In the landscape of Philippine labor law, the term "deregularization"—the act of reverting a regular employee to a probationary, contractual, or fixed-term status—is a concept that frequently surfaces in corporate restructuring or cost-cutting discussions. However, under the eyes of the law, this practice is fraught with legal landmines and is generally considered illegal.
The following article explores the statutory and jurisprudential reasons why once an employee attains regular status, that status is nearly "permanent" barring specific legal causes.
1. The Constitutional Foundation: Security of Tenure
The bedrock of all Philippine labor relations is the Security of Tenure. Under Article XIII, Section 3 of the 1987 Philippine Constitution, the State is mandated to afford full protection to labor and guarantee that workers shall be entitled to security of tenure.
This means that an employee cannot be dismissed—nor can their employment status be downgraded—except for Just Causes or Authorized Causes as defined by the Labor Code, and only after following Due Process.
The Principle of "Vested Rights"
Once an employee completes their probationary period and becomes regular, they acquire a "vested right" to their position. Attempting to "deregularize" them is effectively an attempt to strip them of this constitutional protection.
2. Is "Deregularization" Legally Recognized?
Strictly speaking, the Philippine Labor Code does not recognize "deregularization" as a valid administrative action. Labor law is heavily biased in favor of the employee because of the inherent imbalance of power between capital and labor.
Why Employers Attempt It
- Cost-cutting: Avoiding the payment of 13th-month pay, bonuses, and SSS/PhilHealth/Pag-IBIG contributions.
- Flexibility: Making it easier to terminate the employee at the end of a "new" fixed term.
- Disciplinary measures: Using a status downgrade as a form of punishment (which is illegal).
The Reality of the Law
The Supreme Court has consistently ruled that any contract or agreement that seeks to circumvent the security of tenure is void ab initio (void from the beginning). Even if an employee signs a new contract agreeing to be "downgraded" to a contractual status, the law generally views this as a "waiver of rights," which is against public policy.
3. Common Schemes and Their Legal Consequences
| Scheme | Legal Status | Reasoning |
|---|---|---|
| Re-probationary Status | Illegal | You cannot be "tried out" for a job you have already proven you can do by attaining regular status. |
| Regular to Fixed-Term | Highly Suspect | Usually viewed as a scheme to bypass security of tenure unless there is a genuine break in service and a completely different job scope. |
| Forced Resignation & Re-hire | Illegal | This is considered Constructive Dismissal. The "new" contract is often ignored by the NLRC in favor of the original regular status. |
4. The Principle of Non-Diminution of Benefits
Under Article 100 of the Labor Code, there is a prohibition against the diminution of benefits. While this usually refers to monetary compensation and allowances, the Supreme Court has extended this logic to the "status" of employment.
Moving an employee from a regular status (with its inherent protections) to a non-regular status (with fewer protections) is a significant "diminution" of the terms and conditions of employment.
5. When Can an Employee’s Status Change?
The only legal way an employee’s status changes from regular is through:
- Promotion: Moving to a higher rank (which should increase, not decrease, benefits).
- Valid Termination: If the employee is fired for a Just Cause (e.g., Gross Negligence, Theft) or an Authorized Cause (e.g., Redundancy, Retrenchment).
- Voluntary Resignation: A truly voluntary exit from the company without coercion.
Important Note: If an employee is "terminated" due to redundancy and then immediately rehired as a "contractual" worker for the same role, the company can be sued for Illegal Dismissal. The law sees this as a bad-faith attempt to evade labor standards.
6. Consequences for the Employer
If a company is found to have illegally "deregularized" an employee, the National Labor Relations Commission (NLRC) typically imposes the following:
- Reinstatement: The employee must be returned to their regular position.
- Full Backwages: Payment of all salaries and benefits lost from the time the status was changed until reinstatement.
- Moral and Exemplary Damages: If the act was done in bad faith or in a wanton/oppressive manner.
- Attorney's Fees: Usually 10% of the total monetary award.
Summary
In the Philippines, deregularization is a legal myth. An employer cannot unilaterally—or even through a forced mutual agreement—strip an employee of their regular status. The law protects the worker's right to stay regular until a valid, legal reason for separation arises. Any attempt to "revert" an employee to a lower status is a violation of the Labor Code and the 1987 Constitution.