Below is a comprehensive discussion of the legality and considerations surrounding an employee’s transfer from one company to another under Philippine law. Please note this is a general overview and not legal advice. For specific cases or disputes, consultation with a qualified lawyer is recommended.

1. Overview of the Governing Legal Framework

Constitutional Protection
- The 1987 Philippine Constitution protects labor, promotes full employment, and ensures workers’ rights, including security of tenure and just and humane conditions of work.
- Any policy or act that potentially undermines an employee’s security of tenure or otherwise diminishes an employee’s rights is viewed with caution by Philippine courts.
Labor Code of the Philippines (Presidential Decree No. 442, as amended)
- Governs employment relationships and sets minimum standards.
- Addresses hiring, termination, transfers, and related matters to an extent, although the transfer of employees from one entity to another is not specifically enumerated in great detail. Instead, the Labor Code deals primarily with changes in work assignment, redundancy, retrenchment, or closure of business.
Department of Labor and Employment (DOLE) Regulations and Issuances
- DOLE ensures compliance with statutory regulations and often issues guidance on employment practices (e.g., Department Orders, labor advisories).
- Key concept: Preventing illegal dismissal, preventing labor-only contracting, and ensuring that employees’ rights are not circumvented when a transfer of employees is effected.
Relevant Jurisprudence (Supreme Court Decisions)
- Court decisions clarify the boundaries of management prerogative, employee consent, validity of new employment contracts, secondment agreements, and other specific arrangements.
- Philippine jurisprudence generally holds that unilateral transfers which are tantamount to constructive dismissal—or which effectively cut off employee rights—could be deemed illegal.

2. When is Transferring an Employee to Another Company Legal?

2.1. Management Prerogative vs. Employee Consent

Management Prerogative

An employer has the prerogative to manage its business as it sees fit, including the reorganization of staff or reassignment of duties.
Within a single corporate entity, intra-company transfers (to a different branch, department, or position) generally fall under legitimate management prerogative—so long as there is no demotion in rank or diminution of pay and benefits, and the reassignment is not discriminatory.

Transfers Across Companies

A transfer to another legal entity goes beyond the usual management prerogative to reassign duties within the same company.
Even if the two companies share common ownership (e.g., parent-subsidiary relationship), they are presumed separate legal personalities unless the law or evidence “pierces the corporate veil.”
Because a transfer to a new employer essentially changes the employment relationship, employee consent will usually be required.

2.2. Secondment or Assignment Agreements

Sometimes, an employee may be placed on secondment (or loaned) to a subsidiary or affiliate entity.

Secondment: The employee remains on the payroll of the original employer but is assigned to work temporarily under the direction or premises of another entity.
The legality of this arrangement typically hinges on:
1. The employee’s consent, or at least knowledge and acceptance.
2. A valid business purpose (e.g., specialized project, shared resources, or training).
3. The continuing obligation of the original employer to pay wages and benefits, unless contractually provided otherwise.
4. The absence of any intent to circumvent labor laws (for instance, avoiding obligations under the Labor Code).

2.3. Common Ownership and Group Structures

Groups of companies sometimes want to share or redistribute staff among subsidiaries.

Though the group may have a common owner or be controlled by the same parent, each subsidiary or affiliate is generally viewed as a separate entity under the law.
A transfer to another group entity often requires the employee’s express written agreement to acknowledge that they are taking up new employment with the new entity.
When the employee moves to the new entity, the new entity becomes responsible for compliance with statutory benefits (SSS, PhilHealth, Pag-IBIG, etc.) and Labor Code obligations, unless the parties agree on a different structure (as in secondment).

3. Key Legal Issues

3.1. Security of Tenure and Illegal Dismissal

Under Philippine law, employees enjoy security of tenure. Unilateral acts by the employer that effectively terminate the employment without just or authorized cause—and without due process—can constitute illegal dismissal.

Constructive Dismissal: A forced or coerced transfer to another company that is disadvantageous or not consented to by the employee could be deemed constructive dismissal. This may happen where:
- The employee’s refusal to transfer results in their termination.
- The transfer leads to a demotion in rank or diminution of pay and benefits.
- The transfer is used as a scheme to eliminate tenured employees or avoid certain obligations.
Voluntary Resignation or Acceptance: If the employee voluntarily resigns from the first company and accepts employment in the second company under terms that are acceptable and fair, it is typically considered a valid change in employment status.

3.2. Diminution of Pay and Benefits

Even if an employee voluntarily transfers, a substantial reduction in salary, allowances, or benefits (e.g., paid leaves, bonuses) can be seen as invalid unless such changes are genuinely negotiated and mutually agreed upon.

Under Article 100 of the Labor Code (the Non-Diminution of Benefits Rule), benefits already enjoyed cannot be reduced unilaterally.
If the employee’s new position in the second company offers a different pay structure, the employee should clearly consent and be made aware of how this may change compensation and benefits.

3.3. Employee Consent and Documentation

Written Consent / New Employment Contract

As a best practice, employees should sign a new employment contract or an addendum clearly reflecting the terms and conditions of the new employment.
If an employee refuses to be transferred, the original employer cannot generally force them to sign a new contract with a different employer unless a valid authorized cause (e.g., closure or redundancy of the original position) exists, and due process is observed.

Secondment Agreements

These agreements should spell out the rights, responsibilities, and reporting lines of the seconded employee.
Written agreement avoids ambiguity about who pays wages, who covers government-mandated remittances, and who handles day-to-day management.

4. Authorized Causes and Business Necessities

Even if an employee refuses the transfer, the employer may consider an authorized cause under the Labor Code (e.g., retrenchment, redundancy, closure, or cessation of business) if indeed the original post becomes superfluous or the business is being reorganized.

However, such terminations must observe:

Notice Requirements: 30 days’ prior notice to both employee and the DOLE.
Separation Pay: Usually required, with amounts varying depending on whether it is redundancy, retrenchment, or closure not due to serious business losses.
Good Faith and No Evasion of Law: The employer’s reorganization or closure of the position should be genuine and not merely contrived to force an employee out without cause.

5. Practical Considerations

Clear Communication: The employer should communicate thoroughly the reasons for the transfer, the anticipated benefits, and the terms of employment in the new company.
Voluntary Acceptance: Obtaining the employee’s written consent or signature on a new contract or secondment agreement is the safest legal approach.
Continuity of Benefits: Address continuity of government and private benefits such as SSS, PhilHealth, Pag-IBIG, health insurance, and retirement plans.
Avoiding Constructive Dismissal Claims: Ensure that the terms of transfer do not result in a de facto demotion or pay cut without the employee’s informed agreement.
Documentation: Keep records of all notices, letters, and agreements. This documentation is crucial in case of later disputes.

6. Potential Pitfalls for Employers

Failure to Secure Employee Consent: If the employer unilaterally reassigns an employee to an entirely new company without proper consent, it could be seen as tantamount to illegal dismissal.
Disguised Transfer to Weaken Employment Rights: Any arrangement intended to reduce statutory or contractual benefits can be invalidated by DOLE or the courts.
Violating Non-Diminution Rules: Reducing salary or benefits—without lawful cause and agreement—risks liability.
Improper Use of Contracting or Subcontracting: If the “transfer” is really an attempt to use a third-party contractor to avoid regular employment obligations, DOLE can declare it as labor-only contracting, leading to sanctions and liability.

7. Key Takeaways

Separate Legal Personalities: Even if two companies are affiliates or share common ownership, the law treats them as distinct employers.
Consent is Key: A valid transfer generally requires the employee’s consent, accompanied by a new employment contract or a secondment agreement if the employee will remain on the original employer’s payroll.
No Diminution Without Agreement: The new arrangement should not result in an illegal diminution of pay or benefits.
Authorized Causes for Refusal: If the employee refuses to transfer, an employer may legally restructure or even terminate employment if it can justify such action under the authorized causes recognized by the Labor Code, provided due process and separation pay requirements are met.
Documentation and Process: Written notices, formal offers, and transparent negotiation help avoid disputes and accusations of constructive dismissal or bad faith.

Final Word

Transferring an employee from one company to another in the Philippines is legal provided that:

There is valid employer justification or business necessity,
The employee knowingly and willingly agrees to the transfer,
Employee rights under law and contract are protected or carried over properly, and
The process does not circumvent labor laws or result in a constructive dismissal.

Employers must exercise care and transparency to avoid liabilities. Employees, for their part, should carefully review and understand the new terms before consenting to any transfer arrangement. If disputes arise, consultation with the Department of Labor and Employment or seeking professional legal advice can clarify the parties’ rights and obligations.