Dear Atty. Gab,

Musta Atty! I hope this message finds you well. My name is Roberto Valdez, and I’ve been working for a manufacturing company here in Laguna for almost 25 years. For the first 20 years, I was a regular, rank-and-file employee with all the benefits. About five years ago, during a restructuring, my manager, Mr. Dante Ignacio, offered me a ‘promotion’ to a ‘Consultant’ role. The pay was slightly higher, but I had to sign a Contract for Consultancy Services. Honestly, my day-to-day tasks didn’t really change much. I still reported to the same people, followed company procedures, used company equipment, and even filled out daily attendance sheets sometimes for project tracking. My work is crucial for the production line quality control.

Now, I’m turning 65 next month, the compulsory retirement age in our company policy which mirrors the law. A couple of months ago, I formally wrote to HR and Mr. Ignacio, informing them of my upcoming retirement and inquiring about my retirement package calculation, expecting it to cover my long service. Instead of a response about benefits, I received a letter last week stating that my ‘Consultancy Contract’ is expiring at the end of this month and will not be renewed. It thanked me for my ‘services as a consultant’. When I followed up, HR told me that as a consultant, I’m not entitled to retirement benefits under the company policy or the law.

I feel cheated and deeply worried. Did signing that contract years ago erase my decades of service? Was I effectively dismissed just before retirement? And is Mr. Ignacio, who pushed for this arrangement, somehow responsible? I always thought I was still a regular employee in substance. I don’t know what to do. Any guidance you can offer would be greatly appreciated.

Sincerely,
Roberto Valdez
Musta Atty! – RValdez@email.com

Dear Roberto,

Thank you for reaching out. I understand your distress and confusion regarding your employment status and entitlement to retirement benefits after such long service with the company. It’s disheartening to face this uncertainty, especially so close to your planned retirement.

The core issue here revolves around determining whether an employer-employee relationship truly existed between you and the company despite the ‘Consultancy Contract’ you signed. Philippine labor law emphasizes substance over form; the nature of the actual work arrangement, control exercised by the employer, and the necessity of your tasks are often more decisive than the title or contract given. If an employer-employee relationship is established, your termination without just cause right before retirement could be considered illegal dismissal, potentially entitling you to specific benefits.

Consultancy vs. Regular Employment: Unmasking Your True Status

Determining whether someone is an independent contractor (like a consultant) or a regular employee is crucial because regular employees enjoy significant rights and protections under the Labor Code, including security of tenure and retirement benefits. Courts often use the four-fold test to ascertain the existence of an employer-employee relationship: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct (the ‘control test’). The control test is generally considered the most important factor.

You mentioned that despite the ‘consultancy’ label, your tasks remained largely unchanged, you reported to the same superiors, followed company procedures, and even used company resources and tracking systems like attendance sheets. These factors strongly suggest that the company retained significant control not just over the results of your work, but also over the means and methods by which you performed it. This level of control is a hallmark of an employer-employee relationship, not typically found in a genuine independent consultancy.

Furthermore, the nature of your work – quality control crucial for the production line – appears to be usually necessary or desirable in the ordinary course of the company’s manufacturing business. Engaging someone to perform such tasks continuously for years often points towards regular employment, regardless of contractual designations. The law protects employees from schemes designed to circumvent their rights to security of tenure and benefits.

“The issue of illegal dismissal is premised on the existence of an employer-employee relationship between the parties herein. It is essentially a question of fact… Records reveal that both the LA and the NLRC, as affirmed by the CA, have found substantial evidence to show that respondent Dakila was a regular employee who was dismissed without cause.”

This principle highlights that courts look at the actual evidence of the relationship, not just the contract’s label. If substantial evidence shows control and necessity of work, a finding of regular employment is likely, even if a consultancy contract exists.

If you are indeed found to be a regular employee, the company’s refusal to renew your contract, effectively terminating you right before your compulsory retirement age without a valid cause (like serious misconduct or authorized causes like redundancy with proper procedures), could constitute illegal dismissal. An employee unjustly dismissed is typically entitled to certain remedies.

“Following Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages computed from the time he was illegally dismissed.”

However, since you are already at the compulsory retirement age, reinstatement is no longer a feasible option. In such cases, the appropriate remedy shifts. Instead of reinstatement and potentially separation pay, you would be entitled to your retirement benefits as mandated by law (like R.A. 7641 or The New Retirement Pay Law, if applicable) or under a more favorable company retirement plan or Collective Bargaining Agreement (CBA), if one exists. Your backwages, in this specific scenario where dismissal happens right before retirement, might be computed only for the period between the dismissal and your compulsory retirement date.

Regarding the liability of your manager, Mr. Ignacio, the law generally upholds the principle of separate corporate personality. A corporation is treated as distinct from its officers and directors. Corporate officers are usually not held personally liable for the corporation’s obligations, such as payment of monetary awards in labor cases, unless specific grounds exist.

“The mere lack of authorized or just cause to terminate one’s employment and the failure to observe due process do not ipso facto mean that the corporate officer acted with malice or bad faith. There must be independent proof of malice or bad faith… Perforce, petitioner Jennifer M. Eñano-Bote cannot be made personally liable for the liabilities of the corporation which, by legal fiction, has a personality separate and distinct from its officers, stockholders and members.”

To hold Mr. Ignacio personally liable alongside the company, you would need to present independent proof that he acted with malice, bad faith, or gross negligence in directing your termination or in the consultancy arrangement itself, beyond simply implementing company decisions. This is often a high bar to meet.

“Moreover, for lack of factual and legal bases, the awards of moral and exemplary damages cannot also be sustained.”

Similarly, claims for damages like moral and exemplary damages require proof of bad faith, fraud, or oppressive conduct by the employer, not just the fact of illegal dismissal.

Practical Advice for Your Situation

• Gather Evidence: Collect all documents proving control and the nature of your work (e.g., old employee IDs, memos, emails with instructions, performance evaluations, attendance records, project assignments, testimonies from colleagues).
• Review Your ‘Contract’: Examine the ‘Contract for Consultancy Services’ alongside your actual work practices. Note discrepancies that show employer control.
• Check Retirement Policy/Law: Obtain a copy of the company’s retirement policy and familiarize yourself with R.A. 7641 (The New Retirement Pay Law) to understand your potential entitlements based on your total years of service (including the time before the consultancy contract).
• Document Everything: Keep records of all communications with HR and management regarding your retirement and the non-renewal/termination.
• Consider Filing a Complaint: You have the right to file a complaint for illegal dismissal, non-payment of retirement benefits, and other claims before the Department of Labor and Employment (DOLE) through the Single Entry Approach (SEnA) or directly with the National Labor Relations Commission (NLRC).
• Officer Liability Assessment: Realistically assess if you have concrete evidence of malice or bad faith specifically attributable to Mr. Ignacio, separate from the company’s actions, if you intend to pursue personal liability.
• Seek Formal Legal Counsel: Your situation involves specific facts and requires navigating complex legal standards. Consulting a labor lawyer is highly recommended to evaluate your evidence and guide you through the legal process effectively.

Your situation highlights a common issue where contractual labels conflict with the reality of the employment relationship. Based on your description, there appears to be a strong basis to argue that you remained a regular employee despite the consultancy contract, and thus, should be entitled to retirement benefits upon reaching the compulsory retirement age. The company’s actions may indeed constitute illegal dismissal.

Hope this helps!

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.