Project Employee vs Regular Employee: Security of Tenure in Philippine Law

The distinction between project employees and regular employees is one of the most important concepts in Philippine labor law. It determines whether a worker enjoys security of tenure — the constitutional right to remain employed unless there is a just or authorized cause for termination. This article explains the legal difference between the two classifications and what it means for workers and employers.

The Legal Framework

Under the Labor Code of the Philippines, employment is either regular or non-regular. Regular employees enjoy security of tenure, meaning they cannot be dismissed except for just or authorized causes under the law. Project employees, on the other hand, are hired for a specific project or undertaking, and their employment ends when the project is completed.

The Supreme Court has consistently ruled that the key test in determining whether an employee is a project employee or a regular employee is whether the employee was hired to carry out a specific project or undertaking, and whether the employment was coterminous with the project's completion. If the employee continues to be rehired for successive projects, the Court may consider them a regular employee entitled to security of tenure.

The Case of Lotrim Construction v. COA

In Lotrim Construction, Inc. v. Commission on Audit (G.R. No. 270295, April 29, 2026), the Supreme Court En Banc addressed a different but related issue: the application of the principle of quantum meruit in government contracts. While the case primarily involved a construction dispute with the Commission on Audit, the Court's discussion on the rights of contractors and the limits of equitable compensation offers useful guidance for understanding employment security.

The case involved Lotrim Construction, which was contracted by the Bureau of Customs to expand its Port of Davao Administration Building. The Commission on Audit disallowed certain payments, finding that the project was not covered by a valid appropriation. The Court upheld COA's findings, ordering Lotrim to return an overpayment of PHP 408,859.16.

The Principle of Quantum Meruit

The Court reiterated that quantum meruit — literally "as much as he deserves" — allows a party to recover the reasonable value of services rendered, even in the absence of a valid contract. This principle prevents unjust enrichment and ensures that the government does not benefit from a contractor's work without paying for it.

However, the Court emphasized that quantum meruit cuts both ways. While it protects contractors from being unpaid for work actually performed, it also safeguards public funds by allowing the recovery of overpayments. A contractor cannot use this equitable doctrine to retain payments in excess of what is legally due.

Practical Takeaways

• Project employees are hired for a specific project or undertaking, and their employment ends upon project completion. They do not enjoy the same security of tenure as regular employees.
• Regular employees enjoy security of tenure and cannot be dismissed without just or authorized cause. The law presumes that an employee is regular unless the employer proves otherwise.
• The test for project employment is whether the employee was hired for a specific project and whether they were informed of the project-based nature of their employment at the time of hiring.
• Repeated rehiring for successive projects may convert a project employee into a regular employee, entitling them to security of tenure.
• For government contracts, the principle of quantum meruit ensures fair compensation for work actually performed, but it does not allow contractors to retain overpayments.

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