July 23, 2012 Ma. Ces Curameng Human Resources Manager American Power Conversion (A.P.C.) B.V.

Lot 1, Block 5, Phase 2, PEZA, Rosario, Cavite

Dear Madam: This is in response to your query during our meeting last July 18, 2012 requesting for my opinion on whether repeated re-hiring of temporary worker may result in risk of having the said employee attain regularization. According to the facts you mentioned in the said meeting, there was a temporary worker that is being repeatedly rehired for various purposes and not based on specific project. In reply to thereto, please be informed that Article 280 of the Labor Code differentiate regular employment, project or seasonal employment, and casual employee. The said Article of the Labor Code provides: The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. The Supreme Court in interpreting the provision of the preceding Article of the Labor Code differentiates the three kinds of employment. In Cosmos Bottling Corporation versus NLRC, the Supreme Court provides: The first paragraph provides that regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual trade or business of the employer.

A project employee, on the other hand, has been defined to be one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. The second paragraph of the provision defines casual employees as those who do not fall under the definition of the first paragraph. However, with respect to the first two kinds of employee, the principal test for determining whether an employee is a project employee or a regular employee is whether or not the project employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employee was engaged for that period. In a recent case decided by this Court, the nature of project employment was explained. We noted that in the realm of business and industry, project, could refer to at least two (2) distinguishable types of activities. First, a project could refer to a job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. Second, a project could also refer to a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertakings also begins and ends at determined or determinable times. Regardless of whether or not the project is within the regular or usual business of the employer, the requirement is that it should begin and ends at determined or determinable times. Therefore it is important for the Company to determine the exact duration or termination of the project at the time of the engagement and this must be clearly explained to the employee. The duration or termination cannot also be dependent on any conditions (e.g. completion of work or stages of project). Otherwise, the company is at risk of having such a project employee becoming a regular employee. In Violeta versus NLRCc, the Supreme Court ruled as follows: The predetermination of the duration or period of a project employment is important in resolving whether one is a project employee or not. On this score, the term period has been defined to be a length of existence; duration. A point of time marking a termination as a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A time of definite length or the period from one fixed date to another fixed date. Following the rule on precedents, we once again hold that the respective employment of the present petitioner is not subject to a term but rather to a

condition, that is, progress accomplishment. As we have stated in De Jesus, it cannot be said that their employment has been pre-determined because, firstly, the duration of their work is contingent upon the progress accomplishment and, secondly, the contract gives private respondent the liberty to determine the personnel and the number as the work progresses. It is ineluctably not definite so as to exempt the private respondent from the structures and effects of Article 280. With such ambiguous and obscure word and conditions, petitioners employment was not co-existence with the duration of the their particular work assignments because their employer could, at any stage of such work, determine whether their services were needed or not. Their services could then be terminated even before the completion of the phase of work assigned to them. To be exempted from the presumption of regularity of employment, therefore, the agreement between a project employee and his employer must strictly conform with the requirements and conditions provided in Article 280. It is not enough that an employee is hired for a specific project or phase of work. There must also be a determination of or a clear agreement on the completion or termination of the project at the time the employee is engaged if the objective of Article 280 is to be achieved. Since this requirement was not met in the petitioners case, they should be considered as regular employees despite their admissions and declarations that they are project employees made under the circumstances unclear to us. Also, what is the effect if a project employee was repeatedly rehired continuously (without gap) after the cessation of a project? He may become a regular employee as well. In Tomas Lao versus NLRC, the Supreme Court ruled: While it may be allowed that in the instant case the workers were initially hired for specific projects or undertakings of the Company and hence can be classified as project employees, the repeated re-hiring and the continuing need for their services over a long span of time (the shortest, at seven years) have undeniably made them regular employees. Thus, we held that where the employment of project employee is extended long after the supposed project has been finished, the employees are removed from the scope of the project employees and considered regular employees. While the length of time may not be a controlling test for project employment, it can be a strong factor in determining whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary, and indispensable to the usual business or trade of the employer. IN the case at bar, private respondents had already gone through the status of project employees. But their employments become non-coterminous with specific projects when they are started to be continuously rehired due to the demands of the petitioners business and were re-engaged for many more projects without interruption.

It is clear therefore, that continuously re-hiring the same project employees may result in them becoming regular employees. What about casual employees? The second paragraph provides that if a casual employee has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. This has been upheld by the Supreme Court in various rulings (Arrastre & Stevedoring versus Boclot/PLDT versus Arceo/De Leon versus NLRC). In PLDT versus Arceo, the Supreme Court ruled as followed: Under the foregoing provision, a regular employee is (1) one who is either engaged to perform activities that are necessary or desirable in the usual trade or business of the employer or (2) a casual employee who has rendered at least one year of service, whether continuous or broken, with respect to the activity in which he is employed. Under the first criterion, respondent is qualified to be a regular employee. Her work, consisting mainly of photocopying documents, sorting out telephone bills and disconnection notices, was certainly necessary or desirable to the business of PLDT. But even if the contrary were true, the uncontested fact is that she rendered service for more than one year as a casual employee. Hence, under the second criterion, she is still eligible to become a regular employee. Petitioners argument that respondents position has been abolished, if indeed true, does not preclude Arceos becoming a regular employee. The order to reinstate her also included the alternative to reinstate her to a position equivalent thereto. Thus, PLDT can still regularize her in an equivalent position. In summary therefore, existing jurisprudence of repeated hiring is well settled. Repeated hiring of the same worker may show that the said employee is performing functions that are usual and necessary to the trade or business of the employer. It is imperative therefore that if the temporary worker mentioned is considered a project employee, there should be specific undertakings and the duration is determined at the time of engagement. The said employee cannot be continuously rehired as well (without gap). On the other hand, if the said employee is considered a casual employee, he or she must be hired for at least one year (even with gap or intermittent) as he or she will be considered regular employee. Further Section 7.A.7 of DOLE DO 18-A prohibits repeated hiring of employees under an employment contract of short duration or under Service Agreement of short duration with the same or different contractors, which circumvents the Labor Code provisions on Security of Tenure. It is to be noted that my opinion is provided based on the information as presented. We may not know all circumstantial facts (e.g., the actual contract of the temporary employee and the history of hiring). Hence my opinion is not a valid substitute for

legal opinion. Although my opinion is based on a very detailed research, nevertheless I may have overlooked certain matters. Finally, my opinion is strictly for internal use only and may not be used in any legal proceeding.

Sincerely yours, Eumell Alexis S. Pale, CIA, CPA, RCA General Ledger Process Manager Schneider Electric IT Logistics Lot 1, Block 5, Phase 2, PEZA, Rosario, Cavite

Originally APCs work week is from Monday to Friday (8am to 5pm) and Saturday (8am to 2pm). Therefore only 5 hours are worked every Saturday. As of the date of this writing, we are aware that the company employs a compressed work week scheme but we are not aware if such was approved by the DOLE.