Merchandising Representatives as Fixed-Term Employees

A month ago the Philippine Supreme Court promulgated a very interesting decision that has to do with trade merchandising representatives as fixed term and/or project employees. The case is Fontera Brands Phils., Inc. vs. Leonardo Largado and Teotimo Estrellado (G.R. No. 205300, March 18, 2015).

Fonterra contracted the services of Zytron Marketing and Promotions Corp. (Zytron) for the marketing of its milk and dairy products. Pursuant to their contract, Zytron provided Fonterra with Largado (in 2003) and Estrellado (in 2002) as trade merchandising representatives (TMRs).

Sometime in 2006 Fonterra terminated its promotions contract with Zytron and entered into a manpower supply agreement with A.C. Sicat Marketing and Promotional Services (A.C. Sicat). It appears Largado and Estrellado wanted to continue as TMRs for Fonterra and therefore they submitted their job applications with A.C. Sicat. A.C. Sicat hired them for a term of five months.

After the expiration of the 5-month period, Largado and Estrellado’s contracts were not renewed. The latter filed a case for illegal dismissal (among other claims) against Fonterra, Zytron and A.C. Sicat but did not assert any claim against Zytron and A.C. Sicat.

The Labor Arbiter found in favor of respondents. The NLRC affirmed the Labor Arbiter. But when the case reached the Court of Appeals the CA said respondents (i.e., complainants in the original case before the LA) were illegally dismissed as early as June 6, 2006 because Zytron was in its view not a legitimate job contractor (thus making Fonterra the real employer and the one liable for respondents’ alleged illegal dismissal) and respondents’ transfer to A.C. Sicat is tantamount to a completely new engagement by another employer.

Fonterra filed a petition for review with the Supreme Court. The Supreme Court ruled –

1. Whether Zytron is a legitimate job contractor or not is immaterial to the resolution of the illegal dismissal issue. The SC found that respondents (i.e., complainants in the original case before the LA) refused to renew their contracts with Zytron because apparently they wanted to continue their assignment in Fonterra, which could not happen because of the end of Zytron’s contract with Fonterra. They therefore applied with A.C. Sicat, Fonterra’s new manpower supplier, in the hope that they will be able to continue rendering services as TMRs at Fonterra.  They are deemed to have voluntarily resigned. Worth quoting is the SC’s definition of voluntary resignation:

“Resignation is the voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment, done with the intention of relinquishing an office, accompanied by the act of abandonment.”

2. The SC also found A.C. Sicat to be a legitimate job contractor.

3. More importantly, for purposes of our topic in this post, the SC found that respondents were hired by A.C. Sicat as project employees for a fixed term. According to the SC –

“As held by this Court, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with predetermined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination. The determining factor of such contracts is not the duty of the employee but the day certain agreed upon by the parties for the commencement and termination of the employment relationship.”

The SC agreed with the CA’s finding that the termination of respondents’ employment with A.C. Sicat was simply due to the expiration of their employment contracts, which A.C. Sicat could refuse to renew as a matter of managerial prerogative. What is interesting is that the SC seems to consider respondents’ contracts as fixed-term contracts, yet at the same time it said,

“In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees.”

To my mind, not all fixed-term employees are project employees, although it would seem that all project employees are at the same time fixed-term employees. In any event, what is interesting here is that we now have precedent for considering trade merchandising representatives hired for a specific project, such as the promotion of certain products, as fixed-term employees whose contracts, once expired, their employer can refuse to renew as a matter of managerial prerogative. To quote the SC:

“Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even acceded to the condition that their employment thereat will end on said pre-determined date of termination. They cannot now argue that they were illegally dismissed by the latter when it refused to renew their contracts after its expiration. This is so since the non-renewal of their contracts by A.C. Sicat is a management prerogative, and failure of respondents to prove that such was done in bad faith militates against their contention that they were illegally dismissed. The expiration of their contract with A.C. Sicat simply caused the natural cessation of their fixed-term employment thereat.”


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