Employment Contract Provisions in the Philippines
A comprehensive legal guide (April 2025)
1. Legal foundations and sources of authority
| Level | Instrument | Key points for employment contracts |
|---|---|---|
| Constitution | 1987 Const., Art. III (Bill of Rights); Art. XIII, Sec. 3 (Labor) | Security of tenure, living wage, equal work opportunities, employee participation. |
| Statutes | Labor Code of the Philippines (PD 442, as amended); Civil Code (Arts. 1305–1317, 1700–1712); Special laws (see § 5) | Define employer–employee relationship, mandatory benefits, termination standards, collective bargaining, contractor regulation. |
| Implementing rules | Omnibus Rules Implementing the Labor Code; Department Orders (DO 147‑15 on dismissal, DO 174‑17 on contracting, DO 118‑12 on BPO, etc.) | Flesh out procedural and documentary requirements. |
| Administrative issuances | DOLE Labor Advisories, POEA Standard Employment Contracts, SSS/PhilHealth/Pag‑IBIG circulars | Operationalize registration, reporting, and contribution duties. |
| Jurisprudence | Decisions of the Supreme Court (SC) interpret validity of clauses—e.g., Brent (fixed term), Abbott (non‑compete), Gargoles (waiver of benefits). | Case‑law governs limits on contract freedom and shields employees from oppressive terms. |
Hierarchy rule: A contract may grant more but never less than the minimum standards set by the Constitution, statutes, and DOLE/POEA issuances. Any clause that diminishes or circumvents statutory rights is void.
2. Definition & essential requisites
Under Art. 1305 of the Civil Code, an employment contract is “a meeting of minds between employer and employee, whereby the latter binds himself to render service under the control of the former, for a cause which may be compensation.”
Essential requisites (Art. 1318): (a) consent, (b) object, (c) cause. Absent any of these, the contract is void or voidable.
3. Recognized categories of employment contracts
| Category | Statutory basis | Distinct drafting considerations |
|---|---|---|
| Regular | Art. 295 LC | Indefinite term; security of tenure; termination only for just/authorized causes plus due process. |
| Probationary | Art. 296 LC | Must be in writing and state reasonable “standards for regularization”; max 6 months (unless apprenticeship). |
| Fixed‑term | Art. 1193 CC; validated by Brent v. Zamora (G.R. L‑47771, Feb 5 1990) | Term must be knowingly and voluntarily agreed; not used to defeat security of tenure; no successive renewals meant to avoid regularization. |
| Project & Seasonal | Art. 295(b), 294(c) LC; DO 19 series 1993 | Scope or season must be clearly described; notice of completion required. |
| Casual | Art. 295(c) LC | Work is incidental and not usually necessary/desirable; may become regular after 1 year cumulative service. |
| Apprentice/Learner | Arts. 57–76 LC; Tesda rules | Written agreement approved by DOLE/TESDA; contains training programs and wage at least 75 % of minimum. |
| Part‑time, Remote, Telecommute | RA 11165 (Telecommuting Act), DOLE Advisory 2021‑04 | State equipment, data privacy safeguards, timekeeping, overtime tracking. |
| Overseas Filipino Worker (OFW) | RA 8042/10022; POEA SEC | Uses POEA‑prescribed form; jurisprudence strictly construes against employer. |
4. Mandatory provisions (cannot be waived or diminished)
- Job title, duties, and worksite – clarity avoids abuse and determines pay differentials.
- Work schedule – normal hours (Art. 82 LC), rest days, night‑shift diff.
- Wage rate & payment intervals – at least the prevailing statutory minimum wage for the region/industry; mode of payment; deductions only per Art. 113 LC.
- Statutory monetary benefits
- 13th‑month pay (PD 851)
- Service Incentive Leave (Art. 95) – 5 days/year convertible to cash
- Overtime premium (Art. 87) and holiday/night premiums (RA 9492, Art. 93)
- Social protection coverage – SSS, PhilHealth, Pag‑IBIG; employer’s share is non‑recoverable from the worker.
- Tax compliance – Withholding tax on compensation, BIR Form 2316 issuance.
- Security‑of‑tenure clause – mirrors Arts. 294–301 termination standards; twin‑notice and hearing requirement (DO 147‑15).
- Health, safety & welfare undertakings – RA 11058 (OSH Law) mandates OSH program, PPE, safety officer, DOLE reporting.
- Equal employment and non‑discrimination – RA 6725 (women), RA 10911 (age), RA 10524 (PWD), RA 11313 (Safe Spaces) policies.
- Data privacy & confidentiality – RA 10173; lawful basis for personal‑data processing; retention period.
- Dispute resolution fora – NLRC/DOLE jurisdiction statement does not oust statutory forums but can add voluntary arbitration (Art. 275).
5. Special‑law clauses frequently required
| Law | Provision that must appear | Notes |
|---|---|---|
| Anti‑Sexual Harassment Act (RA 7877) & Safe Spaces Act (RA 11313) | Anti‑harassment policy, grievance officer, investigation timeline | Non‑inclusion risks company liability and closure orders (Sec. 21 RA 11313). |
| Expanded Maternity Leave (RA 11210) | 105‑day leave with optional 15‑day extension; bar on dismissal due to pregnancy | Contract must recognize paid maternity even if employed < 6 months (share pro‑rated). |
| Paternity Leave (RA 8187) | 7 days; married male employee; four earliest deliveries | Applicable only to first four legitimate pregnancies. |
| Solo Parents Welfare (RA 11861) | 7 days parental leave + flexible schedule | Employer to verify Solo Parent ID. |
| Violence Against Women & Children (RA 9262) | 10 days paid leave for victims | Non‑comprised in SIL. |
| Anti‑Violence in the Workplace (RA 11551) | Safety plan for healthcare workers | Industry‑specific. |
6. Permissible but tightly regulated clauses
| Clause | Validity test (Philippine jurisprudence) |
|---|---|
| Non‑compete | Must be (1) reasonable in necessary trade protection, (2) limited as to time (≤ 2 years), geographic scope, and trade/position, and (3) supported by consideration beyond statutory compensation (Abbott Laboratories v. Alcaraz, G.R. 195872, Apr 22 2014). |
| Probationary standards | Must be communicated at hiring; vague “fit for the job” struck down in Aliling v. Feliciano, G.R. 215568, Jan 22 2018. |
| Fixed‑term | Must not be imposed on work that is perennial; renewal indicating indispensability converts to regular (GMA v. Pison, G.R. 196539, June 15 2021). |
| Waiver/Quitclaim | Upheld only if (a) voluntarily executed, (b) payment of credible consideration, and (c) employee fully understands rights; otherwise set aside (Total Gas v. Cruz, G.R. 207563, Feb 18 2019). |
| Bonus & incentives | Contractual bonus enforceable once expressly promised or given with regularity—non‑diminution principle (Seaoil v. Gragar, G.R. 248716, July 15 2024). |
7. Absolutely prohibited provisions
- Labor‑only contracting arrangements contrary to DO 174‑17 (absence of substantial capital, control retained by principal, etc.).
- Complete waiver of statutory benefits (minimum wage, SIL, 13th‑month, OSH, social protection).
- Discriminatory clauses on gender, age, religion, civil status, HIV status (RA 11166), union membership.
- Blank‑check termination rights (“employment at will” language).
- Obligation to pay illegal fees (e.g., OFW placement fees for seafarers, household service workers).
- Payment through promissory notes or vouchers in lieu of lawful wage (Art. 112 LC).
8. Electronic and hybrid contracts
RA 8792 (E‑Commerce Act) and DOLE Advisory 09‑2020 allow electronic employment contracts provided:
- Parties give explicit consent to electronic form.
- Signatures use digital or electronic signatures compliant with the DICT’s Philippines Public Key Infrastructure.
- Employer keeps a tamper‑proof archive and produces hard copies on demand.
Telecommuting Act (RA 11165) requires the written agreement to cover equipment provision, OSH compliance, overtime capture, and data privacy.
9. Contract registration and posting
- Private recruitment and placement – Submit sample contracts to DOLE/POEA for approval (Art. 24 RA 8042).
- Contractors and subcontractors – Register under DO 174; employment contracts plus proof of capitalization.
- BPO/KPO – DO 118‑12 requires two copies on‑site and online accessible version.
- Construction – Submit project employment reports (ER‑PI‑1) within 30 days from project start.
10. Termination provisions & due process roadmap
- Just causes (Art. 297 LC) – e.g., serious misconduct, willful disobedience, gross neglect, fraud, crime, analogous.
- Authorized causes (Art. 298–299) – installation of labor‑saving devices, redundancy, retrenchment, closure, disease.
- Procedural due process:
- For just causes: two‑notice rule + hearing (DO 147‑15).
- For authorized causes: 30‑day prior written notice to worker and DOLE; payment of separation pay (½‑month per year for redundancy/disease; 1‑month for retrenchment/closure).
- Fixed‑term/project completion: simple notice of end of term is sufficient, provided contract is valid.
Failure to observe due process may trigger nominal damages (P30 000–P50 000) even if dismissal is substantively valid (Agabon doctrine).
11. Enforcement & remedies
| Forum | Jurisdiction | Prescription |
|---|---|---|
| DOLE Regional Office (Art. 128) | Labor standards money claims ≤ P5 000/employee without reinstatement; visitorial power | 3 years (Art. 306) |
| NLRC / Labor Arbiter | Illegal dismissal, larger money claims, CBA disputes | 4 years (Art. 1146 CC) for wages, 1 year for intra‑union grievances |
| Voluntary arbitration | CBA interpretation if stipulated | As per CBA |
| Civil courts | Tort damages, enforcement against sureties | 4–10 years |
| POEA / NCMB | OFW contract violations | 3 years from cause |
12. Drafting best practices (2025)
- Use plain‑language Filipino or English plus an optional vernacular translation. Art. 4 favors employees when terms are ambiguous.
- Attach a detailed annex describing performance standards, KPI metrics, and company policies; incorporate by reference to avoid repetitive amendments.
- Provide a data‑privacy consent form separate from the contract to meet transparency principle.
- Include a “no‑diminution” savings clause promising that any law conferring greater benefits will automatically amend the contract.
- Employ gender‑neutral terms (“they/them,” “the employee”) to comply with Safe Spaces Act.
- Digital onboarding – embed clickable acknowledgment buttons for each policy to evidence consent.
- Record retention – keep signed contracts for at least 3 years after termination (Art. 306).
13. Quick compliance checklist
- Written job description & probationary standards (if any)
- Regional minimum wage schedule attached
- Statutory benefits enumerated (13th‑month, SIL, OT, night diff, leaves)
- SSS/PhilHealth/Pag‑IBIG enrollment forms provided
- OSH & anti‑harassment policies acknowledged
- Termination clause mirroring Labor Code grounds & due process
- Non‑compete drafted within reasonable limits (if needed)
- Data‑privacy consent separate but cross‑referenced
- Dispute‑resolution provision (NLRC and/or voluntary arbitration)
- Digital or wet signatures dated + employer ID & employee ID numbers
14. Conclusion
Philippine employment‑contract drafting is a balancing act: it must protect legitimate business interests while remaining faithful to pro‑labor public policy. The Labor Code, special statutes, DOLE issuances, and evolving jurisprudence converge on one central theme—the employee’s welfare is the law’s primordial concern. Employers who craft clear, lawful, and humane contracts not only avoid litigation but also foster productivity and industrial peace. For complex arrangements—cross‑border work, executive equity plans, gig‑platform labor—seek specialized counsel; the legal terrain, though codified, keeps shifting with new technologies and social realities.