Fixed-Term Contracts and Security of Tenure: What Romares v. NLRC Means for Employers and Workers

The line between a legitimate fixed-term employment contract and one that merely masks a permanent job is a question that has produced many labor disputes. In Romares v. National Labor Relations Commission (G.R. No. 122327, August 19, 1998), the Supreme Court clarified this boundary, ruling against an employer that used successive short-term contracts to prevent a worker from becoming regular. The decision remains a key reference for both employers structuring their workforce and employees asserting their right to security of tenure.

The Facts of the Case

Artemio Romares worked for PILMICO Foods Corporation as a mason in its Maintenance/Projects/Engineering Department. Over a period of more than three years, he was hired and terminated three times, with each contract lasting only five months. His work involved painting company buildings, maintenance chores, and operating company equipment.

When his last contract expired in January 1993, PILMICO did not renew it. Romares filed a complaint for illegal dismissal, arguing that he had become a regular employee and could not be terminated without just cause and due process. The company, on the other hand, insisted that he was a contractual employee whose employment ended with the expiration of his fixed-term contract.

The Issue

The central question was whether Romares was a regular employee entitled to security of tenure, or merely a fixed-term employee whose contract had simply expired. The answer depended on how the Court would apply Article 280 of the Labor Code.

The Ruling: Regular Employment Cannot Be Circumvented

The Supreme Court ruled in favor of Romares, holding that he was a regular employee and that his termination was illegal.

The Court applied the two kinds of regular employment under Article 280 of the Labor Code:

1. Regular employment by nature of work — where the employee performs activities that are "usually necessary or desirable" in the employer's usual business or trade.
2. Regular employment by length of service — where a casual employee has rendered at least one year of service, whether continuous or broken.

Romares fell under both categories. His work as a mason was necessary and desirable to PILMICO's operations, which involved the production of flour, yeast, and feeds. The company could not claim that maintenance work was entirely foreign to its business. Moreover, his repeated rehiring over several years showed a continuing need for his services, which the Court considered sufficient evidence of the necessity and indispensability of his work.

The Brent Doctrine and Fixed-Term Contracts

The Court acknowledged the leading case of Brent School, Inc. v. Zamora, which upheld the legality of fixed-term employment. Under Brent, the decisive factor is not the nature of the work but the "day certain" agreed upon by the parties for the commencement and termination of the employment relationship.

However, the Court emphasized an important exception: where the circumstances show that the fixed periods were imposed to prevent the employee from acquiring tenurial security, those periods should be struck down as contrary to public policy.

The Court found that PILMICO's repeated use of two-to-three-month contracts was "obtrusively a convenient subterfuge" to prevent Romares from becoming a regular employee. The arrangement was a clear circumvention of his right to security of tenure and evidenced bad faith on the part of the company.

Practical Takeaways

• Successive short-term contracts do not automatically make an employee "project-based" or "fixed-term." If the work performed is necessary or desirable to the employer's business, the employee may be considered regular regardless of contract labels.

• Fixed-term contracts are valid only in specific circumstances. Under the Brent doctrine, the fixed period must have been knowingly and voluntarily agreed upon by the employee, without force, duress, or improper pressure, and with the parties dealing on more or less equal terms.

• Repeated rehiring for the same kind of work is a red flag. Courts will view a pattern of hiring, terminating, and rehiring an employee for the same functions as evidence that the employer is trying to avoid regularization.

• An employee who has rendered at least one year of service, whether continuous or broken, may be deemed regular with respect to the activity in which they are employed, under the second paragraph of Article 280.

• Employers should review their contracting practices. If the need for a worker's services is ongoing and integral to the business, classifying them as a fixed-term or project employee may not withstand judicial scrutiny.

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