Are project employees entitled to separation pay?


THE employment of 65 employees was terminated due to the expiration of their contracts.  Hence, a compliant for illegal dismissal was filed against their employer, a corporation.  These 65 employees belonged to the same labor union. To show its support, the union filed a notice of strike with the corporation on the grounds of “union-busting, subcontracting of projects which could have been assigned to the dismissed employees, and unfair labor practice.” Six days later, the union declared a strike and began to picket in the perimeter of the corporation’s premises. As a result, the corporation filed a motion to declare the strike illegal and requested for clearance to terminate the employment of 90 employees who took part in the strike.  Out of the 90 employees, 74 were project employees of the corporation, all of which were under a fixed term contract.  The Labor Arbiter (LA) denied the request for clearance and ordered the reinstatement of the employees.

The National Labor Relations Commision (NLRC) modified the LA’s decision by granting clearance to dismiss the union officers, while reinstating the regular employees who were not union officers.  Neither were the project employees reinstated on account that their employment contracts had already expired.

The Supreme Court (SC) agreed with the NLRC’s decision that “the leaders of the illegal strike were correctly punished with dismissal, but their followers (other than the contract workers) were properly ordered reinstated, considering their lesser degree of responsibility.”  In response to the issue of project employees, it ruled that the project employees were illegally dismissed and entitled to separation pay.

Citing Cartagenas v. Romago Electric Co., the SC first explained the essense of a project employee –

[c]ontract workers are not considered regular employees, their services being needed only when there are projects to be undertaken.  ‘The rationale of this rule is that if a project has already been completed, it would be unjust to require the employer to maintain them in the payroll while they are doing absolutely nothing except waiting until another project is begun, if at all.  In effect, these stand-by workers would be enjoying the status of privileged retainers, collecting payment for work not done, to be disbursed by the employer from profits not earned.  This is not fair by any standard.

Given that project employees are employed until the completion of a project, the SC ruled that the project employees could not be validly terminated despite the expiration of their contracts because “the project itself was still on-going and so continued to require the workers’ services for its completion.”  Moreover, common business practice of the corporation showed that the project employees were usually retained to finish projects they had begun despite the expiration of their contracts.

The SC also clarified when a project employee is entitled to separation pay –
‘[p]roject employees are not entitled to separation pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the projects in which they had been employed by a particular construction company.’ Affirmatively put, and interpreting it in the most liberal way to favor the working class, the rule would entitle project employees to separation pay if the projects they are working on have not yet been completed when their services are terminated.  And this should be true even if their contracts have expired, on the theory that such contracts would have been renewed anyway because their services were still needed  (De Ocampo v. NLRC, G.R. No. 81077, 6 June 1990, J. Cruz).


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1 Comment

  1. Norman stevens III on

    How about those contract workers where contract where ceased and tht the work were endorsed to a third party company tht wl provide the same service… H/ever, there employer had endorsed them to this third party n offer the same work with the reduction of their service fee but employee decided to refuse this offer… Are they still entitled to separationpay? Appreciate ur response. Tks…

    Sincerely yours,