Fixed-Term Employment Contract

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  • P.D. 442, otherwise known as the Labor Code, Republic Act No. 386, Omnibus Rules Implementing the Labor Code, and Supreme Court Decisions, are the legal bases.
  • A fixed term employee is one who has been engaged for a specific term or period.
  • Fixed term employees should have willfully and voluntarily entered into the fixed term employment contract.
  • Fixed term employees should have bargained on equal footing on the terms and conditions of employment.
  • Non-compliance of the requirements may result in the employee being reclassified as a regular employee.
  • Burden of proof is on the employer when a non-regular employment is challenged.
  • When in doubt, employment contracts are interpreted in favor of the employee.

Legal basis

The following are the legal bases:

  • P.D. 442, otherwise known as the Labor Code;
  • Omnibus Rules Implementing the Labor Code; and
  • Supreme Court Decisions.

Concept

A fixed-term employment contract is an employment arrangement between an employer and a fixed-term employee.

A fixed-term employee is one who has been engaged for a specific term or period.

Recognized by Jurisprudence, as it is not in the Labor Code

“Interestingly, the Labor Code does not mention another employment arrangement – contractual or fixed term employment (or employment for a term) – which, if not for the fixed term, should fall under the category of regular employment in view of the nature of the employee’s engagement, which is to perform an activity usually necessary or desirable in the employer’s business.

In Brent School, Inc. v. Zamora, the Court, for the first time, recognized and resolved the anomaly created by a narrow and literal interpretation of Article 280 of the Labor Code that appears to restrict the employee’s right to freely stipulate with his employer on the duration of his engagement. In this case, the Court upheld the validity of the fixed-term employment agreed upon by the employer, Brent School, Inc., and the employee, Dorotio Alegre, declaring that the restrictive clause in Article 280 ‘should be construed to refer to the substantive evil that the Code itself x x x singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where [the] fixed period of employment was agreed upon knowingly and voluntarily by the parties x x x absent any x x x circumstances vitiating

[the employee’s]

consent, or where [the facts satisfactorily show] that the employer and [the] employee dealt with each other on more or less equal terms[.]’ The indispensability or desirability of the activity performed by the employee will not preclude the parties from entering into an otherwise valid fixed term employment agreement; a definite period of employment does not essentially contradict the nature of the employees duties’ as necessary and desirable to the usual business or trade of the employer.

Nevertheless, ‘where the circumstances evidently show that the employer imposed the period precisely to preclude the employee from acquiring tenurial security, the law and this Court will not hesitate to strike down or disregard the period as contrary to public policy, morals, etc.’ In such a case, the general restrictive rule under Article 280 of the Labor Code will apply and the employee shall be deemed regular.” (Universal Robina Sugar Milling Corporation v. Acibo, G.R. No. 186439, 15 January 2019.)

Requirements

The following are the requirements:

1. The employee must have willfully and voluntarily entered into the fixed-term employment contract without any duress, force, intimidation, or undue influence from the employer; and

2. The employer and the employee must have bargained on equal footing on the terms and conditions of employment.

Test for fixed-term employment

The principal test is the existence of a fixed term or period.

Fixed term

There is no limitation on the fixed term or period.

The period may be for months or years.

In the landmark and first case on the matter, Brent School v. Zamora (1991), the fixed-term employment was for a period of five (5) years. It was held to be valid.

However, there is jurisprudence applying the Labor Code provision on any employment contract that exceeds for a year results in regular employment, with the exception of project employment contract.

Fixed term requires a start and an end

A fixed term should have a start and an end.

The very essence of a fixed term employment is that the engagement is for a limited period of time only. Accordingly, the starting date and the ending date should be specified in the fixed term employment contract.

Non-compliance with requirements

If any of the above requirements are not complied, the employee may be reclassified as a regular employee.

These may include:

1. The employee was constrained or forced to agree to a fixed-term employment contract due to duress, force, intimidation, or undue influence by the employer; and

2. The employer and the employee did not bargain on equal footing on the terms and conditions of employment.

Burden of proof on the employer

When the validity of the employment arrangement is challenged, the burden of proof is on the employer.

When in doubt, interpreted in favor of the employee

“In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.” (Article 1702, Civil Code)

References

  • Presidential Decree No. 442, a.k.a. Labor Code;
  • Omnibus Rules Implementing the Labor Code; and
  • Supreme Court Decisions (cited in the body)