ARTICLE 295. [280] Regular and Casual Employment. -The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:  Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a  regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

The Supreme Court (SC), in the case of Carpio vs. Modair Manila Co. Ltd., Inc.

[G.R. No. 239622, June 21, 2021] distinguished regular from project employment. According to the SC, as characterized, regular employment exists when the employee is:

(a) engaged to perform activities that are usually necessary or desirable in the usual business or trade of

the employer; or

(b) a  casual employee whose activities are not usually necessary or desirable in the employer’s usual business or trade, and has rendered at least one year of service, whether continuous or broken, with respect to the activity in which he is employed; while project employment exists when the employee is hired under a contract which specifies that the employment will last only for a  specific project or undertaking, the completion or tem1ination of which is determined at the time of engagement.

As regards security of tenure, regular employment may be terminated for just or authorized causes; whereas, for project employment, lawful dismissal is brought about by the completion of the project or contract for which the employee was engaged, unless terminated during the life of the project, in which case, only just or authorized causes may be invoked.

Regarding payment of backwages in cases of illegal dismissal, for regular employment, backwages are computed from the time of dismissal until reinstatement, if such is ordered, or until finality of the decision ordering separation pay, if reinstatement is infeasible; while for project employment, backwages are computed from the date of the termination of employment until the actual completion of the work.

Upon the employer lies the burden of proof to establish project employment by showing that:

(1) the employee was assigned to carry out a specific project or undertaking; and

(2) the duration and scope of which were specified at the time the employee was engaged for such project.

Moreover, the employer must also prove that there was indeed a  project undertaken. Failing these, the worker will be presumed a regular employee.

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Twin Requirements of Notice and Hearing

Procedural Due Process for Other Types of Employment

Notice to Explain: Contents and Requirements

The Supreme Court (SC), in the case of GMA Network, Inc. vs. Pabriga, [G.R. No. 176419., November 27, 2013], it is evidently important to become clear about the meaning and scope of the term “project” in the present context.

The “project” for the carrying out of which “project employees” are hired would ordinarily have some relationship to the usual business of the employer.  Exceptionally, the “project” undertaking might not have an ordinary or normal relationship to the usual business of the employer.  In this latter case, the determination of the scope and parameters of the “project” becomes fairly easy.

According to the SC, it is unusual (but still conceivable) for a company to undertake a project which has absolutely no relationship to the usual business of the company; thus, for instance, it would be an unusual steel-making company which would undertake the breeding and production of fish or the cultivation of vegetables.

From the viewpoint, however, of the legal characterization problem here presented to the Court, there

should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the production of vegetables as “project employees,” as distinguished from ordinary or “regular employees,” so long as the duration and scope of the project were determined or specified at the time of engagement of the “project employees.”

For, as is evident from the provisions of Article 295 of the Labor Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as “project employees” as distinguished from “regular employees,” is whether or not the “project employees” were assigned to carry out a “specific project or undertaking,” the duration (and scope) of which were specified at the time the employees were engaged for that project.

In the realm of business and industry, the SC noted that “project” could refer to one or the other of at least two (2) distinguishable types of activities.  Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company.  Such job or

undertaking begins and ends at determined or determinable times.

The typical example of this first type of project is a particular construction job or project of a construction company.  A construction company ordinarily carries out two or more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City.  Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as “project employees,” and their services may be lawfully terminated at completion of the project.

The term “project” could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation.  Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer.  The job or undertaking also begins and ends at determined or determinable times.

Thus, in order to safeguard the rights of workers against the arbitrary use of the word “project” to prevent employees from attaining the status of regular employees, employers claiming that their workers are project employees should not only prove that the duration and scope of the employment was specified at the time they were engaged, but also that there was indeed a project.

The project could either be (1) a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company; or (2) a particular job or undertaking that is not within the regular business of the corporation.

As it was with regard to the distinction between a regular and casual employee, the purpose of this requirement is to delineate whether or not the employer is in constant need of the services of the specified employee.  If the particular job or undertaking is within the regular or usual business of the employer company and it is not identifiably distinct or separate from the other undertakings of the company, there is clearly a constant necessity for the performance of the task in question, and therefore said job or undertaking should not be considered a project.

Brief examples of what may or may not be considered identifiably distinct from the business of the employer are in order.  In Philippine Long Distance Telephone Company vs. Ylagan, [537 Phil. 840 (2006)] the SC held that accounting duties were not shown as distinct, separate and identifiable from the usual undertakings of therein petitioner PLDT. Although essentially a telephone company, PLDT maintains its own accounting department to which respondent was assigned.  This was one of the reasons why the Court held that respondent in said case was not a project employee.

On the other hand, in San Miguel Corporation v. National Labor Relations Commission, [357 Phil. 954 (1998)] the employee was hired to repair furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral component of its packaging and manufacturing business.

The SC, finding that he was a project employee, explained that San Miguel Corporation is not engaged in the business of repairing furnaces.  Although the activity was necessary to enable the company to continue manufacturing glass, the necessity for such repairs arose only when a particular furnace reached the end of its life or operating cycle.  The complainant therein was therefore considered a project employee.

See here the procedure to observe when the employee refuses to receive employer’s notice.

In addition, the company should send another copy by registered mail and keep the registry receipt for future reference.

Learn how to Validly Terminate Employee in the Philippines with this Tutorial Video of Atty. Elvin

Read more on procedural due process discussion by Atty. Elvin:

Read more on procedural due process by Atty. Villanueva:

Twin Requirements of Notice and Hearing

Procedural Due Process for Other Types of Employment

Notice to Explain: Contents and Requirements

First, a worker is presumed a regular employee, unless the employer establishes that (1) the employee was hired under a contract specifying that the employment will last only for a specific undertaking, the termination of which is determined at the time of engagement; (2) there was indeed a project undertaken; and (3) the parties bargained on equal terms, with no vices of consent.

Second, if considered a regular employee at the outset, security of tenure already attaches, and the subsequent execution of project employment contracts cannot undermine such security, but will simply be considered a continuation in the regular engagement of such employee.

Third, even if initially engaged as a project employee, such nature of employment may ripen into regular status if (1) there is a continuous rehiring of project employees even after cessation of a project; and (2) the tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or trade of the employer.

Conversely, project-based employment will not ripen into regularity if the construction worker was truly engaged as a project-based employee, and between each successive project, the employer made no manifestations of any intent to treat the worker as a continuing resource for the main business.

Fourth, regularized construction workers are subject to the “no work, no pay” principle, such that the employer is not obligated to pay them a salary when “on leave.” In case of an oversupply of regularized construction workers, then the employer can exercise management prerogative to decide whom to engage for the limited projects and whom to consider as still “on leave.”

Finally, submission of termination reports to the DOLE Field Office “may be considered” only as an indicator of project employment; conversely, non-submission does not automatically grant regular status. By themselves, such circumstances do not determine the nature of employment.

Below are sample project employment contracts to make it easy for HR practitioners, business owners, and managers to craft:

1. Project Employment Contract – English Version Soft Copy
2. Project Employment Contract – Filipino / Tagalog Soft Copy

Project employment is an exception to the rule on regular employment.

The Labor Code, under Article 295 states that the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in me usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

Project employment exists when the employee is hired under a contract which specifies that the employment will last only for a specific project or undertaking, the completion or termination of which is determined at the time of engagement. (Carpio vs. Modair Manila Co. Ltd., Inc., G.R. No. 239622, June 21, 2021)

The act of termination is essentially a challenge to the security of tenure of the employee being terminated. There is no doubt that a regular employee has a security of tenure. However, as to project employee, is the right to security of tenure also available?

Yes, although in a limited sense.

The SC held in Carpio case, as regards security of tenure, regular employment may be terminated for just or authorized causes; whereas, for project employment, lawful dismissal is brought about by the completion of the project or contract for which the employee was engaged, unless terminated during the life of the project, in which case, only just or authorized causes may be invoked.

Unlike in regular employment though, the employment of project employee is co-terminus with the completion of the project.

Thus, the services of a project-based employees are co-terminus with the project and may be terminated upon the end or completion of the project of phase thereof for which they were hired. [Engineering Construction Corporation of Asia vs. Palle, G.R. 201247, July 13, 2020]

The services of the project employees are legally and automatically terminated upon the end or completion of the project as the employee’s services are coterminous with the project. [Universal Robina Sugar Milling Corporation vs. Acibo, G.R. No. 186439, January 15, 2014]

It bear noting though that there are other requirements for such termination. One of which is the report or notice to be submitted to the appropriate DOLE office.

See sample project employment contracts to make it easy for HR practitioners, business owners, and managers to craft:

1. Project Employment Contract – English Version Soft Copy
2. Project Employment Contract – Filipino / Tagalog Soft Copy