NLRC reverses Executive Labor Arbiter’s ruling; upholds legality of project employment

In a decision dated 11 June 2012, the National Labor Relations Commission (NLRC), reversed a decision of the Executive Labor Arbiter of Regional Arbitration Board (RAB) III Mariano Bactin, and declared that the complainant was a project employee of respondent company, in the case of Subic Drydock Corp (SDC) vs. Conde. SDC is being represented by this author.

“Undisputed is the fact that the Respondents merely accept contracts for repairs/maintenance of vessels from third parties and only on occasion when it has contracts of this nature that it will hire workers to do the job. The various contracts entered into between the Complainant and the Respondents  sufficiently prove the fixed-term employment between them. Careful review of the aforementioned documents shows that Complainant-Conde was hired as Mechanical Rigger assigned to different clients of Respondent-SDC such as MTSC Projects/Catleya; Super Shuttle Project; for M/V Cabilao, M/V Magsino and M/V Cabo. Thus, Respondent-SDC relies mainly on, and contingent to, the project it enters and thus, it hires project employees to meet the demands of specific projects,” NLRC states in its decision. 

Conde was initially hired as a project-based employee by SDC for a period of three months. When the last of his several contracts expired, he had just completed his project employment for two months as mechanical rigger for three vessels.

The Commission also duly noted in its decision that, “The fact that Complainant-Conde is a project employee is bolstered further with the Complainant having signed his various employment contracts for specific projects and specific period of time. He likewise signed the notice given him upon the expiration of each and every contract.”  It cited the case of William Uy Construction Corp., et. al. vs. Trinidad, involving a driver who was continuously and repeatedly rehired, but was still declared a project employee.

The case is under appeal.

Pakyaw, project employment and job contracting: What every employer must know

The Philippine Labor Code allows hiring of employees on a temporary basis, subject to certain guidelines. Most important is the non-diminution of wages provided by law and other standards, followed by occupational health and safety and observance of due process in case of termination, when applicable. Depending on the need and nature of the business, “pakyaw,” “project employment,” and “job contracting” may be resorted to.

“Pakyaw” or task basis refers to rendering of services by the result, regardless of the time spent for its accomplishment. Workers are hired intermittently and for a short period of time only.

It is a system of hiring a labor group for the performance of a specific work and/or service incidental to the implementation usually of infrastructure project by administration whereby tools and materials are furnished by the principal. For the specific work/service output, a lump-sum payment is made either through the group leader or divided among the pakyaw workers and disbursed using a payroll system.

Workers hired on this basis should receive wages not lower than the minimum wage rate for that particular industry.

“Project employee” is defined as one whose “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.”

In the case of Caseres v. Universal Robina Sugar Milling Corporation, the Supreme Court said that the repeated and successive rehiring of project employees does not qualify them as regular employees, as length of service is not the controlling determinant of the employment tenure of a project employee, but whether the employment has been fixed for a specific project or undertaking, its completion has been determined at the time of the engagement of the employee.

If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required.

“Job contracting” or subcontracting happens when an employer, referred to as the principal, farms out the performance of a part of its business to another, referred to as the contractor or subcontractor. For the purpose of undertaking the principal's business that is farmed out, the contractor or subcontractor then employs its own employees.

Contracting is allowed if the following conditions concur:

a. the contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

b. the contractor or subcontractor has substantial capital or investment;

c. The agreement between the principal and the contractor or subcontractor assures the contractual employees entitlement to all occupational safety and health standards, free exercise of the right to self organization, security of tenure, and social and welfare benefits.