End of Endo Revisited

Outline
Rules on Job Contracting
DO 174-17
DO 150-16
Labor Inspection
DO 183-17
AO 164-17
LA 06-17
EO 51
Pending Legislation
SB 1116
HB 6809
Job Contracting

Types
Principal and Individual Contractor

Principal and Job Contractor

Contract with another person for performance of
principal’s work
Principal Contractor Employee
Statutory Basis

Article 106-109 LC-Salient Points

Failure of contractor to pay wages/violation
of LC
Employer jointly and severally liable
Power of Secretary of Labor
Restrict or prohibit contracting out of labor to
protect rights of workers
Make appropriate distinctions between labor-
only contracting and job contracting
Determine who is the employer
Statutory Basis

Article 106-109 LC-Salient Points

Labor only contracting (LOC):
No substantial capital or investment in the form of
tools, equipments, machineries, work premises
Workers recruited and placed are performing
activities directly related to principal business of
employer
If agency is LOC, the latter’s employees
are considered employees of the principal.
Bond
Equal to cost of labor under contract
To answer for wages due the employees
DO 174-17

Permissible Contracting or LJC

Engaged in distinct and independent business and
undertakes to perform job or work on its own
responsibility, according to its own manner and
method
Has substantial capital to carry out the job farmed by
the principal on his account, manner and method,
investment in the form of tools, equipment,
machinery and supervision
Free from the control and direction of principal
Service Agreement ensures compliance with all rights
and benefits labor laws
DO 174-17

LOC
Contractor does not have substantial capital
or investments and the employees recruited
are performing activities which are directly
related to the main business of the
principal; or
Contractor does not exercise the right to
control over the performance of the work of
the employee.
DO 174-17

Other LOC-Fake Contractor

“Cabo”
Person or group of persons or labor group
In-house agency
Owned, managed or controlled directly or
indirectly by principal
Principal or any of its officers owns/represents
any equity or interest and agency operates
solely or mainly for the principal
In-house cooperative
DO 174-17

Other LOC-Defeating Right to Self-

Organization
Contracting out job by reason of strike or
lock-out
Contacting out work performed by union
members and such interfere with, restrain
or coerce employees in the exercise of right
to self-organization
UNDERSCORED IN EO 51
DO 174-17
Other LOC-Circumventing Right to
Security of Tenure
Requiring contractor employees to perform
functions currently being performed by regular
employees of principal
Repeated hiring by contractor/subcontractor of
employees under contract of short duration
Requiring employees to sign a contract fixing
the period of employment to a term shorter than
the term of the Service Agreement
Other practices or schemes
UNDERSCORED IN EO 51
DO 174-17

Other LOC-Circumventing Right to

Labor Standards
Requiring antedated resignation letter; a
blank payroll; a waiver of labor standards
including minimum wages and social or
welfare benefits; or a quitclaim releasing the
principal, contractor or from any liability as
to payment of future claims
DO 174-17

Rights of Contractor’s Employees

Safe and healthful working conditions
Labor standards
Retirement benefits
Social security and welfare benefits
Self-organization, collective bargaining and
peaceful concerted activities including right
to strike
DO 174-17

Contract between Contractor and

Employee
Specific description of job or work
Place of work and terms and condition of
employment, including statement of the
wage rate applicable to the employee
Contractor shall inform employee of the
foregoing stipulations on or before the first
day of employment
DO 174-17

Service Agreement
Specific description of job or work, including
its term or duration
Place of work and terms and condition
governing contracting arrangement,
including amount of contracted job and
admin fee of 10%
Issuance of bond
DO 174-17

Solidary Liability
Failure to pay wages and other benefits
Principal as Direct Employer
LOC Finding
Violation of rights of contractor’s employees
and required contracts
DO 174-17

Effect of Termination of Employment

Prior to Expiration
Governed by Articles 297, 298 and 299
Pre-termination not due authorized cause
Unpaid wages and other benefits, including
unremitted SSS, Philhealth, Pag-ibig, ECC, to be paid
by party at fault
Expiration of Service Agreement
Employee may wait for re-employment within 3
months
Payment of separation benefits if cannot be placed
Expiration not a ground for termination
DO 174-17
Registration of Contractors
Failure to register: presumed LOC
Requirements
Application Form
Nature of Business and industry, number of regular
workers and total workforce, list of clients,
description of phases of contract, proof of
substantial capital
Accompaning Documents
AOI and by-laws, business permit, listing with proof
of ownership, AFS, sworn disclosure of not engaging
in LOC
Payment of Php100,000.00
DO 174-17
Registration of Contractors
Validity of registration: 2 years
Renewal
30 days before expiration
Renewal Fee: Php100,000.00
Semi-Annual Reporting
List of contracts
Number of workers
Proof of payment of SSS, Pag-ibig, PhilHealth, ECC
and taxes
Certified list of all cases filed against the
contractor
DO 174-17
Grounds for Cancellation
Misrepresentation of facts in application
Submission of falsified or tampered
application or supporting documents
Non-submission of service agreements
Non-submission of required semi-annual
report
Final findings of engaging in LOC
DO 174-17
Grounds for Cancellation
Non-compliance with labor standards and
working conditions
Violation of rights of contractor’s employees
and required contracts
Non-compliance with SSS, Pag-ibig,
Philhealth and ECC laws
Collecting fees not authorized by law
Violation of the provisions of the Labor Code
DO 174-17
Effect of Cancellation of Registration
On Contractor
Cannot engage as LJC
Cannot register as LJC
Officers cannot operate LJC

On existing service agreements with other

principals
Still valid until expiration
DO 174-17
Enforcement
DOLE
Access to records and premises
Right to copy
Question employee

Principal
Produce copy of service agreement
Contractor
Produce service agreement and employment
contract
DO 174-17
Other Salient Points
Tripartite Implementation and Monitoring
Compliance
Financial Relief Program
Enrollment in DOLE Programs on Improving
Compliance with Labor Standards
Exemption of PCAB contractors

“In industries covered by a separate regulation

of the DOLE or other government agency,
contracting therein shall be governed by these
Rules unless expressly provided otherwise.
Circular 01-17
DO 174-17 Not Applicable
BPOs
Knowledge Process Outsourcing
Legal Process Outsourcing
IT Infrastructure Outsourcing
Application Development
Hardware and/or Software Support
Medical Transcription
Animation Services
Back Office Operations/Support
Circular 01-17
DO 174-17 Not Applicable
BPOs
PCAB registered contractors
Except engaged in other contracting or sub-contracting
arrangement in addition to, or other than construction
activities
Private Security Agencies governed by DO 150-16
except registration requirements of DO 174-17
Other Contractual Relationships not Trilateral
Sale or lease contract
Contract of Carriage
Toll Manufacturing
Circular 01-17
DO 174-17 Not Applicable
Other Contractual Relationships not Trilateral
Growing/Growership Agreement
Contract of Management
Operation and Maintenance

Contracting Out Jobs to Professional or

Individual with unique skills and talents
Legal Basis for Inspection
Labor Code
Article 128

EO 51

DOLE Issuances
DO 183-17
AO 164-17
Article 128, LC
SOLE, duly authorized reps, including
labor regulations officers
Access to employer’s records and premises
at any time of day or night
Copy employer’s records
Question any employee
Investigate any fact, condition or matter
necessary to determine violations or aid in
the enforcement of the LC
Issue compliance orders based on findings
of labor and employment officers
Article 128, LC
Compliance Orders of authorized rep
may be appealed to the SOLE
Appeal must be perfected by posting cash or
surety bond
Work stoppage or suspension of
operations
Unlawful to obstruct, impede, delay or
otherwise render ineffective the
compliance orders
TRO or injunction prohibited.
DO 183-17
Modes of Implementation
Routine Inspection
Complaint Inspection
Occupational Safety and Health Standards
Investigation
Special Inspection Team
Group of labor inspectors
Reps from Regional Office, BWC, OSHC
Other DOLE agencies
DO 183-17
Officials Involved
Labor Law Compliance Officers (LLCO)
ER rep
Owner, president, vice president, manager or
other managerial employees
EE rep
Organized: union rep
Unorganized:
Rep from LMC, Compliance Committee, Safety and
Health Committee and Family Welfare Committee
In their absence, any rank and file ee present
Deputized representatives under AO 164-17
AO 164-17
Deputized reps are members of:
Legitimate Labor Organizations
Legitimate Workers Association
Chartered Local
National Union or Federation
Accredited Integrated Professional
Organizations/Accredited Professional
Organization
Non-Government Organization
Employer’s Organization
AO 164-17
Basic Qualifications for Deputized reps:
At least 18 years of age
High school graduate
No pending criminal, civil or administrative
cases
Member in good standing of participating
organization for two (2) years
Completed and passed training
requirements of DOLE
AO 164-17
SOLE shall issue General Authority to
Assess to qualified members
RD issue Authority to Assess to qualified
members on a per establishment basis
Authority to Assess may be revoked
after a finding of:
Threat or coercion of workers
Other ground prejudicial to public service
Routine Inspection
1st Step: RD issues Authority to Inspect
Presented by LLCO at establishment

2nd Step: Verification of Compliance

LLCO shall examine employment records,
interview ees, and inspect work premises
Deputized reps:
AO 164-17: may interview employees and
review records, but cannot copy or keep
affidavits of employees
This, however, has been modified by EO 51
Routine Inspection
2nd Step: Verification of Compliance
Under EO 51, deputized reps now have:
full access to employer records and
premises at any time of day and night
right to copy records, interview employees
and investigate any fact, matter or
condition necessary to determine
violations or aid in enforcement of labor
laws

3rdStep: Notice of Results

Compliant: subject to validation by RD
Routine Inspection
3rd Step: Notice of Results
Non-compliant: contents explained by LLCO
If you agree: sign to acknowledge findings
If you disagree: note comment on the Notice of
Results

4thStep: Period of Correction

Contracting deficiency: non-extendible
period of 10 days, unless there is
compromise
Routine Inspection
4th Step: Verification/Validation of
Compliance
Contracting correction:
Submit proof of compliance
Validation within 5 days from receipt of proof
5thStep: Failure to Correct
Becomes a labor contracting case
Complaint Inspection
Undertaken in any of the following:
SEnA referral
Anonymous Complaint
Request in conciliation-mediation
proceedings at NCMB to validate or verify
violation of labor standards

Procedure: same as Routine Inspection

Labor Contracting Case
1st Step: Mandatory Conference:
Only 2 postponements are allowed
Not exceed 30 days from first conference
Summary in nature
ER usually submits position paper
AO 164-17:
Deputized rep must be notified of dates of
conferences and can likewise attend thereat.
Deputized rep can present evidence in support
of LLCO findings or controvert employer
evidence.
Labor Contracting Case
2nd Step: Compliance Order:
Order to regularize workers:
During appeal, employment of workers ordered
to be regularized shall not be terminated.
EO 51: dismissal of workers ordered to be
regularized during pendency of appeal
renders the Order final and executory
AO 164-17: deputized reps can be given
copies of Compliance Order
Labor Contracting Case
2nd Step: Compliance Order:
Grounds for SOLE to dismiss case
LLCO findings have no basis in fact or law
ER presented substantial evidence to the
contrary
Correction made prior to issuance of order
Compromise Agreement
Analogous circumstances

3rdStep: Appeal to the SOLE

Appeal bond
AO 164-17: deputized rep can be given copy
of appeal.
Voluntary Regularization
ER may voluntarily regularize employees
1 st Step: ER submits Notice of Voluntary
Commitment
2 nd Step: Conduct of Joint Assessment
LLCO shall inspect premises, review
employment records and interview
employees.
LLCO issues Notice of Results:
For deficiencies: 20 days for GLS and 90 days
for OSHS.
LLCO assists Company in preparing Volutary
Commitment Plan.
Voluntary Regularization
3 rd Step: VCP
Must contain the following: (a) employee’s name, status of
employment and date of regularization and (b) undertaking
to submit monthly report of status of regularization; (c)
include all contractor’s employees deployed in principal; (d)
period to regularize shall be definite; and (e) effectivity of
regularization shall retroact from date of deployment to
principal; (f) contain statement that, during period of
regularization, deployed workers shall not be terminated;
(g) regularized workers shall enjoy the benefits under
4 TH existing company rules and regulations.
Step: Approval or Disapproval of VCP by RD
If VCP is disapproved, RD shall call employer and worker
reps for a conference to improve VCP. Thereafter, RD shall
issue Notice of Approved VCP. After issuance of Notice of
Approved VCP, RD shall issue VCP Compliance Order.
Notes on Inspection
Refusal of access to records and/or
premises: filing of criminal action
If denied access to premises: LLCO shall
indicate in NOR
If denied access to records: LLCO shall
interview employees and indicate denial in
NOR
Penalty:
Fine: Php1,000.00 to Php10,000.00
Imprisonment: 3 months to 3 years
TIPC has oversight functions
Compliance

Control and Supervision

Tools, Equipment, Machineries
Work Directly Related
Independent Business
Registration
Regular Employment
Contracts
Inspection
Control and Supervision

Over the Means and Methods

Supervisor
Assign and monitor tasks
Provide performance targets
Determine time when employee must report for
work
Compliance with safety rules
Compliance with principal work procedures
Principal deals with contractor and vice
versa
Control and Supervision

Selection
Hiring
Selection by Principal
Training
Without presence of Principal
Separate and distinct place
Disciplinary action
Code of Conduct
Replacement of Erring Employees
Payment of Wages
Payslips
Tools, Equipments,
Machineries
Substantial Capital or Investment
PHP5 Million
Use of own tools, equipment and
machineries in performing the work
Contractor owns tools, equipment,
machineries
Sale
Lease
Work Not Directly Related
Work Traditionally Contracted Out
Security Guards
Maintenance
Usually necessary and desirable
Primary Purpose of Articles of
Incorporation
Badge of regularity
Repeated hiring of employees under
contract of short duration
Work Not Directly Related
Badge of regularity
Perform functions currently being
performed by regular employees of
principal
Perform other functions apart from the
work stipulated in employment contract
EO 51:
SOLE, in consultation with National
Tripartite Council may declare activities
which may be contracted out.
Distinct and Independent
Business
Office
Duly registered and licensed with
regulatory agencies
Conducts business
Number of clients
No derogatory record as regards
officers, owners, principal
stockholders
Distinct and Independent
Business
In house agency or cooperative
Owned, managed or controlled directly
or indirectly by principal
Principal or any of its officers
owns/represents any equity or interest
and agency operates solely or mainly
for the principal
DOLE Registration
No LOC presumption if registered
If work outside DOLE Regional Office
which issued registration
Secure certified true copy of registration
and present at other DOLE Regional
Office
Subsequent registration to correct
earlier non-registration not allowed
Validity of registration: 2 years
DOLE Registration
Renewal
30 days before expiration
Renewal Fee: Php100,000.00
Semi-Annual Reporting
List of contracts
Number of workers
Proof of payment of SSS, Pag-ibig,
PhilHealth, ECC and taxes
Certified list of all cases filed against the
contractor
Contracts

With Employee
Specific description of job or work
Place of work and terms and conditions
of employment
Inform employee of the stipulations on
or before the first day of employment

Failure to comply
Ground for Cancellation
Contracts

With Principal
Specific description of job or work,
including its term or duration
Place of work and terms and condition
governing contracting arrangement,
including amount of contracted job and
admin fee of 10%
Issuance of bond

Failure to Comply
Ground for Cancellation
Employment

Rights of Employees
Safe and healthful working conditions
Labor standards
Retirement benefits
Separation pay
Social security and welfare benefits
Self-organization, collective
bargaining and peaceful concerted
activities including right to strike
Employment

Failure to Comply
Ground for Cancellation
Expiration of Service Agreement
Not a ground for dismissal
Employee may wait for re-employment
within 3 months
If not deployed within 3 months,
payment of separation benefits
Pending Legislation

Senate Bill No. 1116

House Bill No. 6809
Permissible Job Contracting
Labor Only Contracting
Consequences
Security of Tenure
Jobs For Contracting
SB 1116 HB 6809
Specific Job Specific Job
Work Work
Services Service
Contracted Job, Work PROHIBITED:
or Services contracting out same
work contracted out
by principal
Valid Job Contracting
SB 1116 HB 6809
Identifiable Scope of Substantial Capital or
tasks Investment in Tools,
(service)/component or Equipment, Machineries
phase or product Control over worker’s
(manufacturing/product methods and means
ion)
Job, work or service to
be contracted out have
been determined to be
as such by appropriate
industry tripartite
council or by the SOLE
Valid Job Contracting
SB 1116 HB 6809
Written contract of Contractor must:
regular employment Independent business,
between contractor and separate and distinct
its employees Paid up capital of
Php5M
Contractor/Sub-
Financial Capacity
contractor must be: Sufficient knowledge,
Independent business,
experience, skills or
separate and distinct
competence
Substantially Employment of regular
capitalized for at least ees
Php5 Million
Valid Job Contracting
SB 1116 HB 6809
Contractor/Sub- Contractor:
contractor must be: Possession of
sufficient regular equipment,
employees and machineries or tools
equipment, Control over
machineries and tools performance and
for the outsourced job, completion
work or service
Control over
performance and
completion
Labor Only Contracting
SB 1116 HB 6809
No substantial capital No substantial capital
and investment in the or investment
form of tools, No control and
equipment and supervision
machineries
Workers recruited and
placed are under
control and supervising
of ER
Labor Only Contracting
SB 1116 HB 6809
Jobs, works or services
which are not in the
industry standards
No DOLE license
In house agency or
cabo
Merely provides
manpower
Labor Only Contracting
SB 1116 HB 6809
Cooperative requires
membership before
being deployed with
contracting ER
Contractor merely
absorbs workers of
contracting ER
Control and supervision
by ER
Consequence of LOC
SB 1116 HB 6809
Deemed regular Unlicensed Job
employees retroactive Contractor Commits
to date when they were LOC
first hired regardless if Php30,000.00 to
employment is Php5,000,000.00 per
continuous or broken employee
Criminal, administrative Barred from Job
and civil liabilities Contracting, including
directors and officers
Pay each subcontracted
ee not less than
Php50,000.00
Consequence of LOC
SB 1116 HB 6809
Licensed Job Contractor
Commits LOC
Php30,000.00 to
Php5,000,000.00 per
emploiyee
Work for Principal shall
be closed and barred
from being Job
Contractor
Succeeding offense:
revocation of license
ULP
SB 1116 HB 6809
Job Contracting Causes
termination or
reduction of regular
employees or reduction
of work hours or
reduction or splitting of
bargaining unit
Contracting out work of
union members would
interfere with, restrain
or coerce employees
ULP
SB 1116 HB 6809
Contracting out work
where it violates CBA
Contracting out work
by reason of strike or
lock out
Registration
SB 1116 HB 6809
SOLE to license SOLE to license
qualified contractors qualified contractors
Contractor must be a Unlicensed Job
Filipino or 100% of Contractor:
authorized and voting Php30,000.00
capital are owned and
controlled by Filipinos.
Without license: fine of
Php100k.
Applicablity to Cooperatives
SB 1116 HB 6809
Cooperatives are
deemed employers and
members or non-
members their
employees who are
entitled to rights and
benefits of workers
under the law
Security of Tenure
SB 1116 HB 6809
Illegal Dismissal: Dismissal without
Without Cause and cause:
Due Process Reinstatement,
backwages and
Consequence: accrued benefits, plus
Reinstatement, SSS, Philhealth and
backwages and Pag ibig contributions
accrued benefits, plus
Dismissal without
SSS, Philhealth and
Pag ibig contributions
procedural due
process:
Nominal damages
Employment
SB 1116 HB 6809
ER-EE: Regular:
Hired for Indefinite
Control or supervision
Period
Regular:
All ees, including
No fixed term
project and seasonal employment except:
Probationary ees who OFW
meets standards or Probationary ees
repeatedly hired Relievers of absent
regular ees (< 6 mos)
Probationary Project ees
Written job description
and standards Seasonal ees
Employment
SB 1116 HB 6809
Seasonal Project:
Established periods of Temporary
increased work Seasonal:
demands/inherent Established periods of
industry fluctuations increased work
Project/Seasonal demand inherent to
Work Pool industry
Relievers, Project and
Seasonal
Right of First Refusal
Priority in Hiring
Employment
SB 1116 HB 6809
Probationary (>1 mo):
separation pay
Seasonal:
Established periods of
increased work
demand inherent to
industry
Relievers, Project and
Seasonal
Right of First Refusal
Priority in Hiring
Employment
SB 1116 HB 6809
Illegal Fixed term
employment
Php30,000.00 to
PHP5M per employee
Just Cause
SB 1116 HB 6809
Company rules and
regulations formulated
in observance of
worker’s right to
participate in policy and
decision making
processes
Authorized Cause
SB 1116 HB 6809
Separation pay: 1
month for every year of
service
Separation pay to be
paid 15 days before
effectivity of separation
ER to submit to DOLE
for validation proof of
existence of authorized
cause