Regular Employment After One Year of Service Prevails Over Fixed-Term Contracts

The Supreme Court has long protected workers against employers who use repeated short-term contracts to avoid granting regular employment status. In Romares v. National Labor Relations Commission (G.R. No. 122327, August 19, 1998), the Court ruled that an employee who performs work necessary to the employer's business becomes regular—regardless of what the employment contract says—and cannot be dismissed without just cause and due process.

The case is a reminder that the label on a contract does not determine an employee's true status. What matters is the nature of the work and the circumstances surrounding the hiring.

The Facts of the Case

Artemio Romares worked for Pilmico Foods Corporation in its Maintenance/Projects/Engineering Department during three separate periods: September 1989 to January 1990, January to June 1991, and August 1992 to January 1993. Each engagement lasted about five months. In total, he rendered more than one year of service.

His work involved painting company buildings, maintenance chores, cleaning, operating company equipment, and assisting regular employees. He was never disciplined during his engagements. When his last contract expired on January 15, 1993, Pilmico did not renew it. Romares filed a complaint for illegal dismissal.

Pilmico argued that Romares was merely a contractual employee hired for specific projects under fixed-term contracts. When the last contract expired, his employment simply ended.

The Legal Issue

The central question was whether Romares had become a regular employee entitled to security of tenure, or whether he remained a fixed-term contractual employee whose employment validly ended upon contract expiration.

The Executive Labor Arbiter ruled in Romares' favor, but the NLRC reversed, holding that his fixed-term contracts were the applicable rule. The Supreme Court reinstated the Labor Arbiter's decision.

The Court's Ruling

The Court applied Article 280 of the Labor Code, which defines two kinds of regular employees:

1. Those engaged to perform activities usually necessary or desirable in the employer's usual business or trade; and
2. Those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.

The Court found that Romares' work as a mason and maintenance worker was clearly necessary and desirable to Pilmico's business of producing flour, yeast, feeds, and other flour products. His services were not foreign or irrelevant to the company's operations.

The Court also noted that Romares was repeatedly rehired for the same kind of work over more than three years. This continuing need for his services was sufficient evidence of the necessity and indispensability of his work.

Fixed-Term Contracts Cannot Circumvent the Law

The Court addressed the employer's argument that fixed-term contracts should prevail. Citing the leading case of Brent School, Inc. v. Zamora (181 SCRA 702 [1990]), the Court acknowledged that fixed-term employment is generally valid. The decisive factor is whether the parties knowingly and voluntarily agreed to the term, dealing with each other on more or less equal terms.

However, the Court emphasized the exception: where the periods are imposed to prevent the employee from acquiring tenurial security, those periods must be struck down as contrary to public policy.

In Romares' case, the Court found that the two-to-three-month contracts with express statements that his "temporary job" would end were a "convenient subterfuge" to prevent his regularization. This was a clear circumvention of the employee's right to security of tenure and evidenced bad faith on the part of Pilmico.

Practical Takeaways

• Repeated short-term contracts do not automatically prevent regularization. If an employee performs work necessary or desirable to the employer's business, the employee becomes regular regardless of contract labels.
• One year of service, continuous or broken, creates regular status under Article 280 of the Labor Code with respect to the activity in which the employee is employed.
• Fixed-term contracts are valid only when genuinely agreed upon by parties on equal terms, not when used to avoid granting security of tenure.
• Employers cannot use contract expiration as a shield for what is effectively a dismissal without just cause and due process.
• Employees who believe they have been regularized should document their work history, including repeated engagements and the nature of their duties, as evidence of regular employment.

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