Dear Attorney,
I have been working under an agency for 6 years and 8 months. Throughout that period, I was never asked to sign any new employment contract each year, yet I continued working for the same principal company without interruption. My job responsibilities remained constant, and the agency consistently paid my wages. I would like to know what my rights and possible remedies are under Philippine law, especially regarding regularization, security of tenure, and any potential claims I may pursue.
Respectfully,
Concerned Employee
LEGAL ARTICLE: EVERYTHING YOU NEED TO KNOW ABOUT LONG-TERM EMPLOYMENT UNDER AN AGENCY ARRANGEMENT IN THE PHILIPPINES
In the Philippines, employment arrangements via agencies or third-party contractors are subject to a complex network of laws, regulations, and jurisprudence intended to protect workers’ rights. When an individual has worked for a principal or an agency for a considerable period—like 6 years and 8 months—significant legal questions arise. At the forefront is whether that worker has attained regular status by operation of law, and if so, what rights and benefits attach to such status. This article explores the relevant legal framework, focusing on the Labor Code of the Philippines (as amended), Department of Labor and Employment (DOLE) regulations, as well as Supreme Court decisions that clarify the concept of regular employment despite an agency-based arrangement.
1. Governing Laws and Principles
Constitutional Basis for Security of Tenure
The 1987 Philippine Constitution enshrines the right of workers to security of tenure. This means that an employee cannot be dismissed without just or authorized cause and due process. Whether directly hired or engaged through an agency, workers are protected from unlawful termination and are entitled to fair labor practices.Labor Code Provisions on Regular Employment
The Labor Code of the Philippines, specifically Articles 293 to 302 (previously Articles 279 to 288 before renumbering), provides the legal foundation for determining whether an employee is regular. Of particular importance is the principle that an employee who has rendered at least six (6) months of service is deemed regular, provided the job is not seasonal, project-based, or otherwise exempt under the law.DOLE Department Orders
The DOLE’s Department Order No. 174, Series of 2017 (D.O. 174-17), regulates contracting and subcontracting agreements, aiming to protect the rights of workers from “labor-only contracting” schemes. The issuance outlines requirements for legitimate job contracting and enumerates conditions that, if unmet, can classify the arrangement as labor-only contracting, making the principal the direct employer of the workers.Supreme Court Rulings
Supreme Court decisions highlight that the nature of an employment relationship is determined by the “four-fold test,” which considers: (a) selection and engagement of the employee, (b) payment of wages, (c) power of dismissal, and (d) power to control the employee’s conduct. Even when a worker is hired through an agency, the courts look beyond any contract labels or nomenclature to ascertain the true employer.
2. The Concept of Regular Employment
Definition of Regular Employment
Under Article 295 of the Labor Code (previously Article 280), employment is deemed regular when the employee is engaged to perform activities that are usually necessary or desirable in the usual business or trade of the employer. The law also provides that any employee who has rendered service for at least one year is considered a regular employee with respect to the activity performed, provided that the job is not by nature seasonal or project-based. However, in practice and jurisprudence, six (6) months is often taken as a critical benchmark for regularization.When Agency-Based Workers Become Regular
If a worker has been performing the same function within the principal’s business for more than six (6) months without any legitimate classification (i.e., not a project-based or seasonal worker), that worker generally acquires regular status. The continuity of employment—especially over 6 years and 8 months—tends to weigh heavily in favor of finding regularity.Implied or De Facto Regularization
Even without signing a new contract every year, if the worker’s tasks are necessary to the principal’s trade or business, and the worker continuously renders services without a clear break, such continuity suggests a de facto regular employment status. In many instances, the Supreme Court has held that repeated renewals of a “contractual” arrangement or the absence of valid termination prior to each supposed “end of contract” can be a strong indication that the employee has attained regular status.
3. Labor-Only Contracting vs. Legitimate Contracting
Labor-Only Contracting
D.O. 174-17 prohibits labor-only contracting, a practice in which the agency (contractor) merely recruits and supplies workers to a principal employer without substantial capital or without exercising control over the performance of the employees. If the contractor is deemed to be a “labor-only” contractor, the principal is considered the direct employer of the workers. As a result, all obligations relating to the employer-employee relationship revert to the principal.Legitimate Contracting
Legitimate job contracting exists when the contractor or agency (a) has substantial capital or investment, and (b) exercises control over its employees beyond mere administrative supervision. Such contractors are genuinely in business for themselves, providing specific services or functions that the principal does not directly undertake. In these cases, the agency may be considered the direct employer, and the principal escapes liability for certain employee claims.Significance of Determining the True Employer
Identifying whether the arrangement is labor-only contracting or legitimate contracting significantly affects the question of regularization and where an employee may direct claims for any alleged labor violations. Courts will disregard contractual stipulations that appear to circumvent labor rights, looking instead to the actual working relationship and the “right of control” test, among others.
4. Contract Renewal and the Impact of Long Service
Successive Fixed-Term Contracts
In the landmark case of Brent School, Inc. v. Zamora, the Supreme Court recognized the possibility of valid fixed-term contracts under certain conditions (e.g., the consent of the parties is free from moral or other coercion, and the employer and employee deal with each other on more or less equal terms). Nevertheless, it is also well-settled that repeated renewals of fixed-term contracts—especially when the tasks performed are integral to the business—may indicate the existence of regular employment.Absence of Written Contracts
The fact that a worker has not signed any new written contract for years strongly suggests continuous employment. This continuity generally contradicts any notion of fixed-term or project-based employment, as the worker’s engagement did not end after a defined project or term. Consequently, the employee is likely to be deemed a regular employee by operation of law.Legal Presumption in Favor of Labor
Philippine labor law is imbued with a bias toward the protection of employees, ensuring that any ambiguity in the nature of an employment agreement is resolved in favor of labor. The absence of yearly written contracts can strengthen the presumption that the worker is a regular employee, especially if the duties performed are indispensable to the principal’s business activities.
5. Rights of a Regular Employee
Security of Tenure
Once recognized as a regular employee, an individual enjoys security of tenure, meaning they cannot be terminated without just or authorized cause. Just causes for termination include serious misconduct, willful disobedience, gross neglect of duties, fraud, or commission of a crime against the employer. Authorized causes often involve redundancy, retrenchment, closure of business, or illness that cannot be reasonably accommodated, subject to compliance with legal requirements.Wages, Benefits, and Statutory Entitlements
A regular employee is entitled to benefits mandated by law, such as overtime pay, holiday pay, service incentive leave, 13th-month pay, and other benefits that may be prescribed by a collective bargaining agreement (CBA) or company policy. Additionally, employees are entitled to be covered by social legislation like the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG).Right to Due Process
Before any dismissal, the employer must give two written notices: (1) a notice specifying the ground for dismissal and affording the employee an opportunity to explain; and (2) a notice of decision. Failure to comply with these procedural requirements can make the dismissal procedurally infirm, even if the employer can later prove the existence of a just or authorized cause.Potential Claims for Illegal Dismissal
If a regular employee is dismissed without just or authorized cause and without compliance with due process, the employee may file a complaint for illegal dismissal before the National Labor Relations Commission (NLRC). Remedies include reinstatement without loss of seniority rights, full backwages from the time of dismissal until finality of the decision, and other damages if warranted.
6. Filing Labor Complaints and Seeking Redress
Exhausting Grievance Procedures
If a worker has concerns about their status or benefits, the first step is often to communicate with the employer or the agency to find an amicable resolution. Some workplaces have internal grievance mechanisms or human resources departments ready to address these issues. Documenting all communication is crucial for evidentiary purposes.Filing a Complaint with DOLE
Workers may also file a complaint at the nearest DOLE field office if they believe their employer is violating labor standards (e.g., non-payment or underpayment of wages and statutory benefits). DOLE Labor Inspectors can assess whether the company complies with labor regulations, including the validity of contracting arrangements.Filing a Complaint with the NLRC
For claims of illegal dismissal, underpayment of wages, or other monetary claims exceeding five thousand pesos (PHP 5,000), the NLRC has exclusive original jurisdiction. Filing involves submitting the complaint and relevant evidence. The process includes mandatory conciliation and mediation under the Single Entry Approach (SEnA) before proceeding to the formal docket of the NLRC.Significance of Documentation and Evidence
Keeping pay slips, employment contracts (even if partial or old versions), company IDs, email communications, and any memoranda or notices from management is paramount. In legal proceedings, documentary evidence can serve as the best proof of continuous employment, wage rates, and the nature of one’s work responsibilities.
7. Practical Considerations in Agency-Based Employment
Choice of Defendants
When filing a claim, the worker may include both the agency (the formal employer) and the principal as respondents. This is a strategic move: if the arrangement is declared labor-only contracting, the principal becomes the employer. If the agency is found to be a legitimate contractor, then the agency might be solely liable. The worker must be careful in naming all possible parties to ensure that a favorable decision can be enforced.Time-Barred Claims
Labor claims are subject to prescription. Illegal dismissal and money claims generally must be filed within four (4) years. If the cause of action is based on a written contract or arises out of an obligation created by law, different prescriptive periods may apply. To avoid losing the right to seek redress, it is advisable to file a complaint promptly upon discovering a violation of one’s labor rights.Importance of Legal Counsel
While individuals can file labor claims pro se (without a lawyer), seeking legal counsel ensures that procedural and substantive legal requirements are properly met. A competent lawyer can evaluate the strengths of the case, help gather evidence, and present a coherent argument before the Labor Arbiter or DOLE officials.Impact on Employment Relationship
Workers who file complaints against their employers or agencies may experience tension or retaliation in the workplace. Although labor law strictly prohibits retaliatory acts against employees who assert their legal rights, the reality is that disputes can strain professional relationships. It is essential to carefully evaluate the potential risks and benefits of filing a case, weighing the likelihood of success against the potential repercussions.
8. Remedies for Long-Term Agency Workers
Regularization
One of the primary remedies for a worker who has been employed for 6 years and 8 months without a valid contract renewal or legitimate fixed-term arrangement is a declaration of regular status. Once declared a regular employee, the worker becomes entitled to all benefits and rights under the law.Monetary Awards
- Backwages: In illegal dismissal cases, successful claimants can be awarded backwages computed from the date of dismissal to the date of reinstatement or final judgment.
- Separation Pay: If reinstatement is no longer feasible (due to strained relations or business closure), the employee may be awarded separation pay in lieu of reinstatement. The amount is typically one (1) month’s pay for every year of service, although the law and jurisprudence provide guidelines and variations depending on the nature of the dismissal or authorized cause.
- Damages: Moral and exemplary damages may be awarded in cases where the dismissal was carried out in bad faith, or in a manner that humiliates the employee.
Legal Fees
Under the principle of social justice, the NLRC and DOLE generally adopt a policy of minimal litigation costs. However, if the employee hires private counsel, attorney’s fees may form part of the claim, subject to the labor tribunal or court’s approval.
9. Recommended Action Steps
Gather All Relevant Documents
Locate any form of paperwork—from payslips, ID cards, employment notices, memoranda, or even text messages—that evidences your continuous employment. In some cases, even chat messages from supervisors instructing work assignments can be relevant.Consult a Labor Lawyer
Although labor law is pro-employee, each case’s outcome depends on the specific facts and evidence presented. A lawyer can help formulate the legal theory and identify the appropriate causes of action.Send a Written Inquiry/Request to the Agency or Principal
Sometimes, merely asking for an explanation of employment status, or a request for regularization in writing, can initiate a dialogue. Document all responses, as they can serve as valuable evidence later.Consider Amicable Settlement
Litigation or filing a labor complaint should often be a last resort. Parties may explore mediation or settlement options, particularly if the agency or principal is open to recognizing the worker’s regular status and providing back pay or other benefits.File a Formal Complaint If Necessary
If discussions fail, the next logical step would be to file a complaint with the DOLE or the NLRC. Prompt action ensures that claims do not prescribe, and it signals seriousness in asserting one’s rights.
10. Conclusion
When an employee has rendered long service—beyond six months and certainly extending to several years—without signing fresh contracts and without significant changes to the nature of the work performed, Philippine labor law tends to favor the conclusion that the worker has attained regular status. In agency-based employment, the potential complication lies in determining who the true employer is. Nonetheless, the fundamental principle remains the same: workers deserve protection from unjust termination and are entitled to the benefits commensurate with their labor.
In the presented scenario, a worker who has been employed for 6 years and 8 months under an agency arrangement, continuously performing the same tasks, likely enjoys the rights of a regular employee, including security of tenure and mandated statutory benefits. If any dispute arises regarding the refusal of the agency or principal to recognize regularity, the worker has recourse through DOLE or the NLRC. The key is to gather sufficient evidence of continuous service and to seek timely legal advice when pursuing such claims.
Ultimately, the Philippine labor laws aim to strike a balance between an employer’s need for flexibility and a worker’s right to security of tenure. Whether one is hired directly or indirectly through an agency, the underlying objective is to ensure that no employee’s rights are disregarded or circumvented by contractual technicalities. Legal remedies exist for workers who find themselves in protracted “contractual” setups that do not reflect the reality of their day-to-day functions and loyalty to the company. Through careful documentation, prudent legal consultation, and, if necessary, engagement in the labor dispute resolution process, employees can assert their rights, obtain regularization, and secure the benefits due them under the law.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific concerns, consult a qualified labor lawyer or reach out to the appropriate government agency.