THIRTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
1 
5 RUG 23 i'2 5 9  
Second Regular Session 
) 
SENAT2 0 3 7 
E 
S.B. No. 
RECEIVED BY 'I---.--.-- 
Introduced by Senator Miriam Defensor Santiago 
EXPLANATORY NOTE 
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The competition necessitated 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 arrangements 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 28 1. 
It is therefore imperative to amend the Labor Code to institutionalize the parameters for 
these flexible forms of employment, thereby protecting these recognized forms of atypical 
employment in the Labor Code. 
The urgent passage of this bill is thus recommended. 


THIRTEENTH CONGRESS OF THE REPUBLIC I 
OF THE PHILIPPINES 
Second Regular Session 
__ 
Introduced by Senator Miriam Defensor Santiago 
AN ACT 
PRESCRIBING WORK ARRANGEMENTS BASED ON SBCURITY OF TENURE 
Be it enacted by the House of Representatives and the Senate of the Philippines in 
Congress assembled: 
SECTION 1. Short Title. - This Act shall be called the “Security of Tenure Law of 
2005.” Book Ill of Presidential Decree No. 442, as amended, otherwise known as The Labor 
Code of the Philippines, is hereby further 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. 
. 
SECTION 2. Classification of Workers. -Article 156 shall read as follows: 
“Article 156. Classification 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.” 
SECTION 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; or (b) upon expiration of the stipulated period.” 
SECTION 4. Contracts for Definite Period: When Allowed. - Article 158 shall read as 
follows: 
“Article 158. Contracts for Definite Period; When Allowed. - Contracts for a 
definite period shall be allowed only in the following instances: 


(a) Replacement of an employee who is temporarily absent; 
(b) Temporary increase in the volume of business, which in no case shall exceed 
six (6) months in a twelve (12) month period; 
(c) To meet expansion of a company’s activity, consisting of the launch o f  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; 
(e) 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; 
(f) Professional sports; 
(g) Corporate officers, and those occupying managerial, confidential, or technical 
positions; 
(h) Overseas Filipino workers (OFWs); provided, that such OFWs work under 
contracts of employment consistent with Philippine Overseas Employment Authority 
(POEA) rules and regulations; 
(i) Officials of private academic institutions; 
(j) 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.” 
SECTION 5 .  Contracts for Definite Period; Form and Contents. - Article 159 shall read 
as follows: 
* 
“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 
following: 
(a) Precise purpose of employment; 
@) 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 
(0 Stipulations for renewal; provided, that renewal must be once only, and the 
total duration of the contract, 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 
authorized representative. Failure to produce such a written contract upon due demand 
by the Secretary of hidher 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.” 
. 
SECTION 6. Ratio between Employees for an Indejnite and a Dejnite 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 of employees under contracts for definite period exceed thirty 
percent (30%) of the total number of rank-and-file employees. A violation of this 
provision shall result in the automatic conversion of all such arrangements into contracts 
for an indefinite period.” 
SECTION 7. Rights and Privileges of an Employee for a DeJinite or IndeJinite 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: 
(a) safe and healthful working conditions; 
(b)labor standards, such as service incentive leave, rest days, overtime pay, 
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holiday pay, and 13th month pay; 
(c) social security and welfare benefits; 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.” 
SECTION 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 employee may be terminated for the 
following reasons: 
(a) just or authorized cause under Book VI; or 
(b) when the probationary 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.” 
I 


SECTION 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 
paid 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.” 
SECTION 10. Non-Diminution ofStatus and Benefits. - Article 164 shall read as follows: 
“Article 164. Non-Diminution of Status and Benefits. - There shall be no 
demotion in rank or diminution of pay nor 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.” 
I 
SECTION 11. Recruitment and Placement. - Article 165 shall read as follows: 
“Article 165. Recruitment and Placement. - For purposes of hiring employees for 
definite or indefinite periods, the services of private recruitment and placement agencies 
(PRPAs) shall be made available in accordance with DOLE rules and regulations.” 
SECTION 12. Effects of Illegal Dismissal. - Article 288 (formerly Article 279) of the 
Labor Code is hereby amended to read as follows: 


“Article 287. Effect of Illegal Dismissal. - An employee who is unjustly 
dismissed from work shall be entitled to reinstatement without loss of seniority rights and 
other privileges and to his full backwages, 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 €or 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.” 
SECTION 13. Repeuling Clause. - The 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. 
SECTION 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. 
SECTION 15. Separability Clause. - If any provision or part hereof is held invalid or 
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain 
valid and subsisting. 
SECTION 16. Effectivity Clause. -This Act shall take effect fifteen days (15) after its 
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publication in at least two (2) newspapers of general circulation. 
Approved,