Effects of a Fixed Term Contract that is Vague or Ambiguous

Effects of a Fixed Term Contract that is Vague or Ambiguous

The employment status of a person is defined and prescribed by law and not by what the parties say it should be. In this regard, Article 295 of the Labor Code “provides for two types of regular employees, namely: (a) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer (first category); and (b) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed (second category).”

A fixed-term employment, while not expressly mentioned in the Labor Code, has been recognized by the Supreme Court (SC) as a type of employment embodied in a contract specifying that the services of the employee shall be engaged only for a definite period, the termination of which occurs upon the expiration of said period irrespective of the existence of just cause and regardless of the activity the employee is called upon to perform.   (Regala vs. Manila Hotel Corporation, G.R. No. 204684, October 05, 2020)

Along the same lines, it has been held that the fixed-term character of employment essentially refers to the period agreed upon between the employer and the employee.” Accordingly, “the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship.

Specification of the date of termination is significant because an employee’s employment shall cease upon termination date without need of notice.

In other words, a fixed-term employment contract which otherwise fails to specify the date of effectivity and the date of expiration of an employee’s engagement cannot, by virtue of jurisprudential pronouncement, be regarded as such despite its nomenclature or classification given by the parties. The employment contract may provide for or describe some other classification or type of employment depending on the circumstances, but it is not, properly speaking, a fixed-term employment contract.

The case of Poseidon Fishing vs. National Labor Relations Commission (518 Phil. 146 (2006)) is instructive. The SC held that, unlike in the Brent case where the period of the contract was fixed and clearly stated, in the case of Poseidon, the terms of employment of complainant as provided in the Kasunduan was not only vague, it also failed to provide an actual or specific date or period for the contract.

There is nothing in the contract that says complainant, who happened to be the captain of said vessel, is a casual, seasonal or a project worker. The date July 1 to 31, 1998 under the heading “Pagdating” had been placed there merely to indicate the possible date of arrival of the vessel and is not an indication of the status of employment of the crew of the vessel.

Actually, the exception under Article 280 of the Labor Code in which the respondents have taken refuge to justify its position does not apply in the instant case. The proviso, “Except where the employment has been fixed for a specific project or undertaking the completion or determination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season” (Article 295 Labor Code), is inapplicable because the very contract adduced by the company is unclear and uncertain.

The kasunduan in the Poseidon case does not specify the duration that complainant had been hired.

In the Regala case, complainant Regala is performing activities which are usually necessary or desirable in the business or trade of Manila Hotel Corporation (MHC). This connection can be determined by

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considering the nature of the work performed by Regala and its relation to the nature of the particular business or trade of MHC in its entirety.

Being part of the hotel and food industry, MHC, as a service-oriented business enterprise, depends largely on its manpower complement to carry out or perform services relating to food and beverage operations, event planning and hospitality. As such, it is essential, if at all necessary, that it retains in its employ waiting staff, such as Regala, specifically tasked to attend to its guests at its various dining establishments.

Notably, the desirability of his functions is bolstered by the fact that MHC retains in its employ regular staff of waiters charged with like duties or functions as those of Regala’s.

Second, the fact alone that Regala was allowed to work for MHC on several occasions for several years under various Service Agreements is indicative of the regularity and necessity of his functions to its business. Moreover, it bears to emphasize that MHC has admitted, albeit implicitly, that it renewed Regala’s Service Agreements on various occasions, i.e., during temporary spikes in the volume of its business since February 2000.

Thus, the continuing need for his services for the past several years is also sufficient evidence of the indispensability of his duties as waiter to MHC’s business. Additionally, Regala has already been working with the hotel for many years when he was supposedly constructively dismissed from employment on December 2, 2009.

In any event, it is worth noting that MHC failed to deny that Regala’s work as waiter is necessary and desirable to its business.

While MHC insists that Regala was engaged under a fixed-term employment agreement, the circumstances and evidence on record, and provision of law, however, dictate that Regala is its regular employee.

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