Regular vs. Fixed-Term Employment: Key Lessons from Site for Eyes v. Daming

The distinction between regular and fixed-term employment determines an employee's security of tenure—the right to remain employed unless dismissed for just or authorized causes. In Site for Eyes, Inc. v. Dr. Amor F. Daming, the Supreme Court clarified that employers cannot use repeated fixed-term contracts to circumvent the law on regularization. The ruling offers crucial guidance for both workers and businesses navigating employment status disputes.

The Case at a Glance

Dr. Amor F. Daming worked as an optometrist for Site for Eyes, Inc., an optical company, under a series of fixed-term contracts. She was first hired in November 2012, worked until October 2013, was rehired in April 2014 for a one-year term, and had her contract renewed again in April 2015.

When Dr. Daming sought a salary increase and filed a request for assistance with the Department of Labor and Employment (DOLE), the company accused her of missing items and barred her from entering the store. She then filed a complaint for illegal dismissal and money claims.

The Labor Arbiter ruled in her favor, finding that she was a regular employee and that her barring from the store constituted constructive dismissal. The National Labor Relations Commission (NLRC) and the Court of Appeals (CA) affirmed this decision, and the Supreme Court upheld it on review.

Regular vs. Fixed-Term Employment Under Philippine Law

The Labor Code defines regular employment as work that is "usually necessary or desirable" to the employer's usual business or trade. An employee performing such work enjoys security of tenure and cannot be dismissed except for just or authorized causes.

Fixed-term employment, by contrast, was recognized by the Supreme Court in Brent School, Inc. v. Zamora (1990). A fixed-term contract is valid when the period is genuinely agreed upon by the parties, without force or improper pressure, and when the employer and employee deal on more or less equal terms.

The key question in Dr. Daming's case was whether her repeated engagement under fixed-term contracts made her a regular employee despite the written terms.

The Supreme Court's Ruling

The Court emphasized three critical principles:

First, "the employment status of a person is prescribed by law and not by what the parties say it should be." This means that a contract's label cannot override the actual nature of the work performed.

Second, "the repeated engagement under contract of hire is indicative of the necessity and desirability of the [employee's] work in respondent's business." When an employer repeatedly rehires an employee for the same role, it signals that the work is essential to the business—a hallmark of regular employment.

Third, constructive dismissal occurs when an employer's act of clear discrimination, insensibility, or disdain becomes so unbearable that the employee has no option but to forego continued employment. Barring Dr. Daming from the store after accusing her of missing items met this standard.

The Court affirmed that Dr. Daming was a regular employee and had been constructively dismissed. She was awarded backwages, separation pay, and other benefits, with 6% annual interest until fully paid.

What This Means for Employers and Employees

For employers, the ruling is a clear warning: repeatedly hiring employees under fixed-term contracts does not prevent them from becoming regular employees if their work is necessary to the business. Employment contracts must be carefully drafted to comply with the Labor Code and avoid misclassification.

For employees, the case underscores the importance of understanding one's employment status. Performing tasks essential to the employer's business—especially when repeatedly rehired—may establish regular employment regardless of what the contract states.

Practical Takeaways

• Regular employment is determined by law, not by contract labels. If work is necessary or desirable to the employer's business, the employee is regular, regardless of fixed-term agreements.
• Repeated rehiring signals regular employment. Courts view successive contracts for the same role as evidence that the work is essential to the business.
• Constructive dismissal is actionable. If an employer's actions make continued employment unbearable, the employee may claim illegal dismissal.
• Remedies include backwages and separation pay. Successfully dismissed employees may recover these amounts, plus 6% annual interest until fully paid.
• Seek legal advice promptly. Employees who believe their rights are violated, and employers who want to ensure compliance, should consult a labor law practitioner.

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