Regular Employment Contract

Summary

▪ A regular employment contract is an employment arrangement between an employer and a regular employee wherein the latter has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.

▪ There are those deemed regular employees due to the employer’s non-compliance with labor laws.

▪ Regular employees have no specific end to their employment unlike non-regular employees.

▪ Employees are presumed regular unless proven otherwise.

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 or where the work or service 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. (Labor Code)

a. Concepts

Regular employment contract – refers to an employment contract wherein a an employee is being engaged as a regular employee or has acquired the status of a regular employee after passing/qualifying for regular employment.

Regular employees – refers to employees who performs activities which are usually necessary or desirable in the usual business or trade of the employer.

Deemed regular employees refers to misclassified employees who were previously engaged as non-regular employees but eventually became regular employees since Day 1 due to non-compliance with labor laws.

1) Problem with “usually necessary or desirable”

If you have been wondering by now whether there is something strange or problematic with definition of regular employees, then you are well justified in that kind of thinking.

Because of the definition, many non-regular employees filed labor complaints for regularization and to this day it is still being done. Why is that?

Think for example of an accounting office. Is a security guard necessary? Many would argue that a security guard is not necessary in the operations of an accounting office. However, it is the second phrase that is the source of the problem. Is it not desirable to have a security guard in an establishment? Who does not want to feel secure while at work? A lot of us would probably agree that having a security guard makes us feel secured and thus it is “desirable” to have one.

Thus, the word “desirable” is a subjective word. What is desirable to you might not be to me, it might be desirable for someone but not to another person. This was the problem. Thus, the labor courts are inundated with these kinds of cases where a non-regular employee is arguing that the activities he does for the business is desirable. In some cases, freelancers or independent contractors also file such similar cases.

a) Regular employee, but not usually necessary or desirable

What if regular employees do NOT perform activities which are usually necessary or desirable in the usual business or trade of the employer?

These employees remain as regular employees, nonetheless.

This means that the employer cannot change or re-classify them as non-regular employees anymore. Neither can the employer nor the employees agree or execute a written employment contract changing the status of the employee from a regular to a non-regular (e.g. probationary, casual, project, seasonal, fixed-term). This is because this is contrary to law (on security of tenure) and public policy (as it seriously prejudices the employee).

2) Presumption of regular employment

Employees are regular employees – unless otherwise proven by the employer.

This means that regular employment is the default status of an employee.

Hence, if there would be a dispute between the employer and the employee as to the correct status of an employee whether he/she is a regular or a non-regular, and the employer is unable to show evidence of non-regular employment such as a probationary employment contract or a casual employment contract, then the employee will be considered as a regular employee.

[A] worker [is] presumed a regular employee [unless otherwise proven by the employer]. (Carpio v. Modair Manila Co. Ltd., G.R. No. 239622, June 21, 2021, Per Lopez, J., J.)

Quebral v. Angbus Construction, Inc., G.R. No. 221897, November 7, 2016, Per Perlas-Bernabe, J.:

• [A]lthough the absence of a written contract does not by itself grant regular status to the employees, it is evidence that they were informed of the duration and scope of their work and their status as project employees at the start of their engagement. When no other evidence is offered, the absence of employment contracts raises a serious question of whether the employees were sufficiently apprised at the start of their employment of their status as project employees. Absent such proof, it is presumed that they are regular employees, thus, can only be dismissed for just or authorized causes upon compliance with procedural due process.

NB: While the above jurisprudence involves project employees, the principle applies to other non-regular employees as well. This principle involves the burden of proof being on the employer to prove the validity of a non-regular employment status; otherwise, labor law considers an employee as a regular employee (i.e. default employee status).

This highlights once more why a written employment contract is important and a must-have as it is an important piece of documentation. While an employment contract is consensual, having a written agreement is evidence of the verbal stipulations that the employer and the employee may have made.

3) Deemed regular employees

In addition to the problematic definition of a regular employee, the law in some cases also re-classifies a non-regular employee as a regular employee due to non-compliance with labor law.

These are some of the examples when non-regular employees are deemed regular employees by law:

1) Probationary employees who have been made or allowed to work after the probationary period;

2) Probationary employees who have not been informed of the criteria or standards for regularization;

3) Casual employees who have been made or allowed to work after the casual employment period or beyond the 12-month period limitation;

4) Casual employees who are performing activities which are usually necessary or desirable in the usual business or trade of the employer;

5) Project employees who are not working for a project;

6) Project employees who work for a project but has no completion date or it is undeterminable;

7) Project employees who have been continuously and repeatedly rehired for the same project and the work they do is necessary or indispensable;

8) Seasonal employees who have been made or allowed to work after the season;

9) Fixed-term employees who have been made or allowed to work after the fixed-term or period;

10) Fixed-term employees: (a) who did not willfully and voluntarily entered into the fixed-term employment (due to duress, force, intimidation, or undue influence from the employer); and (b) who did not bargain on equal footing with the employer on the terms and conditions of employment.

As you progress, we will keep coming back to this list of non-regular employes who are deemed regular employees. For now, what is important is that you are made aware of this situation to further appreciate the requirements for each non-regular employment contract. If the requirements are not met, the consequence is that they will be re-classified and deemed regular employees – despite having signed non-regular employment contracts.

4) Engaged as regular employees from Day 1

There is nothing preventing an employer from engaging job applicants as a regular employee from Day 1.

This is following the principle of autonomy and the principle on favorable employee stipulations.

2. Requirements

There are no specific requirements for a regular employment contract to be valid.

For one, the employer may simply extend a regular employment contract to job applicant. If the offer of regular employment is accepted, then a regular employment contract is created.

On the other hand, if the employment status of an employee is unclear, the Labor Code definition of regular employment becomes important. If the employee performs activities which are usually necessary or desirable in the usual trade or business of the employer, then there is a strong indication that the employee may be a regular employment.

Further, non-regular employees (e.g. probationary, casual, project, seasonal, fixed-term) may be deemed as regular employees if the requirements for non-regular employment contracts are not complied. For example, a probationary employee who is made to work beyond the probation becomes a regular employee by operation of law.

a. The exceptions

GENERAL RULE: Regular employees are those who perform activities which are usually necessary or desirable in the usual business or trade of the employer. (Article 295, P.D. 442, Labor Code).

EXCEPTIONS:

1) Probationary employees (Article 296, Ibid.);

2) Project employees (Article 295, Ibid.);

3) Seasonal employees (Ibid.);

4) Independent contractors (Individuals) (Article 106, Ibid.)

1) Probationary employees

Probationary employees have the opportunity of becoming regular employees if they pass/qualify for regular employment during their probationary period. While they are under probation, they are not yet regular employees.

2) Project employees

Project employees are expressly excluded from the definition of a regular employee under Article 295 of the Labor Code.

3) Seasonal employees

Similar to project employees, seasonal employees are expressly excluded from the definition of a regular employee under Article 295 of the Labor Code.

4) Independent contractors (Individuals)

Individuals as independent contractors offer their services to their clients in exchange for professional fees. The parties enter into a contract for services, instead of a contract of services (or an employment contract). For instance, this may come in the form of a retainer agreement (e.g. lawyers, doctors, engineers, consultants, etc.).

Philippine Global Communications, Inc. v. VERA, G.R. No. 157214, June 07, 2005, Per Garcia, J.:

⦁ The appellate court’s premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latter’s business, even without being hired as an employee. This set-up is precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship is in dispute.

⦁ Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues that he satisfies all the requirements thereunder. The provision relied upon reads:

ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency.

⦁ Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous workplaces, the employer may engage the services of a physician “on retained basis.” As correctly observed by the petitioner, while it is true that the provision requires employers to engage the services of medical practitioners in certain establishments depending on the number of their employees, nothing is there in the law which says that medical practitioners so engaged be actually hired as employees, adding that the law, as written, only requires the employer “to retain”, not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours.

⦁ Respondent takes no issue on the fact that petitioner’s business of telecommunications is not hazardous in nature. As such, what applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician and dentist “on retained basis”, subject to such regulations as the Secretary of Labor may prescribe. The successive “retainership” agreements of the parties definitely hue to the very statutory provision relied upon by respondent.

⦁ As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage “on retained basis” the service of a dentist or physician. Nowhere does the law provide that the physician or dentist so engaged thereby becomes a regular employee. The very phrase that they may be engaged “on retained basis”, revolts against the idea that this engagement gives rise to an employer-employee relationship.

⦁ With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by their various “retainership contracts”, so can petitioner put an end, with or without cause, to their retainership agreement as therein provided.

3. Test for regular employment

a. Reasonable connection

Under the definition, 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. (Universal Robina Sugar Milling Corporation v. Acibo, G.R. No. 186439, 15 January 2019)

The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. (Abasolo v. NLRC, La Union Tobacco Redrying Corporation, G.R. No. 118475, 29 November 2000)

4. Kinds of regular employees

a. Hired as regular employees

As earlier discussed, an employer may exercise its management prerogative and offer a regular employment contract to a job applicant. For example, even if the job vacancy only calls for a seasonal employee, the employer may still exercise its discretion and instead offer regular employment to secure the services of an applicant who may be experienced and/or highly skilled.

b. Perform activities that are usually necessary or desirable

The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade. (Basan v. Coca-Cola Bottlers Philippines, G.R. No. 174365-66, 04 February 2015)

c. Regularized or deemed regular by law

Deemed regular employees refer to non-regular employees whose status has been altered by operation of law due to their non-regular employment contract being non-compliant with labor laws and regulations.

These are some of the examples:

1) Probationary employees who have not been informed of the standards/criteria for regular employment on/before the first day of work;

2) Probationary employees who are required or allowed to continue work after the probationary period;

3) Casual employees whose employment exceeded 12 months – they are regular insofar as the position they hold;

4) Project employees who have been hired for a project which turns out to be non-existing;

5) Project employees who have been continuously rehired even after the cessation of a project and the task performed are vital, necessary, and indispensable to the usual business or trade of the employer;

6) Seasonal employees who are required or allowed to continue to work after the season;

7) Fixed-term employees whose consent was vitiated into employment or where it satisfactorily appears that the employer and employee did not deal with each other on more or less equal terms; and

8) Learners who have rendered at least two months of service but has been dismissed without just cause.

5. Regular vs. Non-Regular

Regular employees have no specific end to their employment.

On the other hand, non-regular employees have a specific end to their employment, to wit:

1) For probationary employees, it is the end of their probationary period wherein their employment either expires for failing to pass/qualify for regular employment or their employment continues for passing/qualifying for regular employment.

2) For casual employees, their employment should not exceed 12 months.

3) For project employees, their employment is co-terminus with the undertaking/project.

4) For seasonal employees, their employment should not exceed beyond the season.

5) For fixed term employees, their employment should not exceed the fixed term or period.

7. Security of tenure

Labor Code
ART. 294. [279] Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. (Labor Code)

Based on the above-cited provision, regular employees enjoy security of tenure. Thus, they may only be dismissed from employment for just causes or separated from employment for authorized causes. If there is no just cause nor authorized cause, the employer may be held liable for illegal dismissal.

8. Distinguished

The following are distinguished.

a. Regular employees v. Probationary employees

FactorsRegular employeesProbationary employees
Requirements(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(1) Probationary period not exceeding 180 calendar days; and (2) Standards/criteria for regular employment made known on/before engagement or Day 1
ActivitiesPerforms activities which are usually necessary or desirable in the usual business or trade of the employerMay perform any activity
Employment expirationNone.Until end of probation, unless they pass/qualify for regular employment
Security of tenureYes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of 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.

b. Regular employees v. Casual employees

FactorsRegular employeesCasual employees
Requirements(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 
ActivitiesPerforms activities which are usually necessary or desirable in the usual business or trade of the employerPerforms activities that are incidental to the usual business or trade of the employer
Employment expirationNone.Until end of casual employment period, which should not exceed 12 months
Security of tenureYes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of 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.

c. Regular employees v. Project employees

FactorsRegular employeesProject employees
Requirements(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(1) Engaged for a specific project or undertaking; and (2) Completion has been determined or is determinable
ActivitiesPerforms activities which are usually necessary or desirable in the usual business or trade of the employerMay perform any activity
Employment expirationNone.Until end of probation, unless they pass/qualify for regular employment
Security of tenureYes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of 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.

d. Regular employees v. Seasonal employees

FactorsRegular employeesSeasonal employees
Requirements(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(1) Performs work/services that are seasonal in nature; and (2) Employed for duration of a season
ActivitiesPerforms activities which are usually necessary or desirable in the usual business or trade of the employerPerforms work/services that are seasonal in nature
Employment expirationNone.Until end of the season
Security of tenureYes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of 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.

e. Regular employees v. Fixed-term employees

FactorsRegular employeesFixed-term employees
Requirements(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(1) Voluntary agreement; and (2) Bargained on equal footing
ActivitiesPerforms activities which are usually necessary or desirable in the usual business or trade of the employerMay perform any activity
Employment expirationNone.Until end of fixed-term, period, or duration
Security of tenureYes, they have security of tenure. They may only be dismissed for just causes or authorized causes and after observance of 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. 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

Department of Education’s Manual of Regulations for Private Schools

/Updated: October 6, 2023

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