Letter from a Concerned Employee

Dear Attorney,

Good morning. I would like to inquire about a matter related to employment regularization under Philippine law. I am currently working for a company, and it has come to my attention that the management might be considering a practice where employees are not placed on regular status even after the probationary period, or they keep renewing contracts without ever granting regularization. I am concerned because I was under the impression that the law provides guidelines on when an employee should be deemed regular. Could you kindly clarify whether it is legal for a company to avoid providing regular employment status to workers who have served beyond the legally prescribed probationary period? Additionally, what remedies or recourse might be available if this practice does not comply with the law?

Thank you for taking the time to address this matter. I appreciate your legal expertise.

Sincerely,
A Concerned Employee

Legal Article: A Comprehensive Analysis of Employment Regularization Under Philippine Law

Introduction

In the Philippines, the laws governing employment relationships are primarily found in the Labor Code of the Philippines (Presidential Decree No. 442, as amended) and its implementing rules and regulations. Over the years, the Department of Labor and Employment (DOLE) has also issued guidelines, regulations, and directives aimed at clarifying and strengthening the rights and obligations of both employers and employees. One critical aspect of the Philippine employment landscape is the concept of “regularization”—the process by which employees who initially start under non-regular (often probationary) terms eventually become regular or permanent employees, enjoying the full range of statutory protections and benefits accorded by law.

This article endeavors to explore all pertinent details regarding the legality of withholding or evading regularization, the conditions under which regularization must be granted, the remedies available to employees who may be unfairly deprived of such status, and the potential liabilities faced by employers who attempt to circumvent the regularization process.

I. Concept of Probationary Employment

Definition and Purpose: Probationary employment, as envisioned under Philippine law, is meant to allow an employer a period to observe and evaluate an employee’s fitness, qualifications, and performance prior to granting regular status. During this period, usually not exceeding six (6) months from the date the employee began working (except in certain types of employment or positions that might warrant a longer probationary period per agreement or industry practice), the employer can assess whether the probationary employee meets the company’s standards.
Limits on Duration: Under Article 296 (formerly Article 281) of the Labor Code, the general rule is that probationary employment cannot exceed six months. If, at the end of the probationary period, the employer fails to provide written notice of termination to the employee, or if the employee continues to perform the job beyond the prescribed probationary period, the employee is generally considered a regular employee by operation of law.
Reasonableness and Standards: Employers are required to make known to the probationary employee, at the time of engagement, the reasonable standards on which he or she will be evaluated. If these standards are not clearly communicated, the employee may be deemed a regular employee from the start. In other words, the probationary period must be guided by transparency regarding performance criteria.

II. Rights and Benefits of Regular Employees

Security of Tenure: Once an employee becomes regular, the Constitutionally and statutorily enshrined principle of security of tenure applies. This means that a regular employee cannot be dismissed except for just or authorized causes as determined by law, and only after due process.
Statutory Benefits: Regular employees are entitled to a range of benefits mandated by law or regulations. These may include coverage under social legislation like the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG), as well as 13th month pay, service incentive leaves, and, in some cases, retirement benefits. It is important to note that some of these benefits may accrue even before regularization, but becoming a regular employee generally cements and expands these entitlements.
Unfair Labor Practices (ULPs): Employers who attempt to prevent employees from attaining regular status for the purpose of depriving them of their rightful benefits, or to undermine their rights to self-organization, collective bargaining, or other protected activities, may be guilty of committing unfair labor practices. Regularization is intertwined with the employee’s broader set of rights, making it critical for employers to follow the law.

III. Legality of Withholding Regularization

Mandatory Regularization Upon Expiration of Probationary Period: Under Article 296 of the Labor Code, employees who remain employed beyond the end of the six-month probationary period are deemed regular employees. This is a statutory mandate. If a company attempts to “extend” the probationary period without legal basis or if it fails to provide a just and valid reason for termination before the probation ends, the employee automatically attains regular status.
Fixed-Term Employment vs. Regular Employment: While Philippine law allows for fixed-term employment contracts under certain conditions, these arrangements must be used in good faith and cannot be applied to circumvent security of tenure. Jurisprudence has made it clear that if a series of fixed-term contracts are used to avoid regularization, this may be declared invalid by labor tribunals and the courts. The Supreme Court of the Philippines has repeatedly ruled that hiring employees under successive contractual arrangements without substantive reasons linked to the nature of the work or the specific project requirements is a form of labor-only contracting or an evasion of mandatory regularization.
Project-Based and Seasonal Employees: There are exceptions to the general rule of regularization. For instance, employees hired for a specific project that is time-bound or seasonal employees engaged for work that is dependent on the season may not be covered by the usual regularization rules. However, these exceptions must strictly adhere to the legal definitions and cannot be used as a pretext to perpetually keep employees from becoming regular. If the nature of the work performed by the employee is vital, necessary, and desirable to the usual business or trade of the employer, it strongly suggests that the employee is performing regular work and should be classified accordingly.
Avoidance Schemes and Legal Repercussions: Some employers attempt to use various schemes—e.g., rotating workers through manpower agencies, repeatedly ending and renewing short-term contracts, or classifying employees as “casual” or “project-based” even when the work is regular and continuous—to avoid granting regular status. Such acts may not hold up under legal scrutiny. Courts and quasi-judicial bodies like the National Labor Relations Commission (NLRC) are empowered to look beyond the form of agreements and ascertain the true nature of the employment relationship.

IV. Employee Remedies if Regularization is Withheld

Filing a Complaint with DOLE or NLRC: Employees who believe they have been unjustly denied regularization may file a complaint with the Department of Labor and Employment or the National Labor Relations Commission. These bodies have jurisdiction over labor disputes and can order reinstatement, payment of back wages, correction of status, and other forms of relief.
Illegal Dismissal Complaints: If an employer ends the employment of a probationary employee without a valid reason or for failing to meet standards that were never communicated, the termination may be considered illegal. Once deemed illegally dismissed, the employee may be entitled to reinstatement, full back wages, and the recognition of their regular status from the moment the law deems them regular.
Labor Arbiter and NLRC Process: The first step is typically to file a complaint with the Labor Arbiter, who will hear the case and render a decision. If either party disagrees with the ruling, the matter may be elevated to the NLRC. Further judicial review by the Court of Appeals or even the Supreme Court may be available in certain circumstances.
Burden of Proof on the Employer: Employers carry the burden of proving that the employee did not meet the reasonable standards set for probationary employment or that the employee’s work is genuinely not regular in nature. If the employer fails to discharge this burden, the employee’s claim for regularization is likely to succeed.

V. Relevant Jurisprudence

Brent School vs. Zamora Doctrine: In the landmark case of Brent School, Inc. vs. Zamora (G.R. No. L-48494, February 5, 1990), the Supreme Court held that fixed-term employment contracts are permissible under certain conditions. However, it cautioned that these contracts must not be used to circumvent the employee’s right to security of tenure. If the nature of the job is one that is necessary and desirable in the usual course of the employer’s business and the contract is repeatedly renewed without justifiable reason, the arrangement may be invalidated.
De Leon vs. NLRC and Similar Cases: Subsequent rulings by the Supreme Court have reinforced the principle that employment contracts must reflect the true nature of the work and not be crafted as a mere device to prevent regularization. The courts consistently look at the substance of the employment relationship rather than its form.
Continuous Service Beyond Probation: Another line of jurisprudence, exemplified in numerous Supreme Court decisions, states that once an employee continues to work beyond the probationary period without a notice of termination or a new contract, the employee automatically becomes regular. The courts have rejected attempts by employers to claim ignorance or procedural oversight once the period lapses.

VI. Special Considerations

Managerial Employees and Regularization: Even managerial or supervisory employees who start as probationary have the right to eventual regularization if they meet the standards set by the company. Being in a managerial position does not necessarily exempt an employee from the general rules of regularization. The difference, however, lies in the standards set for such employees, which may be more stringent and performance-based. If these standards are communicated, fair, and consistently applied, and if the managerial probationary employee meets them, he or she should be regularized in due course.
Unionized Workplaces and Collective Bargaining Agreements (CBAs): In unionized environments, the rules on regularization may be further refined by the Collective Bargaining Agreement. CBAs may set shorter probationary periods or offer clearer guidelines on when an employee attains regular status. Employers must comply not only with the Labor Code but also with the terms of these agreements.
Industry-Specific Regulations: Certain industries, like the business process outsourcing (BPO) sector or the construction industry, may have particular policies or regulations. Nevertheless, these cannot weaken the protections granted by law. The overriding principle is that local or internal rules cannot supersede the standards set by the Labor Code and jurisprudence.

VII. The Employer’s Perspective and Compliance

Proper Documentation and Communication: Employers who wish to avoid legal pitfalls must ensure that employment contracts, employee handbooks, and onboarding materials clearly communicate the terms and conditions of probationary employment. Evaluations should be documented, and employees should be apprised of their performance regularly. If an employee does not meet the standards, the employer should issue a notice of termination before the probationary period ends, specifying the reasons.
Training and Development: Many employers see the probationary period as a time to train and orient employees. If an employee is failing to meet standards, the employer should consider whether the expectations were reasonable, whether adequate training was given, and whether the employee had a fair opportunity to improve. If the employer attempts to deny regularization by simply ignoring these considerations and continuing the employment relationship without granting regular status, the employer faces the risk of legal action.
Compliance with Labor Laws and Best Practices: Ultimately, compliance with labor laws is not just a matter of avoiding legal liability. Treating employees fairly, including granting them regular status when warranted, fosters a positive work environment, improves employee morale, and reduces turnover. Employers who follow the law and best practices in human resource management benefit from stable, productive, and committed employees.

VIII. Government Initiatives and Enforcement

Inspections and Compliance Audits by DOLE: The DOLE regularly conducts labor inspections to ensure that companies comply with minimum labor standards, including regularization requirements. If a labor inspector discovers that a company routinely denies or delays the regularization of its employees without a valid legal basis, the employer may be required to rectify the situation and may face administrative penalties.
Labor Law Compliance System (LLCS): DOLE’s Labor Law Compliance System encourages compliance through a mix of developmental and enforcement approaches. When inspectors identify violations, they may issue compliance orders, allowing employers a period to correct the deficiencies. Persistent non-compliance could lead to more severe penalties, including monetary fines and possible closure orders for egregious violators.
Public Awareness and Advocacy: Various labor advocacy groups, unions, and non-governmental organizations work to inform employees of their rights. Increased awareness and understanding of the laws surrounding regularization empower employees to assert their rights and to hold employers accountable.

IX. Conclusion

In Philippine labor law, the principle of security of tenure and the mandate for regularization after the probationary period are deeply ingrained. Employers cannot arbitrarily deny regularization to employees who have performed their jobs satisfactorily and continuously beyond the legal probationary period. Attempts to circumvent this requirement through repeated contractual arrangements, misclassification of employees as project-based or casual, or neglecting to issue timely notices at the end of probation are typically struck down by the courts and labor arbiters.

The practice of withholding regularization without valid justification is generally deemed illegal. Employees who find themselves in such a situation may seek recourse by filing complaints before the DOLE, NLRC, and ultimately, the courts. Jurisprudence consistently reaffirms the right of employees to be recognized as regular once the statutory conditions for regularization are met.

For employers, the clear lesson is to comply with the Labor Code and prevailing jurisprudence. Transparent employment contracts, fair evaluation standards, timely communication, and respecting the statutory period of probationary employment not only ensure legal compliance but also contribute to a stable and harmonious work environment.

In the Philippine context, therefore, it is not legally permissible for a company to continuously withhold regularization once an employee has met the qualifications and completed the mandated probationary period. Should an employer attempt to circumvent this, the law provides robust avenues for redress, ensuring that the fundamental right to security of tenure does not become an empty promise.