Published — June 1, 2022
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Related article: Types of employment, and how it affects security of tenure
Amongst the five (5) general classifications of employment are probationary and project employments. While these two classifications are totally different in terms of regularity of employment, nature of work and process of termination, employees hired under the said classifications are still granted with the constitutionally guaranteed right to security of tenure (Article 13, Section 3 of the 1987 Constitution). Security of tenure means that employees may not be terminated from their regular employment except for just or authorized causes under the Labor Code and other pertinent laws (SME Bank, Inc. vs. De Guzman 707 SCRA 35, October 08, 2013).
Nature of a Probationary Employment
A probationary employee is one who, for a given period of time, is under observation and evaluation to determine whether or not he is qualified for permanent employment. During the probationary period, the employer is given the opportunity to observe the skill, competence and attitude of the employee while the latter seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. The length of time is immaterial in determining the correlative rights of both the employer and the employee in dealing with each other during said period (Escorpizo vs. University of Baguio, 306 SCRA 497, 507 [1999]). Furthermore, Article 296 (281) of the Labor Code of the Philippines provides that a probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement.
Termination of Employment of a Probationary Employee
A probationary employee, like a regular employee, enjoys security of tenure. In cases of probationary employment, however, aside from just or authorized causes of termination, an additional ground is provided under Article 296 (281) of the Labor Code, that is, the probationary employee may also be terminated for failure to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of the engagement. Thus, the services of an employee who has been engaged on probationary basis may be terminated for any of the following: (1) a just or (2) an authorized cause and (3) when he fails to qualify as a regular employee in accordance with reasonable standards prescribed by the employer (Philippine Spring Water Resources, Inc. vs. Court of Appeals 726 SCRA 343, June 11, 2014).
In the case of Carvajal vs. Luzon Development Bank (678 SCRA 132, August 01, 2012), the Supreme Court ruled that the other ground for a valid termination of a probationary employee is failure to qualify in accordance with the standards prescribed by employer does not require notice and hearing. Due process of law for this such ground consists of making the reasonable standards expected of the employee during his probationary period known to him at the time of his probationary employment. By the very nature of a probationary employment, the employee knows from the very start that she will be under close observation and his performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It is in apprising her of the standards against which her performance shall be continuously assessed where due process regarding the said ground lies, and not in notice and hearing as in the case of the first two (2) grounds.
Nature of Project Employment
Under Article 295 (280) of the Labor Code, project employees are those hired for a specific project or undertaking and/or when the completion or termination of which has been determined at the time of engagement of the employee.
The nature of employment of project employee is thoroughly discussed in the case of GMA Network, Inc. vs. Pabriga, 710 SCRA 690, November 27, 2013 to which the Supreme Court explained the meaning and scope of the term “project”. The “project” for the carrying out of which “project employees” are hired would ordinarily have some relationship to the usual business of the employer. Exceptionally, the “project” undertaking might not have an ordinary or normal relationship to the usual business of the employer. The determination of the scope and parameters of the “project” becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely no relationship to the usual business of the company. Thus, for instance, it would be an unusual steel-making company which would undertake the breeding and production of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization problem here presented to the Court, there should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the production of vegetables as “project employees,” as distinguished from “regular employees,” is whether or not the “project employees” were assigned to carry out a “specific project or undertaking,” the duration and scope of which were specified at the time the employees were engaged for that project.
Furthermore, in the same case, the Supreme Court elaborated that, in the realm of business and industry, we note that “project” could refer to one or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as “project employees,” and their services may be lawfully terminated at completion of the project. Secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times.
As discussed above, the project could either be:
- a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company; or
- a particular job or undertaking that is not within the regular business of the corporation. As it was with regard to the distinction between a regular and casual employee, the purpose of this requirement is to delineate whether or not the employer is in constant need of the services of the specified employee. If the particular job or undertaking is within the regular or usual business of the employer company and it is not identifiably distinct or separate from the other undertakings of the company, there is clearly a constant necessity for the performance of the task in question, and therefore said job or undertaking should not be considered a project.
Termination of Employment of a Project Employee
Without a valid cause, the employment of project employees cannot be terminated prior to expiration of the project or undetaking (Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. vs. Puente 453 SCRA 820, March 18, 2005). Furthermore, in the case of Dacuital vs. L.M. Camus Engineering Corporation 629 SCRA 702, September 01, 2010, the Supreme Court noted that DOLE Department Order No. 19 (as well as the old Policy Instructions No. 20) requires employers to submit a report of an employee’s termination to the nearest public employment office every time the employment is terminated due to the completion of a project. Report to the DOLE on termination of project employees is required. Report should be made after every completion of project or phase thereof. Employer’s failure to file termination reports upon the cessation of project employee’s employment was an indication that the employees concerned were not project but regular employees.
Summary of the Differences between Probationary Employment and Project Employment
In view of the above, to further guide its readers, provided below are the summary of differences between a Probationary and Project Employment:
| Probationary Employment | Project Employment | |
| Description | An employee under strict observation and evaluation to determine whether or not he or she is qualified for permanent employment. | An employee that is employed for a named specific undertaking or project only. |
| Nature of Work | Usually related to the main business or industry of the employer. | Not related to the usual business of the employer. |
| Pre-Employment Requirement | Probationary employee must be briefed or given with the standards he or she must achieve in order to attain status of a permanent employee. | Project employee must know that he was employed on a project-term basis. This could be made through a detailed explanation or written agreement showing the name and end date of the project or undertaking. |
| Duration | Period of probationary employment shall not exceed six (6) months. However, a probationary period exceeding 6 months may be valid subject to the nature of work or employment. | Period of project employment depends upon the completion of the project which is usually pre-determined. |
| Grounds for Termination | Just and authorized causes enumerated under the Labor Code and failure to qualify in accordance with the standards prescribed by employer. | Just and authorized causes enumerated under the Labor Code, unsatisfactory services and completion of the project or undertaking |
| Requirements for Termination/ Dismissal | For just and authorized cases, the twin-notice and hearing rule shall be followed. If dismissal is due to failure to qualify, no notice and hearing is required. | For just and authorized cases, the twin-notice and hearing rule shall be followed. Reportorial requirements to the DOLE of the completion of the project or undertaking. Advance notice of termination of project employment is not required. |
However,
in drafting probationary or project employment contracts, employers shall be
reminded that in determining the true nature of an employment, the entirety of
the contract, not merely its designation, or by which it was denominated, is
controlling (Jeannette V. Manalo vs TNS Philippines, Inc., G.R. No.
208567, Nov. 26, 2014).
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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This is really helpful! I’m also wondering if a Project employee (2yr contract, co-terminus) was terminated in their 8th month due to “Retrenchment because of Project Closure” before the contract ended is also entitled to separation/severance pay. Thank you!
This is a very useful article on the difference between probationary and project employee. It is even document or supported by rulings and references.
Thank you for this.
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