Illegal Dismissal Complaints Against Manpower/Staffing “New Agencies” in the Philippines
A comprehensive legal primer (updated to July 2025)
1. What “agency” are we talking about?
In Philippine labor practice, a “new agency” usually refers to a private employment or manpower/contracting agency engaged by a “principal” (client-company) to supply workers. Think of:
| Common label | Governing issuances | Key legal ideas |
|---|---|---|
| “Manpower agency / contractor” | Labor Code (Arts. 106-109), DOLE Dept. Order (DO) 174-17 | May be legitimate (independent contractor) or labor-only (illegal). |
| Private employment agency (PEA) | Labor Code Art. 15, DOLE Rules on PEAs | Primarily recruits for overseas or local placement, collects placement fees (with limits). |
| BPO “staffing partner,” job contractor, service provider | Same rules as above; substance over form | Labels do not matter—courts look at the work relationship. |
2. Constitutional & statutory backbone
1987 Constitution, Art. XIII §3 – guarantees workers’ right to security of tenure.
Labor Code of the Philippines
- Just causes (Art. 297) – e.g., serious misconduct, gross neglect.
- Authorized causes (Art. 298-299) – redundancy, retrenchment, closure, disease.
DOLE D.O. 174-17 – sets strict requirements for legitimate contracting (₱5 million paid-up, registration, proof of control over work).
NLRC Rules of Procedure (2023) – governs illegal dismissal cases.
Security of tenure means a worker may be dismissed only for a lawful cause and with procedural due process. Absence of either = illegal dismissal (even if employed through an agency).
3. Tri-partite relationships & joint liability
| Party | Typical role | Liability exposure |
|---|---|---|
| Principal / Client | Orders the work; benefits from output | Joint & several with the agency if: ① agency is labor-only, or ② dismissal violates law. |
| Agency / Contractor | Recruits, pays, disciplines workers | Primary employer for DO 174-compliant contractors. |
| Worker | Performs tasks at principal’s site | May sue one, some, or all parties. |
Article 109: “Principal shall be solidarily liable with the contractor in case of violations of any provision of the Labor Code.”
4. Determining legality of dismissal
Substantive (valid cause)
- Just causes – employee’s fault (e.g., theft).
- Authorized causes – business reasons (redundancy) or health.
- Fixed-term/project end – valid only if term/project is bona fide and worker was informed at hiring.
Procedural
Two-notice rule (for just causes):
- Notice to explain (specific facts & rule violated)
- Notice of decision (finding + sanction)
Authorized causes:
- 30-day DOLE & employee notice (Art. 298).
Hearing or written explanation opportunity.
Failure in either strand (cause or process) = illegal dismissal. A “twin-notice” signed the same day, or “immediate termination” letters, keep losing in court.
5. Special categories of agency workers
| Worker status | Key rulings | Frequent pitfalls |
|---|---|---|
| Probationary | Abasolo v. Raybur (2022) – standards must be communicated at hiring. | Dismissal for “poor performance” w/o metrics = illegal. |
| Project-based | Betoy v. Manila Water (2023) – project must be defined and time-bound. | Re-hiring across projects → may ripen into regular status. |
| Fixed-term (endo) | Sonza v. Hermano (2024) – successive five-month contracts = evasion. | Courts pierce fixed terms when work is necessary & desirable to business. |
6. Burden of proof
Employer (agency and/or principal) must prove that dismissal was for a valid cause and with due process. Mere allegation of “abandonment” or “end of contract” is insufficient—documents & witness testimony are required.
7. Filing the complaint
| Step | Where | Time limit |
|---|---|---|
| SEnA (Single-Entry Approach) | DOLE Field/Regional Office | Mandatory 15-day conciliation. |
| NLRC Complaint | Regional Arbitration Branch covering workplace | 4 years for illegal dismissal (Art. 1146 Civil Code injury to rights); 3 years cap on money claims (Art. 306 Labor Code). |
| Appeal | NLRC → Court of Appeals → Supreme Court | Strict 10-calendar-day period NLRC → CA by Rule 65. |
Filing fees: ₱500 + 1% of total claims over ₱100,000 (capped). Indigent workers often exempt.
8. Remedies & monetary awards
Reinstatement without loss of seniority and full backwages (from dismissal to reinstatement). If reinstatement is impossible (business closed, strained relations) → Separation Pay in lieu (usually one month pay per year of service).
Backwages computation
- Basic salary + regular allowances + mandated COLA.
Moral & exemplary damages – awarded when dismissal is in bad faith (e.g., fabricated charges).
Attorney’s fees – up to 10% of monetary awards when worker compelled to litigate.
Unpaid benefits – 13th month, service incentive leave, night shift diff., overtime.
Interest – 6% p.a. (rev. from 12% in Nacar v. Gallery Frames).
9. Agency vs. principal: who pays?
- Legitimate contractor – primarily liable; principal secondarily liable.
- Labor-only contractor – both are treated as direct employers, jointly & solidarily liable.
- Courts examine 4-fold test (selection, payment of wages, power of dismissal, control), plus “right-of-control” and substantial capital to classify agency.
Tip for agencies: Maintain books proving payment of wages, SSS/PhilHealth/HDMF remittances, and genuine proof of independent business (equipment, control).
10. Recent Supreme Court highlights (2021 – 2024)
| Case | G.R. No. | Key takeaway |
|---|---|---|
| Peoplelink v. NLRC (2021) | 252199 | Principal solidarily liable despite valid certification as contractor because workers proved actual control by principal. |
| Metrocare Staffing v. Tilos (2022) | 255712 | Dismissal after end of “deployment” found illegal—worker deemed regular; separation pay granted. |
| Abasolo v. Raybur (2022) | 254156 | Probationary employees must be apprised in writing of performance standards; failure → becomes regular. |
| Grab Services v. Malicdem (2023) | 256331 | Driver-partners ruled independent contractors given freedom over means & time—no illegal dismissal, but dicta clarifies tests. |
| Sonza v. Hermano (2024) | 258488 | Successive 5-month contracts = regularization; “end of term” dismissal struck down. |
(The Court’s full texts are available on sc.judiciary.gov.ph.)
11. Practical guidance
For employees
- Gather proof – IDs, payslips, chat screenshots, company memos.
- Act fast – initiate SEnA within weeks; memories fade.
- Computation sheet – list salary, allowances, dates to aid NLRC.
- Beware of quitclaims – you can sign under protest; releases are void if vitiated by fraud/duress or for unconscionably low consideration.
For agencies & principals
- Document due process – serve notices, hold hearings (online ok), minutes.
- Contracting compliance – maintain DO 174 registration, ₱5 million capitalization, service contracts indicating control.
- Audit contractors – principals can be tagged liable if contractor defaults.
- Mediation mindset – NLRC encourages compromise; compute best–worst case early.
12. Enforcement of judgments
- NLRC sheriff may levy bank accounts, chattels.
- Escrow deposits (₱100k-₱5 M) for contractors under DO 174 satisfy awards if agency folds.
- Contempt & garnishment – refusal to reinstate invites writ of execution and criminal contempt.
13. FAQs
| Question | Short answer |
|---|---|
| Can I file against the principal if my ID card says the agency is my employer? | Yes. The NLRC has consistently allowed suing both; labels do not defeat security of tenure. |
| Is a project completion notice enough to end employment? | Only if project is real, defined, and worker was told at hiring. Otherwise, workers may be deemed regular and dismissal is illegal. |
| Prescription for illegal dismissal? | 4 years (Civil Code), but money claims are limited to 3 years back from filing. |
| Can I get damages even if reinstated? | Yes—moral/exemplary damages may be awarded for bad-faith dismissal; plus 10% attorney’s fees. |
14. Conclusion
An illegal dismissal complaint against a “new” manpower or staffing agency in the Philippines follows the same core rules that protect every employee’s security of tenure. Yet, the tri-partite setup and the ever-evolving world of contracting add layers of complexity—especially on solidary liability and status of employment. Workers should act promptly, marshal evidence, and understand both substantive and procedural safeguards. Agencies and principals, for their part, must internalize DOLE’s stringent contracting rules and rigorously observe due process. With informed action, parties can navigate (or avoid) the costly path of an illegal dismissal suit.