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17 OCTOBER 2016

AMBASSADOR _____________________
Dear Ambassador,
As per your query whether there is a legal framework governing Fixed Term
Employment Contract in the Philippines, the following legal justifications are herein
The 1987 Constitution of the Philippines provides that The State shall protect the
rights of the workers and promote their welfare. It shall afford full protection to
labor and promote full employment. It shall also guarantee the right of the workers
to security of tenure thereby mandating the regularity of employment of a worker
as a general rule. However, as an exception to the general rule of regularity of
employment, the validity of fixed term employment has been recognized by the
Supreme Court of the Philippines in its several Labor cases decisions.
However, the long struggle of the legislation and its interpretation as to legality of
fixed term employment still subsists. This is due to the absence of well-defined rules
on fixed-term employment, thus, deceitful employers take advantage of its legal
loopholes to the prejudice of the employees rights to security of tenure and
regularization. Hence, Article 280 of the Labor Code does not mention fixed-term
employment. It is not expressly provided for under the Labor Code. However, the
Supreme Court recognized the validity of fixed-term employment. The Court defined
fixed-term employment as a contract of employment for a definite period which
terminates by its own terms or the end of such period. The decisive determinant in
fixed-term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relation. Stipulations in
employment contracts providing for term employment or fixed-period
employment are valid when the period has been agreed upon knowingly and
voluntarily by the parties, without force, duress or improper pressure exerted on the
employee, and when such stipulations were not designed to circumvent the laws on
security of tenure.
But despite of the clear and concrete legal definition of fixed term employment, the
Civil Code which has always recognized and continues to recognize the validity
and propriety of contracts and obligations with a fixed or definite period, and
imposes no restraints on the freedom of the parties to fix the duration of a contract,
whatever its object, be it specie, goods or services, except the general admonition

against stipulations contrary to law, morals, good customs, public order or public
The long and unending questions of constitutionality of this fixed term employment
still exists due to conflict between regularization and fixed-term employment as to
the nature of work of the employee. Thats why the doubt between regular
employment and fixed-term employment that needs to be addressed is the
determination of the reckoning point which will invalidate fixed-term employment
due to circumvention of the right to security of tenure of the employee engaged in
activities which are reasonably connected to the usual business of the employer.
Several examples of fixed-term employment have been cited in different Court
decisions, as an essential and natural appurtenance to the work of employees
though usually necessary or desirable in the business of the employer. Some are the
1. Overseas employment contracts, whatever the nature of the engagement,
the concept of regular employment does not appear ever to have been
applied, Article 280 of the Labor Code notwithstanding.
2. Appointments to the positions of dean, assistant dean, college secretary,
principal, and other administrative offices in educational institutions, which
are by practice or tradition rotated among the faculty members and where
fixed terms are a necessity, without which no reasonable rotation would be
But cases subsequently decided by the Court declared fixed-term employment as
invalid because the work performed by the employees are usually necessary or
desirable in the usual business of the employer and thus a violation of the security
of tenure of the workers. Some of these cases illustrate the illegality of fixed term
employment, as follows:
1. In the case of Purefoods Corporation v. National Labor Relations
Commission, et al.,[the workers were hired for a fixed period of five months at
Purefoods tuna cannery plant in General Santos City, Philippines. These
workers were engaged in activities such as receiving, skinning, loining,
packing and casing-up of tuna which were subsequently exported by
Purefoods. Indisputably, they were performing activities which were necessary
and desirable in Purefoods business or trade. After the expiration of their
contracts of employment, their services were terminated. Said workers
questioned their termination, claiming that they are regular employees.
The Court pronounced that the scheme of the employer in hiring workers on a
uniformly fixed contract basis of five months and replacing them upon the
expiration of their contracts with other workers with the same employment
status was designed to prevent the casual employees from attaining the

status of regular employment. It was a clear circumvention of the employees

right to security of tenure and to other benefits like minimum wage, cost-ofliving allowane, sick leave, holiday pay, and 13th month pay.
2. In the case of Price, et al v. Innodata, Phils., Inc., et al,[61]Cherry, Stephanie
and Lolita were employed as formatters by INNODATA whose primary business
was data encoding. Their contracts of employment provided, among others,
that their employment was for a period of one (1) year and that these may be
pre-terminated by either party with or without cause, by giving them fifteen
(15) days notice to that effect. The Court ruled that their employment was not
for a fixed-term. They were employed in activities usually necessary or
desirable in the usual business of the employer. The term was obviously fixed
to circumvent their right to security of tenure.
3. Similar to the above-cited cases are the following fixed-term employment
schemes which has not yet been questioned by the concerned working force
or even invalidated by the Courts in the Philippines:
a. Workers employed as trainees in Shopping Centers for a period of three
(3) months to five months and upon the expiration of which are
subsequently replaced by new trainees. These affected workers are
usually engaged in activities which are necessary and desirable to the
business of the employer. Examples of these workers in shopping centers
are sales ladies, sales associates, cashiers, baggers, checker and gift
b. Workers in export processing zones such as in garments factories have
to undergo 3 stages of non-regular working status such as trainees,
floater, and piece-raters before they become regular employees.
As to date, the urge of legislation to address the question of unconstitutionality of
fixed term employment is being tackled under the present administration, which
sought to totally abolish contractualization, specifically to protect the employees
from the abusive ENDO or end of contract.
For further clarifications and other legal questions, please feel free to inquire. Thank
Best Regards,
ATTY. ____________________________