Employee Transfers to a Sister Company and the Right to Security of Tenure in the Philippines
(A practitioner‑oriented legal brief)
1. What do we mean by a “sister company”?
Under Philippine law, separate corporations within the same conglomerate are distinct juridical entities (Art. 44, Civil Code; Heirs of Fe Tan Uy v. IAC, G.R. No. 68901, 29 July 1986). Two companies are colloquially called sisters when they share the same parent or ultimate beneficial owner. Because each has an independent personality, an employee of Corporation A does not automatically become an employee of Corporation B unless:
- a new employment contract is executed, or
- statutory doctrines (e.g., piercing the corporate veil, successor‑employer, or labor‑only contracting findings) treat them as one.
2. Sources of law and policy framework
| Layer | Key Provisions / Issuances | Relevance |
|---|---|---|
| Constitution | Art. XIII, §3 | Security of tenure, humane conditions of work |
| Labor Code (PD 442, as renumbered) | Arts. 294‑300 (just & authorized causes), Art. 301(bona fide suspension/lay‑off), Art. 297 (termination for just cause) | Governs any termination that may attend a transfer |
| DOLE regulations | D.O. 174‑17 (subcontracting), D.O. 119‑12 (contracting in mining/oil), D.O. 019‑18 (mandatory bridging of service for OFWs) | Prevents the use of group restructuring to mask labor‑only contracting |
| Corporation Code (RA 11232) | Arts. 2, 3 (separate personality) | Explains why consent is required for a transfer |
| Civil Code | Art. 1315 (consent in contracts), Art. 1700 (labor contracts imbued with public interest) | |
| Data Privacy Act (RA 10173) | §§20‑21 | Personnel file sharing during transfer |
| SSS Law (RA 11199), PhilHealth (RA 7875), Pag‑IBIG (RA 9679), Tax Code | Substitution of employer and continuity of contributions |
3. Types of inter‑company movement and their legal treatment
| Mode | Employer–employee tie with origin firm? | Control exercised by destination firm? | Treatment of tenure |
|---|---|---|---|
| Reassignment (same employer, different unit) | Continues | Same corporation | Tenure uninterrupted, no new contract |
| Secondment/Loan‑out | Remains with origin (paymaster may vary) | Shared or ceded temporarily | Tenure stays with original employer; seconding agreement needed (Phil. Global Communications v. De Vera, G.R. L‑29155, 30 Aug 1971) |
| Permanent transfer with employee consent | Ends with origin; new contract with sister firm | Fully with sister firm | Tenure ordinarily restarts unless parties stipulate “bridging” |
| Group‑wide absorbing merger / sale of business | Dissolves origin | Vests in buyer | Successor‑employer doctrine may preserve tenure (SMC Packaging v. NLRC, G.R. No. 146206, 14 Feb 2005) |
| Fictitious transfer used to avoid security of tenure | Origin still controls work | Sister firm nominally listed as employer | Veil may be pierced; tenure treated as continuous with origin (Hijo Plantation v. Enriquez, G.R. No. 155384, 29 Jun 2004) |
4. Employer prerogative vs. employee consent
- General rule. Management may validly reassign employees within the same company so long as no demotion in rank, diminution in pay, or unreasonable inconvenience results (Art. 296, Labor Code; PT&T v. NLRC, G.R. No. 144130, 17 April 2008).
- *Transfers across corporations, however, require the worker’s express, informed consent because they entail the termination of the original contract and the creation of a new one (Art. 1315, Civil Code).
Refusal to accept a cross‑company transfer is not insubordination per se; the lawful options for the origin firm are:
- Retain the employee (status quo), or
- Terminate under Art. 298 (b) (redundancy) or Art. 298 (c) (closure/cessation) with 1‑month notice to both employee and DOLE, plus separation pay.
5. Continuity of tenure and benefits
- Security of Tenure. An unconsented cross‑transfer that severs the first contract is constructive dismissal; back wages and reinstatement are available (Philips Semiconductors v. Fadriq, G.R. No. 141717, 27 Dec 2002).
- Bridging of Service. Employers may contractually recognize uninterrupted service to preserve accrued benefits (retirement, CBA seniority, incentive leaves). Jurisprudence upholds these “credit‑for‑past‑service” clauses (Abella v. NLRC, G.R. No. 153880, 23 Jan 2013).
- Statutory Retirement (RA 7641). In the absence of bridging, the 5‑year minimum service resets with the new employer.
- Social security and tax reporting. The sister company must file BIR “employer substitution” and register the worker under new SSS/PhilHealth employer IDs. Failure exposes the group to penalties.
6. Common pitfalls for conglomerates
| Pitfall | Legal consequence | Key cases |
|---|---|---|
| Transferring rank‑and‑file to a manpower affiliate but retaining control (labor‑only contracting) | Joint and several liability; solidary obligations for wage claims; possible criminal penalties under Art. 109 | Vinoya v. NLRC (G.R. No. 126586, 2 Feb 2000) |
| Forcing transfer without separation pay | Constructive dismissal; full back wages | Cosmos Bottling v. NLRC (G.R. No. 155864, 23 Jan 2009) |
| Denying earned longevity benefits by fragmenting service | Violation of Art. 100 (non‑diminution) | Acebedo Optical v. NLRC (G.R. No. 122241, 30 Jan 1998) |
| Disclosing personnel files to sister firm sans consent | Breach of Data Privacy Act; possible damages | NPC Circular 16‑01 (Guidelines on Personal Data Processing for HR) |
7. Due‑process checklist for a lawful cross‑company transfer
| Step | When | Who should act | Notes |
|---|---|---|---|
| 1. Business rationale | Before offer | Origin firm | Redundancy study, board resolution |
| 2. Consultation w/ union or affected employee(s) | ≥30 days before effectivity | HR & employee | Secure written consent; if refused, evaluate authorized‑cause dismissal |
| 3. Draft tripartite agreement | After consent | Origin‑firm HR, sister‑firm HR, employee | Spell out bridging of service, rank, salary, probation (if any), benefit portability |
| 4. Serve DOLE notice (if termination from origin) | Within 30 days prior | Origin firm | Required under Art. 299 |
| 5. Settle final pay | On last day with origin | Finance | Include unused leaves, 13ᵗʰ month pro‑rated, separation pay (if applicable) |
| 6. Register new employment | Within 30 days after hire | Sister firm | SSS R‑1A, BIR, PhilHealth ER2, Pag‑IBIG M1 |
8. Special sectors and nuanced rules
- Banking and utilities. Transfers may need Bangko Sentral or ERC clearance where “fit‑and‑proper” tests are applied to key officers.
- Government‑owned or controlled corporations (GOCCs). Movement between GOCCs remains public employment; Civil Service Commission memoranda on lateral transfers apply.
- PEZA / Freeport locators. Tax incentives can be affected if headcount pledges are reduced; advise checking the investor’s Registration Agreement.
9. Practical drafting tips
- State continuing liability. If the origin firm promises to honor pending money claims (e.g., incentive plans that vest later), specify.
- Set a carve‑out for future corporate reorganizations. Avoid the need for renewed consent at each intra‑group move by obtaining an advance “global mobility” acceptance—provided it is clear, voluntary, and does not diminish pay/benefits.
- Align with CBAs. Many Philippine CBAs prohibit cross‑company transfers without union concurrence; violating this is an unfair labor practice.
- Observe gender‑sensitive and family‑friendly policies. Reassignments that disregard parental status or employee safety may be struck down as unreasonable.
10. Key takeaways
- Consent is king. A worker can be assigned within the same corporation as a matter of management prerogative, but transferring him or her to a separate sister entity needs genuine, voluntary agreement.
- Tenure follows the real employer. If control never truly shifts to the sister company, the law disregards the corporate firewall and treats employment as continuous with the original firm.
- Plan the paperwork. Proper notices, well‑drafted secondment or transfer agreements, and benefit‑bridging clauses prevent most disputes.
- Mind the doctrines. Labor‑only contracting and successor‑employer findings are the usual traps in Philippine conglomerate restructurings.
For HR leaders and counsel, integrating these rules into a written Group Mobility Policy—reviewed jointly by corporate, tax, and labor specialists—will help ensure compliance while preserving the operational flexibility that modern business demands.