Regular Employment Contract

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.

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. Concept

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.

A regular employee is one who has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, as defined under the Labor Code. (Article 295, Labor Code; cf. Section 5, Rule I, Book VII, Omnibus Rules & Regulations of the Labor Code)

a. Legal basis

This provision classifies employees into regular, project, seasonal, and casual. It further classifies regular employees into two kinds: (1) those “engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer”; and (2) casual employees who have “rendered at least one year of service, whether such service is continuous or broken.” (Fuji Television Network, Inc. v. Espiritu, G.R. No. 204944-45, 03 December 2014)

NB: Fixed-term employment contract is recognized under jurisprudence starting with Brent School v. Zamora.

b. 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.

c. 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, 07 June 2005

⦁ 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)

2. Classes of regular employees

a. Engaged as a regular employee

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. Deemed regular due to non-compliance of labor 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.

6. Presumption of regular employment

Regular employment is the default employment status unless proven otherwise by the employer. Otherwise stated, it is the employer who has the burden of proof that the employee is not a regular employee. This is done through showing of documentation, such as the employment contract.

7. Security of tenure

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.

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

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/Updated: February 23, 2023