Dear Attorney,
I recently started working for a company in December 2023. However, the establishment is about to be turned over to a new employer. Will my regularization be carried over by the new employer, or is it something they can choose to discontinue?
Sincerely,
[Concerned Employee]
Insights
In Philippine labor law, the concept of "employee regularization" is central to ensuring job security for workers after they meet the qualifications for becoming a regular employee. Article 295 (formerly Article 280) of the Labor Code of the Philippines governs regularization and the conditions under which an employee may be deemed a regular worker.
Definition of Employee Regularization
Regularization occurs when an employee has been employed by a company for a continuous period of six months (often referred to as the probationary period) unless the employer has provided a justifiable reason for extending the probationary status. After completing this period, the employee is deemed a "regular" employee with corresponding rights and privileges, including security of tenure.
This means that the employer cannot terminate the worker without a valid or authorized cause, such as redundancy, retrenchment, or a just cause under Article 297 (formerly Article 282) of the Labor Code.
Employer Transfers and Employee Regularization
When an establishment is transferred to a new owner or employer, the question of whether the new employer is required to recognize the employment status of existing employees arises.
Article 300 (formerly Article 283) of the Labor Code of the Philippines addresses this issue. Under the provision, the sale or transfer of an enterprise does not automatically sever the employment relationship between the employees and the business. It provides that unless otherwise stipulated, the transfer of ownership or management does not end the employment of the employees.
Obligations of the New Employer
The new employer is generally obliged to retain the workers and maintain their tenure and benefits. This includes recognizing the regularization status of employees who have met the qualifications under their previous employer.
Key principles derived from jurisprudence and labor regulations support the idea that the new employer steps into the shoes of the previous employer. For instance:
Continuity of Employment: The transfer of the business from one employer to another does not terminate the employees' services. Therefore, regular employees retain their status even under the new management, assuming they meet the conditions for regularization.
Non-Diminution of Benefits: The new employer is generally prohibited from reducing the benefits that the employees previously enjoyed unless there is a clear, legal justification. This includes the retention of regularized status once acquired.
In the 2001 case of Nitto Enterprises v. National Labor Relations Commission (G.R. No. 114337), the Supreme Court ruled that when an employee has been regularized by their previous employer, the new employer cannot ignore that status without legal basis. Failure to recognize the employee's status may be interpreted as constructive dismissal, which opens up the employer to liability under labor laws.
Probationary Employees
If an employee is still under probation, the new employer may have the right to reassess whether the employee is fit for regularization. Probationary employees must still meet the standards set out by the new employer, provided these standards are lawful, reasonable, and made known to the employee at the time of hiring.
However, if the probationary employee has already met the conditions for regularization under the previous employer but has not been formally declared regular, the new employer cannot arbitrarily withhold regularization. This principle is grounded in the idea of "tenurial continuity," which protects employees from losing job security due to changes in ownership.
Retrenchment and Redundancy
There are, however, exceptions to this general obligation to retain employees. For instance, if the new employer can prove a valid ground for termination—such as redundancy or retrenchment—they may not be required to retain the employee. However, these cases are subject to stringent legal requirements, including the payment of separation pay and other applicable benefits.
If a company decides to reduce its workforce or undergo restructuring, employees, whether regular or probationary, are still entitled to due process. Article 298 (formerly Article 283) and Article 299 (formerly Article 284) of the Labor Code outline the process for redundancy and retrenchment, respectively.
Rights of Regular Employees Upon Transfer of Ownership
Employees who have been regularized under the old employer are generally entitled to the following:
Security of Tenure: Their status as regular employees continues unless a valid reason for termination is presented.
Non-Diminution of Benefits: The new employer cannot reduce any of the benefits previously enjoyed by the employees, including salaries, bonuses, and other entitlements.
Separation Pay: If the new employer chooses not to retain the regular employees (for valid reasons like redundancy or retrenchment), they must provide separation pay, as prescribed by law.
Union Membership and Collective Bargaining: In cases where the employees are part of a union, the new employer must recognize existing collective bargaining agreements (CBAs), unless a legal basis for non-recognition exists.
Conclusion
In summary, if an employee has been regularized by their previous employer, the new employer must continue to recognize this status under the principle of continuity of employment unless there are valid reasons for termination under the law. Failure to do so may expose the employer to potential claims of constructive dismissal. Understanding the provisions of the Labor Code and relevant jurisprudence is crucial for both employers and employees during such transitions.