THIRTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
S E N A T E  
.., , ': ,'i 
1959 
S. B. NO. __ 
Introduced by Honorable SENATOR JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
The competition necessitated i by the integration of world markets 
has pushed domestic industries to devise various flexible work 
arrangements in order to survive. Unfortunately, the Labor Code 
provisions are not responsive to these changes. While two flexible forms of 
employment are recognized by the Labor code, namely project and 
seasonal employment, the rights of workers under such arrangement 
required the intervention of the Supreme Court for their definition. In fact, 
a third form, fixed term employment, was derived by the Supreme Court 
from the legal precepts surrounding articles 280 and 281. 
It is therefore imperative to amend the Labor Code to 
institutionaIize the parameters for these flexible forms of employment, 
thereby protecting these recognized forms of a typical employment in the 
Labor Code. 
.Hence, the approval of this bill is earnestly sought. 
JI e
P
GO EJERCITO ESTRAD 
U Senator 
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;"i; 10 
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THIRTEENTH CONGRESS OF 
1 
) 
THE REPUBLIC OF THE PHILIk'PINES 
) 
gt;:i;i. 
*V(-p 6: >' : , 
i 
First Regular Session 
S E N A$jE. 
83 
S.B. No. 
Introduced by Senator JINGGOY EJERCITO ESTRADA 
AN ACT 
PRESCRIBING WORK ARRANGEMENTS BASED ON SECURITY OF 
TENURE, AMENDING FOR THIS PURPOSE, ARTICLES 156,157,158,159, 
160,161,162,163,164 AND 165 OF PRESIDENTIAL DECREE NUMBER FOUR 
HUNDRED FORTY TWO (PD 442), AS AMENDED, OTHERWISE KNOWN 
AS THE LABOR CODE OF THE PHILIPPINES 
Be it enacted by the Senate and the House of Representatives of the 
Philippines in Congress assembled 
SECTION 1. Title. - This Act shabl be called "The Security of Tenure Law 
of 2005." Book I11 of Presidential Decree No. 442, as amended, otherwise known 
as The Labor Code of the Philippines, is hereby amended to include Title IV 
entitled "Security of Tenure". The provisions of this Act shall comprise the new 
Articles 156-165 of the Labor Code. 
SEC. 2. Classification of workers. - Article 156 shall read as follows: 
"Article 156. Class$cation of workers. - Work arrangements based on 
security of tenure shall be as follows: (a) contracts with an indefinite period; and 
(b) contracts with a definite period. In general, an employment contract shall be 
for an indefinite period, unless otherwise stipulated and allowed by conditions 
stated in Article 158." 
SEC. 3. Security of tenure - Article 157 shall read as follows: 
"Article 157. Security of tenure. - Contracts with an indefinite period shall 
not be terminated except for just or authorized cause under Book VI. Contracts 
with a definite period shall not be terminated except: (a) for just or authorized 
cause under Book VI; and (b) upon expiration of the stipulated period." 
SEC. 4. Contracts for definite period; when allowed - Article 158 shall 
read as follows: 
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"Article 158. Contracts for definite period; when allowed. - Contracts 
for a definite period shall be allowed only in the following situations: 
Replacement of an employee who is temporarily absent; 
(a) 


(b) Temporary increase in the vhlume of business, which in no 
case shall exceed six (6) nionths in a twelve (12) month 
period; 
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(c) To meet expansion of a company’s activity, consisting of the 
launch of a new production line, product or service, which in 
no case shall be less than six’ (6) months nor more than three 
(3) years: provided that, employees still hired after the 
contract for definite period shall be under a new contract for 
an indefinite period; 
(d) Part-time contracts, where the , employee undertakes to 
render services for a number of hours or days less than two 
thirds (2/3) of the usual number of working hours for the 
same position in the establishment; 
Construction work, in which case the duration of the project 
or a specific phase thereof shall be indicated in the contract 
and made known to the employee at the commencement of 
the employment relationship: provided that, pertinent rules 
and regulations issued by the Department of Labor and 
Employment (DOLE) on employment in the construction 
industry shall continue to remain in full force and effect; 
(e) 
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(f) Professional sports; 
(g) Corporate officers, and thosi occupying managerial, 
confidential, or technical positions; 
(h) Overseas Filipino workers: provided that, such OFWs work 
under contracts of employment consistent with Philippine 
Overseas Employment Authority (POEA) rules and 
regulations; 
(i) Officials of private academikinstitutions; 
0) 
Seasonal positions or jobs in the tourism, agriculture, and 
entertainment sectors: provided that, the duration of the 
season shall be specified in the contract of employment and 
made known to the employee at the commencement of the 
employment relationship; or 
(k) Other cases where, based on the nature of the work to be 
performed or on the circumstances under which it is to be 
performed, and with no fraud, duress or coercion practiced 
upon the worker, the employment relationship cannot be of 
indefinite duration.” 
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SEC 5. Contracts for definite period; form a ~ d  
contents. - Article 159 shall read 
as follows: 


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"Article 159. Contracts for definite period; form and contents. - The 
contract for a definite period shall be in writing and signed by the 
employer and employee, stating the follbwing: 
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a. precise purpose of employment; 
b. name and qualifications of the employee; 
c. description of the job; 
d. wages and other terms and conditions of employment; 
e. date of expiry of the contract; and I, ' 
f. stipulations for renewal provided that, renewal must be once 
only, and the total duration of the iontract, including renewal, 
may not exceed two (2) years: :provided further, that an 
employee for an indefinite period; allowed to work after the 
expiry of the stipulated period -without the benefit of a 
renewed contract shall be deemed engaged for an indefinite 
period. 
All of the foregoing contents of a contract for a definite period 
shall be made known to the employee at the commencement of the 
employment relationship. 
Every contract of employment for a definite period shall be made 
available by the employer upon written demand by the Secretary of 
Labor and Employment or his/her authorized representative. Failure to 
produce such a written contract upon due demand by the Secretary of 
his/her authorized representative or upon issuance of a subpoena duces 
tecum by the National Labor Relations Commission (NLRC) shall give 
rise to the presumption that the arrangement is for an indefinite period." 
SEC. 6. Ratio between employees for an indefinite and a definite period. 
- Article 160 shall read as follows: 
"Article 160. Ratio between employees for an indefinite and a definite 
period. - In no case shall the number bf: employees under contracts for 
definite period exceed thirty percent (3d%) of the total number of rank- 
and-file employees. A violation of th& provision shall result in the 
automatic ,conversion of all such arrangements into contracts for an 
indefinite period." 
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SEC. 7. Rights and privileges of an employee for a definite or indefinite period. - 
Article 161 shall read as follows: 
"Article 161. Rights and privileges of an employee for a definite or 
indefinite period. - An employee for a definite or indefinite period shall 
have the following rights and privileges: 
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(a) safe and healthful working conditions; 
(b) labor standards, such as service incentive leave, rest 
days, overtime pay, holiday pay, and 13" month pay; 
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(c) social security and welfarebenefits; and 
(d) self-organization, collective bargaining, and peaceful 
concerted action. 
In addition, the Bureau of Internal Revenue (BIR) shall, in 
appropriate revenue regulations, grant employees for a definite 
period a privileged personal income tax exemption, which shall 
be higher than those provided ‘in each income bracket based on 
existing schedules.” 
SEC. 8. Probationary status; nature:- Article 162 shall read as follows: 
“Article 162. Probationary $status; nature. - A  contract of 
employment may stipulate a probationary period to test the 
skills or abilities of a prospective employee for a definite or 
indefinite period. A probationary eGployee may be terminated 
for the following reasons: (a): just Qr authorized cause under 
Book VI; or (b) when the probati0nai.y employee fails to qualify 
as an employee for a definite or indefinite period in accordance 
with reasonable standards made known by the employer at the 
time of engagement.” 
SEC. 9. Probationary status; periods. - Article 163 shall read as follows: 
“Article 163. Probationary status; periods. - The duration of 
probationary employment varies according to the annual gross 
basic salary of the probationary employee. 
For employees with an annual gross basic salary below 
one hundred twenty thousand pesos (P120,000.00), the 
probationary period shall ,not exceed three (3) months. 
Employees with an annual gross basic salary of one hundred 
twenty thousand pesos (P120,OOO.OO) may exceed three (3) 
months, and in no case shall such a probationary period be more 
than one (1) year. 
The probationary period of professors, instructors, and 
teachers shall be subject to law and standards established by the 
Department of Education (DepEd). 
For purposes of this Act, ”basic salary” shall refer to all remunerations or 
earnings pa id^ by an employer for services rendered, but does not include 
allowances and monetary benefits which are not considered or integrated as part 
of the regular or basic salary, such as the cash equivalent of unused vacation and 
sick leave credits, overtime, premium, night differential and holiday pay, and 
cost-of-living allowances.” 
SEC. 10. Non-diminution of status and benefits. - Article 164 shall read as 
follows: 


”Article 164. Non-diminution of &atus and benefits. - “here shall be no 
demotion in rank or diminution of pay or illegal dismissal of any person already 
employed upon the effectivity of this Act. Henceforth, regular employees as 
defined under the former Article 280 of the Labor Code shall be deemed under 
contracts for an indefinite period.” 
SEC. 11. Recruitment and placement.. - Article 165 shall read as follows: 
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“Article 165. Recruitment and ! placqnent. - For purposes of hiring 
employees for definite or indefinite period$& the services of private recruitment 
and placement agencies (PRPAs) shall be made available in accordance with 
DOLE rules and regulations.” 
SEC. 12. Effects of illegal dismissal..Article 288 (formerly Article 279) of 
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the Labor Code is hereby amended to read.& follows:. 
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“Article 287. Effect of illegal dism‘ssal. - An employee who is unjustly 
dismissed from work shall be entitled to reinstatement without loss of seniority 
rights and other privileges and to his sf&l back wages, inclusive of allowances, 
and to his other benefits or their monetary equivalent computed from the time 
his compensation was withheld from him up to the time of his actual 
reinstatement. 
If reinstatement is not possible, the unjustly dismissed employee engaged 
for an indefinite period shall be entitled to separation pay in the amount of one 
(1) month pay or at least one (1) month pay for every year of service, whichever 
is higher. For employees engaged for a definite period, the amount of separation 
pay shall be one (1) month pay or the remaining basic salary for the unexpired 
portion of the contract, whichever is higher.” 
SEC. 13. Repealing clause. - iThe provisions of Articles 289 and 290 
(formerly Articles 280 and 281) of, the Labor Code are hereby repealed 
accordingly. All laws, presidential ! decrees, executive orders, presidential 
proclamations, rules and regulations or parts thereof contrary to or inconsistent 
with this Act are hereby repealed or modified accordingly. 
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SEC. 14. Renumbering and rules and regulations. - The Department of 
Labor and Employment (DOLE) shall cause the renumbering of affected 
provisions of the Labor Code, as amended. The DOLE shall also promulgate the 
necessary rules and regulations to implement the provisions of this Act. 
SEC. 15. Separability clause. - iIf any part or provision of this Act, or the 
application thereof to any person or circumstance, is held invalid, the remaining 
other persons or circumstances, shall not be affected thereby. 
provisions, or the application of such remaining provisions or parts thereof to 
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SEC. 16. Effectivity. - This Act shall take effect after two (2) weeks of 
publication in two (2) newspapers of national’general circulation. 
Approved,