Fixed-Term Employment in the Philippines: Project Employees and the Risk of Illegal Dismissal

TLDR: This case clarifies the distinction between project employees and regular employees in the Philippines, emphasizing that even project employees with fixed-term contracts cannot be dismissed illegally. Employers must still demonstrate just cause and due process for termination, regardless of employment type. Misclassifying regular employees as project-based to circumvent labor laws can lead to costly illegal dismissal cases.

G.R. No. 129449, June 29, 1999

INTRODUCTION

Imagine working diligently on a project, believing your employment is secure for a specified duration, only to be abruptly dismissed under the guise of contract expiration. This scenario is all too common in the Philippines, where the line between project-based and regular employment can become blurred, often to the detriment of employees. The Supreme Court case of Cisell A. Kiamco v. National Labor Relations Commission sheds light on this crucial labor law issue. At its heart, the case questions whether an employee hired under multiple fixed-term contracts for a specific project should be considered a project employee, and if so, whether their dismissal upon contract expiration was legal despite allegations of misconduct.

LEGAL CONTEXT: PROJECT EMPLOYEES VS. REGULAR EMPLOYEES IN THE PHILIPPINES

Philippine labor law, specifically Article 280 of the Labor Code, distinguishes between regular and project employees. This distinction is critical as it dictates an employee’s rights, particularly regarding job security and termination. A regular employee is engaged to perform tasks “usually necessary or desirable in the usual business or trade of the employer.” They enjoy security of tenure and can only be dismissed for just cause and with due process.

In contrast, a project employee is hired “for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee.” Project employment is permissible, especially in industries like construction or project-based consultancy. However, employers sometimes misuse project-based contracts to avoid the obligations associated with regular employment.

Article 280 of the Labor Code states:

“Art. 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.”

The Supreme Court, in Violeta v. NLRC, further clarified the definition of project employees, emphasizing that they are assigned to carry out a “specific project or undertaking,” with the duration and scope clearly defined at the outset. Policy Instruction No. 20 of the Secretary of Labor also reinforces this, differentiating project employees from non-project (regular) employees based on whether their employment is tied to a particular project.

CASE BREAKDOWN: KIAMCO VS. NLRC

Cisell Kiamco was hired by the Philippine National Oil Company (PNOC), through its PNOC-Energy Development Corporation (PNOC-EDC), as a technician for the Geothermal Agro-Industrial Plant Project in Valencia, Negros Oriental. He signed three consecutive fixed-term contracts, each for a specific duration tied to the project. Initially hired for five months, his contract was renewed twice, with slight changes in terms but always linked to the same project.

However, before the expiration of his third contract, Kiamco was issued a memorandum alleging several infractions, including misconduct, AWOL, non-compliance with accident reporting, and unauthorized vehicle use. He was asked to explain, which he did, but was subsequently placed under preventive suspension pending investigation. Crucially, no formal investigation ever took place.

Upon reporting back to work after his suspension and the supposed expiration of his contract, Kiamco was barred from entering company premises. PNOC-EDC then reported to the Department of Labor and Employment that Kiamco’s employment was terminated due to contract expiration and position abolition. Aggrieved, Kiamco filed an illegal suspension and dismissal complaint with the National Labor Relations Commission (NLRC).

Here’s a step-by-step breakdown of the case’s procedural journey:

1. Labor Arbiter: Dismissed Kiamco’s complaint, siding with PNOC-EDC, stating the contracts were clear about project-based, fixed-term employment.
2. NLRC (First Decision): Reversed the Labor Arbiter, declaring Kiamco a regular employee and finding his dismissal illegal, ordering reinstatement and back wages.
3. NLRC (Motion for Reconsideration): Modified its decision, classifying Kiamco as a project employee but still found his dismissal illegal. However, instead of reinstatement, NLRC awarded back wages for only six months, citing lack of proof of project completion.
4. Supreme Court: Reviewed the NLRC’s modified decision upon Kiamco’s petition for certiorari.

The Supreme Court addressed several key issues, including the procedural technicality of Kiamco not filing a motion for reconsideration of the NLRC’s modified decision. The Court brushed this aside, recognizing the issues were already thoroughly ventilated before the NLRC.

On the core issue of employment status, the Supreme Court agreed with the NLRC’s modified decision, confirming Kiamco was indeed a project employee. The Court emphasized the clear stipulations in Kiamco’s contracts linking his employment to the Geothermal Agro-Industrial Demonstration Plant Project, with a defined period “or up to the completion of the PROJECT, whichever comes first.”

However, the Court disagreed with the NLRC’s limited back wage award and its implicit condonation of the dismissal. The Supreme Court firmly stated:

“The argument of private respondents that reinstatement and payment of back wages could not be made since Kiamco was not a regular employee is apparently misplaced. As quoted above, the normal consequences of an illegal dismissal are the reinstatement of the aggrieved employee and the grant of back wages. These rights of an employee do not depend on the status of his employment prior to his dismissal but rather to the legality and validity of his termination. The fact that an employee is not a regular employee does not mean that he can be dismissed any time, even illegally, by his employer.”

The Court found PNOC-EDC failed to prove any just cause for dismissal and violated due process by not conducting a proper investigation or issuing a second notice of termination. The reliance solely on contract expiration was deemed insufficient to justify dismissal, especially given the pending allegations of misconduct. The Court concluded that Kiamco’s dismissal was illegal and ordered reinstatement with full back wages.

PRACTICAL IMPLICATIONS: FIXED-TERM CONTRACTS AND EMPLOYEE RIGHTS

The Kiamco case provides critical lessons for both employers and employees regarding project-based employment and fixed-term contracts in the Philippines.

For employers, this case serves as a strong reminder that simply labeling an employee as “project-based” and utilizing fixed-term contracts does not grant absolute freedom to terminate employment at will. Even project employees are entitled to security of tenure for the duration of the project. If employers wish to terminate a project employee before contract expiration due to misconduct or other just causes, they must still adhere to due process, including proper investigation and notices. Furthermore, employers bear the burden of proving the legitimacy of project-based employment and the completion of the project if they claim termination is due to project completion.

For employees, especially those under project-based contracts, this case reinforces their rights against illegal dismissal. It clarifies that project employment does not equate to a waiver of all labor rights. Employees dismissed without just cause and due process, even if under fixed-term contracts, can pursue illegal dismissal claims and seek reinstatement and back wages.

Key Lessons:

• Misclassification Risk: Incorrectly classifying regular employees as project employees to circumvent labor laws is illegal and can result in costly legal battles.
• Due Process is Mandatory: Even for project employees, termination for cause requires due process – notice and opportunity to be heard.
• Burden of Proof on Employer: Employers must prove just cause for dismissal and, in project employment cases, the completion or legitimate termination of the project.
• Fixed-Term ≠ At-Will Employment: Fixed-term contracts for project employees do not mean employees can be dismissed without valid reason before the term expires.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q1: What is the main difference between a regular employee and a project employee in the Philippines?

A: A regular employee performs tasks essential to the employer’s core business, while a project employee is hired for a specific project with a predetermined completion date.

Q2: Can a project employee become a regular employee?

A: Yes, if a project employee’s tasks are actually necessary and desirable for the employer’s usual business, or if they are repeatedly rehired for similar projects without a significant break, they may be deemed regular employees.

Q3: Can an employer terminate a project employee simply because their contract expired?

A: Generally, yes, if the project is genuinely completed and the contract is truly project-based. However, if the dismissal is used to circumvent security of tenure or is done without due process for other causes (like misconduct), it can be deemed illegal.

Q4: What is “due process” in termination cases?

A: Due process requires the employer to provide two written notices: one informing the employee of the grounds for dismissal and another informing them of the decision to terminate after a fair hearing or opportunity to respond.

Q5: What remedies are available to an illegally dismissed project employee?

A: An illegally dismissed project employee can seek reinstatement to their former position, back wages from the time of dismissal until reinstatement, and potentially damages if the dismissal was done in bad faith.

Q6: What should I do if I believe I was illegally dismissed as a project employee?

A: Consult with a labor lawyer immediately. Gather your employment contracts, termination notices, and any relevant communication. You may need to file a case for illegal dismissal with the NLRC.

ASG Law specializes in Labor Law and Employment Disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.