Regular vs Project Employees: Security of Tenure in Philippine Construction

The distinction between regular and project employees is one of the most contested questions in Philippine labor law, especially in the construction industry where work is inherently cyclical. A 1997 Supreme Court decision, Tomas Lao Construction v. NLRC (G.R. No. 116781), provides a clear guide: workers repeatedly rehired for successive projects over many years may lose their status as mere project employees and become regular employees entitled to full security of tenure.

The Case

Eleven construction workers filed complaints for illegal dismissal against three related corporations informally known as the "Lao Group of Companies." The workers had been employed for periods ranging from seven to nearly twenty years, working as foremen, welders, drivers, operators, and clerks. They were transferred among the three corporations as projects demanded, often rehired immediately after one project ended and another began.

In 1989, management issued a memorandum requiring all workers to sign employment contracts that described them as project employees hired only for definite periods. The contracts were antedated and employees who refused to sign had their salaries withheld. Most workers refused, believing the scheme was designed to strip them of their regular status. They were subsequently dismissed for insubordination.

The Issue

The central question was whether the workers were project employees, whose employment ends upon project completion, or regular employees, who enjoy security of tenure and can only be dismissed for just cause and after due process.

The Ruling

The Supreme Court ruled in favor of the workers, holding that they had become regular employees.

The Court explained that the principal test for project employment is whether the employee is assigned to carry out a "specific project or undertaking," the duration and scope of which are specified at the time of engagement. A project is a particular job that is distinct and identifiable, with determined or determinable start and end dates.

However, the Court emphasized that repeated rehiring and the continuing need for the workers' services over a long span of time can convert project employees into regular employees. Where employment is extended long after a supposed project has been finished, the workers are removed from the scope of project employment.

The Court found that the workers had been continuously rehired for many projects without interruption. The employers themselves admitted that projects were prosecuted simultaneously or successively, with workers transferred from one ongoing project to another. This arrangement, the Court held, showed that the workers were part of a "work pool" from which the company drew its labor force — a strong indicator of regular employment.

The Court also noted that the employers failed to submit termination reports to the public employment office after each project completion, a requirement under Policy Instruction No. 20 and later Department Order No. 19. Failure to file such reports is proof that the employees were not project employees.

The Contracts Were a Scheme

The Court described the employment contracts as "farcical," a scheme to prevent the workers from acquiring tenurial security. The Court struck down the fixed periods, noting that when periods are imposed to preclude the acquisition of tenurial security, they are contrary to public morals and public order.

Security of Tenure for Project Employees

Importantly, the Court clarified that even genuine project employees enjoy security of tenure. Citing Archbuild Masters and Construction, Inc. v. NLRC, the Court held that a project employee hired for a specific task also enjoys security of tenure — termination must be for a lawful cause and with proper notice and hearing. Employers cannot terminate project workers based on gratuitous assertions of project completion.

The Dismissal Was Illegal

The workers' refusal to sign the contracts was not willful insubordination. It was a justifiable act of self-preservation against an unreasonable and unlawful directive. The dismissal was therefore without just cause and without due process.

The Court also rejected the claim of abandonment, noting that the workers who left were forced to do so because their salaries were withheld — they had to seek other employment to survive.

Monetary Awards

Because the dismissal occurred after the effectivity of RA 6715, the workers were entitled to full back wages from the time compensation was withheld until actual reinstatement, undiminished by earnings elsewhere. If reinstatement was no longer feasible, they were entitled to separation pay of one month salary for every year of service.

The Court also pierced the veil of corporate fiction, holding the three corporations jointly and severally liable since they were owned and controlled by the same family and operated as one entity.

Practical Takeaways

• Repeated rehiring can convert project employees into regular employees. If a worker is continuously rehired for successive projects over many years, the law may treat them as regular employees entitled to security of tenure.
• A work pool is a sign of regular employment. Workers who form an integral part of a labor pool from which the employer draws for various projects are likely regular employees, even if they are not paid between projects.
• File termination reports. Employers of project employees must submit termination reports to the public employment office after each project. Failure to do so is evidence that the workers are not project employees.
• Fixed-term contracts cannot defeat security of tenure. Contracts that impose periods merely to prevent workers from acquiring regular status will be struck down as contrary to public policy.
• Even project employees have security of tenure. Their termination must be for a lawful cause and with proper notice and hearing; employers bear the burden of proving lawful dismissal.

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