Key Takeaway: The Importance of Clear Employment Terms in Distinguishing Regular from Project Employees

Engineering & Construction Corporation of Asia [Now First Balfour, Incorporated] v. Segundino Palle, et al., G.R. No. 201247, July 13, 2020

Imagine being a dedicated employee, working tirelessly on various projects for decades, only to be told your job ends with the project. This was the reality for six construction workers who found themselves at the center of a legal battle that would redefine their employment status. In the case of Engineering & Construction Corporation of Asia [Now First Balfour, Incorporated] v. Segundino Palle, et al., the Supreme Court of the Philippines had to determine whether these workers were regular employees or project-based, a decision that would impact their job security and benefits.

The key legal question was whether the workers, hired by the construction company for various projects, were regular employees entitled to security of tenure or merely project employees whose employment ended with the completion of each project. This case highlights the importance of clear employment terms and the significant impact they can have on employees’ rights.

Understanding the Legal Context

In the Philippines, the distinction between regular and project employees is crucial, as it determines the rights and protections afforded to workers. According to Article 295 of the Labor Code, an employee is considered regular if engaged in activities necessary or desirable to the employer’s usual business or trade, unless their employment is fixed for a specific project or undertaking.

Project employees are those hired for a specific project, with their employment ending upon its completion. This is particularly common in the construction industry, where projects have defined start and end dates. The Department of Labor and Employment (DOLE) provides guidelines through Department Order No. 19, series of 1993, which states that project employees are those employed in connection with a particular construction project or phase thereof.

The critical factor in distinguishing between these two types of employment is the notice given to the employee at the time of hiring. For an employee to be considered a project employee, they must be informed of the duration and scope of their work at the outset. Failure to provide such notice can lead to a presumption of regular employment.

For example, if a construction worker is hired to work on a building project and is told that their employment will end when the building is completed, they are a project employee. However, if the worker is hired without being informed of the project’s duration and continues to work on various projects without clear termination dates, they may be considered a regular employee.

Case Breakdown: The Journey of Segundino Palle and Colleagues

Segundino Palle, Felix Velosa, Alberto Pampanga, Randy Galabo, Marco Galapin, and Gerardo Felicitas were hired by Engineering & Construction Corporation of Asia (ECCA) to work on its construction projects. They were employed for varying lengths of time, with some starting as early as 1975. Despite being told their employment was tied to specific projects, they argued that they were regular employees due to the nature of their work and the lack of clear employment contracts.

The workers filed a complaint for illegal dismissal in 2004, claiming they were not project employees but regular employees who were entitled to security of tenure. ECCA argued that the workers were project employees whose employment ended upon the completion of each project.

The case progressed through the labor courts:

• The Labor Arbiter ruled in favor of the workers, finding them to be regular employees and ordering their reinstatement with backwages.
• The National Labor Relations Commission (NLRC) reversed this decision, ruling that the workers were project employees and their employment ended with the projects.
• The Court of Appeals (CA) overturned the NLRC’s decision, reinstating the Labor Arbiter’s ruling that the workers were regular employees.

The Supreme Court, in its final decision, upheld the CA’s ruling. The Court emphasized the importance of clear employment terms, stating, “ECCA failed to present substantial evidence to show that it informed respondents of the duration and scope of their work at the time of their hiring.” The Court further noted, “The absence of a written contract does not by itself grant regular status to the employees, but it is evidence that they were not informed of the duration and scope of their work and their status as project employees at the start of their engagement.”

Ultimately, the Supreme Court ruled that the workers were regular employees who were illegally dismissed, as ECCA did not provide sufficient evidence of their project employment status.

Practical Implications and Key Lessons

This ruling has significant implications for employers and employees in the construction industry and beyond. Employers must ensure that they clearly communicate the terms of employment, especially for project-based roles, to avoid misclassification and potential legal challenges.

For employees, this case underscores the importance of understanding their employment status and rights. If unsure about their classification, employees should seek clarification from their employer or legal counsel.

Key Lessons:

• Employers must provide clear, written employment contracts specifying the duration and scope of work for project employees.
• Employees should be informed of their employment status at the time of hiring to avoid confusion and potential disputes.
• The absence of clear employment terms can lead to a presumption of regular employment, entitling workers to greater job security and benefits.

Frequently Asked Questions

What is the difference between a regular and a project employee?

A regular employee is engaged in activities necessary or desirable to the employer’s business, while a project employee is hired for a specific project or undertaking with a defined duration.

How can an employer prove that an employee is a project employee?

An employer must provide evidence that the employee was informed of the project’s duration and scope at the time of hiring, typically through a written employment contract.

What happens if an employer fails to inform an employee of their project employment status?

If an employer fails to provide clear notice, the employee may be presumed to be a regular employee, entitled to security of tenure and other benefits.

Can a project employee become a regular employee?

Yes, if a project employee is repeatedly rehired or their employment extends beyond the project’s completion without clear termination, they may be considered a regular employee.

What should employees do if they believe they are misclassified as project employees?

Employees should seek clarification from their employer and, if necessary, consult with a labor lawyer to understand their rights and potential legal remedies.

ASG Law specializes in labor and employment law. Contact us or email hello@asglawpartners.com to schedule a consultation.