The Supreme Court clarified that construction workers hired for specific projects are project employees, not regular employees, even with repeated rehiring. This means their employment lawfully ends with the project’s completion, impacting their rights to security of tenure and separation pay. However, employers must still comply with minimum wage laws and provide legally mandated benefits.

Hard Hat, Short Contract? Defining Project Employment in Construction

This case revolves around Reyman G. Minsola’s claim against New City Builders, Inc., alleging illegal dismissal and seeking regularization. Minsola argued that his continued employment as a laborer and mason for over a year, performing tasks necessary for the company’s business, transformed his status from a project employee to a regular one. The central legal question is whether Minsola’s employment was indeed project-based, and if so, whether New City properly terminated his services upon the project’s completion.

The Labor Code distinguishes between regular and project employees. Article 294 defines regular employees as those engaged to perform activities that are usually necessary or desirable in the employer’s usual business or trade. Conversely, it defines project employees as those whose employment is fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement.

In project-based employment, the employee is assigned to a particular project or phase with a defined beginning and end. Consequently, their services may be lawfully terminated upon the project’s completion. The Supreme Court has consistently held that for employment to be considered project-based, the employer must prove that the employee was hired to carry out a specific project or undertaking, and that the employee was notified of the duration and scope of the project.

Article 294. 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.

In Minsola’s case, the court found that he was indeed hired as a project employee. New City presented evidence that Minsola was hired for specific phases of the Avida Tower 3 project—first as a laborer for the structural phase and later as a mason for the architectural phase. His employment contracts clearly stated that he was hired as a project employee and that his employment would end upon the completion of the specific phase for which he was assigned. Therefore, the Supreme Court highlighted that these contracts sufficiently informed Minsola that his tenure would only last as long as the specific phase to which he was assigned.

Minsola argued that his continuous work and the necessity of his tasks to New City’s business made him a regular employee. However, the Supreme Court did not agree to this argument. In Gadia v. Sykes Asia, Inc., the Court clarified that projects may consist of a particular job within the regular business of the employer but distinct and separate from other undertakings. The unique nature of the construction industry was further emphasized in William Uy Construction Corp. v. Trinidad where the Supreme Court acknowledged that construction firms cannot guarantee work beyond each project’s life, and getting projects is not a matter of course.

Generally, length of service provides a fair yardstick for determining when an employee initially hired on a temporary basis becomes a permanent one, entitled to the security and benefits of regularization. But this standard will not be fair, if applied to the construction industry, simply because construction firms cannot guarantee work and funding for its payrolls beyond the life of each project. And getting projects is not a matter of course. Construction companies have no control over the decisions and resources of project proponents or owners. There is no construction company that does not wish it has such control but the reality, understood by construction workers, is that work depended on decisions and developments over which construction companies have no say.

In Malicdem v. Marulas Industrial Corporation, the Court took judicial notice that construction employees’ work depends on project availability, and their tenure is coterminous with the work assigned. Therefore, an employer cannot be forced to maintain employees on the payroll without projects. The Supreme Court reiterated that length of service and repeated rehiring do not automatically lead to regularization in the construction industry; thus, Minsola’s tenure did not make him a regular employee.

Minsola also claimed constructive dismissal, alleging he was forced to sign an employment contract and termination report. The Court defined constructive dismissal as cessation of work due to continued employment being rendered impossible, unreasonable, or unlikely, such as a demotion or pay reduction. It also exists if discrimination makes employment unbearable, foreclosing any choice but to forego continued employment.

However, the Court found no evidence that Minsola was dismissed or that his continued employment was impossible. He was not demoted, discriminated against, or prevented from returning to work. It was Minsola who stopped reporting after refusing to sign his employment record. Since he was not notified of dismissal or prevented from working, there was no illegal dismissal.

Despite the finding that Minsola was a project employee and not illegally dismissed, the Supreme Court addressed his monetary claims. The burden of proof for payment of salary differential, service incentive leave, holiday pay and 13th month pay, the burden rests on the employer to prove payment. This is because the pertinent payrolls, records, and remittances are in the custody and control of the employer.

Monetary Claim	Burden of Proof
Salary Differential	Employer
Service Incentive Leave	Employer
Holiday Pay	Employer
13th Month Pay	Employer
Overtime Pay	Employee
Premium Pay for Holidays and Rest Days	Employee

The Court found that Minsola’s daily wage of Php 260.00 was below the prevailing minimum wage of Php 382.00 mandated by Wage Order No. NCR-15. Thus, he was entitled to salary differentials. Additionally, New City failed to prove that Minsola’s salary included holiday pay; therefore, he was also entitled to holiday pay. Minsola was awarded salary differentials, service incentive leave pay differentials, a 13th-month pay differential, and holiday pay. Because the case involved unlawfully withheld wages, Minsola was also awarded attorney’s fees.

FAQs

What was the key issue in this case?	The key issue was whether Reyman Minsola was a regular employee or a project employee of New City Builders, Inc., and whether he was illegally dismissed. This determined his rights to security of tenure and other benefits.
What is the difference between a regular employee and a project employee?	A regular employee performs tasks necessary for the employer’s usual business, while a project employee is hired for a specific project with a predetermined completion date. Project employees can be terminated upon the project’s completion.
What did the court decide regarding Minsola’s employment status?	The Supreme Court determined that Minsola was a project employee because he was hired for specific phases of a construction project, and his employment contracts specified the project-based nature of his work. His employment was coterminous with the projects that he was assigned to.
Did the court find that Minsola was illegally dismissed?	No, the court found no evidence of illegal dismissal. Minsola was not terminated or prevented from returning to work; he voluntarily stopped reporting after refusing to sign his employment record.
Was Minsola entitled to any monetary claims?	Yes, despite being a project employee, Minsola was entitled to salary differentials, service incentive leave pay differentials, a 13th-month pay differential, and holiday pay because his wages were below the legal minimum and the company did not prove payment of these benefits.
What is the significance of being classified as a project employee in the construction industry?	In the construction industry, project employment is common due to the temporary nature of projects. It allows companies to hire workers for the duration of specific projects without guaranteeing long-term employment.
What should employers do to ensure proper classification of project employees?	Employers should clearly specify the project-based nature of the employment in the contract, inform employees of the project’s duration, and ensure compliance with minimum wage laws and mandated benefits. This will help ensure that the employees hired are project based employees only.
What happens if a project employee is repeatedly rehired for different projects?	Repeated rehiring does not automatically convert a project employee into a regular employee in the construction industry. The key factor is whether each engagement is for a specific project with a defined end date.
What is constructive dismissal?	Constructive dismissal occurs when an employer makes continued employment unbearable, such as through demotion, discrimination, or creating hostile working conditions, forcing the employee to resign.

This case clarifies the distinction between project and regular employment in the construction industry, highlighting the importance of clearly defining employment terms and complying with labor laws. While project-based employment is permissible, employers must still ensure fair wages and benefits are provided to their workers.

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: Reyman G. Minsola vs. New City Builders, Inc., G.R. No. 207613, January 31, 2018