Dear Attorney,

I hope this message finds you well. I am reaching out to seek your legal advice regarding a matter that has become a growing concern for me and my colleagues. Despite years of service under a contractual employment arrangement with a private company, our wages have remained stagnant. This is disheartening, given the length of time we have been with the company and the increasing cost of living.

We feel that our contributions and loyalty to the organization have not been appropriately recognized, as our salaries have not seen any adjustments even after repeated inquiries. Is there any legal recourse or protection under Philippine labor law for employees in our situation? What steps can we take to address this issue, and what are our rights as contractual workers when it comes to wage adjustments?

Thank you for your guidance.

Sincerely,
A Concerned Contractual Employee

Comprehensive Legal Analysis on Wage Stagnation for Contractual Employees

The issue of stagnant wages for long-term contractual employees is a complex and recurring concern in the Philippine labor landscape. To understand the problem and identify potential remedies, it is crucial to analyze the existing legal framework, relevant jurisprudence, and the practical realities of employment contracts. Below is a detailed breakdown of the applicable laws, rights, and options for affected workers.

1. The Nature of Contractual Employment

Contractual employment, also referred to as fixed-term employment, is characterized by a pre-determined duration of engagement or completion of specific projects. Under Philippine labor laws, this arrangement is typically governed by the employment contract, which outlines the scope of work, duration, and compensation.

Legitimate Use of Contractual Employment

The Department of Labor and Employment (DOLE) permits contractual arrangements for valid purposes, such as seasonal work, project-based tasks, or specialized assignments.
Employers are required to respect the agreed-upon terms and are generally not obligated to extend the contract or provide wage increases unless stipulated in the employment agreement.

Issues with Wage Stagnation

One of the most pressing challenges for contractual employees is the absence of legal provisions mandating periodic wage increases, even for long-term engagements or recurring contracts.
Unlike regular employees, who may benefit from collective bargaining agreements (CBAs) or company-wide salary adjustment policies, contractual workers rely solely on the terms of their contracts.

2. Relevant Laws and Policies

A. Labor Code of the Philippines

The Labor Code provides the foundational legal framework for employment in the Philippines, but its provisions concerning wage increases and employment regularization do not automatically apply to contractual workers.

Minimum Wage Compliance (Article 99–122)
- Employers must comply with the prevailing minimum wage rates set by the Regional Tripartite Wages and Productivity Board.
- Wage stagnation is legally permissible as long as the employer adheres to these minimum standards.
Provisions on Regularization (Article 280)
- Employees who perform "usually necessary or desirable" tasks and have worked for more than six months may be entitled to regular employment status.
- Employers often circumvent this by terminating contracts before six months or justifying fixed-term arrangements under lawful exceptions.

B. DOLE Department Order No. 174, Series of 2017

This regulation aims to protect contractual employees by:

Requiring contractors and subcontractors to comply with labor standards, including proper payment of wages.
Prohibiting labor-only contracting, which occurs when the contractor merely supplies workers without substantial capital or control over work conditions.

While this order strengthens protections against exploitative practices, it does not address wage adjustments for long-term contractual workers.

3. Jurisprudence on Long-Term Contractual Employment

Several Supreme Court rulings highlight the nuances of contractual arrangements:

Brent School, Inc. v. Zamora (1990)
- This case established the legality of fixed-term contracts as long as both parties voluntarily agreed to the arrangement and it was not intended to circumvent labor laws.
Abbott Laboratories v. Alcaraz (2013)
- The Court emphasized that employers cannot disguise regular employment under a series of fixed-term contracts without valid justification.
Escario v. NLRC (2011)
- The Court ruled that repeated renewals of contracts could indicate an employer-employee relationship that warrants regularization.

While these cases provide insight, they primarily address regularization rather than wage increases, leaving contractual workers with limited remedies in cases of stagnant pay.

4. Wage Adjustments: Rights and Realities

Contractual Workers’ Rights

Right to Fair Compensation: Contractual workers are entitled to wages at least equal to the minimum wage.
Right to Non-Discrimination: Employers must ensure that contractual employees are not unfairly treated compared to regular workers performing similar tasks.

Limitations

The law does not impose an obligation on employers to increase wages for contractual employees, even after multiple renewals of their contracts.
Contractual employees do not benefit from tenure-based salary adjustments, as these are often reserved for regular employees.

5. Possible Remedies for Contractual Workers

A. Negotiation

Contractual workers can initiate discussions with their employer to negotiate for wage increases, citing their tenure, performance, and rising living costs.

B. Filing a Complaint with DOLE

Workers may file a complaint if their wages fall below the minimum or if they suspect unfair labor practices.

C. Pursuing Regularization

Employees who believe they have been improperly classified as contractual may file a case for regularization. If granted, they become entitled to benefits, including periodic wage increases.

D. Collective Efforts

Forming or joining a workers' association can strengthen bargaining power and potentially lead to wage adjustments or better contractual terms.

6. Legislative Gaps and Proposals

The issue of stagnant wages highlights broader policy gaps, including:

The need for clearer guidelines on wage adjustments for contractual workers.
Proposed legislation, such as the Security of Tenure Bill, which seeks to limit abusive contractualization practices.

While progress has been slow, continued advocacy is essential to achieving meaningful reforms.

Conclusion

Contractual employment is a legitimate arrangement under Philippine law, but its increasing prevalence underscores the need for stronger protections for workers. Stagnant wages, while not explicitly unlawful, raise significant equity concerns, especially for long-term workers. Contractual employees should consider their options carefully, from negotiation to legal action, while advocating for systemic changes to labor policies.

If you or your colleagues wish to pursue legal remedies or engage in advocacy efforts, consulting a labor lawyer for personalized advice would be a prudent next step. Your rights as workers deserve to be acknowledged and upheld.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.