Fixed-Term Contracts vs Security of Tenure: Protecting Employee Rights in the Philippines

The Supreme Court recently reminded employers that fixed-term employment contracts cannot be used to deprive workers of their security of tenure. In Claret School of Quezon City v. Sinday (G.R. No. 226358, October 9, 2019), the Court ruled that a school illegally dismissed an employee who had been repeatedly hired for various positions over three years without any written contract proving a fixed-term arrangement.

The case illustrates a crucial principle: while fixed-term employment is not automatically illegal, it is the exception, not the rule. Employers who wish to hire workers on a fixed-term basis must prove that the arrangement was genuinely voluntary and fair.

The Facts of the Case

Madelyn Sinday worked for Claret School of Quezon City from 2010 to 2013. She held several positions: releasing clerk at the school's book sale, filing clerk at the Human Resources Department, secretary at the school's Technical-Vocational Training Center, and substitute teacher aide at the Child Study Center.

When her services were terminated in October 2013, Sinday filed a complaint for illegal dismissal. She claimed she was a regular employee because her work was necessary and desirable to the school's operations.

The school, however, argued that Sinday was merely a fixed-term contractual employee who knew her engagements were temporary. It pointed to her biodata, which showed the periods of her employment, and claimed she was only accommodated because her husband was a longtime driver and their children were scholars.

The Legal Framework: When Are Fixed-Term Contracts Valid?

The Labor Code (Article 295) defines regular employment as work that is "usually necessary or desirable in the usual business or trade of the employer." Employees who perform such work are entitled to security of tenure—they cannot be dismissed except for just or authorized causes.

In the landmark case Brent School, Inc. v. Zamora (1990), the Supreme Court recognized that fixed-term employment contracts are allowed under the Civil Code and Labor Code. However, the Court imposed strict conditions:

1. The parties must have knowingly and voluntarily agreed to the fixed period, without force, duress, or improper pressure; or
2. The employer and employee must have dealt with each other on more or less equal terms, with no moral dominance by the employer.

These criteria exist to prevent employers from using fixed-term contracts to circumvent an employee's right to security of tenure. As the Court explained in GMA Network, Inc. v. Pabriga, the employer bears the burden of proving that it was not in a dominant position when the contract was made.

The Court's Ruling

The Supreme Court ruled in favor of Sinday, finding that the school failed to satisfy either of the Brent criteria.

First, the Court noted that Sinday was not on equal footing with the school. She was a high school graduate whose entire family depended on the school—her husband was a driver, and their children were scholars. She was in no position to bargain over the terms of her employment.

Second, the school failed to present any written contract for most of Sinday's positions. The only document it produced was a Memorandum of Agreement for her work as a substitute teacher aide, which surfaced only on the third year of her employment. As the Court held, a fixed-term employment "cannot be held valid based on mere allegations and speculations."

Third, Sinday's repeated hiring over three years showed that her services were necessary and desirable to the school's operations. Her work as a clerk, secretary, and teacher aide were all connected to the school's business as an educational institution.

The Court also rejected the school's allegation that Sinday stole relief goods. The school never investigated the matter or served any notice of the charge. Even if the allegation were true, the school failed to comply with the two-notice rule required for valid dismissal: a first notice stating the grounds for termination and giving the employee a chance to respond, and a second notice with the findings and reason for termination.

Practical Takeaways

• Fixed-term employment is valid only when it is genuinely voluntary and fair. Employers cannot use short-term contracts to avoid giving workers security of tenure, especially when the worker has no real bargaining power.
• The employer bears the burden of proof. In illegal dismissal cases, the employer must prove with clear and convincing evidence that the fixed-term arrangement was knowingly and voluntarily agreed upon, and that the parties dealt on equal terms.
• Written contracts matter. Without a written contract clearly stating the fixed period, courts will presume the employee is regular. A biodata or application letter mentioning dates is not enough.
• Repeated hiring indicates regular employment. When an employer repeatedly rehires a worker for the same or similar tasks, this suggests the work is necessary and desirable to the business.
• Due process is non-negotiable. Even if an employer has a valid ground for dismissal, it must still comply with the two-notice rule and give the employee an opportunity to be heard.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.