1) The typical fact pattern

This issue usually arises in arrangements like security services, janitorial, manpower, logistics, construction support, manufacturing auxiliaries, and other “contracted-out” functions:

A principal/client (the company where the work is performed) has a service contract with a contractor/subcontractor (the entity that hired and deploys the workers).
The workers report daily at the principal’s premises, but their employer on paper is the contractor.
Something happens: the principal ends the service contract, changes vendors, reduces headcount, or the contractor loses the account.
The contractor then pulls out workers—sometimes abruptly, sometimes verbally, sometimes via supervisor text—often with instructions like: “Umuwi muna kayo,” “floating muna,” “hintay ng tawag,” “lipat tayo,” or “tapos na kontrata.”

The legal questions that follow are predictable:

Was there a dismissal? Or a lawful temporary layoff (floating status)?
Was due process observed?
Who is liable—the contractor, the principal, or both?
What monetary awards can workers recover if it is illegal dismissal?

This article explains the legal landscape under Philippine labor law.

2) The governing legal framework (what rules apply)

A. Security of tenure and valid causes for termination

Under Philippine labor law, an employee may be terminated only for:

Just causes (employee fault/misconduct), or
Authorized causes (business reasons not based on employee fault), or
Special cases (e.g., project completion for true project employees; expiry of valid fixed-term employment).

A contractor “pulling out” workers because an account ended is not automatically a valid termination ground by itself. It may lead to an authorized cause situation (e.g., redundancy, retrenchment, closure), or it may justify temporary layoff/floating status, but it does not erase statutory protections.

B. Procedural due process: different standards for just cause vs authorized cause

Philippine law distinguishes the cause from the process:

Just cause termination (employee fault): generally requires the two-notice rule and opportunity to be heard:
1. Notice of charge(s) + directive to explain,
2. Notice of decision (termination), after considering the employee’s explanation (and hearing/conference when needed).
Authorized cause termination (business reasons): requires written notice to:
1. the employee, and
2. the Department of Labor and Employment (DOLE), typically at least 30 days before the effective date (plus the correct separation pay when applicable).

A contractor that ends employment due to loss of account but skips required written notices faces serious exposure—even if the underlying business reason is legitimate.

C. Temporary layoff / “floating status” (Labor Code concept)

Philippine law allows bona fide suspension of operations or temporary layoff (commonly called “floating status”), but with strict limits:

It must be genuine (not a pretext to terminate).
It must be temporary.
It must not exceed six (6) months. After 6 months, if the employee is not recalled to work, it commonly ripens into constructive dismissal/illegal dismissal unless a lawful termination is executed with proper notices and payments.

3) Contractor vs principal: who is the employer?

A. General rule in legitimate contracting

In legitimate job contracting, the workers are employees of the contractor, not the principal. The contractor controls hiring, wages, discipline, and deployment, and has substantial capital/investment and independence.

In this setup:

The contractor is primarily responsible for wages and legal compliance.
The principal may become solidarily liable for certain labor standards violations and/or as provided by law/regulations, depending on the issue.

B. Labor-only contracting: the exception that changes everything

If the arrangement is labor-only contracting (a prohibited scheme), the principal can be treated as the employer for legal purposes. This can shift or expand liability dramatically.

Red flags often associated with labor-only contracting include:

Contractor has no substantial capital/investment or lacks independence;
Workers perform tasks directly related to the principal’s main business and the contractor merely supplies manpower;
Principal exercises control over the means and methods of the workers’ work (beyond results).

If labor-only contracting is found, workers may assert rights as if they were employed by the principal, including security of tenure protections against the principal.

4) What “pulled out without written notice” legally means

A “pull-out” can be one of several legal things, depending on what actually happens after the pull-out:

Scenario 1: Pull-out + immediate reassignment with no loss of pay/work

If workers are pulled out from Site A but are promptly reassigned to Site B with continuous work and no diminution of wages/benefits, it may be a management prerogative (within limits), not a dismissal.

Scenario 2: Pull-out + instructed to wait / “floating muna” (no work, no pay)

This is the classic floating status situation. It can be lawful only if:

The contractor is truly unable to provide work temporarily,
The status is not used to punish or force resignation,
The layoff does not exceed 6 months, and
The employer acts in good faith to recall/redeploy.

Even though floating status is not “termination,” it still carries risk if handled loosely:

No written advisory at all, no clarity, no timeline, no redeployment effort → looks like constructive dismissal.

Scenario 3: Pull-out + told “terminated” / “end of contract,” no notices, no pay

If the worker is effectively severed from employment and not recalled, it is a termination. If no valid cause and/or no due process, it is likely illegal dismissal.

Scenario 4: Pull-out + forced resignation, quitclaim pressure, or “absent ka na lang”

If the employer pressures employees to resign, sign quitclaims, or “AWOL” them to sanitize a pull-out, this often supports constructive dismissal and bad faith.

5) Floating status explained: what it is, what it isn’t

A. What floating status is

Floating status is a legally recognized temporary suspension of work due to bona fide business conditions (e.g., loss of account, temporary lack of postings, suspension of operations). The employment relationship continues; the employee is not “terminated” yet.

B. Pay during floating status

As a general principle:

No work, no pay applies.
But the employer must not illegally withhold earned wages, 13th month pay accrual rules must be applied correctly, and statutory benefits must be handled lawfully based on actual rules and remittances.

C. The 6-month rule (critical)

If an employee is kept on floating status beyond 6 months without recall or lawful termination, it commonly becomes constructive dismissal. Employers cannot “float” workers indefinitely to avoid legal obligations.

D. Floating status is not a loophole to terminate without due process

Floating status is supposed to be temporary. If the contractor already knows it has no accounts and no realistic redeployment plan, “floating” becomes a façade for termination without compliance.

6) Due process obligations in pull-out cases

A. If the employer treats it as floating status

While the Labor Code does not present a single “two-notice rule” template for floating status (since it’s not disciplinary termination), good compliance practice in the Philippines is to provide a written advisory that clearly states:

The reason for temporary layoff (e.g., loss of account, temporary suspension),
The expected period and that it will not exceed 6 months,
The process for recall/redeployment (how and where the employee will be contacted),
Reporting requirements (if any) that are reasonable and not designed to create “abandonment,”
Assurance that employment subsists.

Failure to give any written advisory isn’t automatically illegal by itself, but it makes the employer’s story weaker and can support claims of constructive dismissal, especially when coupled with prolonged inactivity, non-responsiveness, or refusal to redeploy.

B. If the employer terminates due to business reasons (authorized causes)

If the contractor decides that the loss of account results in termination (e.g., redundancy/retrenchment/closure), the contractor typically must:

Serve written notice to the employee, and
Serve written notice to DOLE, usually at least 30 days before the effectivity date, and
Pay the proper separation pay (unless a recognized exception applies, such as closure due to serious business losses in appropriate cases).

Skipping the written notices exposes the employer to findings of procedural defect. In Philippine jurisprudence, even when a valid cause exists, failure to comply with notice requirements can result in nominal damages (amount depends on the circumstances and prevailing case law).

C. If the employer alleges a just cause (e.g., abandonment)

Employers sometimes respond to prolonged “floating” disputes by accusing workers of abandonment. Abandonment is not simply absence or failure to report once. It generally requires:

Failure to report for work without valid reason, plus
A clear intention to sever the employment relationship.

In pull-out disputes, abandonment claims often fail when:

The worker was the one told to “wait,”
There was no valid recall notice,
The worker filed a complaint (filing a case is typically inconsistent with intent to abandon).

7) Illegal dismissal and constructive dismissal in this context

A. What counts as illegal dismissal here

Illegal dismissal may be found when:

There is no valid cause (just/authorized), or
There is a valid cause but required due process is not observed (procedural defect), or
The worker is placed on “floating” status beyond 6 months without recall or lawful termination, or
The employer’s actions effectively force the worker out (constructive dismissal).

B. Constructive dismissal: the common pull-out variant

Constructive dismissal occurs when continued employment becomes impossible, unreasonable, or unlikely, or when there is demotion/diminution or a situation indicating the employer no longer intends to honor the employment relationship.

In pull-out cases, constructive dismissal is often alleged when:

The worker is pulled out and left in limbo indefinitely,
The employer stops responding and provides no posting,
The worker is barred from entering the worksite with no reassignment,
The employer conditions redeployment on unlawful concessions (e.g., “sign a waiver,” “accept lower pay,” “resign first”).

C. Burden of proof

In Philippine labor disputes, once dismissal is alleged, the employer bears the burden of proving that the dismissal was for a valid cause and that due process was observed. Contractors who rely on verbal instructions, undocumented recall efforts, or vague “end of contract” narratives are at a disadvantage.

8) “End of contract” is not a magic phrase

A frequent defense is: “Tapos na kontrata kaya tanggal na kayo.”

Whether that is valid depends on the real employment status:

If the worker is a true project employee and the project is completed, termination at project completion can be valid (with required reporting/requirements and proper classification).
If the worker is a fixed-term employee under a valid fixed-term contract, expiry may end employment (but fixed-term arrangements are scrutinized).
If the worker is a regular employee of the contractor (common in manpower agencies with repeated deployments), the mere expiration of a service agreement between contractor and principal does not automatically terminate the employee’s employment. The contractor must redeploy, lawfully float (within limits), or terminate via authorized causes with notices and separation pay when required.

In other words, the service contract ending is a business event between contractor and principal; it is not automatically a lawful termination event for the worker.

9) Liability: contractor, principal, or both?

A. Contractor’s liability

The contractor is usually the direct employer and is responsible for:

Wages and benefits,
Compliance with termination due process,
Proper handling of floating status,
Separation pay when required.

B. Principal’s potential liability

Even in legitimate contracting, principals may face exposure depending on the issue:

Statutory/regulatory rules may impose solidary liability for certain labor standards violations and compliance failures.
If the arrangement is found to be labor-only contracting, the principal can be treated as the employer, which can include liability for illegal dismissal and reinstatement-related consequences.

Because of these stakes, principals often require contractors to shoulder employment risks contractually—but contractual allocations do not necessarily defeat statutory worker protections.

10) Remedies and monetary consequences if dismissal is illegal

When illegal dismissal is found, typical remedies may include:

A. Reinstatement and backwages

Reinstatement to the former position (or substantially equivalent), and
Full backwages from dismissal until actual reinstatement.

If reinstatement is not feasible due to strained relations or other recognized reasons, separation pay in lieu of reinstatement may be awarded, depending on circumstances and doctrine applied.

B. Separation pay in authorized cause terminations

If termination is for authorized causes, separation pay depends on the specific cause (e.g., redundancy often higher than retrenchment). Failure to pay correct separation pay supports money claims and can be an indicator of bad faith.

C. Nominal damages for procedural defects

Philippine jurisprudence recognizes nominal damages when:

There is a valid cause, but due process requirements (notices) were not properly observed.

The amount varies by circumstances and doctrinal line (often discussed in leading cases like Agabon and Jaka).

D. Attorney’s fees

Attorney’s fees may be awarded in certain cases, especially when the employee is forced to litigate to recover lawful wages/benefits or due to unlawful termination (subject to standards applied by labor tribunals).

E. Money claims (independent or additional)

Depending on facts:

Unpaid wages, overtime, holiday pay, service incentive leave, 13th month pay differentials,
Underpayment due to misclassification,
Non-remittance issues may have separate consequences.

F. Quitclaims and waivers

Quitclaims are not automatically invalid, but they are closely scrutinized. If there is:

Undue pressure,
Unconscionably low consideration,
Lack of voluntariness or understanding, they may be disregarded.

11) What employers should document (and what employees should keep)

A. For contractors/employers (best practice compliance file)

Written pull-out advisory (if floating),
Deployment/redeployment offers with dates, locations, and wages,
Proof of employee receipt (signature, registered mail, credible service),
DOLE notice (if authorized cause termination),
Separation pay computation sheet and proof of payment,
Clear HR memos showing good faith effort to recall within 6 months.

B. For employees (useful evidence in disputes)

Text messages/GC messages about pull-out and instructions to “wait,”
Gate pass/incident reports showing denial of entry,
Payslips, contracts, IDs, DTRs, schedules,
Any written communications requesting posting and employer responses (or lack thereof).

12) Practical legal analysis checklist (how cases are usually decided)

Labor tribunals often resolve pull-out disputes by walking through these questions:

Who is the employer—contractor, principal, or both (labor-only vs legitimate contracting)?
Did the employer terminate the employee, or merely place them on floating status?
If floating:
- Was the lack of posting bona fide?
- Were there real redeployment efforts?
- Did it exceed 6 months?
If terminated:
- Was there a valid cause (just or authorized)?
- Was due process observed (proper notices, DOLE notice when required)?
- Were statutory payments (e.g., separation pay) made when required?
If procedural defects exist:
- Are there nominal damages or other monetary consequences?
Final remedy:
- Reinstatement/backwages or separation pay in lieu, plus money claims if proven.

13) Key takeaways

A contractor/subcontractor cannot lawfully treat “loss of account” as an automatic employee termination without following Philippine labor law requirements.
Floating status is allowed, but it must be genuine, temporary, and not beyond 6 months.
Written notices matter most when the employer is terminating employment (especially authorized causes requiring employee + DOLE notice), but lack of written documentation also weakens an employer’s defense even in “floating” scenarios.
If workers are left in limbo, ignored, not recalled, or floated beyond six months, the situation often becomes constructive/illegal dismissal.
Liability can extend to the principal depending on the contracting arrangement and statutory/regulatory rules, and especially if the setup is labor-only contracting.