The Supreme Court ruled that employees continuously working for a construction firm for at least a year are considered regular employees, unless a definite termination date was agreed upon. Hanjin Heavy Industries failed to prove its workers were project employees, as it did not provide employment contracts showing they were informed of the project’s scope and duration. This ensures construction workers’ rights to security of tenure are protected.

Shifting Sands: Can Employers Change Their Story on Employee Status?

This case revolves around a dispute between Hanjin Heavy Industries and several of its workers, who claimed they were illegally dismissed. Hanjin initially argued that the workers were hired under fixed-term contracts, which clearly defined them as project employees. However, the company failed to produce these contracts in court. The central legal question is whether the absence of a written contract and Hanjin’s shifting arguments affected the workers’ status and their right to security of tenure.

The Court emphasized the importance of clearly defining an employee’s status as a project employee at the time of hiring. Article 280 of the Labor Code distinguishes between regular and project employees. A project employee is hired for a specific project, the completion or termination of which has been determined at the time of engagement. However, the Court noted that employers must provide clear and convincing evidence that employees were informed of their status as project employees and the duration of their employment.

Article 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 services to be performed is seasonal in nature and the employment is for the duration of the season.

The Court also pointed out that the absence of a written contract is not the sole determinant of employee status. However, its absence raises questions about whether employees were properly informed of the terms and conditions of their employment. The burden of proof lies with the employer to demonstrate the legality of the dismissal. Hanjin’s failure to present employment contracts significantly weakened its claim that the workers were project employees.

Building on this principle, the Court referred to Department Order No. 19, Series of 1993, which provides guidelines for the employment of workers in the construction industry. This order states that project employees with at least one year of continuous service in a construction company shall be considered regular employees, absent a ‘day certain’ for termination. The Court emphasized the significance of a ‘day certain,’ which implies that the completion date is determinable and made known to the employee.

Furthermore, the Court addressed Hanjin’s claim that the Termination Report filed with the DOLE indicated the project-based nature of the employment. The court, however, ruled that failure to present Termination Reports for each project completed undermined this argument. Reporting the final termination only, after continuous employment on other projects, raised suspicions about Hanjin’s true intent. An employer cannot use Termination Reports to unfairly deny employees security of tenure. A completion bonus, if paid, should be established as an undertaking upon hiring, and properly accounted for.

The Court noted that quitclaims and waivers are viewed with disfavor as they can be used to circumvent labor laws. For a quitclaim to be valid, it must be entered into voluntarily and represent a reasonable settlement of the employee’s claims. In this case, the Court found that the quitclaims signed by the workers did not constitute a fair settlement of their rights as regular employees. The respondents, being found as regular employees, are entitled to backwages and separation pay.

Based on these considerations, the Court upheld the Court of Appeals’ decision, finding that the workers were regular employees who were illegally dismissed. The decision underscored the importance of employers adhering to due process requirements before terminating regular employees. This includes providing notice and an opportunity to be heard. The ruling serves as a reminder to construction companies to respect the rights of their workers and ensure fair labor practices.

FAQs

What was the key issue in this case?	The key issue was whether the employees of Hanjin Heavy Industries were regular or project employees and whether they were illegally dismissed.
What is the main difference between a regular and a project employee?	A regular employee performs tasks necessary for the usual business of the employer, while a project employee is hired for a specific project with a predetermined completion date.
What happens if an employer fails to provide an employment contract?	The absence of a written contract raises doubts about whether the employee was properly informed of their employment status and terms. It increases the likelihood they will be considered a regular employee.
What is the significance of a Termination Report?	A Termination Report should be filed with the DOLE upon the completion of each project for project employees. Failure to do so can indicate that the employees are not truly project-based.
What are the requirements for a valid quitclaim?	A valid quitclaim must be entered into voluntarily and represent a fair settlement of the employee’s claims. It cannot be used to waive rights to which the employee is legally entitled.
What is the effect of Department Order No. 19 on construction workers?	Department Order No. 19 provides guidelines for the employment of workers in the construction industry, including the criteria for determining project vs. regular employment.
What constitutes illegal dismissal?	Illegal dismissal occurs when an employee is terminated without just cause and without due process, including notice and an opportunity to be heard.
Are project employees entitled to separation pay?	Project employees do not usually get separation pay when a project ends. Regular employees are entitled to separation pay when illegally dismissed or under certain other conditions.
How does continuous employment affect a worker’s status?	If a project employee is continuously employed by a construction company for at least one year without a clear termination date, they may be considered a regular employee.

In conclusion, the Supreme Court’s decision underscores the importance of clear employment contracts and adherence to labor laws in the construction industry. The ruling reaffirms the rights of construction workers to security of tenure and fair labor practices. It highlights that employers must properly document and communicate the terms of employment to avoid disputes regarding employee status and illegal dismissal claims.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Hanjin Heavy Industries and Construction Co. Ltd. vs. Ibanez, G.R. No. 170181, June 26, 2008