Are project employees entitled to

separation pay?
BY THE MANILA TIMES
JULY 26, 2013

 HOME
 /
 LEGAL ADVICE
 /
 BENCHPRESS
 /
 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).