Project Employee vs Regular Employee: Fixed-Term Contracts and Illegal Dismissal in the Philippines

In the Philippines, the distinction between a project employee and a regular employee determines the security of tenure an worker enjoys. A recent Supreme Court ruling, Kiamco v. NLRC (G.R. No. 129449, June 29, 1999), clarifies that even project employees cannot be dismissed without just or authorized cause and without due process. The case serves as a reminder that a fixed-term contract is not a license for an employer to terminate an employee arbitrarily.

The Facts of the Case

Cisell Kiamco was hired by the Philippine National Oil Company (PNOC) and PNOC-Energy Development Corporation (PNOC-EDC) as a technician for the Geothermal Agro-Industrial Plant Project. He signed three successive employment contracts, each specifying a fixed duration tied to the project's completion. His last contract ran from May 1, 1993 to October 31, 1993.

In October 1993, Kiamco received a memorandum charging him with several infractions, including unauthorized use of a company vehicle and absence without leave. He was placed under preventive suspension. No investigation was ever conducted. When his contract expired on November 30, 1993, the company took the position that he ceased to be an employee automatically. When Kiamco reported for work on December 1, 1993, security guards barred him from entering the premises.

The Issue: Project Employee or Regular Employee?

The central question was whether Kiamco was a project employee or a regular employee. Under Article 280 of the Labor Code, employment is considered regular where the employee performs activities "usually necessary or desirable in the usual business or trade of the employer." An exception exists for employees hired for a "specific project or undertaking" whose completion or termination was determined at the time of engagement.

The Supreme Court applied the test from Violeta v. NLRC: project employees are those hired (1) for a specific project or undertaking, and (2) the completion or termination of which was determined at the time of engagement. Since Kiamco's contracts explicitly identified the Geothermal Agro-Industrial Demonstration Plant Project and specified its duration, the Court ruled that he was indeed a project employee, not a regular employee.

The Ruling: Project Employees Still Have Rights

Despite affirming Kiamco's status as a project employee, the Court ruled that his dismissal was illegal. The employer relied solely on the expiration of his contract to justify termination, but the project itself was still ongoing. The Court cited De Ocampo, Jr. v. NLRC, noting that project workers should be retained until the actual completion of the project if their services are still needed.

The Court emphasized that the burden of proving a valid cause for dismissal rests on the employer. In this case, the employer presented no evidence of just or authorized cause under Articles 282 to 284 of the Labor Code. Furthermore, the employer failed to comply with the two-notice rule: a notice apprising the employee of the charges, and a subsequent notice informing him of the decision to dismiss.

The Strained Relations Principle

The employer also invoked the "strained relations" doctrine to avoid reinstatement. The Court rejected this, citing Globe-Mackay Cable and Radio Corp. v. NLRC, which held that the principle cannot be applied indiscriminately. Reinstatement should only be denied when the employee occupies a position of trust and confidence, and where reinstatement would likely generate an atmosphere of antipathy affecting productivity. Mere hostility arising from litigation is not enough.

Practical Takeaways

• Project employees are not regular employees if they are hired for a specific project with a predetermined completion date, even if they sign successive contracts.
• A fixed-term contract does not permit arbitrary dismissal. Even project employees can only be terminated for just or authorized causes under the Labor Code.
• Employers must observe due process. The two-notice requirement applies to all dismissals, regardless of the employee's status.
• The burden of proof is on the employer. If a project is still ongoing, the employer must show why the project employee was not retained.
• The "strained relations" defense is limited. It cannot be used to avoid reinstatement simply because the employee filed a case.

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