In a new landmark ruling on employment, the Philippine Supreme Court has affirmed that an employer-employee relationship begins the moment a job offer is signed – not on the first day of work. The decision carries significant implications for human resources policies, particularly in cases involving pre-employment withdrawal and redundancy.

The case in question involves Paolo Landayan Aragones and his would-be employer, Alltech Biotechnology Corporation. In April 2016, Aragones signed an offer for the role of Swine Technical Manager – Pacific, which came with a monthly salary of P140,000. He resigned from his previous position and prepared to join Alltech by July 2016.

However, before his official start date, Alltech informed him that the role had been scrapped as part of a global restructuring initiative. The company offered him a goodwill payout of P140,000 – equivalent to one month’s salary – as consolation. Unconvinced, Aragones pursued a complaint for illegal dismissal.

The case initially went through multiple turns in the legal maze. The labour arbiter sided with Aragones, but the National Labor Relations Commission (NLRC) overturned the decision, arguing that no formal employment had begun. This reversal was upheld by the Court of Appeals.

However, the Supreme Court’s Third Division saw the matter differently. In a 16-page ruling dated 2 April 2025 and released to the public recently, the Court concluded that employment contracts, like any legally binding agreement, are perfected once parties agree to the terms.

An employment contract, like any other contract, is perfected at the moment the parties come to agree upon its terms and conditions,” wrote Associate Justice Alfredo Benjamin Caguioa.

Alltech’s assertion that no employer-employee relationship existed because Aragones had not yet reported for duty did not hold water. The Court underscored that once a candidate accepts a job offer, both parties are already bound by its terms, regardless of whether the actual work has commenced.

A warning against rescinding job offers

This decision raises a red flag for HR leaders and legal teams that may assume job offers can be revoked without consequence prior to a start date. The Court cautioned that employers cannot simply declare redundancy without robust justification.

It is not enough for a company to merely declare redundancy; it must produce adequate proof of such redundancy,” the Court stated.

This includes documentation such as revised staffing patterns, feasibility studies, detailed job descriptions, and formal approvals by management.

In this case, Alltech failed to provide any such supporting evidence. The Court noted the absence of specifics in the company’s affidavit explaining how or why Aragones’ position was deemed redundant, which further undermined their defence.

As a result, the Supreme Court ruled in favour of Aragones and declared that he was illegally dismissed. Given that he no longer wished to be reinstated, the Court awarded him financial compensation instead. The ruling orders Alltech to pay Aragones:

• Backwages starting from 1 July 2016 until the finality of the decision
• Separation pay equal to one month’s salary for each year of service, starting from 1 July 2016 until the finality of the decision
• Attorney’s fees equivalent to 10% of the total monetary award
• Legal interest of 6% per annum on the judgment amount, to be computed from the time the decision becomes final until full payment is made

The labour arbiter has been tasked with computing the exact amounts due.

Declaring redundancies and its consequences

From a broader perspective, this case highlights the legal risks of rescinding job offers and the importance of following due process in declaring redundancy. It serves as a cautionary tale for businesses navigating workforce changes, especially during organisational restructuring.

The Supreme Court’s firm stance proves the acceptance of a job offer is not just symbolic – it’s binding. Employers must think twice before pulling the rug out from under candidates who have already committed, lest they find themselves paying dearly for a misstep.