TERMINATION OF EMPLOYMENT
whether the worker is dependent on the alleged employer for his continued
A. EMPLOYER-EMPLOYEE RELATIONSHIP
1. Four-Fold Test
• What is the 4-fold test of existence of employer-employee relationship?
1. Selection and engagement of the employee;
2. Payment of wages or salaries;
3. Exercise of the power of dismissal; or
4. Exercise of the power to control the employee’s conduct.
These tests, however, are not fool-proof as they admit of exceptions.
The control test is the controlling test which means that the employer controls or has
reserved the right to control the employee not only as to the result of the work to be done
but also as to the means and methods by which the same is to be
accomplished.
What is the 2-tiered test of employment relationship?
The two-tiered test enunciated in Francisco v. NLRC,1 is composed of:
(1) The putative employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished [control test]; and
(2) The underlying economic realities of the activity or relationship [broader
economic reality test].2Employment relationship under the control test is
determined by asking whether “the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the manner
and means to be used in reaching such end.”3
The broader economic reality test calls for the determination of the nature of the
relationship based on the circumstances of the whole economic activity, namely:
(1) The extent to which the services performed are an integral part of the
employer’s business;
(2) The extent of the worker’s investment in equipment and facilities;
(3) The nature and degree of control exercised by the employer;
(4) The worker’s opportunity for profit and loss;
(5) The amount of initiative, skill, judgment or foresight required for the success of
the claimed independent
enterprise;
(6) The permanency and duration of the relationship between the worker and the
employer; and
(7) The degree of dependency of the worker upon the employer for his continued
employment in that line of business.4
Under the economic reality test, the proper standard of economic dependence is
employment in that line of business.5
Following the broader economic reality test, the Supreme Court found petitioner in
Orozco v. The Fifth Division of the Honorable Court of Appeals,6 who is a columnist
in the Philippine Daily Inquirer (PDI), not an employee of PDI butan independent
contractor. Thus:
“Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights
advocate working in various women’s organizations. Likewise, she herself admits that she also
contributes articles to other publications. Thus, it cannot be said that petitioner was dependent
on respondent PDI for her continued employment in respondent’s line of business.
“The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.”
• Is it necessary to have a written contract of employment in order to establish
employer-employee relationship?
No. It may be an oral or written contract. A written contract is not necessary for the creation
and validity of the relationship.
The only exception is in the case of Kasambahay where it is required that the
contract of employment should
be in writing.
2. KINDS OF EMPLOYMENT
What are the general classifications of employment?
There are five (5) classifications of employment:
(a) Regular employees referring to those who have been “engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer”;
(b) Project employees referring to those “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”;
(c) Seasonal employees referring to those who work or perform services which are seasonal
in nature, and the employment is for the duration of the season;
(d) Casual employees referring to those who are not regular, project, or seasonal employees;
(e) Fixed-term employees whose term is freely and voluntarily determined by the employer
and the employee.
PROBATIONARY EMPLOYMENT
How is probationary period, say, of 6 months computed?
The 6-month probationary period should be reckoned “from the date of appointment up to
the same calendar date of the 6 th month following.”
May probationary period be extended?
Yes, but only upon the mutual agreement by the employer and the probationary employee.
What is the effect of allowing a probationary employee to work beyond the
probationary period?
He is considered a regular employee.
What is the effect if there is no written contract providing for probationary
employment?
If there is no written contract, the employee is considered a regular employee from day one of
his employment. And even if there is one, he is deemed regular if there is no stipulation on
probationary period.
What are the grounds to terminate probationary employment?
Under Article 281, a probationary employee may be terminated only on three (3) grounds, to
wit:
1. For a just cause; or
2. For authorized cause; or
3. When the probationary employee fails to qualify as a regular employee in
accordance with reasonable
standards made known by the employer to the employee at the start of the
employment.
Is procedural due process required in termination of probationary employment?
Yes, but only in the case of Numbers 1 and 2 above.
No, in the case of No. 3 above.
When should termination of probationary employment be made?
Termination to be valid must be done prior to lapse of probationary period. Termination a few
days after lapse of
probationary period cannot be done without due process as he has already become a regular
employee by that time.
REGULAR EMPLOYMENT
How does one become a regular employee?
Under the Labor Code, regular employment may be attained in either of three (3) ways,
namely:
1. By nature of work. - The employment is deemed regular when the employee has been
engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the
employer.
2. By period of service. - The employment is reckoned as regular when the employee has
rendered at least one (1) year of service, whether such service is continuous or broken, with
respect to the activity in which he is employed and his employment shall continue while such
activity exists.
3. By probationary employment. - The employment is considered regular when the
employee is allowed to work after a probationary period.
Is the manner or method of paying wage material in determining regularity of
employment?
No. The manner and method of payment of wage or salary is immaterial to the issue of
whether the employee is regular or not.
PROJECT EMPLOYMENT
What is the litmus test of project employment?
The litmus test of project employment, as distinguished from regular employment, 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.
A true project employee should be assigned to a project which begins and ends at determined
or determinable times and be informed thereof at the time of hiring.
What are the indicators of project employment?
Either one or more of the following circumstances, among others, may be considered as
indicator/s that an employee is a project employee:
1. The duration of the specific/identified undertaking for which the worker is engaged is
reasonably determinable.
2. Such duration, as well as the specific work/service to be performed, are defined in an
employment agreement and is made clear to the employee at the time of hiring.
3. The work/service performed by the employee is in connection with the particular
project or undertaking for which he is engaged.
4. The employee, while not employed and awaiting engagement, is free to offer his
services to any other employer.
5. A report of the termination of employment in the particular project/undertaking is submitted
to the DOLE Regional Office having jurisdiction over the workplace, within thirty (30) days
following the date of his separation from work.
6. An undertaking in the employment contract by the employer to pay completion bonus to
the project employee as practiced by most construction companies.
Is length of service material in determining validity of project employment?
No. Length of service is not a controlling determinant of employment tenure.
What are some principles on project employment?
1. Project employees should be informed of their status as such at inception of the
employment relationship.
2. There must be a written contract of project employment stating the duration of the project
employment as well as the particular work or service to be performed. A written project
employment contract is an indispensable requirement.
3. Intervals in employment contracts indicate project employment.
4. Continuous, as opposed to intermittent, rehiring shows that employee is regular.
5. “Project-to-project” basis of employment is valid.

On termination of project employment.
1. Project employees enjoy security of tenure only during the term of their project employment.
2. Project employees have presumably become regular employees if they are allowed to work
beyond the completion of the project or any phase thereof to which they were assigned or
after the “day certain” which they and their employer have mutually agreed for its completion.
Having become regular employees, they can no longer be terminated on the basis of the
completion of the project or any phase thereof to which they were deployed.
SEASONAL EMPLOYMENT
Can a seasonal employee become a regular seasonal employee?
Yes, provided the following requisites are complied with:
1. The seasonal employee should perform work or services that are seasonal in nature; and
2. They must have also been employed for more than one (1) season.
Can a regular seasonal worker file an illegal dismissal case in the event he is not
hired for the next season?
Yes. The reason is, being a regular seasonal employee, the employer should re-hire him in the
next season. During off-season, his employment is deemed suspended and he is considered
as being on leave of absence without pay.
2. 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
on the latter.
Is fixed-term employment valid if the job is directly related to the principal
business of the employer?
Yes. Fixed-term employment is the only exception to the rule that one becomes regular if he
is made to perform activities directly related to the principal business of the employer
(Regularity by virtue of nature of work)
When does a fixed-term employee become regular?
1. When he is allowed to work beyond the agreed fixed term.
2. When there are successive renewals of fixed-period contracts.
NOTE: The practice of hiring of employees on a uniformly fixed 5-month basis and replacing
them upon the expiration of
their contracts with other workers with the same employment status circumvents their right to
security of tenure.

CASUAL EMPLOYMENT
What is the most important distinguishing feature of casual employment?
The most important distinction is that the work or job for which he was hired is merely
incidental to the principal business of the employer and such work or job is for a definite
period made known to the employee at the time of engagement.

When does a casual employee become regular?

Casual employee becomes regular after one year of service by operation of law. The one (1)
year period should be reckoned from the hiring date. Repeated rehiring of a casual employee
makes him a regular employee.

FIXED-TERM EMPLOYMENT
What are the requisites in order for fixed-term employment to be valid?
The two (2) requisites or criteria for the validity of a fixed-term contract of employment are as
follows:
1. The fixed period of employment was knowingly and voluntarily agreed upon by the
parties, without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
Tests of Employment Relations
The determination of whether employer-employee relation exists between
the parties is very important. For one, entitlement to labor standards benefits
such as minimum wages, hours of work, overtime pay, etc., or to social
benefits under laws such as social security law, workmen’s compensation law,
etc., or to termination pay, or to unionism and other labor relations
provisions under the Labor Code, are largely dependent on the existence of
employer-employee relationship between the parties.
 Another thing is that the existence of employer-employee relationship
between the parties will determine whether the controversy should fall within
the exclusive jurisdiction of labor agencies or not. If for example the parties
are not employer-employee of each other, respectively, but perhaps partners
or associates, then any dispute between them will be not be covered by the
jurisdiction of labor agencies but by regular courts.
Three test to determine employer-employee relationship
There are three test commonly used to determine the existence of employer-
employee relationship, viz.:
1. Four-fold test
2. Economic reality test
3. Two-tiered test (or Multi-factor test)
Four-fold test elements
The usual test used to determine the existence of employer-employer
relationship is the so-called four-fold test. In applying this test, the following
elements are generally considered:
1. Right to hire or to the selection and engagement of the employee.
2. Payment of wages and salaries for services.
3. Power of dismissal or the power to impose disciplinary actions.
4. Power to control the employee with respect to the means and
methods by which the work is to be accomplished. This is known as the right-
of-control test.
Of the above-mentioned elements, the right of control test is considered as
the most important element in determining the existence of employment
relation. The control test initially found application in the case of Viaña vs. Al-
Lagadan and Piga, where the court held that there is an employer-employee
relationship when the person for whom the services are performed reserves
the right to control not only the end achieved but also the manner and
means used to achieve that end.
Control test thus refers to the employer’s power to control the employee’s
conduct not only as to the result of the work to be done but also with respect
to the means and methods by which the work is to be accomplished.
In applying this test, it is the existence of the right, and not the actual
exercise thereof, that is important.
Economic reality test
In view of today’s highly specialized workforce, the court are often faced with
situations where the right-of-control-test alone can no longer adequately
determine the existence of employer-employer relationship. Subsequently,
another test has been devised to fill the gap, known as the economic reality
test.
In Sevilla v. Court of Appeals, the Court observed the need to consider the
existing economic conditions prevailing between the parties, in addition to
the standard of right-of-control, to give a clearer picture in determining the
existence of an employer-employee relationship based on an analysis of the
totality of economic circumstances of the worker.
Economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.
Under economic reality test, the benchmark in analyzing whether
employment relation exists between the parties is the economic dependence
of the worker on his employer. That is, whether the worker is dependent on
the alleged employer for his continued employment in the latter’s line of
business.
Applying this test, if the putative employee is economically dependent on
putative employer for his continued employment in the latter’s line of
business, there is employer-employee relationship between them. Otherwise,
there is none.
Two-tiered test (or Multi-factor test)
The economic reality test is not meant to replace the right of control test.
Rather, these two test are often use in conjunction with each other to
determine the existence of employment relation between the parties. This is
known as the two-tiered test, or multi-factor test. This two-tiered test
involves the following tests:
 The putative employer’s power to control the employee with respect to
the means and methods by which the work is to be accomplished; and
 The underlying economic realities of the activity or relationship.