Disclaimer: The following discussion is provided for general informational purposes only and is not intended as legal advice. For questions or clarifications regarding any specific situation, it is always best to consult a qualified lawyer in the Philippines.

1. Introduction

In the Philippines, employment relationships are generally governed by the Labor Code of the Philippines (Presidential Decree No. 442, as amended) and relevant provisions of the Civil Code of the Philippines. One scenario that occasionally arises is the rescission—or withdrawal—of an employment contract before its effective (or start) date.

Despite seeming straightforward, the legal implications can be complex. This article aims to provide a comprehensive discussion on the nature, legal basis, and potential consequences of withdrawing or rescinding a future-dated employment contract under Philippine law.

2. Definition of Key Terms

Employment Contract
An employment contract is a formal agreement between an employer and an employee that stipulates the terms and conditions of employment (e.g., salary, position, responsibilities, benefits, and effective date).
Future-Dated Employment Contract
A contract may be signed days, weeks, or months before the intended start date. This contract remains valid unless properly rescinded or until the start date lapses without either party objecting or withdrawing.
Rescission / Withdrawal
In general contract law, “rescission” refers to the revocation or cancellation of a contract by mutual agreement or for valid causes recognized under law. In an employment context, it typically means unilaterally pulling out from an already agreed-upon job offer or employment arrangement before the official commencement of the employment relationship.

3. Legal Framework

3.1. Labor Code of the Philippines

The Labor Code sets out the minimum standards of employment and the general rules governing the employer-employee relationship. However, it primarily addresses active employment relationships (i.e., once the employment has commenced). Thus, many issues related to “pre-employment” or “future-dated contracts” often require supplementary reference to the Civil Code.

3.2. Civil Code of the Philippines

When an employment contract is signed (even if the start date is in the future), a binding agreement is typically created. This agreement may be enforced under the general law on obligations and contracts under the Civil Code. Provisions relating to breach of contract, damages, and the necessity of a valid cause for rescission can all come into play.

3.3. Relevant DOLE Regulations and Jurisprudence

While there are no specific Labor Code provisions dedicated solely to future-dated contracts, Philippine jurisprudence and Department of Labor and Employment (DOLE) regulations guide how standard contractual principles apply in the employment sphere. Courts have recognized that an employer-employee relationship may technically not yet exist if the person has not actually started working. Still, the signed contract creates certain rights and obligations that may be enforced in court.

4. When is an Employment Contract Formed?

An offer of employment, once accepted by the prospective employee, generally becomes a valid agreement. Even if the effective date is in the future, the signing of a contract can create binding obligations. In most scenarios:

Employer’s Offer: The employer presents terms, responsibilities, salary, etc.
Employee’s Acceptance: The employee signifies agreement, typically by signing.
Start/Effective Date: The date on which the individual is expected to commence work.

From the moment both parties mutually consent to the terms, there is a binding contract—albeit an executory one until the start date. The acceptance finalizes the contract, and the law considers it valid unless a legal ground exists for cancellation.

5. Rights and Obligations of the Parties

5.1. Rights of the Employer

Right to Expect Performance
The employer can expect that the employee will report on the agreed start date.
Right to Terminate
Under certain legal conditions (e.g., just or authorized causes under the Labor Code) or if the contract itself provides conditions allowing withdrawal, the employer may terminate even before commencement. However, arbitrary or bad-faith withdrawal may expose the employer to potential liability.

5.2. Rights of the Employee

Right to Employment Commencement
Once a contract is signed, the employee can reasonably expect to start work on the specified date under the agreed terms.
Right to Damages for Breach
If the employer cancels the contract without a valid reason or in bad faith, the employee may seek relief or damages for losses sustained (e.g., if they have resigned from another job or incurred relocation expenses).

6. Withdrawing a Future-Dated Contract: Key Considerations

Rescission or withdrawal from a future-dated employment contract—by either the employer or the employee—hinges on whether there is a valid cause and whether the withdrawal is carried out in good faith. The following points are crucial:

Contractual Stipulations
If the contract itself provides a clause that either party can withdraw before the start date under specific conditions (e.g., notice period, for cause, force majeure), these provisions will typically govern.
Good Faith vs. Bad Faith
- Good Faith: The withdrawal is prompted by legitimate reasons (e.g., significant business downturn, closure of the hiring department, or external factors such as the employee’s health).
- Bad Faith: The withdrawal is designed to harm the other party or is made under misleading pretenses (e.g., offering the position to someone else at a lower wage after securing the first candidate’s acceptance).
Damages or Liabilities
If a party withdraws without a valid ground or in a manner contrary to the terms of the contract, the aggrieved party can potentially seek damages (including actual damages, moral damages, and in some cases, even exemplary damages, if bad faith is proven).
No Actual Employer-Employee Relationship Yet?
Courts have, at times, recognized that the Labor Code’s provisions on illegal dismissal might not directly apply if the employee never performed work. Nonetheless, the general principles on obligations and contracts under the Civil Code may still entitle the aggrieved party to recover damages.

7. Employer’s Perspective: Can an Employer Legally Withdraw an Offer?

Employers should tread carefully when considering rescinding an already accepted offer:

Valid Business Reason
Justifications might include significant operational or financial difficulties. However, such reasons should be documented and clearly communicated to the prospective employee.
Notice Requirements
While the Labor Code does not specifically outline notice periods for pre-employment rescissions, providing a reasonable notice period and explaining the cause can reduce potential liability and accusations of bad faith.
Liability for Damages
If the prospective employee can show that they relied on the employer’s promise (e.g., resigned from a stable job, relocated, or incurred expenses) and the offer was withdrawn arbitrarily, the employer may be obligated to indemnify the prospective employee for their actual losses.
Best Practices
- Avoid finalizing a written contract too far in advance unless necessary.
- Insert a clear clause specifying that the employer reserves the right to withdraw under extraordinary circumstances or for authorized causes.
- If circumstances change, communicate promptly and offer assistance if possible (e.g., outplacement, referrals).

8. Employee’s Perspective: Can an Employee Withdraw Before Starting?

Prospective employees are similarly not free to withdraw without consequences if their contract has already been signed:

Civil Liability for Breach of Contract
The employer might demand compensation for damages if the employee’s sudden withdrawal causes operational or financial harm (e.g., project delays, costs in re-hiring or training a replacement).
Reasonableness and Good Faith
A common example of good faith withdrawal is if the employee encounters a compelling circumstance (e.g., family emergency, sudden health issue). However, simply getting a better offer and backing out last minute might be viewed as a breach in bad faith if it severely disrupts the employer’s operations.
Professional Courtesy
- Provide a formal notice of non-commencement if deciding not to pursue the job.
- If possible, give advance notice to allow the employer to find a replacement.

9. Remedies and Damages

9.1. Breach of Contract Under the Civil Code

Actual Damages: Measurable losses (e.g., recruitment costs, relocation expenses).
Moral Damages: If bad faith or fraud is proven.
Exemplary Damages: If the circumstances surrounding the breach show wanton disregard for the rights of the other party.

9.2. Labor Remedies

If no employer-employee relationship has commenced, a labor complaint for illegal dismissal may not prosper. Instead, the employee might seek redress under regular civil proceedings. However, some employees still file a complaint with the National Labor Relations Commission (NLRC), arguing that a de facto employment relationship was created. Outcomes vary depending on the specific facts and judicial interpretation.

10. Practical Tips to Avoid Disputes

Use a Conditional Offer
Employers may issue a conditional offer stating that the employment offer is subject to the fulfillment of certain requirements (e.g., medical clearance, background checks). This can allow an employer to rescind if legitimate conditions are not met.
Clear Contract Clauses
Include provisions on the effect of withdrawal by either party before the start date, specifying any notice periods or liability for certain expenses.
Prompt Communication
Whether employer or employee, once you foresee the need to withdraw, communicate immediately to minimize harm and potential damages.
Seek Legal Counsel
In complex or high-stakes scenarios, it is best to consult with a lawyer to ensure that any withdrawal is done legally and with minimal exposure to liability.

11. Conclusion

Rescinding a future-dated employment contract in the Philippines involves navigating both labor laws and general principles of contract law. While the Labor Code primarily governs active employment relationships, the Civil Code covers obligations and remedies for breaches of agreements—even if the work has not yet commenced.

Both employers and employees should be aware that signing a contract—regardless of the start date—creates binding obligations. Withdrawal without valid justification or in bad faith can expose the withdrawing party to potential damages. Clarity, good faith, and fairness are key. When in doubt, seek professional legal advice to protect your interests and comply with Philippine law.

Important Note: Laws, regulations, and jurisprudence can change. The above information is provided for general guidance and does not replace individualized legal counsel. For specific concerns or unique factual scenarios, consult a qualified Philippine lawyer or labor law specialist.