Contract Law

All businesses inherently deal with contracts, even if they are unwritten, as with many
transactions involving goods or services. Since a contract is a legally binding agreement,
and even an honest contractual mistake can cause serious problems, it is crucial that small
business owners have at least a basic understanding of contract law. This section covers
the basics of contract law and how it relates to the many facets of running a business,
including articles on when a verbal agreement carries the weight of a contract, the meaning
of "breach of contract," which contracts must be in writing, and related topics.
The Philippine government has taken steps to ensure that contractual employees are as
protected by law as permanent employees. In 2011, the Department of Labor and
Employment issued Department Order 18-A, Series of 2011, which lists the employees’
rights (Section 8) that contractual employees are entitled to, as well as the guidelines for the
employment contract.
What are the rights of a contractual worker?
So what are the rights of a contractual employee? Here goes:
1. Safe and healthful working conditions
Whether your position is a desk job or it entails a lot of physical labor, your employer should
ensure that your health isn’t compromised at work. Your employer should take steps to
safeguard your health and well-being while on the job.
2. Service incentive leave, rest days, overtime pay, holiday pay, 13th month pay, and
separation pay
Aside from your wage or salary, you should also be given paid time off, as well as additional
pay for any work done beyond your contract’s work hours, 13th month pay and a separation
pay if your employment is terminated early.
3. Retirement benefits under the SSS or retirement plans of the contractor, if there is any
If your employer has a retirement plan for their permanent employees, you should also be
granted the same benefit.
4. Social security and welfare benefits
Your employer must also grant you SSS, PhilHealth, and Pag-Ibig benefits, just like any
other permanent employee.
5. Self-organization, collective bargaining and peaceful concerted action
Contractual employees may also join or form employee unions, collective bargaining
agreements, and join peaceful demonstrations or protests. Your employment shouldn’t be
in jeopardy should you decide to join a union, which might result to your termination of
employment.
6. Security of tenure
You should be ensured secure employment for the duration stated on your employment
contract, unless your employer has a defensible reason for early termination (such as your
inability to perform tasks specified in contract) and has terminated you under due process.
What You Should Look For In Your Contract
Your job contract is an official legal agreement between you and your employer, ensuring
that both parties will do their best to adhere to the terms. Performing well at work is how you
make sure you stick to the contract, while your company’s job is to grant you your rightful
compensation and humane treatment.

If you’re a contractual employee, you should also ensure that your employment contract
includes the following terms and conditions:
1. The specific description of the job, work or service to be performed by the employee
Ensure that your actual work done matches the description in your employment contract.
2. The place of work and terms and conditions of employment, including a statement of the
wage rate of the individual employee
Your contract should specify where you should work and the specific terms and conditions
of your employment (e.g. Is your contract renewable? Is there a confidentiality agreement
or a non-competition clause?)
3. The term or duration of employment, which shall be coextensive with the contract of the
principal and subcontractor, or with the specific phase which the contractual employee is
engaged
The length of your employment should coincide with the time span of the project or contract
that you were hired for and should be specified in your job contract.
4. The contractor or subcontractor shall inform the contractual employee of the foregoing
terms and conditions on or before the first day of his employment.
Before you even begin working for your employer, they should go through the terms and
conditions of your employment. Make sure you know what you’re getting yourself into before
you start working.
A contractual position can sound like a risky job to accept. And it’s true; it can be a bit of a
gamble, but don’t let that be the only deciding factor in accepting or rejecting the position. If
you do decide to accept the job offer, guarantee that your future employer will take the
required steps to ensure the protection of your rights as a contractual employee. Knowing
what you’re getting yourself into and being aware of your legal rights will give you the
preparation you didn’t know you needed on your first day at work.
The Associated Labor Unions (ALU) announced that contractual workers, just like rank-and-
file employees, are entitled to a 13th month pay.
With this, ALU spokesperson Alan Tanjusay told contractual workers to assert their rightful
claim to it because it is mandated by law as incentive to workers for helping boost economic
growth.
“All rank-and-file employees regardless of position, designation or employment status have
all the right to claim their thirteenth month pay cash bonus. Even if you are employed for
even at least a month during the calendar year or receiving salary of PHP1,000 per month,
they can avail of this bonus,” he said.
The ALU official clarified that 13th month pay is different from the Christmas bonus, which
is not mandated by law but is a discretionary act of goodwill on the part of the employers. It
may come in the form of cash or kind or combination of both.
But, he noted that the minimum 13th month pay is required by law. The said incentive must
be equivalent to a month’s basic pay excluding allowances, overtime pay, premium pay,
night shift differential, holiday pay, profit-sharing payments, cash equivalent of unused
vacation and sick leave.
Tanjusay said the bonus must be received in cash, not in kind.
“Employers must give it in cash. If employers convert it to rice or grocery items, it’s not 13th
month pay bonus anymore. The bonus must be in cash. If they want to give rice and grocery
items, it is welcome but it must be received as additional bonus,” he added.
Computation of 13th Month Pay
According to rules and regulation of Presidential Decree 851 otherwise known as 13th Month
Pay Law, the 13th month pay shall be paid not later than December 24.
However, an employer may give his or her employees half of the 13th month pay before the
opening of the regular school year and the remaining half on or before December 24 every
year.
There are around 920,000 establishments in the country employing 39 million workers in
various major industry enterprises including agriculture, manufacturing and services sectors.
All ranked and file employees regardless of their designation or employment status who
have worked at least one month during the calendar year are entitled to a 13th month pay.
The 13th month pay shall be in the amount not less than 1/12 of the total basic salary earned
by the employee within the Calendar day.
Example: Let say an employee basic salary is Php15,000 per month and had worked for 10
months, the 13th month computation is:

(Php15,000 X 10 months) / 12= Php12,500.00

So PayrollHero keeps a record for every employee on how much has been accumulated for
13th Month benefits.
Every pay check will take 12th of the employee pay (Either Base pay or Gross pay,
depending on how the payment has been set up) and add this number to the accumulating
account.

Erica S. Peñafiel Homework #1

ABM12-C1