1) The recurring workplace problem

In many workplaces in the Philippines, individuals report to a company site every day, follow internal rules, and work alongside regular employees—yet their contract (or the service agreement between the company and a third party) states there is “no employer-employee relationship” (often shortened to “no EER”) between the company (the “principal”) and the workers.

This setup creates two linked questions:

Can the company’s policies be applied to contractual workers?
Does applying company policies undermine the “no EER” clause and create an employment relationship?

The short legal reality is this: a “no EER” clause is not controlling. In labor law, substance prevails over form. Whether company policies apply—and what happens when they do—depends on the true relationship, not the label in the contract.

2) Who are “contractual workers” in Philippine practice?

“Contractual” is used loosely in everyday speech. Legally, workers commonly fall into these categories:

Employees of the principal They may be regular, probationary, project-based, seasonal, fixed-term, etc. They are covered by the principal’s HR policies as a matter of employment.
Employees of a contractor (legitimate job contracting) The principal engages a contractor to perform a job/service. The workers are employees of the contractor, not the principal—if the arrangement is legitimate under labor rules.
Labor-only contracting (LOC) / prohibited arrangements The “contractor” is merely supplying manpower without substantial capital/investment and without real control/supervision over the work, or the workers are doing activities directly related to the principal’s business under circumstances showing the principal is effectively the employer. In LOC, the law treats the principal as the employer.
Independent contractors / consultants (true contracting for services) Individuals engaged for a specific deliverable, typically controlling their own means/methods, often using their own tools, not integrated like staff.

These distinctions matter because policy “applicability” follows the legal relationship—and the legal relationship follows the facts.

3) Why “no employer-employee relationship” clauses are weak shields

A “no EER” clause can be relevant as evidence of intent, but intent does not override reality. Philippine labor adjudication looks at:

How the work is actually performed
Who directs and controls the means and methods
Who disciplines or effectively has the power to terminate
Who pays and how payment is structured
Whether the worker is integrated into the business

Courts and labor tribunals consistently treat disclaimers as non-determinative when the day-to-day facts show employment. A company cannot contract out of labor protections simply by inserting a clause.

Key takeaway: A “no EER” clause may reduce ambiguity when the facts already support contracting, but it cannot cure an arrangement that operates like employment.

4) The legal tests that decide whether company policies can bind the worker as “employee policies”

A. The Four-Fold Test (classic Philippine standard)

The indicators are:

Selection and engagement (who hired?)
Payment of wages (who pays, and is it wage-like?)
Power of dismissal (who can terminate the worker?)
Power of control (who controls the means and methods?)

Of these, control is the most important.

B. “Control” in practice: where policies become risky

Company policies often operationalize control through:

Required attendance schedules and timekeeping
Direct supervision by company officers
Company performance evaluations and KPI scoring
Company-issued disciplinary sanctions (written warnings, suspensions)
Mandatory compliance with internal HR rules as if the worker were staff

The more a principal applies policies in a way that directs the manner of work (not just the result), the more it looks like an employer.

5) Types of company policies, and whether they can be imposed on contractual workers

Not all “policies” are equal. Some can validly apply to anyone on the premises; others are hallmarks of employment.

Category 1: Site-access and premises rules (generally safe to apply)

A principal may impose rules on any person entering its premises—employees, contractor personnel, visitors—because they are conditions of access and risk management, not “employment governance.”

Examples:

Security protocols (IDs, visitor logs, access badges)
Workplace safety rules (PPE, hazard reporting, emergency procedures)
Confidentiality and restricted-area rules
IT acceptable-use rules for access to company systems
Anti-bribery / gifts / conflict-of-interest rules for dealings with company staff
Rules against harassment, violence, and disruptive conduct within the workplace

Why this is usually lawful: These rules regulate conduct on site and protect legitimate business interests. They do not necessarily direct how the worker performs the service in a labor-law sense—especially when enforcement is framed as contract compliance and site access conditions.

Category 2: Service-level and deliverable standards (safe if outcome-focused)

A principal can require performance standards that define the results to be delivered:

Scope of work, milestones, quality benchmarks
Turnaround times (as deliverables, not daily “time-in/time-out” employment rules)
Reporting requirements (project progress reports, incident reports)
Acceptance testing, defect correction procedures

The line to watch: Standards should focus on outputs and service levels, while the contractor retains control over who does the work and how it is done.

Category 3: Employment/HR policies (high-risk to apply directly)

These are typically employee-only and, if applied to contractor personnel, can be strong evidence of the principal acting as employer:

Attendance and tardiness rules tied to timekeeping
Leave approvals (VL/SL), overtime approvals as if they were staff
Company benefits enrollment, allowances structured like wages
Company HR disciplinary code (written warnings, suspension) imposed by principal
Performance appraisals conducted by principal HR for contractor staff
Mandatory participation in internal employee programs unrelated to safety/site needs

Applying these directly can show the principal is exercising the power of control and disciplinary authority characteristic of an employer.

Category 4: Discipline and sanctions—what the principal may do

A principal generally should not discipline contractor employees using employee sanctions (e.g., suspension) as if it were their employer.

What the principal can do (properly framed):

Report violations to the contractor and require corrective action
Request replacement of personnel assigned to the account
Deny site access for serious misconduct or security/safety reasons
Impose contractual remedies against the contractor (withhold per contract, liquidated damages, termination for breach), subject to due process standards in the contract and general law

This preserves the contractor’s role as employer while protecting the principal’s legitimate interests.

6) Government regulatory backdrop: contracting rules and why they matter for “policy applicability”

Philippine rules on contracting (enforced by Department of Labor and Employment through department orders) distinguish legitimate job contracting from labor-only contracting and other prohibited arrangements. These frameworks typically require that a legitimate contractor has:

Substantial capital or investment
Independence in carrying out the work
The right to control and supervise its employees
Proper registration/compliance requirements under applicable rules

When the principal’s policies effectively substitute for the contractor’s supervision, the arrangement can drift toward labor-only contracting indicators—especially if the workers perform functions directly related to the principal’s business and are effectively managed like company staff.

7) The paradox: policies can both apply and backfire

A. Policies can apply as “premises rules” even without employment

A principal is not helpless. It may enforce:

Safety and security policies
Confidentiality and data protection rules
On-site conduct standards
Third-party codes of conduct

These apply because the principal controls the premises and protects its operations.

B. But using policies as “HR control” can create employment evidence

If the principal:

Sets daily schedules and closely supervises methods
Issues disciplinary notices directly to workers
Integrates workers into internal org charts and appraisal systems
Requires approval for leave/overtime like regular employees

…then the “no EER” clause becomes largely cosmetic. Those policies may be treated as proof of control and thus proof of employment.

8) “If they violate a policy, can we terminate them?”—the legally safer framing

If they are truly contractor employees:

The principal typically terminates the service arrangement (or partially terminates the assignment) or requires replacement, rather than “dismissing” the worker as an employee.
The contractor, as employer, handles employee discipline under its own policies consistent with labor standards.

If the facts show they are principal’s employees (despite the clause):

Termination must comply with just/authorized cause and due process requirements, or the principal risks illegal dismissal liability.

Operational point: Termination language matters. “We are terminating your employment” is dangerous if the principal insists there is no EER. “We are revoking site access / requesting replacement / terminating the service for breach” aligns better with contracting—if the facts support it.

9) Practical compliance architecture: how to impose necessary rules without creating “control” evidence

A. Separate documents: “Site Rules” vs “Employee Handbook”

Create a Third-Party / Contractor Site Rules & Code of Conduct document distinct from the employee handbook.
Avoid importing employee-only sections (leave policy, compensation, progressive discipline).

B. Contract design

In the service agreement:

Make site rules an annex and a condition for access
State the contractor retains exclusive control over:
- hiring, discipline, supervision, scheduling
- payroll, benefits, statutory contributions
Require the contractor to designate an on-site supervisor who receives instructions and relays them to workers

C. Communication protocol (reduces “control” signals)

Principal communicates work requirements to the contractor supervisor, not directly to individual workers, except for immediate safety/security instructions.
Avoid direct daily tasking that dictates methods; focus on deliverables and service levels.

D. Tools and integration

Contractor provides tools/equipment where feasible.
If the principal must provide access (badges, systems), tie it to security/IT controls, not employment integration.

10) Special topics: policies driven by other laws (OSH, harassment, privacy)

Certain laws create workplace obligations that practically require company-wide rules affecting contractor personnel on site.

A. Occupational safety and health (OSH)

Workplace safety rules are among the strongest examples of policies that should apply to everyone on site, including contractor personnel, because the workplace operator has duties to maintain safety systems. Safety policies usually do not create employment by themselves; they are a compliance necessity.

B. Anti-harassment and respectful workplace rules

Companies may apply anti-harassment rules to all workplace participants to prevent and address misconduct. Enforcement for contractor personnel is commonly done through:

Investigation and documentation by the principal
Referral to contractor for employment action
Site access bans for safety

C. Data privacy and confidentiality

If contractor personnel handle personal data or confidential company information, the principal may require:

Confidentiality undertakings
Data handling rules
Security incident reporting
Acceptable use of systems

These are compatible with contracting because they protect information and define permitted conduct, not necessarily the means of performing the service.

11) Liability and consequences when the arrangement is misclassified

If the relationship is found to be employment (or labor-only contracting is found), the principal can face exposure such as:

Payment of statutory and monetary benefits (including but not limited to 13th month, holiday pay, service incentive leave if applicable, overtime, etc., depending on classification and coverage)
Illegal dismissal liability if workers are removed without lawful cause and due process
Solidary liability with the contractor for certain labor standards violations in contracting contexts
Administrative enforcement risks under labor regulations
Reputational and operational disruption (work stoppage, disputes)

Misclassification risk increases when company policies are used to manage contractor personnel as if they were employees.

12) A workable rule of thumb

Company policies can apply to contractual workers when they are:

Premises-based (safety, security, access, conduct)
Information-protection based (confidentiality, privacy, IT security)
Contract-performance based (service levels, deliverables)
Third-party governance based (anti-corruption, conflicts, vendor ethics)

Company policies become legally risky when they:

Replicate HR management (attendance, leave, employee discipline, appraisals)
Dictate the means and methods of work on a day-to-day basis
Place contractor personnel under the principal’s direct supervisory chain as if staff

13) Bottom line

A “no employer-employee relationship” clause does not decide whether company policies apply. The decisive factor is the actual relationship, measured primarily by control.

If the worker is truly under a legitimate contractor or is an independent contractor, the principal may still enforce site rules, safety, confidentiality, and conduct standards, and may impose contractual remedies—but should avoid applying employee HR policies directly.
If the principal applies policies in a way that shows employer-like control and discipline, those same policies may become evidence that an employment relationship exists notwithstanding the clause.