Fixed-term employment is valid in the Philippines, but only when the term was knowingly and voluntarily agreed by the parties, without the employer using its stronger position to force it, and the term is not a device to prevent the employee from acquiring security of tenure. Where a fixed term is imposed to defeat regularization, for example the five-month endo practice, courts disregard the term and treat the worker as a regular employee, especially where the work is necessary or desirable to the employer's usual business.
Contracts that end on a set date — five months, a year, project-based — are everywhere in Philippine workplaces. Are they legal? Sometimes. The line between a valid fixed term and an illegal scheme is one of the most litigated questions in labor law.
Fixed-Term Contracts Are Not Illegal Per Se
The Supreme Court has recognized that a contract fixing a definite period of employment is not inherently invalid. There are legitimate fixed-term arrangements — a professor hired for a semester, an overseas contract for a defined tour, a genuinely seasonal or one-off engagement. The Labor Code’s protection of security of tenure does not outlaw every agreement with an end date.
The Requirements for a Valid Fixed Term
But because fixed terms can be abused, the courts impose strict conditions. A fixed-term contract is valid only where:
- The fixed period was knowingly and voluntarily agreed upon by the parties, without force, duress, or improper pressure on the employee; and
- The employer and employee dealt with each other on more or less equal terms, with no moral dominance exercised by the employer.
The core question is whether the term was a genuine agreement or something the employer imposed on a worker who had no real choice. A term dictated by the employer to a rank-and-file applicant who needed the job is suspect.
When the Term Is a Scheme — and Is Disregarded
The decisive test is purpose. If the fixed term was designed to prevent the employee from becoming regular and acquiring security of tenure, it is void, and the worker is treated as a regular employee. Two signals point to a sham:
- The work performed is necessary or desirable to the employer’s usual business — the hallmark of regular work; and
- The employer repeatedly rehires the same worker on successive short contracts, or ends the contract just short of six months.
The notorious “endo” (end-of-contract) five-month scheme — hiring, terminating before six months to avoid regularization, then rehiring — is the classic abuse the courts strike down. The five-month label does not save it; the worker doing regular work is a regular employee.
Fixed-Term vs. Project and Seasonal Employment
Fixed-term is distinct from project employment (tied to a specific project whose completion is determinable at hiring) and seasonal employment (tied to a season). Those have their own rules, but they share the same anti-circumvention logic: the label must match the reality, and repeated rehiring for the employer’s regular needs points to regular status.
Practical Advice
Employees: if you were on rolling short contracts doing the company’s core work, you may in law be a regular employee despite the paper, and ending your “contract” may be illegal dismissal. Employers: use fixed terms only where they are genuine and freely agreed; do not deploy them to dodge regularization, because courts see through it and the liability (reinstatement and back wages) is real.
Frequently Asked Questions
Are fixed-term employment contracts legal in the Philippines? Yes, but only when the term was knowingly and voluntarily agreed on equal terms, and not used as a device to prevent the employee from acquiring security of tenure. Otherwise the term is void and the worker is regular.
What is the endo or five-month scheme? It is the practice of ending a worker's contract just before six months to avoid regularization, then rehiring. Courts disregard such terms and treat the worker as a regular employee, especially where the work is part of the employer's usual business.
How do I know if my fixed term is a sham? Strong signs are that your work is necessary or desirable to the employer's regular business and that you were repeatedly rehired on short contracts. Those point to regular employment despite the fixed-term label.
What is the remedy if my fixed term was illegal? You are treated as a regular employee, so ending the contract is illegal dismissal, with the remedies of reinstatement and back wages, or separation pay in lieu of reinstatement.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you were kept on short contracts doing regular work, you may be a regular employee, and our firm can assess your case. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.