Project Employees: When Length of Service Does Not Mean Regular Employment

The Supreme Court recently settled a common labor dispute: whether construction workers who have been continuously rehired for several projects automatically become regular employees entitled to security of tenure. In Felipe v. Danilo Divina Tamayo Konstract, Inc. (G.R. No. 218009, September 21, 2016), the Court ruled that length of service and repeated rehiring do not, by themselves, convert project employment into regular employment.

The Facts of the Case

Marvin Felipe and Reynante Velasco worked for Danilo Divina Tamayo Konstract, Inc. (DDTKI), a construction company. Felipe was hired as a Formworks Aide in December 2005, and Velasco as a Warehouse Aide in March 2007. Both worked continuously for DDTKI until September 2010, when they were no longer given assignments.

The workers filed a complaint for illegal dismissal, claiming they were regular employees because they had performed tasks necessary to DDTKI's construction business for nearly four years. DDTKI countered that they were project employees, hired for specific construction projects with predetermined durations. The company presented employment contracts showing that each engagement was tied to a particular project, including their last one—the US Embassy New Office Annex 1 Project (MNOX-1)—which was completed on September 18, 2010.

The Issue

The central question was whether Felipe and Velasco were project employees (whose services may be validly terminated upon project completion) or regular employees (who may only be dismissed for just or authorized causes under the Labor Code).

The Court's Ruling

The Supreme Court denied the petition, affirming the rulings of the Labor Arbiter, the NLRC, and the Court of Appeals that the workers were project employees validly terminated upon completion of their last project.

The Court applied Article 280 of the Labor Code, which defines regular employment as work "usually necessary or desirable in the usual business or trade of the employer," except where employment is "fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee."

The decisive test, the Court explained, is whether the employees were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time of engagement. Here, the employment contracts clearly identified each project, its duration, and the specific client. The Court found that the termination was not illegal—the project merely expired.

Length of Service Is Not Decisive

Addressing the workers' argument that their four years of continuous service and monthly contract renewals made them regular employees, the Court cited its ruling in Aro v. NLRC: the length of service or rehiring of construction workers on a project-to-project basis does not confer regular employment status, since rehiring is only a natural consequence of the fact that experienced construction workers are preferred.

The Court also noted that the workers were not entitled to service incentive leave pay because they had not rendered at least one year of continuous service for the specific project.

Practical Takeaways

• Project employment is a valid exception to regular employment under Article 280 of the Labor Code, provided the project's scope and duration are determined at the time of hiring.
• Documentation matters. Employers should maintain clear, written employment contracts specifying the project, its duration, and the client for each engagement.
• Length of service alone does not guarantee regular status for project employees, even if rehired repeatedly over several years.
• Employees should review their contracts to understand whether they are hired for a specific project or for continuing work in the employer's business.
• The completion of a project is a lawful ground for termination of project employees, distinct from the just and authorized causes required for regular employees.

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