An employee is considered regular if he/she is engaged to perform work, which is necessary or desirable in the usual business or trade of the employer.
There are three exceptions: when employment has been fixed for a specific project or undertaking, the completion of which has been determined from the beginning; when the work to be performed is seasonal and employment is for the duration of the season and when the work is casual if it is not covered by the three, but if any employee has rendered at least one year of service shall be considered a regular employee [Article 295 (280), Labor Code].
Based on the legal definition, there are two types of regular employees: [1] those who are engaged to perform activities which are usually necessary or desirable in the usual business of the employer and [2] those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.
On the other hand, retirement is of two types: optional at age 60 and compulsory at age 65. In both cases, the retirement benefit is equivalent to one half month salary for every year of service, computed at 22.5 days for at least five years prior to retirement [Article 302 (287), Labor Code, as amended by Republic Act No. 7641].
There are some employers who put a fixed term of not more than six months in their employment contracts. This practice is known as fixed term employment contract. It is not illegal per se so long as the purpose is not to prevent regularization of the employee.
As a query, may an employee who signed a fixed term employment contract be treated as regular emplloyee entitled to full backwages and retirement benefits in case of illegal dismissal? These was the issue tackled in the case of Sampana v. The Maritime Training Center of the Philippines [TMTCP] G.R. No. 264439, 26 February 2024 uploaded on 20 June 2024.
TMTCP hired Sampana in March 2011 as instructor with consultancy contract for three months and repeatedly renewed every three months for three years up to March 2014. His consultancy was changed to a fixed term contract for three months and repeatedly renewed every three months until December 2016. He wrote a letter of his intention to retire after five years with TMTCP at age 60, but he was dismissed.
He filed an illegal dismissal case. TMTCP argued that Sampana is a consultant and not a regular employee, who entered a fixed-term contract. In 2017, the Labor Arbiter ruled that he is a regular employee and though he was not illegally dismissed, yet he is entitled to retirement pay.
In 2018, the National Labor Relations Commission reversed and ruled that he is not a regular, but a fixed-term employee. His employment as consultant from March 2011 to 2014 should be excluded from the five-year service requirement for retirement since there is no employer-employee relationship. The Court of Appeals affirmed the NLRC ruling.
On appeal, our Honorable Supreme Court ruled that while Sampana signed a fixed term employment under consultancy agreement, he is considered a regular employee since he provides training to seafarers enrolled in TMTCP, which is necessary to its business as training school. Thus, calling the contract as Consultancy Agreement is a misnomer [wrong term]. A consultant is one who gives expert or professional advice and possesses special knowledge or expertise to client for a fee. A contract indicating a fixed term does not automatically mean that an employee could never be a regular employee, as this is precisely what the law seeks to avoid [Article 280, Labor Code].
The Brent ruling on fixed-term employment remains as the exception rather than the general rule. As held in Fuji case, the repeated engagement under a fixed-term contract is indicative of the necessity of the employee’s work in the employer’s business. And where the employee’s contract has been continuously extended or renewed to the same position, without any interruption, then such employee is a regular employee.
Indeed, it is neither the title of the contract nor the designation of the position given, which determines the nature of his engagement. It is how the law defines it. Clearly, it was an employment contract and Sampana was an employee who was issued seven successive and uniformly worded “Consultancy Agreements” with TMTCP from March 2011 to March 2014, as well as ten subsequent alleged “Employment with a Fixed Term” contracts up to September 2016, bearing exactly the same wording as the previous “Consultancy Agreements.” This is a scheme to prevent Sampana from acquiring regular status. Thus, he is considered a regular employee, who was illegally dismissed and entitled to full backwages and retirement pay.
