fixed term

8/11/2019 Fixed Term

1/23

What is a fixed-term employment contract and when is it considered valid? The Supreme Court had

occasion to tackle these questions in the case of Cherry J. Price, et al. versus INNODATA Phils. Inc., et

al., (G.R. No. 178505), promulgated on September 30, 2008.

Cherry, Stephanie and Lolita were employed as formatters by INNODATA a domestic corporation engaged

in the data encoding and data conversion business. The parties executed an employment contract

denominated as a Contract of Employment for a Fixed Period, stipulating that the contract shall be for a

period of one year.

The days passed by and soon Cherry and her companions found themselves separated from work due to the

end of their contract. Cherry and her companions decided to contest the validity of said contract by filing a

case for illegal dismissal. The case eventually reached the Supreme Court.

In the course of deciding the case the Court cited Art. 280 of the Labor Code which states, The provisions

of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties,

an employment shall be deemed 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 Accordingthe Court:

The employment status of a person is defined and prescribed by law and not by what the parties say it

should be. Equally important to consider is that a contract of employment is impressed with public interest

such that labor contracts must yield to the common good. Thus, provisions of applicable statutes are

deemed written into the contract, and the parties are not at liberty to insulate themselves and their

relationships from the impact of labor laws and regulations by simply contracting with each other.

It went on to say that, Under Article 280 of the Labor Code the applicable test to determine whether an

employment should be considered regular or non-regular is the reasonable connection between the

particular activity performed by the employee in relation to the usual business or trade of the employer.

However, the High Court also pointed out that employment which requires performance of usual and

desirable functions, and does not exceed one year, does not always result in regular employment. This iswhere the concept of fixed-term employment comes in:

Under the Civil Code, fixed-term employment contracts are not limited, as they are under the present

Labor Code, to those by nature seasonal or for specific projects with predetermined dates of completion;

they also include those to which the parties by free choice have assigned a specific date of

termination.The decisive determinant in term employment is the day certain agreed upon by the parties

for the commencement and termination of their employment relationship, a day certain being understood

to be that which much necessarily come, although it may not be known when.

Does this mean that fixed-term employment contracts are always valid, provided they are entered into

knowingly and voluntarily? No. In the case under consideration the Supreme Court emphasized that fixed-term employment contracts are the exception rather than the general rule, and are valid only under certain

circumstances. Citing its earlier decision in Brent School v. Zamora (G.R. No. 48494, 5 February 1990, 181

SCRA 702) the Court identified several circumstances wherein a fixed-term is anessential and natural

appurtenance:

Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor

for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas


2/23

employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular

employment with all that it implies does not appear ever to have been applied, Article 280 of the Labor

Code notwithstanding; also appointments to the positions of dean, assistant dean, college secretary,

principal, and other administrative offices in educational institutions, which are by practice or tradition

rotated among the faculty members, and where fixed terms are a necessity without which no reasonable

rotation would be possible. Similarly, despite the provisions of Article 280, Policy Instructions No. 8 of theMinister of Labor implicitly recognize that certain company officials may be elected for what would amount

to fixed periods, at the expiration of which they would have to stand down, in providing that these officials,

x x may lose their jobs as president, executive vice-president or vice president, etc. because the

stockholders or the board of directors for one reason or another did not reelect them.

The Court also mentioned the fact that in the same Brent case, it issued a stern admonition that where,

from the circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial

security by the employee, then it should be struck down as being contrary to law, morals, good customs,

public order and public policy.

To end the long story: Cherry and her companions were considered by the Court as regular employees; and

as far as their fixed-term employment contract was concerned, the Court had this to say:

After considering petitioners contracts in their entirety, as well as the circumstances surrounding

petitioners employment at INNODATA, the Court is convinced that the terms fixed therein were meant

only to circumvent petitioners right to security of tenure and are, therefore, invalid.


3/23

DEMARCATING THE BOUNDARIES:

A Treatise on Fixed-Term Employment and an Antidote for its

Indistinctness and Insecurities

By LESTER JAY ALAN E. FLORES II[1]and LAMBERTO L. SANTOS III[2]

Those who have less in life, shouldhave more in law.

- Ramon Magsaysay[3]

I. INTRODUCTION

The 1987 Constitution of the Philippines provides that The State shall protect the rights of the

workers and promote their welfare.[4]It shall afford full protection to labor and promote fullemployment.[5]It shall also guarantee the right of the workers to security of tenure[6]thereby mandating

the regularity of employment of a worker as a general rule.[7]But, when the economy is down or unstable,

employers sometimes resort to different schemes just to survive. One scheme commonly availed by

employers, whether of small and/or growing companies or large companies, is called fixed-term

employment. Its validity has been recognized by the Supreme Court of the Philippines in the leading case

ofBrent School Inc. v. Zamora[8].The Court in the said case consistently held that it is the exception to the

general rule of regularity of employment.

However, due to absence of well-defined rules on fixed-term employment, deceitful employers try to take

advantage of its legal loopholes to the prejudice of the employees rights. Some workers are employed for

the same kind and amount of work as regular employees, whose work are essential to the business of theemployer, but are denied the status and attendant benefits of a regular employee. Employers primarily

resort to fixed-term employment just to enhance the income of an already profitable enterprise. Moreover,

most companies prefer fixed-term employment to save labor costs, because if they hire regular employees,

they cannot terminate expediently their employment without valid and legal cause and the payment of

separation pay and other benefits.[9]

Former Labor Undersecretary Susan Ople has expressed that with lack of job opportunities and the increase

of unemployment and underemployment rates, a lot of Filipinos are forced to choose this type of

employment. The companies they work for flourish while the workers are left with meager salary and lack

of security of tenure.[10]These problematic areas of fixed-term employment must be corrected in order to

protect the rights of the workers and promote their welfare[11]consistent with the social justice principle

which insures that no sector of society will become so strong and so rich as to be able to obliterate the weak

and the poor, and that no sector of the society will be rendered so poor and so weak as to be totally helpless

against the incursions of the rich and the powerful.[12]

II. FIXED-TERM EMPLOYMENT IN THE PHILIPPINES:

REVISITING BRENT SCHOOL v. ZAMORA
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4/23

A. FIXED-TERM EMPLOYMENT, DEFINED

Article 280[13]of the Labor Code identifies only four (4) kinds of employees. These are (1) regularemployees or employees who have been engaged to perform activities which are usually necessary or

desirable in the usual business or trade of the employer; (2) project employees or employees whose

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; (3) seasonal employees or where the

work or service to be performed by the employee is seasonal in nature and the employment is for the

duration of the season; and (4)casual employees or employees who are neither regular nor project

employees.[14]

Article 280 of the Labor Code does not mention fixed-term employment. It is not expressly provided for

under the Labor Code.[15]However, the Court in the Brent School case recognized the validity of fixed-term

employment. The Court defined fixed-term employment as a contract of employment for a definite periodwhich terminates by its own terms or the end of such period.[16]The decisive determinant in fixed-term

employment should not be the activites that the employee is called upon to perform, but the day certain

agreed upon by the parties for the commencement and termination of their employment relation.[17]

B. GENESIS OF FIXED-TERM EMPLOYMENT

As stated, fixed-term employment is not identified by the Labor Code.[18]Its inception, was fully

recognized and validated by the Court in the Brent School case. The case is about an athletic director whowas hired by Brent School for a period of five (5) years but was not rehired upon the expiration of said

period. The athletic director questioned his termination, alleging that he was a regular employee and could

not be dismissed without valid cause. The Court ruled that he was not a regular employee but an employee

under a fixed-term contract. In determining the status of fixed-term employment, the Court discussed the

early beginnings of fixed-term employment and its validity as evinced by the following:

Before the effectivity of the Civil Code of the Philippines[19]and the Termination Pay Law,[20]as amended

by R.A. 1787,[21]it was the Code of Commerce that governed employment without a fixed period,

and implicitly acknowledged the propriety of employment with a fixed period. Article 302 of the aforesaid

law provides that in cases in which the contract of employment does not have a fixed period, any of the

parties may terminate it, notifying the other thereof one month in advance. x x x[22]

Upon the effectivity of the Civil Code on August 30, 1950, the Code of Commerce was repealed. The

Civil Code then dealt with those obligations with a period; and with contracts of labor and for a piece of

work. No prohibition against term-or fixed-period employment is contained in any of its articles or is

otherwise deducible therefrom.[23]
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5/23

Later, on June 12, 1954, the Termination Pay Law, as amended by R.A. 1787,[24]took effect . Said

law impliedly but nonetheless clearly recognized fixed-term employment. Basically, the statute provided

that

In cases of employment, without a definite period, the employer or the employee may terminate at any timethe employment with just cause; or without just cause in the case of an employee by serving written notice

on the employer at least one month in advance, or in the case of an employer, by serving such notice to the

employee at least one month in advance or one-half month for every year of service of the employee,

whichever is longer, a fraction of at least six months being considered as one whole year.

The employer, upon whom no such notice was served in case of termination of employment without just

cause, may hold the employee liable for damages.

The employee, upon whom no such notice was served in case of termination of employment without just

cause, shall be entitled to compensation from the date of termination of his employment in an amount

equivalent to his salaries or wages corresponding to the required period of notice.[25]

There was, to repeat, clear (albeit merely implied) recognition of the licitness of term employment. R.A.

1787 also enumerated what it considered to be just causes for terminating an employment without a definite

period, either by the employer or by the employee without incurring any liability therefor.[26]

Also, on March 31, 1977, stipulations involving a term were explicitly recognized for the first time by the

Court in the case of Biboso v. Victorias Milling Co., Inc.[27]It was also later on recognized by the Court in

the case of J. Walter Thompson Co. (Phil.) v. NLRC.[28] The Thompson case involved an executive who

had been engaged for a fixed period of three (3) years while Biboso involved teachers in a private school.

Thus, the case of Brent School made the the following pronouncement:

What is decisive is that the (teachers) were well aware during the time that their tenure was for a limitedduration. Upon its termination, both parties to the employment relationship were free to renew it or to let

it lapse.[29]

It was on the advent of the Labor Code, on November 1, 1974, where it explicitly recognized fixed-term

employment. To wit:

Article 320. Probationary and Fixed-Period Employment - the termination of employment of probationary

employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the

Secretary of Labor may prescribe x x x

The asserted objective was to prevent the circumvention of the right to security of tenure of the workers

and to be secured in their employment. Article 321 prescribed the just causes for which an employer couldterminate an employment without a definite period. While Article 319 defined employment without a fixed

period as:

An employment shall be deemed to be without a definite period where the employee has been engaged to

perform activities which are usually necessary or desirable in the usual business or trade of the employee

x x x[30]
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6/23

However, upon effectivity of Presidential Decree (P.D.) No. 850 on December 16, 1975, Articles 319 and 320

of the Labor Code were amended. The amendment eliminated the explicit reference to fixed-term

employment. Article 320, dealing with probationary and fixed period employment, was altered

by eliminating the reference to persons employed with a fixed period, and was renumbered (becoming

Article 271).[31]Article 319 (entitled Employment with a fixed period) (a)deleted mention of employment

with a fixed or definite period, (b) added a general exclusion clause declaring irrelevant written or oralagreements to the contrary, and (c) made the provision treat exclusively of regular and casual

employment.[32]

But Article 272 of the Labor Code as amended by P.D. 850 still impliedly acknowledged the propriety of

term employment: it listed the just causes for which an employer may terminateemployment without a

definite period, thus giving rise to the inference that if the employment be with a definite period, there

need be no just cause for termination thereof if the ground be precisely the expiration of the term agreed

upon by the parties for the duration of such employment.[33]

It was only on August 21, 1981, the date of effectivity of Batas Pambansa (B.P.) Bilang 130 that Article

272 of the Labor Code was amended, eliminating reference to employment without a definite period. Said

article was renumbered to Article 283 and now pertinently reads: An employer may terminate an

employment for any of the following just causes: x x x. B.P. 130 thus completed the elimination of every

reference in the Labor Code, express or implied, to employment with a fixed or definite period or term.[34]

C. VALIDITY OF FIXED-TERM EMPLOYMENT

1. REASONABLE INTERPRETATION OF ART. 280 AND RECOGNITION OF FREEDOM TO

CONTRACT

The Labor Code gradually and progressively eliminated references to fixed-term employment. It is

evident from Article 280 of the Labor Code which provides:

Regular and Casual Employment.The provisions of written agreement to the contrary notwithstanding

and regardless of the oral agreement of the partiesx x x

Said article, under a narrow and literal interpretation, not only failed to exhaust the gamut of

employment contracts to which the lack of a fixed period would be an anomaly, but would also appear torestrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the

duration of his engagement.[35]It follows that such a literal interpretation should be avoided. The law must

be given a reasonable interpretation, to preclude absurdity in its application.[36]Article 280 of the Labor

Code should be construed to refer to the substantive evil that the Labor Code itself has singled out:

agreements entered into precisely to circumvent security of tenure.
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Furthermore, despite the gradual elimination of any reference to fixed-term employment, there is still the

Civil Code which has always recognized and continues to recognize the validity and propriety of

contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the

parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the

general admonition against stipulations contrary to law, morals, good customs, public order or public

policy.[37]

2. DURATION OF EMPLOYMENT NOT SYNONYMOUS WITH THE NATURE OF EMPLOYEES DUTIES

The decisive determinant in term employment should not be the activities that the employee is

called upon to perform, but the day certain agreed upon by the parties for the commencement and

termination of their employment relationship; a day certain being understood to be that which must

necessarily come, although it may not be known when.[38]

The term period has a definite and settled signification. It means length of existence or duration; which is a

point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion;

termination. It is a series of years, months or days in which something is completed. It is a time of definite

length, the period from one fixed date to another fixed date. It connotes a space of time which has an

influence on an obligation as a result of a juridical act, and either suspends its demandability or produces

its extinguishment. It should be apparent that this settled and familiar notion of a period, in the context of

a contract of employment, takes no account at all of the nature of the duties of the employee; it has

absolutely no relevance to the character of his duties as being usually necessary or desirable to the usual

business of the employer, or not.[39]

III. SURVEY OF FIXED-TERM EMPLOYMENT IN FOREIGN JURISDICTIONS

A. AS TO NATURE OF EMPLOYMENT

An article titled Fixed-Term Employment (and New-Hire Probation) Worldwide published in

January 2011 by White & Case said that while there are countries that restrict employers power to employ

staff at-will by imposing firing restrictions and vested rights obligations, still there are employers in the

United States who have found ways to build in some flexibility, if not to circumvent the law. This is doneby hiring employees on repeated fixed-term basis if not daily or weekly, then monthly or annually. This

way, no one will be fired; the employer can merely stop renewing someones contract. Asimilar strategy is

to put newly hired staff on long probation periods, keeping workers employed at-will for the first year or

so.[40]

Said article furthers that, in the real world, these strategies may not be so effective. Any legal system that

imposes firing restrictions and vested rights obligations has obvious policy reasons to prevent employers
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from sidestepping its rules. Accordingly, many countries cap serial rollovers of fixed-term employment

contractsafter an employee reaches the cap, employment becomes indefinite-term (in some countries

called permanent), and any further purported daily/weekly/monthly/annual fixed-term provision

becomes void. Some jurisdictions such as Mexico, Venezuela and South Africa, belonging to developing

countries[41]and Poland and New Zealand, belonging to second-world countries[42]flatly prohibit fixed-

term employment arrangements except where a job is inherently temporary. Spain also adheres to fixed-term agreements so long as it pertains to temporary contract for a specific task, a seasonal work, a one-off

project or substituting for someone out on leave. Russia validates fixed-term employment where the job is

inherently temporary, where the employer is a small business, or where employee works on high level

positions such as manager, director and chief-accountant.[43]

B. AS TO TERMINATION PROCEDURE

Countries also regulate early termination of fixed-term employment, often requiring employers to

pay wages until the end of the term unless the employee mitigates damages by working another job. In

Mexico, employees can claim unfair dismissal and win reinstatement or damages where fixed-term contractis terminated earlier without cause. Russia does not also allow early termination unless it is for cause.

Netherlands, on the other hand, allows early termination of fixed-term contract with the permission of the

court or UWV Werbedrijf agency and where the parties agreed on an early termination contingency.

Vietnam entitles an employee for severance pay unless terminated for cause.[44]

C. AS TO STIPULATIONS OF CONTRACT IN FIXED-TERM EMPLOYMENT

Developing countries such as Angola[45],Indonesia and Peru require employers to file or register

fixed-term employment contractsbut not indefinite-term contractswith a government agency.

Collective bargaining agreements can add yet other restrictions to fixed-term employment. In theNetherlands, fixed-term employment is allowed. However, there are some restrictions provided by their

laws to ensure that this practice does not prejudice the employees security of tenure. This is called in their

jurisdiction as the anti-abuse rule introduced in 1999. The law involves limits on the maximum duration

and the maximum number of renewals of successive fixed-term contracts known as chain regulations (art.

7:668a CC). According to these regulations a fixed-term contract concluded between the same parties is

automatically conferred into an open-ended contract (regular employment in the Philippine Jurisdiction),

once: (1) two or more contracts have succeeded each other without interruptions of more than three

months, for over a total period of more than three years (including these interruptions), or (2) more than

three fixed-term contracts have successively been concluded without interruptions of more than three

months between the contracts. To summarize, in case of successive fixed-term contracts the provision

allows for a total maximum duration of three years and/or a maximum of three consecutive contracts. Once

either one of these limits is exceeded the contract is one of an indefinite period. Noteworthy, the

regulations on successive fixed-term contracts concluded between the same parties do not require the

worker to perform the same job. Their law also deals with successive fixed-term contracts concluded by

different parties:

The second paragraph of article 7:668a CC extends the scope of the term successive contracts of the first

paragraph, and thereby the scope of the chain regulations, from contracts concluded between the same
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parties, to subsequent contracts concluded between the employee and more than one employer, if the

employers must be considered each others successor with respect to the work performed by the

employee. This implies that the worker stays at the same post, however the employer is replaced for

another. This provision codified to a certain extent already established case law. Confronted with cases of

avoidance of the (former) rules on fixed-term contracts by a user company and a temporary work agency,

which, by turn, employ a worker on the same job by the user company itself and by the agency posting theworker to the user company, the Dutch Supreme Court (Hoge Raad) held this to be unlawful in view of the

Dutch legal dismissal protection system. Except for this case that requires the involvement of a temporary

work agency, the Supreme Court more recently decided that also the company that acquires another

company after its bankruptcy, and chooses to employ a worker formerly employed by the latter for a fixed-

term in the same job, can be affected by the chain regulations. (Emphasis supplied)[46]

IV. INDISTINCTNESS AND INSECURITIES OF FIXED-TERM EMPLOYMENT IN THE PHILIPPINES

A. OVERLAPPING OF BOUNDARIES

1. REGULAR EMPLOYMENT vis-a-vis FIXED-TERM EMPLOYMENT

a. Reasonable Connection[47]Rule under regular employment

Article 280 of the Labor Code provides that x x x 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 x x x. In determining regular employment, the Court in the case

of De Leon v. NLRC[48]held that:

The primary standard, is the reasonable connection between the particular activity performed by the

employee in relation to the usual business or trade of the employer. x x x The connection can be

determined by considering the nature of the work performed and its relation to the scheme of the

particular business or trade in its entirety.[49]

b. Non-application of the reasonable connection rule in fixed-term employment

The Court held in Brent School that:

It should be apparent that this settled and familiar notion of a period, in the context of a contract of

employment, takes no account at all of the nature of the duties of the employee; it has absolutely no
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relevance to the character of his duties as being usually necessary or desirable to the usual business of the

employer, or not.[50]

In fixed-term employment, factors such as the nature of work, whether usually necessary or desirable

in the usual trade or business of the employer are notdecisive indicators of regularity of employment. It

does not impair the validity of the term employment contract.[51]The decisive determinant is theday

certain[52]agreed upon by the parties for the commencement and termination of their employment

relationship.[53]

It does not also necessarily follow that where the duties of the employee consist of activities usually

necessary or desirable in the usual business or trade of the employer, the parties are forbidden from

agreeing on a period of time for the performance of such activities. There is nothing essentially

contradictory between a definite period of employment and the nature of employees duties.[54]

c. Conflict between regularization and fixed-term employment as to the nature of work of the

employee

The doubt between regular employment and fixed-term employment that needs to be addressed is the

determination of the reckoning point which will invalidate fixed-term employment due to circumvention of

the right to security of tenure of the employee engaged in activities which are reasonably connected to the

usual business of the employer. The following cases manifests the overlapping of principles and boundaries

of fixed-term employment in relation to the nature of work of the employee:

i. Valid fixed-term employment in relation to nature of work

The Court in Brent School, through then Chief Justice Andres Narvasa, cited several examples of fixed-term

employment as an essential and natural appurtenance to the work of employees though usually necessary

or desirable in the business of the employer. These are the following:

1. Overseas employment contracts, whatever the nature of the engagement, the concept of regular

employment does not appear ever to have been applied, Article 280 of the Labor Code notwithstanding.[55]

2. Appointments to the positions of dean, assistant dean, college secretary, principal, and other

administrative offices in educational institutions, which are by practice or tradition rotated among the

faculty members and where fixed terms are a necessity, without which no reasonable rotation would be

possible.[56]

3. Despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor implicitly

recognize that certain company officials may be elected for fixed periods, at the expiration of which they

would have to stand down, because the stockholders or the board of directors for one reason or another did

not re-elect them.[57]

ii. Invalid fixed-term employment in relation to nature of work
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Cases subsequently decided by the Court declared fixed-term employment as invalid because the work

performed by the employees are usually necessary or desirable in the usual business of the employer and

thus a violation of the security of tenure of the workers. These cases are the following:

1. In the case of Purefoods Corporation v. National Labor Relations Commission, et al.,[58]the workers werehired for a fixed period of five months at Purefoods tuna cannery plant in General Santos City, Philippines.

These workers were engaged in activities such as receiving, skinning, loining, packing and casing-up of tuna

which were subsequently exported by Purefoods. Indisputably, they were performing activities which were

necessary and desirable in Purefoods business or trade. After the expiration of their contracts of

employment, their services were terminated. Said workers questioned their termination, claiming that they

are regular employees.[59]

The Court pronounced that the scheme of the employer in hiring workers on a uniformly fixed contract

basis of five months and replacing them upon the expiration of their contracts with other workers with the

same employment status was designed to prevent the casual employees from attaining the status of

regular employment. It was a clear circumvention of the employees right to security of tenure and to otherbenefits like minimum wage, cost-of-living allowane, sick leave, holiday pay, and 13th month pay.[60]

2. In the case of Price, et al v. Innodata, Phils., Inc., et al,[61]Cherry, Stephanie and Lolita were employed as

formatters by INNODATA whose primary business was data encoding. Their contracts of employment

provided, among others, that their employment was for a period of one (1) year and that these may be pre-

terminated by either party with or without cause, by giving them fifteen (15) days notice to that effect. The

Court ruled that their employment was not for a fixed-term. They were employed in activities usually

necessary or desirable in the usual business of the employer. The term was obviously fixed to circumvent

their right to security of tenure.[62]

3. Similar to the above-cited cases are the following fixed-term employment schemes which has not yet

been questioned by the concerned working force or even invalidated by the Courts in the Philippines:

a. Workers employed as trainees in Shopping Centers[63]for a period of three (3) months to five months

and upon the expiration of which are subsequently replaced by new trainees. These affected workers are

usually engaged in activities which are necessary and desirable to the business of the employer. Examples of

these workers in shopping centers are sales ladies, sales associates, cashiers, baggers, checker and gift

wrappers.[64]

b. Workers in export processing zones such as in garments factories have to undergo 3 stages of non-regular

working status such as trainees, floater, piece-raters before they become regular employees.[65]

3. PROJECT EMPLOYMENT vis-a-vis FIXED-TERM EMPLOYMENT

a. Termination under project employment


12/23

Under project employment, no prior notice of termination is required if the termination is brought

about by completion of the project or phase thereof for which the worker has been engaged. This is

because completion of the work or project automatically terminates the employment.[66]

Accordingly, instead of requiring the giving of a notice of termination to the affected project employees

upon the completion of the project or any phase thereof, the law merely requires that the employer should

render a report to the Department of Labor and Employment (DOLE) on the termination of their

employment.[67]Policy Instructions No. 20 required the employer to report to the nearest Public

Employment Office (PEO) of the DOLE the fact of termination of project employees as a result of the

completion of the project or any phase thereof in which one is employed. Department Order No.

19[68]which superseded said Policy Instructions, did not eradicate the notice requirement. Instead, it was

enshrined as one of theindicators that a worker is a project employee.[69]The failure of the employer to file

termination reports after every completion of a project or any phase thereof with the nearest PEO-DOLE is

an indication that the employees are not project employees but regular employees.[70]

b. Termination under fixed-term employment

In a fixed-period employment, lack of notice of termination is of no consequence because when the

contract specifies the period of its duration, it terminates on the expiration of such period. An employment

contract for a definite period terminates by its own term at the end of the mutually agreed period fixed by

the parties.[71]

c. Conflict between project employment and fixed-term employment

The case of Brent School, which institutionalized fixed-term employment as a kind of employment,

recognized the relation between project employment and fixed-term employment. The Court held that:

Seasonal employment, and employment for a particular project are merely instances of employment in

which a period, where not expressly set down, necessarily implied.[72]

x x x

Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are

not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects

with pre-determined dates of completion x x x.[73]


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Although project employment is related to fixed-term employment, the latter did not require a report to the

DOLE by the employer in case an employee under a fixed-term employment is terminated upon the

expiration of the period.

B. UNSTABLE CRITERIA FOR VALIDITY OF FIXED-TERM EMPLOYMENT

In the case of Philippine National Oil Company-Energy Development Corporation v. NLRC,[74]the

Court laid down two (2) criteria under which fixed contracts of employment cannot be said to be in

circumvention of tenure, to wit:

1. The fixed period of employment was knowingly and voluntarily agreed upon by the parties, without any

force, duress or improper pressure being brought to bear upon the employee and absent any other

circumstances vitiating his consent; or

2. It satisfactorily appears that the employer and employee dealt with each other on more or less equal

terms with no moral dominance whatever being exercised by the former on the latter.

Although, the Court provided criteria for fixed-term employment, it did not provide for its detailed

coverage. As a result, these guidelines present a very unstable foundation subject to broad interpretation.

The following are instances of broad appreciation of the criteria.

1. FIRST CRITERIA

a. Economic situation as a vice of consent

A negotiation for a fixed-term employment is rarely achieved in the ideal conditions, where there is

no force, duress or improper pressure exerted on the employee, and the parties knowingly and voluntarily

agree. Sometimes, it is not the employer himself who should exert duress upon the employee but it is also

the prevailing economic situation which provides the greatest source of duress.[75]

The Philippine economy is unique in Southeast Asia for having a large service sector and private

consumption comprising around three quarters of the economy. The manufacturing sector is comparatively

small and public while private investment is very low. Unemployment and underemployment continue to

remain high. The prospect of securing a well-paying job is beyond the reach of many, especially young

adults under the age of 25 that comprise about half of the unemployed.[76]

The prevailing economic situation of the Philippines, where there is greater demand for work than the

supply of available workers, forces an individual to enter into an employment contract whether or not the

provisions of the said contract are already prepared. These kinds of contracts are commonly called

Contracts of Adhesion, and they are contrary to public policy.[77]In Rowell Industrial Corp. v. CA,[78]the

Court declared the employment contract signed by the respondent is one of adhesion. It is an agreement

wherein the parties bargaining are not on equal footing, the weaker partys participation being reduced to

the alternative to take it or leave it.In said case, respondent employee, in need of a job, was compelled to

agree to a contract that contained a five-month period of employment as a condition precedent for hiring.
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Hence, it cannot be argued that respondent employee signed the employment contract with a fixed-term of

five months willingly and with full knowledge of the impact thereof.[79]

2. SECOND CRITERIA

a. Unequal Footing

The Court in Purefoods[80]case held that:

[I]t could not be supposed that private respondents and all other so-called casual workers of [the

petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery

workers are never on equal terms with their employers. Almost always, they agree to any terms of an

employment contract just to get employed considering that it is difficult to find work given their ordinary

qualifications. Their freedom to contract is empty and hollow because theirs is the freedom to starve if they

refuse to work as casual or contractual workers. Indeed, to the unemployed, security of tenure has no value.It could not then be said that petitioner and private respondents dealt with each other on more or less

equal terms with no moral dominance whatever being exercised by the former over the latter.

As ruled by the Court, casual workers such as, but not limited to, cannery workers, sales ladies, janitors and

other lowly blue-collar workers cannot be said to be in equal footing with their employers because of their

ordinary qualifications and, worst, their lack of qualifications. Hence, any fixed-term employment contract

entered by them is invalid. But what if said worker has a good educational attainment? What are its

implications? These are the questions that will be answered by the subsequent paragraphs.

In a study entitled, The OFW Economic Engine, Philippine Reality and Required Reform Arising from the

Global Financial Crisis, Of the one million college graduates annually, only five to ten percent areemployed in jobs consistent to their course, only thirty to forty percent will find any employment. The vast

majority of graduates will remain unemployed.[81]There is therefore a great probability that a college

graduate would contract a job different from his course out of necessity.

The countrys education system continues to turn out college graduates whose training and skills are not

attuned to the needs of the labor market both at home and abroad. This is the lament of human resources

and labor recruitment officials who decry the continuing popularity of glamorous and white-collar courses

that produce diplomas but not well-paying jobs. The issue gains added urgency in view of the governments

inability to provide jobs and its continued dependence on the overseas job market. The problem is,

Philippine education is not well suited to the requirements of the global economy as well.[82]

As can be gleaned, it does not mean that if a person has a good educational attainment, he or she can enterinto agreements with an employer on equal terms especially if the unemployment and underemployment

rate in the Philippines is unsatisfactory.

3. Who are these employers?
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The criteria for a valid fixed-term employment does not provide for the exact definition of an

employer. In fixed-term employment, employers may pertain to those who want to survive or to those who

want to increase profits; hence a list of covered employers should be provided. According to Rep. Emmeline

Y. Aglipay of the Democratic Independent Workers Association (DIWA) Party-list in her proposed

law,[83]fixed-term employment is allowed, but only during a period of substantial losses in the industry as

a whole, brought about by an inability to price goods competitively in the market despite resort to allreasonable measures. This does not only provide the law with enough flexibility to adjust to the needs of

business but also provides safeguards so that fixed-term employment is not used to increase the profits of

an already profitable enterprise.[84]

4. Who are these employees?

Fixed-term employment does not also provide for the specific kind of worker to be covered by the

contract. In spite of this, cases decided by the Court point to employees who vary from white-collared

workers such as professors, company presidents and instructors, to blue-collared workers such as factory

employees and sales personnel.[85]The problem in the cases decided by the Court is that they provide for adifferent ruling as to the validity of the fixed-term contracts when it comes to white-collared workers,

compared to those involving blue-collared workers. As a result, inconsistencies and ambiguity will still

continue to abound.

C. LABOR CONTRACTS ARE NOT ORDINARY CONTRACTS

The Court in Brent School[86],affirming the validity of fixed-term employment said that:

Although the Labor Code has gradually and progressively eliminated fixed-term employment, there is still

the Civil Code which has always recognized, and continues to recognize, the validity and propriety ofcontracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the

parties to fix the duration of a contract, whatever its object, be it specie, goods or services, exceptthe

general admonition against stipulations contrary to law, morals, good customs, public order or public

policy.

Although agreeing with the Court in saying that the Civil Code has always recognized the validity and

propriety of contracts, it still failed to relate other provisions of the Civil Code, particularly Article 1700,

which provides that:

The relation between capital and labor are not merely contractual. They are soimpressed with public

interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the

special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working

conditions, hours of labor and similar subjects.

This argument was correctly pointed out by Justice Abraham Sarmiento in his dissent in Brent. According

to him, employment contracts cannot be likened to ordinary civil contracts in which the relationship is

established by the stipulations agreed upon.[87]Likewise, provisions of applicable statutes are deemed

written into the employment contract, and the parties are not at liberty to insulate themselves and their

relationships from the impact of labor laws and regulations by simply contracting with each other.[88]Any
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contract of employment entered by the employer and the employee which amounts to a disregard of our

labor laws and the Constitution must be outrightly declared as null and void.

Since labor contracts are vested with public interest and is not equal with ordinary contracts, it must

not be prone to waiver of rights. And assuming that fixed-term employment contract is equal with ordinarycontracts, the statutory rights of employees under the Labor Code and other social legislations cannot be

subject to waiver pursuant to Article 6 of the Civil Code which provides that:

Rights may be waived unless, the waiver is contrary to law, public order, public policy, morals or good

customs or prejudicial to a third person with a right recognized by law.

Generally, the employer and the employee can agree any terms in the employment contract. However, they

cannot agree to a fixed-term contract which gives the employee fewer rights than his statutory rights. If

they have agreed to such an arrangement, the employer will not be able to enforce the contract. The

employee will still retain his statutory rights.[89]

Furthermore, labor laws are not violative of the due process clause or freedom to contract.[90]According to

the Court, the school of thought that resists the expansion of the social rights of employees and workers is

essentially capitalistic, conservative, reactionary and flesh. The invocation of the due process clause to

challenge the validity of social and labor legislation as violative of the freedom of contract and an undue

deprivation of property had long been discarded in America since the 1937 case of West Coast Hotel v.

Parrish[91]in affirming the validity of minimum wage laws.

D. CONTRACTS OF ADHESION ARE GENERALLY CONTRARY TO PUBLIC POLICY

Employers not only resort to fixed-term employment to favor its business but also make use ofalready prepared contracts known as contracts of adhesion to favor its terms. As defined by the Court,

contracts of adhesion are those by which one of the parties drafts the contract for the other party who will

decide on whether to accept or not. An example of such would be an insurance contract. The adherent has

no freedom of bargain because he cannot modify the ready-made covenant.[92]His freedom is only to

choose one of two options: either he takes or leaves it. If he takes it, he is giving consent, hence he is bound

thereby.[93]These are binding as ordinary contracts where the party adhering thereto is free to reject it in

its entirety.[94]

A contract of adhesion is contrary to public policy when it disregards the rights accorded to the workers

under the Labor Code and the Constitution. The Civil Code recognizes labor contracts as vested with public

interest.[95]Hence, a contract of adhesion must not be equated with an ordinary contract.[96]In the

employment of workers, contracts of adhesion admits of no exceptions as to its binding power. It is

outrightly contrary to public policy, the Labor Code and the 1987 Constitution as it leaves the weaker party

the employee in a take it or leave it situation. Certainly, the employer is being unjust to the employee

as there is no meaningful choice on his part while the terms are unreasonably favorable to the

employer.[97]

V. RECOMMENDATION
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Fixed-term employment, as already discussed, is not provided by the Labor Code. Since it has no

exact reference in the Code, there is also no rule implementing it. However, the cases decided by the Court

regarding fixed-term employment in the Philippines do not demarcate its boundaries as compared to other

kinds of employment. As a result, ambiguity and conflict as to the extent and exact coverage of fixed-term

employment arises. Also, it does not exactly provide a reckoning point on when work which is usually

necessary or desirable in the conduct of business of the employer is interrelated to the duration of the

contract. It does not provide for the particular kind of employers and employees that are covered. Instances

on when fixed-term employment are really necessary are absent. Fixed-term employment does not

emphasize the principle that labor contracts are not the same with ordinary contracts. These grey a

fixed term

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