Regular vs Project Employees: Understanding Employment Status in the Philippines

The Supreme Court recently settled important questions about employment status, constructive dismissal, and retirement rights in Ondevilla v. Colegio de San Juan de Letran (Laguna) (G.R. No. 278615, June 29, 2026). The case clarifies when an employee becomes regular, what constitutes illegal dismissal, and how retirement rules apply when no company retirement plan exists. For employees and employers alike, the ruling offers practical guidance on how Philippine labor law protects workers.

The Facts of the Case

Rodolfo Ondevilla was hired by Colegio de San Juan de Letran in Laguna in June 2004 as Comptroller. His contract was renewed after one year, and in May 2006, he was appointed Assistant Vice President for Finance and Controller. His appointment was renewed every three years until it expired on June 30, 2018.

When a new management took over in June 2018, Ondevilla was appointed as Controller for a fixed period ending August 29, 2019. He objected, claiming this was a demotion that substantially reduced his salary and benefits. The school insisted he was merely a consultant, not a regular employee.

Ondevilla filed a complaint for illegal dismissal in November 2019. The Labor Arbiter ruled in his favor, and the case eventually reached the Supreme Court.

The Issue: Regular or Project Employee?

The central question was whether Ondevilla was a regular employee entitled to security of tenure, or merely a fixed-term or project employee whose contract simply expired.

The Supreme Court upheld the finding that Ondevilla was a regular employee. His repeated renewals over 14 years, the nature of his work as AVP for Finance—which was necessary and desirable to the school's operations—and his Employee Status and Compensation Profiles all pointed to regular employment. The Court applied the four-fold test (selection, payment of wages, power of dismissal, and power of control) and found that an employer-employee relationship existed.

Constructive Dismissal and the Retirement Issue

The Court also addressed whether Ondevilla's demotion amounted to constructive dismissal and whether he had validly retired.

The Court of Appeals had ruled that Ondevilla was illegally dismissed on August 29, 2019, when his contract expired, but that he had opted to retire on July 31, 2020. The Supreme Court disagreed on the retirement point.

Under Article 302 of the Labor Code, as amended by Republic Act No. 7641, an employee may optionally retire at age 60 but cannot be compelled to retire before age 65 absent a valid agreement. The Court emphasized that acceptance of an early retirement option must be explicit, voluntary, free, and uncompelled. Ondevilla's letter mentioning July 31, 2020 was merely a response to a demand for payment of a cash advance—not an express election to retire.

Because Ondevilla did not expressly agree to retire early, he could not be considered retired before reaching 65. His dismissal on August 29, 2019 was therefore illegal.

What the Employee Was Entitled To

The Court ruled that Ondevilla was entitled to:

• Full backwages from August 29, 2019 until his compulsory retirement age of 65 on August 29, 2024
• Separation pay in lieu of reinstatement, since reinstatement was no longer feasible after he reached compulsory retirement age
• Retirement pay under Article 302 of the Labor Code, equivalent to one-half month salary for every year of service
• Attorney's fees equivalent to 10% of the total monetary award

The Court also clarified that managerial employees are generally not entitled to CBA benefits under Article 255 of the Labor Code, and that disputes over tax withholding belong to the Commissioner of Internal Revenue, not labor tribunals.

Practical Takeaways

• Regular employment is determined by the nature of work and length of service, not by the label in a contract. Repeated renewals over many years strongly indicate regular status.
• A demotion that reduces rank and benefits can constitute constructive dismissal, even if the employee continues to receive the same salary.
• Early retirement requires explicit, voluntary consent. An employee who does not expressly agree to retire before age 65 cannot be forced into retirement.
• Separation pay may be awarded even when reinstatement is impossible, such as when the employee reaches compulsory retirement age during litigation.
• Managerial employees are barred from CBA benefits unless the employer grants them as a matter of established company practice.

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