Pamela Denise Hilario

DOCULMG K31

August 19, 2014

MEET ME HALFWAY:
A review on the Validity of Fixed-term Employment in the Philippines

The Philippine economy is expected to broaden further in the

succeeding years after its extensive growth and performance last year, wherein
Philippines was hailed as one of the best performing economies in the Asian
region, second to China with 7.7 percent growth. The Philippines full year Gross
Domestic Product (GDP) in 2013 grew by 7.2 percent, higher than the
governments expectations of 6 percent to 7 percent and despite several
challenges that strained the economy last year.1 The economic boost encouraged
several foreign investors to put up their businesses and companies in the
country. Due to the improving business environment, stimulating industry
incentives, and competitive labor resources, set the Philippines well as a feasible
investment destination.2

With the continuous coming of these foreign investors in the country, it

is important that the government should first and foremost take into consideration
the right to protection and benefits of the Filipino employees by ensuring that
these privileges are not being encroached in the performance of their work.

The rise in the different foreign companies called for the increase in
the number of the labor force in the Philippines. Due to this, the need for flexibility
and modernization in labor market force were recognized, thus, non-standard
work arrangements were brought into existence. Non-standard work
arrangement or also known as fixed-term contracts, just like its growing presence
in other countries, are also being practiced here in the Philippines.

Fixed terms contracts cover those employees whose contracts end on

a specified date, or after the completion of a specific task, or when a specific
1 Lopez, Philippines GDP growth at 7.2% in 2013, Manila Bulletin, January 31,
2014. p. 1, col. 3
2 Quisimbing Torres. Guide to Philippine Employment Law: An Overview of
Employment Laws for Private Sector (2013).
1

event occurs. In most cases, a fixed-term contract terminates on an agreed date.

The period of such a contract ranges from a matter of months up to a period of a
year or depending upon the agreed date of the employee and employer. On the
other note, employees on fixed-term contracts have broadly similar rights to
those on open-ended contracts or also known as the employees who are under a
regular employment.

The 1987 Philippine Constitution has been effectual in recognizing and

providing a guarantee on the rights of Filipino workers. Article 13, Section 3 3,
expressly states that:

Section 3. The State shall afford full protection to labor, local

and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy
and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility
between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and
shall enforce their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations between workers and
employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable
returns to investments, and to expansion and growth.

In line with the constitutional mandate of protecting the rights of the

Filipino labor force, in the exercise of legislative power of former President
Marcos, has made into existence, Presidential Decree No. 442 or also known as
the Labor Code of the Philippines that serves as the guiding principles for
employment relations.
The code prohibits termination from employment of private employees
3 CONST. art. XIII Sec. 3
2

unless it is based on just or authorized causes as prescribed in Article 282 to 284

of the Code.
On one hand, just cause refers to a misdeed committed by the
employer or employee on the basis of which the aggrieved party may terminate
the employer-employee relationship. On the other, authorized cause refers to a
cause brought about by changing economic or business conditions of the
employer.
Just causes for expulsion of employee was not expressly enumerated
in the Labor Code, however, it can be perceived to be as lawful or valid grounds
for termination of employment, attributable to the fault or negligence of the erring
employee. Just causes are usually serious or grave in nature, accompanied by
willful or wrongful intent or can be reflected upon the moral character of the
employees.
However, causes that would result to the termination by the employer
under the Labor Code4 is found in Article 282 and enumerated here as follows:
Art. 282. Termination by employer. An employer may
terminate an employment for any of the following causes:
a. Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
b. Gross and habitual neglect by the employee of his
duties;
c. Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
d. Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized
representatives; and
e. Other causes analogous to the foregoing.

4 LABOR CODE, Art. 282

3

In the same vein, the Labor Code has also gave its standpoint on the
probationary period involving the labor employment, under Article 281 5 which
states that:
Art. 281. Probationary employment. Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in
accordance with reasonable standards made known by
the employer to the employee at the time of his
engagement. An employee who is allowed to work after a
probationary period shall be considered a regular
employee.

A probationary period is a time period that is being set among the

employees particularly the new ones in examining their performance and
assessing their capabilities in their new jobs. Generally, probationary periods
vary according to the nature of the business involved. It typically lasts anywhere
from 1-3 months, however the period may be longer or shorter. The primary
purpose of which is for both parties to decide whether the employee is suited for
the position or in the employer's business. Furthermore, the outcome of the
probationary period strongly influences the employees opportunities, especially
with regards to raises, promotions, employee benefits or other work positions.
The probationary period and its rules are usually comprehensively discussed in
employee handbooks. 6

5 LABOR CODE, Art. 281

6 Legal Match, http://www.legalmatch.com/law-library/article/employeeprobationary-periods.html (last accessed Aug. 14, 2014)
4

Most employment is executed on an at-will employment basis, which

only gives an implication that the employer may terminate an employment at any
time for any reason, even during a probationary period. However, an at-will basis
does not leave the employee without any rights during a probationary period.
For the protection of both the employee and the employer, it is
best if the following measures are taken:

The employee should be informed that they will be undergoing

a probationary period, and should be given the reason(s) for the
probation.
A performance or evaluation plan should be developed and
disclosed to the employee if appropriate. This may actually help
the employees performance if they understand the terms of the
probationary period.
The employee should receive periodic review and feedback of
their performance so that they know whether they are on the
right track or not.
Supplementary training should be provided in order to correct
deficiencies.
A mentor may be assigned to assist the employee in reaching
the required standards, and input from other employees should
be considered when evaluating the worker.7

A contract, as provided in the Civil Code of the Philippines 8, is similar

to an agreement wherein meeting of minds is evident between two parties. A
contracts takes effect when one agrees with the other, therefore he binds himself
to give something or to render some service. As specified in the Civil Code 9, it
states that:
Art. 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
Similar to a normal contract, in a fixed-term contract, an employee
agrees to work for a specific employer, within a specific period of time, following
specific terms and conditions, therefore binding himself to the terms and
conditions of his employer.
7 Supra note at 6.
8 CIVIL CODE, Art. 1305
9 CIVIL CODE, Art. 1306
5

In the case of Brent v. Zamora 10, the Court ruled that fixed-term
contracts are by all means valid, and an employment, which requires
performance of usual and desirable functions, and does not exceed one year,
does not always result in regular employment .Emanating from the Civil Code of
the Philippines, it states that:
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; they also include those to which the
parties by free choice have assigned a specific date of
termination.
x

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.
The Courts ruling is lawful since the termination per se, made by the
Brent School is valid, as the agreed period stipulated in the fixed-term contract
has already expired. In addition to this, the fact that Alegre has knowledge of his
termination thereof does not render the termination to be unjust. The fact that he
accepted the separation pay from Brent School and by signing the receipt
thereof, only insinuates that he agrees with termination of his contract.

Another reason for the validity of the fixed-term contracts is that, the
Labor Code has been silent on whether or not these kinds of contracts are
against the law. According to the case of Mercado, et al. v. AMACC 11, the Court
has stated that:

[Cases which] dealt purely and simply with the validity of a

fixed-term employment [are] under the terms of the Labor
10 G.R. No. L-48494 (Feb. 5, 1990).
11 G.R. No. 183572 (Apr. 13, 2010)
6

Code, then newly issued, and. . . does not expressly contain

a provision on fixed-term employment.

However, Article 28012 of the Civil Code suggests that fixed-term

contracts are invalid, as it states that:
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 actually exists.

The Labor Code, in its provision, provides a probationary period of six

months, whereby any employee who is allowed to work after that period, is
deemed to be a regular employee. Even though the employee has exceeded the
probationary period, if he signed in a fixed-term contract, the latter shall prevail
hindering it from ripening into a regular employment. The mere fact that
employment contract was signed by both parties, constitutes a meeting of the
minds. Therefore, both parties should comply with whatever is stipulated in the
contract.
So in the case of Brent v. Zamora, it is just right for the Court to
declare the reinstatement of Alegres employment invalid in Brent School since
his employment is legal only for the period of 5 years. Moreover, in case the
reinstatement was granted, it would only contradict the issuance of a fixed-term
contract. Allowing the reinstatement would render the fixed-term contract useless
because whats the essence of executing one if they will only allow
reemployment, then they should just have made the employee a regular one
instead.
In relation to his protest, Alegre cannot push for the regularity of his
employment, mainly because, his job as an athletic director, is not absolutely
necessary in the natural course of the business. In consequence, he cannot
readily acquire the status of a regular employee. Thus, he can be terminated
from his position anytime.

12 LABOR CODE, Art. 280

7

However, in circumstances wherein fixed-term employment were

executed for purposes of depriving the employee of his security of tenure, or
when there has been abuses committed by the company, the Court, with its
judicial power, can terminate those contracts. This was further discussed in the
case of San Miguel Corp. vs. Eduardo L. Teodosio 13:
While this Court recognizes the validity of fixed-term
employment contracts, it has consistently held that this is the
exception rather than the general rule. Verily, a fixed-term
contract is valid only under certain circumstances. In the oftcited case of Brent School Inc. v. Zamora, G.R. No. 48494, Feb.
5, 1990, 181 SCRA 702, this Court made it clear that a contract
of employment stipulating a fixed term, even if clear as regards
the existence of a period, is invalid if it can be shown that the
same was executed with the intention of circumventing an
employees right to security of tenure, and should thus be
ignored. Moreover, in that same case, this Court issued a stern
admonition that where from the circumstance, 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.
Since respondent was already a regular employee months
before the execution of the Employment with a Fixed Period
contract, its execution was merely a ploy on SMCs part to
deprive respondent of his tenurial security. Hence, no valid
fixed-term contract was executed. 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
athat labor contracts must yield to the common good.
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 to simply contracting with each other.
A fixed-term contract, which was issued for lawful and valid reasons,
shall be implemented as long as its for the mutual reason of both employee and
employer. The employment is governed by the contracts they sign every time
they are rehired and their employment is terminated when the contract expire.

13 G.R. No. 163033 (Oct. 2, 2009)

8

REFERENCES:
A. CONSTITUTION
CONST. art. XIII Sec. 3
B. LABOR CODE
LABOR CODE, Art. 282
LABOR CODE, Art. 281
LABOR CODE, Art. 280
C. CIVIL CODE
CIVIL CODE, Art. 1305
CIVIL CODE, Art. 1306
D. JURISPRUDENCE
Brent v. Zamora. G.R. No. L-48494 (Feb. 5, 1990).
San Miguel Corp. v. Eduardo L. Teodosio. G.R. No. 163033 (Oct. 2, 2009)
Mercado, et al. v. AMACC. G.R. No. 183572 (Apr. 13, 2010)
E. INTERNET SOURCE
Legal Match, (Aug. 14, 2014, 4:30 pm), http://www.legalmatch.com/lawlibrary/article/employee-probationary-periods.html
F. JOURNALS
Torres, Quisimbing. Guide to Philippine Employment Law: An Overview of
Employment Laws for Private Sector (2013).
G. NEWSPAPER
Lopez, Philippines GDP growth at 7.2% in 2013, Manila Bulletin, January
31, 2014, p. 1, col. 3