By: Gerardo Maximo Francisco on May 10, 2018

To fix the problem of “endo” (end-of-contract), House Bill No. 6908 (An Act Strengthening the Security of Tenure of Workers, Amending for the Purpose Presidential Decree No. 442, as amended, otherwise known as the “Labor Code”) proposes, as one major solution (another being the expansion of what constitutes prohibited “labor-only” contracting), the prohibition of employment with a fixed-term or definite period, except in the following cases: (i) OFWs (overseas Filipino workers), (ii) workers on probation, (iii) relievers who are temporary replacements of absent regular employees whose engagements shall not exceed six months, (iv) project employees, and (v) seasonal workers. The bill further states that “[c]lauses in employment contracts providing for a fixed term or definite period of employment are void.”

Endo is the practice of some ill-advised employers of ending the contracts of their employees so that they will not attain the status of a regular (or permanent) employee and obtain the benefits pertaining to such status. The example often illustrated is the case where an employee is employed for a fixed-term of only five months and, after the expiration of the period, successive new five-month contracts are given to the same employee and ended again after each period. If the employer cannot provide valid business reasons for employing the employee in this manner, it may be effectively argued that the employer is unlawfully preventing the employee from becoming regular (under the Labor Code, an employee is considered regular if he or she is allowed to work beyond a probationary period of six months).

This proposed “fix” to the endo problem of prohibiting or voiding fixed-term contracts, however, will greatly constrict businesses that legitimately need to augment, for a temporary or defined period, their workforce. This will affect the productivity of businesses and growth of the economy. It can also be surmised that the Philippine unemployment rate will significantly increase as a result of this proposal. Employers will be reluctant to hire permanent employees to fulfill their short-term or “defined-term” needs. There will be considerably less opportunities for employment.

There is no need to invalidate fixed-term contracts to end endo because protections are already in place for employees with fixed-term contracts.

In Brent School v. Zamora (“Brent case;” 181 SCRA 702 [1990]), the Supreme Court upheld the legality of “fixed period employment” under the Labor Code as long as there is no “circumvention of the employee’s right to be secure in his [or her]tenure” and “[the fixed period]employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his [or her]consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter.”

According to the Brent case, “where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc.”

Therefore, in a case where there is a repeated execution and ending of short-term contracts concerning the same employee (or perhaps even different employees), the fixed-term contracts may be struck down as contrary to public policy and the employee shall be considered as a regular employee of the employer.

There is no need to fix the endo problem by prohibiting fixed-term contracts (which may be good for the economy and help in the employment of labor). The Supreme Court has already given employees the power to void fixed-term contracts intended to circumvent their right to security of tenure.

As the Supreme Court aptly stated in the Brent case: “Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employers’ using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head.”

#laborcontracts #labor #fixed-term #endo #end-of-contract

Gerardo Maximo V. Francisco is a partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). He is a corporate, deal, litigation and labor lawyer. The contents of the above article are intended for general information purposes only and do not constitute legal advice. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF Counsel’s website at www.mtfcounsel.com.

From the The Manila Times Website  May 10, 2018

http://www.manilatimes.net/fixing-fixed-term-contracts/397844/