Understanding Regular Employment: How Continuous Rehiring Affects Worker Status

In a significant ruling for Philippine labor law, the Supreme Court clarified when an employee labeled as a "project employee" should actually be considered a regular employee. The case of Serrano v. Loxon Philippines, Inc. (G.R. No. 249092, September 30, 2020) shows how continuous rehiring for the same tasks can convert project employment into regular employment, entitling the worker to security of tenure and full labor law protections.

The Facts of the Case

Armando Serrano worked for Loxon Philippines, Inc., a building management company that installs and maintains smoke detectors, fire alarms, sprinklers, and CCTV cameras. Serrano was hired in 1994 as a Helper Service Technician, tasked with installing and maintaining these devices.

Over 21 years, Loxon repeatedly hired Serrano under successive project contracts for various clients. Between projects, he was only out of work for a few days at a time, with the longest break being one month. In December 2015, Loxon required Serrano to sign a document stating his contract would expire, with rehiring contingent on signing a new three-month contract and submitting an NBI clearance and medical certificate. Serrano refused, believing he was already a regular employee. When Loxon stopped assigning him work, he filed a complaint for illegal dismissal.

The Legal Issue

The central question was whether Serrano was a regular employee or a project employee. Project employees may be hired for a specific project or undertaking, and their employment ends upon project completion. Regular employees, by contrast, enjoy security of tenure and can only be dismissed for just or authorized causes under Article 294 of the Labor Code.

The Supreme Court's Ruling

The Court ruled in favor of Serrano, holding that he was a regular employee. The ruling rested on three key points.

First, the Court examined the nature of Serrano's work. His tasks of installing and maintaining fire alarms and related equipment were not distinct, separate, or identifiable from Loxon's usual business. These services were vital, necessary, and indispensable to the company's operations. Citing the principle from Paregele v. GMA, the Court noted that it would be absurd to consider work integral to the employer's core business as "project" work.

Second, the Court found that Loxon failed to comply with DOLE Department Order No. 19, which requires employers to report employee terminations after each project completion. Loxon presented no termination reports for Serrano's assignments from 1994 to 2014, and the reports it did submit did not even include his name.

Third, the Court noted that Serrano appeared in Loxon's 2014 payroll despite not being assigned to any project that year—strong evidence that he was part of the company's regular workforce.

The Legal Principle on Continuous Rehiring

The Court reaffirmed that an employment contract with a fixed term does not automatically prevent an employee from becoming regular. Under Article 295 of the Labor Code, employment is deemed regular where the employee performs activities usually necessary or desirable in the employer's business, regardless of any written agreement to the contrary.

The Court emphasized that where an employee's contract is continuously extended or renewed for the same position, with the same duties and without interruption, the employee is regular. Continuous renewal in such circumstances is a scheme to prevent regularization and is contrary to public policy.

The Award

The Court found Serrano illegally dismissed and ordered Loxon to pay backwages from January 2016 until the decision's finality, separation pay of one month's salary for every year of service, moral and exemplary damages of P50,000 each, and attorney's fees of 10% of the total monetary award.

Practical Takeaways

• Labels do not control status. Calling a worker a "project employee" in a contract does not make it so if the work is necessary to the employer's usual business.
• Repeated rehiring is a red flag. Continuous renewal of contracts for the same tasks, with minimal gaps, indicates regular employment.
• Employers must document project employment. Failure to file termination reports with DOLE after each project completion weakens claims of project employment.
• Fixed-term contracts have limits. Contracts cannot be used to circumvent security of tenure when the employee's work is indispensable to the business.
• Workers should document their history. Records of continuous service, payroll inclusion, and assignments are crucial evidence in regularization disputes.

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