In the Philippines, several types of employment arrangements are recognized, each with its own set of regulations outlined in the Labor Code of the Philippines (Republic Act No. 6715). These categories are determined based on the nature of the employment and the specific characteristics of the work performed.

Regular Employment

Regular employment is the most secure form of employment in the Philippines. It applies to employees performing work that is necessary or desirable for the usual business or trade of the employer and for an indefinite period. An employee is presumed to be regular after completing a probationary period, which cannot exceed six months. Regular employees are entitled to various benefits, including security of tenure, termination pay, and social security contributions.

Probationary Employment

Probationary employment is a temporary period within a regular employment arrangement. It serves as a trial period for both the employer and employee to assess suitability for the position. The maximum allowable probationary period is six months, and it can be renewed only once.

Project-Based Employment

Project-based employment contracts are for a specific project or undertaking with a definite timeframe or scope of work. Once the project is completed, the employment contract automatically terminates. Project-based employees are generally not entitled to security of tenure or termination pay but are entitled to benefits mandated by law, such as minimum wage and social security contributions.

Fixed-Term Employment

Fixed-term employment contracts are for a predetermined period, unlike regular employment with an indefinite term. However, these contracts can only be availed of for specific reasons as stipulated by law. Renewal of fixed-term contracts is generally discouraged to prevent circumventing the rights of regular employees.

Seasonal Employment

Seasonal employment contracts are for work that is dependent on a particular season or time of the year. Similar to project-based employment, the contract terminates upon the completion of the season. Seasonal employees are entitled to benefits mandated by law but may not be entitled to security of tenure or termination pay.

Casual Employment

Casual employment refers to work that is not necessary or desirable for the employer's usual business operations, occurs for a short and predetermined period, and does not have a regular schedule. Casual employees are typically not entitled to benefits like security of tenure or termination pay but are entitled to minimum wage and social security contributions mandated by law.

An employment agreement in the Philippines clarifies the rights and obligations of both employers and employees. It allows for clear communication and avoids potential disputes. Here are the essential clauses to consider incorporating:

Basic Information

• Parties to the Agreement: Identifies the employer and the employee, including their full names and contact details.
• Position and Job Description: Outlines the employee's job title, role, and responsibilities.

Compensation and Benefits

• Salary and Allowances: Specifies the employee's basic salary, allowances (if applicable), and mode of payment.
• Benefits: Details the employee's entitlement to benefits such as leave (sick leave, vacation leave), social security, PhilHealth, and Pag-IBIG contributions mandated by law.

Working Hours and Schedule

• Regular Workweek: The standard workweek in the Philippines is 48 hours, with a daily maximum of 8 hours. This clause can specify the agreed-upon work schedule, including rest days and overtime pay calculations.

Termination of Employment

• Grounds for Termination: Outlines the grounds for termination considered just or authorized under the Labor Code, such as serious misconduct, willful disobedience, or redundancy.
• Notice Periods: States the required notice periods for termination by either the employer or employee in accordance with the law.
• Severance Pay: Specifies the computation of severance pay mandated by law in cases of termination due to authorized causes by the employer.

Confidentiality and Intellectual Property

• Confidentiality: If the position requires handling confidential information, a clause protecting the employer's confidential information can be included.
• Intellectual Property: Addresses the ownership of intellectual property rights created by the employee during the course of employment as per relevant intellectual property laws.

Applicable Law and Dispute Resolution

• Governing Law: Specifies the Philippine Labor Code as the governing law for interpreting the agreement.
• Dispute Resolution: Outlines a mechanism for resolving disputes arising from the employment agreement, such as grievance procedures or voluntary arbitration.

The probationary period in a Philippine employment agreement serves as a trial period, allowing both the employer and the employee to assess suitability for the position before committing to a regular employment status. The Philippine Labor Code (Republic Act No. 6715) governs the parameters of probationary employment.

Maximum Duration and Purpose

The maximum allowable probationary period is six months. It can be renewed only once for another six months. The probationary period allows employers to evaluate an employee's skills, performance, and suitability for the role. Employees can also assess the work environment and determine if the position aligns with their expectations.

Rights During Probation

Probationary employees are still considered employees and are entitled to certain rights under the Labor Code. These include minimum wage, overtime pay if they work beyond the regular 8-hour workday or 48-hour workweek, and social security benefits. Employers must continue statutory contributions to Social Security, PhilHealth, and Pag-IBIG for probationary employees.

Termination During Probation

Termination of employment during the probationary period is easier compared to regular employment. Notice periods are shorter, and severance pay is not mandated by law unless otherwise stipulated in a company policy or collective bargaining agreement. However, probationary periods should not be used to circumvent the rights of regular employees. An employee who has been repeatedly placed on probationary periods may be considered a regular employee and entitled to the benefits associated with regular employment status.

In Philippine employment agreements, confidentiality and non-compete clauses are often included to safeguard the employer's legitimate business interests. However, for these clauses to be enforceable, they must be in compliance with Philippine law.

Confidentiality Clauses

Confidentiality clauses are designed to protect an employer's sensitive or proprietary information from unauthorized disclosure. They are especially relevant in industries where trade secrets or customer information are vital.

Although there's no specific law solely dedicated to confidentiality clauses in employment agreements, Philippine courts generally uphold them based on the principle of freedom of contract enshrined in the Civil Code.

Key considerations for confidentiality clauses include:

• Specificity: The clause should clearly define the confidential information protected, avoiding overly broad language that restricts the employee's ability to use general knowledge and skills acquired during employment.
• Reasonable Scope: The scope of the confidentiality clause, including the duration of confidentiality obligations after employment ends, should be reasonable and not impose undue burden on the employee.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to join a competitor or start a competing business for a certain period after their employment ends. These clauses are intended to protect the employer's customer base, trade secrets, or goodwill.

Non-compete clauses are not automatically enforceable in the Philippines. The Supreme Court has ruled that they can be valid only if they meet the following criteria:

• Protection of Legitimate Business Interest: The clause safeguards a legitimate business interest of the employer, such as trade secrets or confidential information.
• Reasonable Limitations: The restrictions on the employee's post-employment activities must be reasonable in terms of:
  • Time: The duration of the non-compete period should not be excessively long.
  • Geography: The geographic area covered by the clause should be reasonably limited.
  • Industry: The restriction should not prevent the employee from working in a different industry altogether.
• No Undue Burden on Employee: The clause should not create an undue hardship on the employee's ability to earn a living.

It's important to note that Philippine courts tend to view non-compete clauses restrictively, and the burden of proof lies with the employer to demonstrate the clause's reasonableness.