Project Employment vs Regular Employment: Security of Tenure in Construction

The Supreme Court, in Minsola v. New City Builders, Inc. (G.R. No. 207613, January 31, 2018), settled an important question for the construction industry: when does a project employee become a regular employee? The case clarifies that length of service and repeated rehiring do not automatically convert a construction worker into a regular employee, but employers must still pay all wages and benefits lawfully due.

The Facts of the Case

New City Builders, Inc. hired Reyman Minsola as a laborer on December 16, 2008, for the structural phase of its Avida Tower 3 Project. His employment contract stated that his work would last until completion of that phase. When the structural phase was completed on August 24, 2009, Minsola received a notice of termination.

The very next day, New City rehired Minsola as a mason for the architectural phase of the same project. In December 2009, the company noticed Minsola had no appointment paper for his new role and instructed him to update his employment records. Minsola refused. When summoned again on January 20, 2010, he stormed out of the office and never returned.

Minsola filed a complaint for illegal dismissal, claiming he was a regular employee because he had worked for more than one year and his work was necessary to New City's business. He also claimed underpayment of wages and other monetary benefits.

The Issue

The central issues were: (1) whether Minsola was a project employee or a regular employee; (2) whether he was constructively dismissed; and (3) whether he was entitled to monetary claims such as salary differentials, holiday pay, and attorney's fees.

The Ruling: Project Employment in Construction

The Supreme Court ruled that Minsola was a project employee, not a regular employee. Under Article 294 of the Labor Code, employment is regular when the employee performs activities "usually necessary or desirable" to the employer's business—except where employment is fixed for a specific project whose completion is determined at the time of engagement.

For employment to be considered project-based, the employer must prove two things: (1) the employee was hired to carry out a specific project or undertaking, and (2) the employee was notified of the duration and scope of the project at the time of hiring.

The Court found that New City satisfied both requirements. Minsola's contracts clearly stated he was hired as a project employee for specific phases, and his employment would end upon completion of those phases.

Why Length of Service Does Not Regularize Construction Workers

Minsola argued that working for over a year and being rehired made him regular. The Court rejected this. The Court acknowledged that construction firms cannot guarantee work beyond each project's life, as they have no control over project owners' decisions and resources.

The Court also noted that in the construction industry, an employee's tenure is tied to the work to which he is assigned. Requiring construction companies to keep workers on payroll after project completion would force them to pay wages for work not done—an outcome the Court described as "labor coddling at the expense of management."

No Constructive Dismissal

The Court also found no constructive dismissal. Constructive dismissal exists when continued employment is rendered impossible, unreasonable, or unlikely—such as through demotion or diminution of pay. Here, Minsola failed to show any act of dismissal. He was never prevented from reporting for work; rather, he chose to storm out and stop reporting. There can be no illegal dismissal where the employee was not notified of termination and was not barred from returning.

Monetary Claims: The Employer's Burden

While Minsola lost on the dismissal issue, he won on monetary claims. The Court held that for salary differentials, service incentive leave, holiday pay, and 13th month pay, the burden rests on the employer to prove payment. This is because personnel files and payroll records are in the employer's custody.

New City paid Minsola only Php 260.00 per day, far below the prevailing minimum wage of Php 382.00 per day under Wage Order No. NCR-15. The Court awarded him salary differentials of Php 41,616.64, service incentive leave pay differentials of Php 310.00, 13th month pay differentials of Php 2,652.00, and holiday pay of Php 5,340.00 for unworked legal holidays, plus 10% attorney's fees.

Practical Takeaways

• Project employees are valid in construction. Employers may hire workers for specific projects or phases, provided the duration and scope are clearly stated at the time of hiring.
• Notice is critical. To preserve project employment status, employers must inform employees in writing that their employment is project-based and coterminous with project completion.
• Length of service alone does not regularize. In the construction industry, repeated rehiring and service beyond one year do not automatically convert a project employee into a regular employee.
• Employers must prove payment of wages. The burden falls on the employer to show that wages, holiday pay, and other statutory benefits were paid. Failure to present payroll records can result in monetary awards against the company.
• Employees who stop reporting risk losing dismissal claims. Without evidence of dismissal or prevention from work, an employee who simply stops reporting cannot claim illegal or constructive dismissal.

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