-based employees) does not (also), by and of itself: qualify them as regular employees. Case law states that length of service (through rehiring) is not the controlling determinant of the employment tenure (of project-based employees but, as earlier mentioned), whether the employment has been fixed for a specific project or undertaking, with its completion having been determined at the tin1e of (their) engagement.’ Stated otherwise the rule that employees initially hired on a temporary basis may become permanent employees by reason of their length of service is not applicable to project-based employees.” (Herma Shipyard, Inc. v. Oliveros [2017], supra.)f

Thus, the fact that petitioners worked for (the Company) under different project employment contracts for several years cannot be made a basis to consider them as regular employees, for they remain project employees regardless of the number of projects in which they have worked. Length of service is not the controlling determinant of the employment tenure of a project employee. In the case of Mercado Sr. v. NLRC, this Court rule that the proviso in the second paragraph of Article 280, providing that an employee who has served for at least one year, shall be considered a regular employee, relates only to casual employees and not to project employees. (Villa v. NLRC, 348 Phil 116, 141 [1998])

While generally, length of service provides a fair yardstick for determining when an employee initially hired on a temporary basis becomes a permanent one, entitled to the security and benefits of regularization, this standard will not be fair, if applied to the constrn9tion industry because construction firms cannot guarantee work and funding for its payrolls beyond the life of each project as they have no control over the decisions and resources of project proponents or owners. Thus, once the project is completed it would be unjust to require the employer to maintain these employees in their payroll since this would be tantamount to making the employee a privileged retainer who collects payment from his employer for work not done, and amounts to labor coddling at the expense of management. (Dacles v. Millenium Erectors Corporation, G.R. No. 209822, 08 July 2015.)

c. Length of service

Generally, length of service provides a fair yardstick for determining when an employee initially hired on a temporary basis becomes a permanent one, entitled to the security and benefits of regularization. But this standard will not be fair, if applied to the construction industry, simply because construction firms cannot guarantee work and funding for its payrolls beyond the life of each project. And getting projects is not a matter of course. Construction companies have no control over the decisions and resources of project proponents or owners. There is no construction company that does not wish it has such control but the reality, understood by construction workers, is that work depended on decisions and developments over which construction companies have no say. (Carpio v. Modair Manila Co. Ltd. Inc., G.R. No. 239622, 21 June 2021)

However, as discussed in Maraguinot, idle construction workers, even if regularized, are still subject to the “no work, no pay” principle. In case the contractor is faced with an oversupply of regularized construction workers, then it can exercise its management prerogative in deciding whom to engage for the limited projects and whom to consider as still “on leave.” Indeed, under such principle, the “employer has the inherent right to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees.” Still, the employer must use fair and reasonable standards in deciding, e.g., experience, skills-match, availability. (Carpio v. Modair Manila Co. Ltd. Inc. [2021], supra.)

d. Separation pay

DOLE DO 19-1993
3.3. Project employees entitled to separation pay. –
a) Project employees whose aggregate period of continuous employment in a construction company is at least one year shall be considered regular employees, in the absence of a “day certain” agreed upon by the parties for the termination of their relationship. Project employees who have become regular shall be entitled to separation pay.

A “day” as used herein, is understood to be that which must necessarily come, although it may not be known exactly when. This means that where the final completion of a project or phase thereof is in fact determinable and the expected completion is made known to the employee, such project employee may not be considered regular, notwithstanding the one-year duration of employment in the project or phase thereof or the one-year duration of two or more employments in the same project or phase of the project. (Toyo Seat Philippines Corporation v. Velasco, G.R. No. 240774, March 03, 2021, Per Gaerlan, J.)

The completion of the project or any phase thereof is determined on the date originally agreed upon or the date indicated in the contract or, if the same is extended, the date of termination of project extension. (Toyo Seat Philippines Corporation v. Velasco [2021], supra.)

e. The 2 strands of jurisprudence

Throughout the years, Supreme Court Decisions or Jurisprudence resulted in two strands (2) of case law. The 2021 case of Carpio v. Modair Manila Co. Ltd. Inc. resolved these two strands of jurisprudence by coming up with a synthesis of the legal principles involving project employees in the construction industry.

Carpio v. Modair Manila Co. Ltd. Inc., G.R. No. 239622, June 21, 2021, Per Lopez, J., J.:

• In the first strand of jurisprudence, despite the employer’s claims of project-based employment, the workers were deemed regular employees from the beginning because: (a) despite the execution of employment contracts for certain projects, the workers were actually engaged to work in-house, for services vital and necessary to the employer’s usual trade or business; or (b) the employer failed to substantiate the allegations of project-based employment, even if for just a fraction of the employee’s service.

• Under the second strand of jurisprudence, workers initially engaged as project employees may attain regular status. Notably, however, despite factual similarity with the latter set of cases, a sub-strand of jurisprudence held that therein project employees remained as such.

• Thus, synthesizing all the above-discussed jurisprudence, and to obviate further confusion regarding the nature of employment for workers in the construction industry, the Court articulates the following principles for the guidance of workers, employers, labor tribunals, the bench, bar, and public:

• First, a worker is presumed a regular employee, unless the employer establishes that (1) the employee was hired under a contract specifying that the employment will last only for a specific undertaking, the termination of which is determined at the time of engagement; (2) there was indeed a project undertaken; and (3) the parties bargained on equal terms, with no vices of consent.

• Second, if considered a regular employee at the outset, security of tenure already attaches, and the subsequent execution of project employment contracts cannot undermine such security, but will simply be considered a continuation in the regular engagement of such employee.

• Third, even if initially engaged as a project employee, such nature of employment may ripen into regular status if (1) there is a continuous rehiring of project employees even after cessation of a project; and (2) the tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or trade of the employer. Conversely, project-based employment will not ripen into regularity if the construction worker was truly engaged as a project-based employee, and between each successive project, the employer made no manifestations of any intent to treat the worker as a continuing resource for the main business.

• Fourth, regularized construction workers are subject to the “no work, no pay” principle, such that the employer is not obligated to pay them a salary when “on leave.” In case of an oversupply of regularized construction workers, then the employer can exercise management prerogative to decide whom to engage for the limited projects and whom to consider as still “on leave.”

• Finally, submission of termination reports to the DOLE Field Office “may be considered” only as an indicator of project employment; conversely, non-submission does not automatically grant regular status. By themselves, such circumstances do not determine the nature of employment.

• For a case digest, see: Carpio v. Modair Manila Co. Ltd. Inc. (2021)

6. Distinguished

The following are distinguished.

a. Project employees v. Regular employees

 Project employeesRegular employees
Requirements(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable(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 probation, unless they pass/qualify for regular employmentNone.
Security of tenureYes, 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.Yes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of due process.

b. Project employees v. Probationary employees

 Project employeesProbationary employees
Requirements(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable(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 probation, unless they pass/qualify for regular employmentUntil end of probation, unless they pass/qualify for regular employment
Security of tenureYes, 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.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. Project employees v. Casual employees

 Project employeesCasual employees
Requirements(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable 
ActivitiesMay perform any activityPerforms activities that are incidental to the usual business or trade of the employer
Employment expirationUntil end of probation, unless they pass/qualify for regular employmentUntil end of casual employment period, which should not exceed 12 months
Security of tenureYes, 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.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.

e. Project employees v. Seasonal employees

 Project employeesSeasonal employees
Requirements(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable(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 probation, unless they pass/qualify for regular employmentUntil end of the season
Security of tenureYes, 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.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.

f. Project employees v. Fixed-term employees

 Project employeesFixed-term employees
Requirements(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable(1) Voluntary agreement; and (2) Bargained on equal footing
ActivitiesMay perform any activityMay perform any activity
Employment expirationUntil end of probation, unless they pass/qualify for regular employmentUntil end of fixed-term, period, or duration
Security of tenureYes, 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.Yes, 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.

7. Full backwages

Regarding payment of backwages in cases of illegal dismissal, for regular employment, backwages are computed from the time of dismissal until reinstatement, if such is ordered, or until finality of the decision ordering separation pay, if reinstatement is infeasible; while for project employment, backwages are computed from the date of the termination of employment until the actual completion of the work. (Carpio v. Modair Manila Co. Ltd. Inc. [2021], supra.)

8. Burden of proof on the employer

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

Equally important to stress that the employer has the burden to prove that the employee is indeed a project employee. (Inocentes v. R. Syjuco Construction, Inc. [2019], supra.)

In order to safeguard the rights of workers against the arbitrary use of the word ‘project’ which prevents them from attaining regular status, employers claiming that their workers are project employees have the burden of showing that: (a) the duration and scope of the employment was specified at the time they were engaged; and (b) there was indeed a project. Therefore, as evident in Article 295, the litmus test for determining whether particular employees are properly characterized as project employees, as distinguished from regular employees, is whether or not the employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employees were engaged for that project. (Innodata Knowledge Services, Inc. v. Inting, G.R. No. 211892, 06 December 2017)

Upon the employer lies the burden of proof to establish project employment by showing that: (1) the employee was assigned to carry out a specific project or undertaking; and (2) the duration and scope of which were specified at the time the employee was engaged for such project. Moreover, the employer must also prove that there was indeed a project undertaken. Failing these, the worker will be presumed a regular employee. (Carpio v. Modair Manila Co. Ltd. Inc. [2021], supra.)

9. 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

Similar Posts