Letter to a Lawyer

Dear Attorney,

I hope this letter finds you well. I am writing to seek legal advice on an issue concerning my current employment. This is my first job, and I am not fully knowledgeable about the provisions of the Philippine Labor Code.

I am employed under a fixed-term contract with my company. Recently, I signed a contract extending my employment for another 30 days (from November 30 to December 27). However, we were informed today (November 27) that the company intends to preterminate the extension contract due to their client no longer requiring the services.

I am concerned about the legality of this action. Is it lawful for the company to preterminate a fixed-term contract, especially one that has been recently signed? What remedies, if any, do I have under Philippine labor laws?

Your insights and guidance on this matter will be greatly appreciated.

Sincerely,
A Concerned Employee

The Legal Framework of Fixed-Term Employment in the Philippines

Fixed-term employment is a legally recognized arrangement under Philippine labor law, but it is subject to strict requirements and interpretations. The scenario presented raises significant legal questions about the nature of fixed-term contracts, the enforceability of their terms, and the remedies available in cases of premature termination.

1. What is a Fixed-Term Employment Contract?

Under Philippine law, a fixed-term employment contract specifies a definite period for the employment relationship. Unlike regular employment, which presumes continuity, a fixed-term contract ends automatically upon the expiration of its term. This type of contract is often used for project-based work or for employment arrangements where the duration is predetermined.

However, jurisprudence from the Supreme Court, particularly in cases such as Brent School, Inc. v. Zamora (1990), has emphasized that fixed-term contracts should not be used to circumvent the provisions on regular employment. For a fixed-term contract to be valid:

Mutual Agreement: Both parties must willingly agree to the fixed term.
Valid Reason: The fixed term must be justified by the nature of the work, such as project completion or seasonal employment.
Absence of Bad Faith: The contract must not be designed to deprive employees of security of tenure.

2. Pretermination of Fixed-Term Contracts: Legal Grounds

A fixed-term contract binds both the employer and the employee to its terms. Premature termination is generally not allowed unless justified by valid causes. Legal grounds for pretermination include:

For Employers:
- Just causes under Article 297 of the Labor Code (e.g., serious misconduct, gross negligence).
- Authorized causes under Article 298 (e.g., redundancy, retrenchment due to business exigencies, or closure of business).
For Employees:
- Voluntary resignation with or without just cause.

Notably, the Supreme Court in cases like Philippine Refining Co. v. NLRC has held that preterminating a fixed-term contract without valid grounds can render the employer liable for damages and unpaid wages.

3. Applicability to Your Case

From the details provided, the employer’s justification for pretermination—“no need as per their client”—does not appear to qualify as a just or authorized cause. Here’s why:

No Clear Legal Basis: The client’s lack of need is not listed as a just or authorized cause under the Labor Code. Even in cases of redundancy or retrenchment, employers must comply with procedural requirements, including notice and payment of separation benefits.
Breach of Contract: By preterminating the extension contract without valid grounds, the employer may be in breach of the agreement, exposing them to liability for damages.

4. Rights and Remedies of an Affected Employee

If a fixed-term contract is preterminated unlawfully, the employee has several potential remedies:

Full Payment of Wages: The employer may be required to pay the employee for the unexpired portion of the contract.
- Legal Basis: The Supreme Court in Traders Royal Bank v. NLRC ruled that an employee whose fixed-term contract is unlawfully preterminated is entitled to wages corresponding to the remaining term of the contract.
Filing a Complaint for Illegal Dismissal: The affected employee may file a complaint with the National Labor Relations Commission (NLRC) for illegal dismissal.
- Remedies may include reinstatement, back wages, and damages.
Moral and Exemplary Damages: If bad faith is proven on the part of the employer, the employee may claim moral and exemplary damages.
Filing a Complaint for Breach of Contract: Separate from labor claims, an employee may also pursue a civil case for breach of contract.

5. Procedural Steps for Filing a Complaint

To pursue a legal remedy, the employee may follow these steps:

File a Complaint with the Department of Labor and Employment (DOLE): The employee can seek assistance through DOLE’s Single Entry Approach (SEnA) for mediation and conciliation.
Proceed to the NLRC: If conciliation fails, the employee may file a formal complaint with the NLRC. Supporting documents, such as the signed contract and proof of pretermination, should be submitted.
Seek Legal Counsel: Consulting a lawyer specializing in labor law can help strengthen the case.

6. Preventive Measures for Employees

To protect themselves from similar issues in the future, employees should:

Review Contracts Thoroughly: Ensure that the terms of employment are clear, particularly regarding grounds for termination.
Document Communications: Keep copies of contracts, emails, and other relevant documents.
Understand Labor Rights: Familiarize themselves with the Labor Code and related jurisprudence.

Conclusion

In the Philippines, the pretermination of fixed-term employment contracts without valid justification is generally considered unlawful. Employers must adhere to the terms of the contract or risk legal consequences, including payment of wages for the unexpired term and possible damages. Employees facing such situations are encouraged to assert their rights by filing a complaint with DOLE or the NLRC and seeking legal assistance.

If you are in this situation, gathering evidence of the signed extension contract and the employer’s notice of pretermination will be critical in pursuing your case. A consultation with a labor lawyer can provide further clarity and support in asserting your rights.