Department Order No. 18-A Department Order No.

174
Definition of Terms Sec. 3 (m) In-House Cooperative
-refers to a cooperative which is managed, or
controlled directly or indirectly by the
principal or one where the principal or any of
its officers owns/represents any equity or
interest, and which operates solely or mainly
for the principal
Sec.3 (l) Substantial Capital Sec. 3 (l) Substantial Capital

at least P3,000,000.00 at least P5,000,000.00

(paid-upcapital stocks/shares) (paid-upcapital stocks/shares)
Corporations/Partnerships/Cooperatives Corporations/Partnerships/Cooperatives

at least P3,000,000.00 at least P5,000,000.00

(net worth) (net worth)
Single Proprietorship Single Proprietorship
Sec. 6 Prohibition Against Labor-only
Contracting.
Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only
contracting shall refer to an arrangement
where:
a) The contractor does not have substantial
capital or investments in the form of tools,
equipment, machineries, work premises,
among others, and the employees recruited
and placed are performing activities which
are usually necessary or desirable to the
operation of the company or directly related
to the main business of thee principal...
b)
Prohibition Against Labor-only Contracting Sec. 5 Absolute Prohibition against Labor-
only Contracting.
Labor-only contracting,which is totally
prohibited, refers to an arrangement where:
a) i
ii
and
iii. The contractor's or subcontractor's
employees recruited and placed are
performing activities which are directly
related to the main business operation of the
principal.
or
b)
Sec. 7 Other Prohibitions Other Prohibitions Sec. 6 Other Illicit Forms of Employment
Nothwithstanding Section 6 of these Rules, Arrangements
the following are hereby declared prohibited In addition to Section 5 of these Rules, the
for being contrary to law or public policy: following are hereby declared prohibited for
being contrary to the law or public policy:
A. Contracting out of jobs, works or services
when not in done in good faith and not 1.
justified by the exigencies of the business 2.
such as the following: 3.
1. 4.
2 5.
3. 6.
i 7.
ii. 8.
4.
5.
6,
7.
8.
9.
10.

B) Contracting out of jobs, works or services

analogous to the above when not done in
good faith and not justified by the exigencies
of the business.
Sec. 9 Required Contracts Under These Required contracts under these Rules Sec. 11 Required Contracts Under These
Rules Rules
a. a.
i i
ii ii
iii. The term or duration of employment xxx
that must be co-extensive with the Service
Agreement or with the specific phase of
work for which the employee is engaged.
xxx
Sec. 9 Required Contracts Under These Required contracts under these Rules Sec. 11 Required Contracts Under These
Rules Rules
b. Service Agreement between the principal b. Service Agreement between the principal
and the contractor. The Service Agreement and the contractor. The Service Agreement
shall include the following: shall include the following:
i i
ii ii.
iii. Provisions ensuring compliance with all iii.
the rights and the benefits of the employees
under the Labor Code and these Rules on:
provision for safe and healthful working
conditions; labor standards such as, service
incentive leave, rest days, overtime pay, 13th
month pay; retirement benefits; contributions
and remittance of SSS, Philhealth, PagIbig
Fund, and other welfare benefits; the right to
self-organization, collective bargaining and
peaceful concerted action; and the right to
security of tenure.
iv. A provision on the Net Financial
Contracting Capacity of the contractor,
which must be equal to the total contract
cost.
v.
vi. The contractor or subcontractor shall
directly remit monthly the employers' share
and employees' contribution to the SSS,
ECC, Philhealth and PagIbig
vii. The term or duration of engagement.

xxx
Sec. 13 Effect of Termination of
Employment
Where the termination results from the
expiration of the service agreement, or from
the completion of the phase of the job, work
or service for which the employee is
engaged, the latter may opt for payment of
separation of benefits as may be provided by
law or the Service Agreement, without
prejudice to his/her entitlement to the
completion bonuses or emoluments,
including retirement benefits whenever
applicable.
Sec. 19 Registration Fee
P25, 000. 00
Sec. 20 Validity of Certificate of
Registration of Contractors
3 years, unless cancelled after due process
Sec. 21 Renewal of Registration
Renewal fee of P25, 000.00
Effect of Termination of Employment
Registration Fee
Validity of Certificate of Registration of
Contractors
Renewal of Registration
Sec. 13 Effect of Termination of
Employment
Where the termination results from the
expiration of the service agreement, or from
the completion of the phase of the job, work
or service for which the employee is
engaged, the latter may opt to wait for re-
employment within three (3) months to
resign and transfer to another contractor-
employer. Failure of the contractor to
provide new employment for the employee
shall entitle the latter to payment of
separation benefits as may be provided by
law or the Service Agreement whichever is
higher, without prejudice to his/her
entitlement to completion bonuses or
emoluments, including retirement benefits
whenever applicable. The mere expiration of
the Service Agreement shall not be deemed
as a termination of employment of the
contractor's/subcontractor's employees who
are regular employees of the latter.
Sec. 19 Registration Fee
P 100, 000. 00
Sec. 20 Validity of Certificate of
Registration of Contractors
2 years, unless cancelled after due process
Sec. 21 Renewal of Registration
Renewal fee of P100,000.00
Sec. 23 Grounds for Cancellation of Grounds for Cancellation of Registration Sec. 23 Grounds for Cancellation of
Registration Registration
a. a.
b. b.
c. c.
d. d.
e. e.
f. f.
g. g.
h. h.
i. i.
j. Violations of any provisions of the Labor
Code
Sec. 24 Due Process in Cancellation of
Registration
Upon receipt of the complaint, the Regional
Director shall direct the contractor, with
notice to the complainant, to file a verified
answer/counter affidavit within ten (10)
calendar days without extension,..
The Regional Director or his or her duly
authorized representative may conduct a
clarificatory hearing within ten (10) calendar
days within which to file a verified answer/
counter affidavit.
Within the said ten (10) calendar days
period, the contractor shall make the
necessary corrections/ rectifications on the
violations that are immediately rectifiable
upon its own initiative in order to be fully
compliant.
The conduct of hearings shall be terminated
within fifteen (15) calendar days from the
first scheduled clarificatory hearing. The
Regional Director shall resolve the case
within ten (10) working days from the date
of the last hearing. If there is no necessity to
conduct a hearing, the case shall be resolved
within ten (10) working days from receipt of
the verified answer/ counter affidavit.
Due Process in Cancellation of Registration Sec. 24 Due Process in Cancellation of
Registration
Upon receipt of the complaint, the Regional
Director shall direct, with notice to the
complainant, to file a verified answer/
counter affidavit within seven (7) calendar
days without extension,..
The Regional Director or his or her duly
authorized representative may conduct a
clarificatory hearing within seven (7)
calendar days within which to file a verified
answer/counter affidavit.
Within the said seven (7) calendar days
period, the contractor shall make the
necessary corrections/ rectifications on the
violations that are immediately rectifiable
upon its own initiative in order to be fully
compliant.
The conduct of hearings shall be terminated
within ten (10) calendar days from the first
scheduled clarificatory hearing. The
Regional Director shall resolve the case
within seven (7) working days from the date
of the last hearing. If there is no necessity to
conduct a hearing, the case shall be resolved
within seven (7) working days from receipt
of the verified answer/ counter affidavit.