VIII

CONTRACTUALIZATION
(5 pts)
In her State of the Nation Address, the President stressed the need to provide an investor-friendly
business environment so that the country can compete in the global economy that now suffers from a
crisis bordering on recession. Responding to the call, Congress passed two innovative legislative
measures, namely: (1) a law abolishing the security of tenure clause in the Labor Code; and (2) a law
allowing contractualization in all areas needed in the employer’s business operations. However, to soften
the impact of these new measures, the law requires that all employers shall obtain mandatory
unemployment insurance coverage for all their employees.
The constitutionality of the two (2) laws is challenged in court. As judge, how will you rule? (5%)
The first innovative measure, on abolition of the security of tenure clause in the Labor Code, is security of
tenure clause in the L:abor Code, is unconstitutional as it goes against the entitlement of workers to
security of tenure under Section 3, Article XIII of the 1987 Constitution.
The second innovation measure, on a law allowing contractualization in all areas needed in the
employer‘s business operations, is legal. Article 106 of the Labor Code already allows the Secretary of
labor and Employment not to make appropriate distinction between labor-only and job contracting. This
means that the Secretary may decide, through implementing regulation, arrangement where the person
supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and place by such
person are performing activities which are directly related to the principal business of the employer.
Hence, it would be legal for Congress to do any with the prohibition on labor-only contracting and allow
contractualization nin all areas needed in the employer‘s business operations. Assuming, of course, that
contractual workers are guaranteed their security of tenure.