LETTER TO A LAWYER

Dear Attorney,

I hope this letter finds you well. I am writing to seek your legal advice about a recent situation I encountered regarding my employment. I was hired through an agency under a six-month contract, which was set to run from August 15, 2024, to February 15, 2025. However, I was terminated on December 2, 2024, barely three months into my contract, without prior written or verbal warning. Additionally, I was informed that my salary, which I was supposed to receive on December 5, would be put on hold.

I would like to understand whether my termination was valid, given that I had a signed employment contract for a fixed duration. Furthermore, I want to know what my rights might be regarding the withholding of my salary, as I was not given any documented reason for my termination or the salary hold. Any guidance you can offer—whether on possible administrative remedies through the Department of Labor and Employment (DOLE), filing a complaint for illegal dismissal, or any other legal approach—would be most appreciated.

Thank you for taking the time to review my concerns. I look forward to your expert opinion on the matter.

Sincerely,

(Aggrieved Employee)

LEGAL ARTICLE ON PHILIPPINE LAW: A COMPREHENSIVE DISCUSSION

Introduction

In the Philippines, employment relationships may take many forms, including regular employment, contractual employment, project-based employment, and fixed-term employment. In certain industries, it is commonplace for companies to source workers through an intermediary or an agency. The arrangement known as “agency-hired” or “manpower agency” employment raises important questions regarding the rights of workers when it comes to security of tenure, salary payments, and due process in case of termination. The present concern involves an employee who signed a fixed-term contract (six months in duration) but was abruptly dismissed after just three months—and without any formal notice or cause—followed by the withholding of the salary that was otherwise due and payable.

This article will provide a comprehensive survey of Philippine labor laws and regulations, alongside relevant jurisprudence and administrative issuances by the Department of Labor and Employment (DOLE) and the National Labor Relations Commission (NLRC). It will cover the key points surrounding fixed-term employment contracts, the significance of due process in dismissals, and the potential claims an illegally dismissed employee may have with regard to reinstatement, backwages, or separation pay. Lastly, it will address the legal prohibitions against withholding salary, detailing any potential exceptions under Philippine law.

Relevant Philippine Labor Laws

2.1 Labor Code of the Philippines (Presidential Decree No. 442, as amended)
The primary source of law for labor matters in the Philippines is the Labor Code. It covers fundamental labor standards, such as wages, hours of work, the right to self-organization, and procedures for termination of employment. A key principle under the Labor Code is security of tenure: employees may only be terminated for just or authorized causes, following the procedures mandated by law.

2.2 Department of Labor and Employment (DOLE) Regulations
Several regulations, administrative orders, and labor advisories promulgated by the DOLE serve to operationalize the Labor Code. They include rules on contractualization, end-of-contract or “endo” practices, and the use of service contracts, all of which may impact how agency-hired employees are treated.

2.3 Jurisprudence
Philippine Supreme Court rulings provide additional guidance on whether an employer-employee relationship exists (and with whom), what constitutes valid termination, and the legal remedies available to dismissed employees. Important cases have clarified issues surrounding the classification of employees, particularly in manpower or service agency relationships, and the permissible scope of fixed-term employments.
Nature of Agency Employment

Agency-hired employees typically have a contract with a manpower agency rather than with the principal (the client company). Nonetheless, under certain conditions, the principal can be solidarily liable with the agency if the latter is found to be a mere “labor-only” contractor. Labor-only contracting is illegal under Philippine law and occurs when an agency merely recruits and supplies workers but does not carry out substantial business operations, control, or supervision.

In legitimate job contracting, the agency exercises the right to control and is financially capable of undertaking the services it has contracted to deliver. It is essential to distinguish whether the worker, although deployed to the principal, truly remains the agency’s employee. For instance, if the principal exerts a great deal of control over the manner and means by which the worker performs the job, this might indicate that the principal is a direct employer. In turn, that distinction has vital implications for who is responsible for providing benefits and for who must observe labor standards, including due process in termination.

Fixed-Term Contracts under Philippine Law

A fixed-term contract is permitted under certain circumstances in the Philippines. The Supreme Court, in various decisions, has upheld the validity of fixed-term employment so long as:

The fixed period of employment was knowingly and voluntarily agreed upon by both parties.
The employer and employee dealt with each other on more or less equal terms, without moral dominance or undue coercion.
The nature of the engagement is such that the work required is seasonal or project-based, or that the agreement for a definite term serves a legitimate business purpose.

However, courts remain vigilant. They scrutinize fixed-term contracts for any indication that the arrangement is being used to circumvent security of tenure. If a court concludes that a fixed-term agreement was designed to prevent employees from becoming regular employees without a valid reason, the employee might be deemed regular, conferring on that employee all the rights and privileges accompanying regular status.

In the situation where an employee signs a six-month contract from August 15, 2024, to February 15, 2025, the termination must be consistent with the terms of that contract and with the lawful grounds for dismissal under the Labor Code. If the termination is purely at the employer’s discretion without legally valid reason, or if no due process was observed, an employee may question the legality of such an abrupt dismissal.

Termination Without Due Process

5.1 Just Causes and Authorized Causes
Under the Labor Code, an employer can terminate an employee for just causes (e.g., serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud, commission of a crime against the employer or the employer’s representative, or analogous causes) or for authorized causes (e.g., redundancy, retrenchment, closure of business, disease not curable within six months). Dismissal outside these enumerated causes may be illegal.

5.2 Procedural Due Process
The Labor Code and implementing rules also prescribe certain procedural requirements:
- For just cause dismissal, the so-called “two-notice rule” must be observed. The first notice informs the employee of the specific grounds for termination and provides an opportunity to explain. The second notice terminates employment if the employer finds that dismissal is warranted.
- For authorized cause dismissal, prior written notice must be given to the employee and the DOLE at least 30 days before the intended date of termination.

If there is no notice whatsoever—whether written or even verbal—and the employee is simply told to stop reporting, then the employer may be in violation of procedural due process. An illegally dismissed employee can file a complaint for illegal dismissal before the National Labor Relations Commission (NLRC) or the appropriate DOLE office.

Consequences of Illegal Dismissal

When an employee is found to have been illegally dismissed, Philippine labor tribunals generally award the following:

Reinstatement – The right to be restored to the position the employee held prior to dismissal, or to a substantially equivalent position.
Full Backwages – Wages and other benefits that the employee would have earned from the time of dismissal up to the time of actual reinstatement, or up to the finality of the decision, if reinstatement is no longer feasible.
Separation Pay – If reinstatement is no longer viable (e.g., due to strained relations or the closure of the business), the employee may be awarded separation pay in lieu of reinstatement.

If the dismissal is found invalid for failure to prove a just or authorized cause or for non-compliance with due process, the employee may pursue these remedies.

Withholding of Salary

The Labor Code imposes stringent rules regarding wages. Employers are generally required to pay employees their salaries on time and in full. The law strictly regulates wage deductions. Under Article 113 of the Labor Code (renumbered as Article 113 in the Labor Code’s updated version), the only allowable deductions from wages are:

Those mandated by law (e.g., SSS, PhilHealth, Pag-IBIG contributions, withholding tax).
Those that the employer is authorized by law or regulations to make (e.g., union dues, or if there's a court order).
Those with written authorization of the employee for insurance premiums or similar programs, provided that these do not exceed 20% of the employee’s wages.

Beyond these narrowly defined circumstances, the employer has no legal right to unilaterally withhold an employee’s salary. Notably, withholding salary as a form of disciplinary action, absent a final determination of liability for wrongdoing, is typically regarded as an illegal deduction. If the reason for holding the December 5 salary was simply that the employee was terminated (purportedly) or that the employer decided to do so without prior notice, this may well be an unlawful practice.

Breach of Contract vs. Illegal Dismissal

The concept of a “breach of contract” often arises in civil disputes. In the sphere of Philippine labor law, if an employee is abruptly terminated from a fixed-term contract, two sets of legal remedies could be relevant:

Labor Remedies (Illegal Dismissal Case) – The employee may file an illegal dismissal case before the NLRC, or initially lodge a complaint with the DOLE for preventive mediation. If successful, the employee could be entitled to reinstatement (or separation pay if reinstatement is no longer feasible) plus full backwages and other benefits from the date of illegal dismissal until reinstatement.
Civil Remedies (Breach of Contract) – If the fixed-term contract is established to be valid, and the employer unilaterally pre-terminated the contract without cause or notice, the employee could theoretically have a separate claim for damages under civil law. However, labor tribunals generally have primary jurisdiction over termination disputes.
Rights and Remedies for the Employee

9.1 Filing a Complaint with the DOLE
When employees experience abrupt termination or suspect that their employer is in violation of labor standards (e.g., refusing to pay wages, illegally dismissing staff), they can seek recourse at their local DOLE office. DOLE may attempt to mediate the dispute. If mediation fails, the employee may be directed to file a formal complaint before the NLRC.

9.2 Filing a Complaint before the NLRC
The NLRC is the quasi-judicial body tasked with resolving labor disputes. An illegally dismissed employee may file a complaint to demand reinstatement, backwages, and other damages. The Commission then conducts proceedings wherein both parties present their evidence.

9.3 Constructive vs. Actual Dismissal
A distinction exists between constructive dismissal (where work conditions are made intolerable, forcing the employee to resign) and actual dismissal (where the employee is outright terminated). In this case, if the employee was explicitly told not to report to work and was deprived of salary, that is an instance of actual dismissal.

9.4 Money Claims
Apart from the claim for illegal dismissal, the employee can also pursue money claims for unpaid wages, 13th-month pay, holiday pay, or any other benefits withheld. Such claims are often consolidated with the illegal dismissal complaint in one NLRC proceeding.
The Concept of Probationary vs. Regular Employment

Though the employee in question signed a fixed-term contract, in other cases, employees are placed on a probationary period of six months. Employers have until the end of the probationary period to evaluate performance and fit. If the employee is not formally regularized, the relationship could end. However, if an employee completes six months of probation and continues to be employed, the law deems them a regular employee by operation of law.

In a fixed-term contract, the arrangement is different: the end-date is pre-agreed. Thus, if an employer attempts to circumvent the mandatory regularization by repeatedly issuing fixed-term agreements or suddenly terminating an employee in the middle of the term without just or authorized cause, that might be deemed an act in bad faith or an illegal labor practice.

Legal Personality of the Agency and Principal

When a worker is placed in a client company but is officially the employee of an agency, questions arise as to who is the true employer. If the agency is found to be a legitimate contractor, it is primarily liable for the worker’s wages, benefits, and obligations under the Labor Code. The client company (principal) may be secondarily liable if the agency fails to meet those obligations. If, however, the agency is found to be engaged in labor-only contracting, the principal is deemed the direct employer. This distinction could affect who is responsible for the abrupt termination and the withheld salary.

In practice, employees sometimes name both the agency and the principal as respondents in a labor complaint. The labor court or arbitration branch can then evaluate the nature of the relationship, making sure that the employee’s rights are not unduly sacrificed through elaborate contractual arrangements.

Due Process Requirements for Agency Employees

Even if an employee is hired through an agency, the rules on due process in termination still apply. If the agency is the official employer, it must comply with the two-notice rule or the 30-day notice requirement, depending on the ground for termination. In case the principal decides that it no longer needs the employee, the agency must follow lawful procedures before ending that employee’s contract. If the contract is not followed and the employee is summarily dismissed without observing due process, such dismissal may be ruled illegal.

Damages and Other Forms of Relief

In illegal dismissal cases, employees may also seek additional damages such as:

Moral Damages – If the dismissal was conducted in a manner that humiliates or belittles the employee, or if bad faith is manifest.
Exemplary Damages – If the employer’s conduct is found to be wantonly oppressive or malicious.
Attorney’s Fees – Employees who win their case may be awarded attorney’s fees in an amount not exceeding 10% of the total monetary award.

Nevertheless, claims for moral and exemplary damages require substantial evidence showing the employer’s bad faith or oppression. Labor tribunals do not lightly grant such damages, but they are possible in egregious cases.

Practical Steps for the Employee

14.1 Demand Letter
Before filing a formal complaint, the aggrieved employee may opt to send a demand letter to the employer or the agency, seeking payment of wages due and explaining that the termination violates the contract and labor law. This letter can serve as evidence of good faith efforts to settle.

14.2 Settlement and Mediation
The parties may attempt an amicable settlement under the supervision of the DOLE or the NLRC. Such mediation could result in financial settlements that save time and money otherwise spent in litigation.

14.3 Filing a Complaint
If mediation is unsuccessful, the employee can file a complaint with the NLRC for illegal dismissal and money claims. Upon receipt of the complaint, the NLRC will schedule mandatory conciliation and mediation conferences, giving both sides the chance to resolve the matter without a full-blown litigation.

How Agencies and Companies Typically Defend Such Dismissals

Employers may argue that the termination is valid for any of the following reasons:

Completion of the Project or Phase – If the contract stipulates that the employee is hired only for a specific project or phase of work, and that phase has ended, they might argue that the contract naturally concluded.
Valid Just Cause – Employers might claim that the employee’s performance was unsatisfactory, or that there was misconduct or habitual neglect of duty. This has to be adequately substantiated through documentation, notices, and an opportunity to be heard.
Authorized Cause – Employers could argue that a substantial reduction in business or an economic downturn justified retrenchment, or that the entire business closed down. The law requires compliance with procedural and substantive requirements even for authorized cause dismissals.
Remedies When Salary Is Withheld

If the employer withholds salary or final pay without lawful basis, the employee can claim payment plus legal interest. Under recent jurisprudence, final pay or last salary is due and demandable upon separation from service, with the employer typically given a reasonable period to process payroll and clearance (often 30 days). If an employer unjustifiably holds that payment beyond the standard processing period, the employee may consider filing a complaint for money claims. DOLE can also step in to enforce payment of wages.

Penalties for Non-Compliance with Labor Standards

Philippine law imposes both civil and, in some cases, criminal liabilities for severe labor violations. For instance, willful refusal to pay wages can be subject to criminal prosecution under the Labor Code. However, it is more common for employees to seek administrative or civil remedies. If found liable by the DOLE or the NLRC, the employer (or the agency) may be ordered to pay the employee the wages owed, plus penalties or administrative fines, and risk further sanctions.

Labor Arbiters, NLRC, and the Court of Appeals

The typical forum for labor disputes is the NLRC, presided over by Labor Arbiters at the first instance. Decisions of Labor Arbiters can be appealed to the NLRC en banc, and subsequently to the Court of Appeals via a Petition for Certiorari, and ultimately to the Supreme Court if warranted. This multi-tiered process ensures the availability of due process, though it can take time.

Mitigating Factors for Employers and Employees

There are circumstances when both employer and employee can mitigate or compromise. For instance, if the employer realizes the termination lacked due process, the employer might opt to settle, offering separation pay or financial compensation to avoid reinstatement or additional liabilities. The employee, on the other hand, may accept a reasonable settlement to avoid the costs, delay, and uncertainty of litigation.

Advice for Employees in Similar Situations

Secure Documentation: Always keep a copy of the employment contract, payslips, and any correspondence regarding your employment status.
File a Complaint Within the Prescriptive Period: As a general rule, illegal dismissal claims must be filed within four years from the date of dismissal. Nonetheless, employees are advised to file promptly to preserve evidence and expedite resolution.
Seek Legal Aid Early: Consulting a lawyer or accredited labor consultant can provide clarity on procedural steps and possible outcomes.

Conclusion

In the Philippines, employment through an agency is recognized by law, but it does not divest the employee of the rights and protections under the Labor Code. A fixed-term contract that is prematurely or arbitrarily terminated may be challenged as an illegal dismissal, particularly if no just or authorized cause is given and due process is not observed. Furthermore, withholding an employee’s salary without legal justification contravenes provisions of the Labor Code, and such an act exposes the employer or agency to liability.

The rule of thumb is that workers enjoy security of tenure. Even in a fixed-term arrangement, an employer (or an agency) cannot whimsically end the contract without adhering to the law’s requirements. When faced with an abrupt and unceremonious dismissal, the employee may explore legal remedies through the DOLE and the NLRC, seeking reinstatement (or separation pay), backwages, and compensation for other labor standard violations.

In the provided scenario—where the employee’s contract was for six months, but termination occurred after roughly three months with neither notice nor due process, followed by the withholding of salary—the employee has strong grounds to question the legality of the termination and the employer’s or agency’s practice of withholding pay. Should the facts warrant, the recourse may be to file an illegal dismissal and money claims complaint before the NLRC, naming both the agency and the principal company if necessary.

Understanding the interplay of laws, regulations, and jurisprudential rulings on fixed-term contracts is crucial. Workers should be aware that they remain protected by Philippine labor law against any form of unjust or oppressive employer practices, including abrupt termination and withholding of wages. On the other hand, employers and agencies must observe the correct legal procedure in termination to avoid exposure to substantial liability. By respecting due process and fulfilling contractual obligations, businesses can maintain lawful and fair employment relationships in accordance with the Labor Code of the Philippines.