Q & A on Contracting/Subcontracting

(DOLE Department Order No. 18-A, Series of 2011)

u  DO18-­‐A,  Series  of  2011,  is  a  product  of  5  years  a:empt  to  
amend  DO18-­‐02.  

u  Extensive  triparAte  consultaAons  with  the  following  labor  

groups:    APL,  AFW,    AGLO,  BMP,  MAKABAYAN,  FFW,    
TUCP,  TUPAS,  NAFLU,  and  LMLC,  NCL,  and  AIHRWU,  with  
the  employers  groups  through  the  ECOP  and  PALSCON.  

u  Total  of  6  triparAte  consultaAons,  in  addiAon  to  separate  

sectoral  and  organizaAonal  siZngs,  were  conducted  since  
July  2011  right  a\er  the  reconsAtuAon  of  the  TIPC.      
 
 
u The  new  issuance  –    
 
§  strikes  a  balance  between  the  need  of  business  for  
numerical  and  funcAonal  flexibility,  on  one  hand,  and  
observance  of  labor  standards  and  workers’  rights,  
on  the  other.        
 
§  recognizes  subcontracAng  as  a  legiAmate  business  
undertaking,  and  regulates  it  to  induce  legiAmate,  
responsible  and  ethical  subcontracAng,  with  
enterprise  compeAAveness  enhancement  and  
decent  jobs  in  mind.  
u  The  track  of  the  issuance  -­‐  
§  to  curb  abuses  and  ensure  full  compliance  with  workers’  
rights  to  security  of  tenure,  labor  standards,  and  
occupaAonal  health  and  safety  standards,  by  Aghtening  
the  requirements  to  allow  only  legiAmate,    responsible  
and  ethical  contractors  to  do  subcontracAng  of  jobs,  
work  or  services  
 
§  to  equally  afford  protecAon  to  the  principal  or  “user  
enterprise”  and  the  workers    
 
§  to  remove  the  liAgiousness  in  the  arrangement  
§  All  parAes  to    contracAng  or  subcontracAng  which  is  define  
as  an  arrangement  where  a  principal  or  “user  enterprise”,  
farms  out  the  performance  or  compleAon  of  a  specific  job,  
work  or  service  of  its  business  to  a  contractor  or  
subcontractor  or    “third  party”  within  a  definite  or  
predetermined  period,  regardless  of  whether  the  job,  work  
or  service  is  to  be  performed  or  completed  within  or  
outside  the  premises  of  the  principal.  

§  The  contractor  or  subcontractor  must  be  legiAmate,  

(substanAally  capitalized,  registered,  not  LOC),  employs  its  
own  employees  to  carry  out  the  job,  work  or  service  
covered  by  the  Service  Agreement.  
 
  

1)  Recognizes  subcontracAng  as  a  legiAmate  business  

undertaking,  and  regulates  the  “supply  side”  to  induce  
legi%mate,  responsible  and  ethical  subcontrac%ng.  
2)  Prohibits  contractors/subcontractors  from  engaging  as  
private  recruitment  and  placement  agencies  to  clearly  
establish  E-­‐E  relaAonship  in  a  legiAmate  subcontracAng  
arrangement  with  the  subcontractor.    

3)  Prohibits  labor-­‐only  contracAng  (and  shi\s  the  E-­‐E  

relaAonship  to  the  principal  or  “user  enterprise”  in  case  of  a  
finding  of  LOC).  
 
4)  Sets  clear  criteria  for  legi%mate  contrac%ng  or  subcontrac%ng  
by  providing:  

(a)  Minimum  standard  to  determine  substanAal  capitalizaAon  

(P3  Million  paid  up  capital  or  networth);    
(b)  Proof  of  ownership  or  lease  contract  for  the  tools,  
equipment,  machineries  and  work  premises  that  are  
actually  and  directly  used  for  the  subcontracted  work  or  
services  must  be  shown,  which  is  subject  to  verificaAon  
inspecAon;    
(c)    RegistraAon  with  the  DOLE;  and    
(d)  Presence  of    “control  test”  element  in  employer-­‐employee  
relaAonship  between  the  subcontractor  and  the  employees  
deployed  to  carry  out  the  subcontracted  service.        
  
5)  Directs  mandatory  registraAon  of  subcontractors  by  
reiteraAng  that  non-­‐registraAon  will  give  rise  to    
presumpAon  of  LOC;    provides  a  registraAon  system  with  
built-­‐in  mechanism  to  detect  and  deter  re-­‐entry  of  cancelled  
registrant  or  recidivist  violators  of  labor  standards  with  full  
disclosure  requirement;  and  requires  a  P25,000.00  
registraAon  fee  (for  both  new  &  renewal  of  registraAon)  
 
Increase  intended  to  put  value  to  the  Cer%ficate  of  
Registra%on  which  stands  as  DOLE  guarantee  to  the  “user  
enterprise”  and  to  the  workers  that  the  registrant  is  a  
legiAmate  subcontractor  and  substanAally  capitalized.  
6)  Ensures  that  the  contractor  has  the  capacity  to  carry  out  the  
Service  Agreement  and  be  able  to  pay  its  workers’  wages  and  
benefits  by:  
(a)  adopAng  the  government  formula  (Net  Financial  
ContracAng  Capacity)  to  be  shown  in  every  service  
contract;  and  
(b)  requires  compliance  with  standard  contracts  (Standard  
Service  Agreement,  sample  computaAon  form  for  the  
minimum  administraAve  fee  of  10%).    

Compliance  will  be  monitored  through  the  required  semi-­‐

annual  reports  from  the  contractors/subcontractors  to  the  
region  where  it  is  registered,  and  consistent  compliance  
would  merit  a  seal  of  Good  Housekeeping.  
7)  Reiterates  the  rights  of  the  contractor’s  employees,  whether  deployed  or  
assigned  as  reliever,  seasonal,  week-­‐ender,  temporary,  or  promo  jobbers,  
to  all  the  rights  and  privileges  as  provided  in  the  Labor  Code,  to  include:    

(a)    safe  and  healthful  working  condiAons;  

(b)    labor  standards  such  as  service  incenAve  leave,  rest  days,  overAme  
pay,  holiday  pay,  13th  month  pay    
(c)  separaAon  pay  as  may  be  provided  in  the  Service  Agreement  or  
under  the  Labor  Code;    
(d)    reArement  benefits  under  the  SSS,  or  reArement  plans  of  the  
contractor,  if  there  are  any;    
(e)    social  security  and  welfare  benefits;    
(f)    self-­‐organizaAon,  collecAve  bargaining  and  peaceful  concerted  
acAviAes;  and    
(g)      security  of  tenure.        
  

 
8)  Provides  a  summary  proceedings  for  the  cancella5on  of  cer5ficate  
of  registra5on  in  case  of  violaAon  of  the  Rules.  
9)  Reiterates  the  right  to  security  of  tenure  of  the  contractor’s  
employees  and  clearly  set-­‐out  the  “due  process”  requirement  in  
terminaAon  of  employment  to  remove  the  liAgiousness  in  the  
process.    
10)  Ensures  compliance  by  clarifying  that  the  principal  and  
subcontractor  is  subject  to  rouAne  inspecAon  regardless  of  the  
number  of  employees  and  provides  for  triparAte  engagement  in  
the  region-­‐based  triparAte  monitoring  team  in  the  
implementaAon  of  DO  18-­‐A,  Series  of  2011,  with  “opt-­‐out”  
provision  for  voluntary  compliance  through  TAV-­‐KapaAran  and  
IncenAvizing  Compliance  Program.  
 
Required  substanAal  capital  is  clear…  
 
Ø  Minimum  capitalizaAon  requirement  of  at  least  P3Million  
paid  up  capital  for  corporaAons,  cooperaAve,  partnership;    
same  P3M  net  worth  for  sole  proprietorship  (SecAon  3[l])    
 
Ø  Tools,  equipment,  machineries  and  work  premises  are  
separately  considered  from  the  paid  up  capital  requirement.  
It  must  be  actually  and  directly  used  for  the  subcontracted  
work  or  services.  Proof  of  ownership  or  lease  agreement  
must  be  shown  with  photograph.    Subject  to  verificaAon  
inspecAon.  
  
Ø  The  P3  Million  capitalizaAon  requirement  is  intended  to:  
§  clarify  and  quanAfy  substanAal  capital,  which  has  been  the  
source  of  liAgaAon    (the  amount  is  the  high-­‐end  of  DTI  
capitalizaAon  category  for  SMEs)  
§  deter  fly-­‐by  night  and  unscrupulous  contractors  from  
engaging  in  subcontracAng  and  profiteering  through  
underpayment  of  wages,  non-­‐remi:ance  of  collected  SSS,  
Philhealth,  or  PagIBIG  contribuAons,  non-­‐payment  of  other  
labor  standards  benefits  such  as  overAme  pay,  and  non-­‐
observance  of  occupaAonal  health  and  safety  standards  
resulAng  to  workplace  accidents  (to  protect  the  principal  
or  user  enterprises  and  the  workers)  
     
Approximately,  200,000  workers  under  2,624  
registered  subcontractors    will  be  covered  
(data  as  of  Oct.  2011)  
 
It  also  covers  manpower  cooperaAves  or  
cooperaAves  that  engage  in  subcontracAng  
 
1.  Requiring  an  employment  contract  and  Service  Agreement.  
2.  Prescribing  a  standard  form  for  Service  Agreement  (will  be  
checked  through  seal  of  Good  Housekeeping)  
3.  SeZng  a  standard  administraAve  fee  of  at  least  ten  (10)  
percent  to  prevent  the  “race  to  the  bo3om”  compeAAon  to  
the  detriment  of  workers.  
4.  Inclusion  of  cooperaAves  to  observe  the  regulaAons  on  
subcontracAng  and  the  required  registraAon  with  DOLE  
Regional  Offices  to  ensure  their  compliance  to  labor  
standards  and  regulaAons.  
 
5.  Validity  of  registraAon  is  limited  to  the  region  where  it    is  
registered.    In  case  of  Service  Agreement  outside  the  region  
where  registered,    the  subcon  should  submit  a  DOLE  cerAfied  
copy  of  its  registraAon  to  the  region  where  it  seeks  to  
operate  for  registraAon  &  monitoring  purposes.  
6.  Development  of  co-­‐regulaAon  schemes  with  the  triparAte  
stakeholders.  
7.  ProhibiAon  of  repeated  hiring  of  employees  under  an  
employment  contract  of  short  duraAon  (5-­‐month  
employment  contract)  or  under  a  Service  Agreement  of  short  
duraAon  with  the  same  or  different  contractors.    
8.  Underscoring  observance  of  security  of  tenure  by  requiring  
compliance  with  the  clear  standards  of  due  process  in  
terminaAon  cases.  
YES.    
 
Ø  A  subcontractor  directly  undertakes  a  specific  job  
or  service  for  a  principal,  and  for  this  purpose,  
employs  its  own  workers.    

Ø  The  PRPA  merely  recruits  workers  for  the  purpose  

of  placing  them  with  an  employer  or  company.    It  
is  not  the  employer  of  the  workers  it  recruited  
and  placed.    It  is  an  agent  of  the  employer.  
 
Ø  In  subcontracAng,  the  four-­‐fold  test  of  E-­‐E  relaAonship  should  
be  saAsfied  by  the  subcontractor  in  relaAon  to  the  employees  
it  engages  to  accomplish  the  subcontracted  job  or  service.  In  
such  cases,  the  subcontractor  is  also  referred  to  as  
independent  contractor.      
 
Ø  If  the  four-­‐fold  test  is  saAsfied  by  the  principal,  the  principal  
becomes  the  employer  of  the  employees  engaged  by  the  
subcontractor  to  accomplish  the  job  or  service.  What  exists  is  
not  subcontracAng  but  a  direct  employer-­‐employee  
relaAonship  between  the  principal  and  the  employees.  
YES.    
 
Ø  In  an  ordinary  ER-­‐EE  relaAonship,  there  are  only  two  parAes  
involved  -­‐  the  employer,  who  directly  hires  the  employee,  
and  the  employee.    Jurisprudence  is  well-­‐se:led  that  to  
ascertain  the  existence  of  an  E-­‐E  relaAonship,  the  four-­‐fold  
test  is  applied.  
 
Ø  In  subcontracAng,  there  are  three  parAes  involved:  the  
principal,  the  subcontractor,  and  the  employees.  The  four-­‐
fold  test  is  saAsfied  by  the  contractor/subcontractor.  
YES.    
 

Ø  LegiAmate  subcontracAng  is  different  from  labor-­‐only  

contracAng.    The  former  is  allowed  and  the  la:er  is  
prohibited.  
 
Ø  SecAon  6:  There  is  LOC  where  the  contractor/  subcontractor  
merely  recruits,  supplies  or  places  workers  to  perform  a  job,  
work  or  service  for  a  principal,  and  the  following  elements  
are  present:  
 
a)  The  contractor  or  subcontractor  does  not  have  
substanAal  capital  or  investment  to  actually  perform  the  
job,  work  or  service  under  its  own  account  and  
responsibility;  and  

b)  The  employees  recruited,  supplied  or  placed  by  such  

contractor  or  subcontractors  are  performing  acAviAes  
directly  related  to  the  main  business  of  the  principal;  or  

c)  The  contractor  does  not  exercise  the  right  to  control  over  
the  performance  of  the  work  of  the  employees.  
 
The  basis  in  prohibiAng  labor-­‐only  contracAng  are:    
 
Ø  The  ConsAtuAon,  which  mandates  that  the  State  shall  
protect  labor  and  promote  its  welfare,  and  shall  guarantee  
basic  labor  rights  including  just  and  humane  terms  and  
condiAons  of  employment  and  the  right  to  self-­‐
organizaAon.  

Ø  ArAcle  106  of  the  Labor  Code,  which  allows  the  Secretary  
of  Labor  to  disAnguish  between  labor-­‐only  contracAng  and  
job  contracAng  to  prevent  any  violaAon  or  circumvenAon  
of  the  Labor  Code.  
 
1.  The  subcontractor  will  be  treated  as  the  agent  of  the  
principal.  Since  the  act  of  an  agent  is  the  act  of  the  principal,  
representaAons  made  by  the  subcontractor  to  the  
employees  will  bind  the  principal.  
2.  The  principal  will  become  the  employer  as  if  it  directly  
employed  the  workers  engaged  to  undertake  the  
subcontracted  job  or  service.  It  will  be  responsible  to  them  
for  all  their  enAtlements  and  benefits  under  the  labor  laws.  
3.  The  principal  and  the  subcontractor  will  be  solidarily  treated  
as  the  employer.    
4.  The  employees  will  become  employees  of  the  principal,  
subject  to  the  classificaAons  of  employees  under  ArAcle  280  
of  the  Labor  Code.  
NO.    
 
Ø  Under  ArAcle  106  of  the  Labor  Code,  a  principal  has  two  
types  of  liability  in  relaAon  to  the  employees  of  the  
subcontractor.  The  first  type  of  liability  is  limited,  and  is  
governed  by  the  first  two  paragraphs  of  ArAcle  106.  Thus,  
mere  inability  of  the  subcontractor  to  pay  wages  will  not  
automaAcally  make  the  principal  the  direct  employer.  It  
will  only  make  the  principal  jointly  and  severally  liable  with  
the  subcontractor  for  payment  of  the  employees'  wages  to  
the  extent  of  the  work  performed  under  the  contract.  
  
Ø  The  second  type  of  liability,  which  arises  from  the  third  
and  fourth  paragraphs  of  ArAcle  106,  is  absolute  and  
direct.  This  liability  arises  when  there  is  labor-­‐only  
contracAng  as  defined  in  SecAon  6  of  the  new  DO.    In  such  
cases,  the  principal  shall  be  responsible  to  the  workers  in  
the  same  manner  and  extent  as  if  it  directly  employed  
these  workers.  
YES.        
 
Ø  Sec%on  7(A)[7]  makes  subcontracAng  a  prohibited  acAvity  
when  it  is  done  through  repeated  hiring  of  workers  for  a  5  
to  6  months  employment  contract  under  the  same  
employer  or  Service  Agreement  of  the  same  duraAon  
 
Ø  In  case  of  violaAon,  the  Contractor’s  CerAficate  of  
RegistraAon  can  be  cancelled,  a\er  due  process,  and  the  
worker  becomes  regular  employee  of  the  principal,  and  all  
benefits  due  to  him/her  shall  be  the  liability  of  the  
principal.  
The  “5-­‐5-­‐5”  or  “endo”  workers  refers  to  the  hiring  pracAce  that  is  deliberately  
resorted  to  prevent  workers  from  acquiring  regular  status  by  reason  of  length  of  
service  of  at  least  6  months  and  one  day.    Under  a  subcontracAng  arrangement,  this  
is  done  through:  
 
(a)  repeated  short-­‐term  arrangements  (e.g.,  “5  months,  5  months”,  “5-­‐5-­‐5”,  or  less)  
by  one  principal  through  the  same  contractor,  or  under  different  contractors,  or    
 
(b)  repeated  short-­‐term  arrangements  (e.g.,  “5  months,  5  months”,  “5-­‐5-­‐5”,  or  less)  
through  a  Service  Agreement  of  short  duraAon  under  the  same  contractor,  or  
different  contractors.  
 
Jurisprudence  of  repeated  hiring  is  well-­‐se:led.    Repeated  hiring  of  the  same  
workers  shows  that  he/she  is  performing  funcAons  that  is  usual  and  necessary  to  the  
trade  or  business  of  the  employer.  
 
On  the  other  hand,  the  5-­‐5-­‐5  working  arrangement  that  is  not  repeated  has  been  
declared  by  the  SC  in  the  Purefoods  Case  in  General  Santos,  as  in  violaAon  of  public  
policy  as  it  has  been  shown  to  have  been  resorted  to  prevent  regular  employment.  
The  new  DO  has  provided  ample  safeguards.    
 
Ø  Sec%on  8  provides  that  all  contractor’s  employees  are  enAtled  to  all  
the  rights  and  privileges  provided  in  the  Labor  Code,  and  set  out  in  
subparagraph  (e)  the  right  to  self-­‐organizaAon,  collecAve  bargaining  
and  peaceful  concerted  acAviAes  
 
Ø  Sec%on  7,  subcontracAng  is  prohibited  acAvity  when  it  results  to:  (1)  
the  terminaAon  or  reducAon  of  regular  employees  and  reducAon  of  
work  hours  or  reducAon  or  spliZng  of  the  bargaining  unit  as  
provided  in  SecAon  7(A)[1]);  and  (2)  unfair  labor  pracAce  (interfere  
with,  restrain  or  coerce  employees  in  the  exercise  of  their  rights  to  
self-­‐organizaAon  as  provided  in  ArAcle  248  (c)  of  the  Labor  Code,  as  
amended)  as  provided  in  SecAon  7(A)[6].  
The  new  DO  has  improved  on  the  exis%ng  enforcement  and  
compliance  mechanism.    
 
Ø  Engagement  of  the  triparAte  partners  in  region-­‐based  
triparAte  monitoring  team  on  the  observance  of  labor  
standards  in  contracAng  and  subcontracAng  arrangement  
 
Ø  Conduct  of  rouAne  inspecAon  regardless  of  the  number  of  
employees  engaged  by  the  principal  or  by  the  contractor,  
excepted  from  the  coverage  of  LSEF  
The  new  DO  also  provides  for  an  “opt-­‐out”  enforcement  and  
compliance  scheme.    
 
Ø  Sec%on  35,  the  principal  and  subcontractors  may  opt  to  
enroll  and  parAcipate  in    DOLE  programs  on  improving  
compliance  with  labor  standards  and  OSH  such  as  the  
KapaAran-­‐WISE-­‐TAV  Program  and  IncenAvizing  
Compliance  Program  (ICP)  
 
YES.    
 

Ø  Provisions  of  the  new  DO  applies  to  contracAng/  

subcontracAng  arrangement  in  specific  industries,  including  
those  covered  by  separate  regulaAons  or  issuances  of  the  
DOLE  or  other  government  agency,  unless  expressly  provided  
otherwise  
Ø  Construc%on  Industry:  it  shall  be  covered  by  applicable  
provision  of  DO  18-­‐A  but  conAnue  to  be  governed  by  DO  19,  s.  
1993;  DO  13,  s.  1998;  and  the  DOLE-­‐DPWH-­‐DI.LG-­‐DTI  and  PCAB  
Memorandum  of  Agreement-­‐Joint  AdministraAve  Order  No.  1,  
Series  of  2011  
 
For  the  contractor’s  employees,  DO  18-­‐A  provides  that  the  E-­‐E  
relaAonship  is  with  the  contractor.  
 
The  workers  it  deployed  to  do  the  contract  will  conAnue  to  be  
his/her  employees  regardless  of  the  Service  Agreement,  unless  
the  workers  will  opt  to  be  separated  a\er  every  engagement  
and  receive  separaAon  pay.  (SecAon  2.  Coverage  and  SecAon  
13.  Effect  of  terminaAon  of  employment)  
 
There  is  also  a  provision  on  development  of  Financial  Relief  
Program  and  TriparAte  Engagement  on  Co-­‐regulaAon  in  SecAon  
34  for  workers  in  transiAon.  
 
For  workers  of  the  principal  or  “user  enterprise”,  separaAon  
from  employment  by  reason  of  legiAmate  business  
undertaking,  is  amply  covered  by  the  provisions  of  the  Labor  
Code  pursuant  to  authorized  causes  terminaAon.  
 
SecAon  7  of  DO  18-­‐A    also  sets  safeguards.  If  subcontracAng  is  
for  purposes  of  union  busAng  or  reducAon  of  regular  workers,  
which  if  established  to  be  true  a\er  due  process,  would  result  
to  a  declaraAon  that  it  is  a  prohibited  acAvity.  
 
 

 
NO.    
 
Ø  There  is  a  period  of  compliance  because  the  effecAvity  of  
the  CerAficates  of  RegistraAon  acquired  under  DO  18,  s.  
2002,  which  has  a  life  of  3  years,  shall  be  respected  unAl  
its  expiraAon.  This  is  due  to  the  ConsAtuAonal  principle  
against  impairment  of  contract.  
 
  
Ø  SecAon  38  of  DO18-­‐A  provides  that  rights  or  benefits  being  enjoyed  by  
the  parAes  to  exisAng  contracAng  and  subcontracAng  arrangements  
shall  not  be  impaired.  

Ø  Contracts  referred  to  are  those  contracts  executed  and  already  being  
implemented  before  the  effecAvity  of  DO18-­‐A.  ObligaAons,  rights  and  
benefits  of  parAes  to  any  subcontracAng  arrangement  prior  to  the  
effecAvity  of  DO18-­‐A  shall  not  be  diminished.  

Ø  Service  Agreements  entered  into  upon  the  effecAvity  of  DO18-­‐A  (on  5  
Dec.    2011)  and  onwards  will  have  to  observe  the  requirements  of  the  
Rules  on  standard  contracts.  
 
  
Ø  DOLE  registry  of  subcontractors  that  was  established  under  
DO  18,  s.  2002,  shall  be  respected  unAl  the  expiraAon  of  the  
CerAficates  issued  in  accordance  thereto.  

Ø  New  subcontractors  or  those  who  will  renew  their  

registraAon  shall  be  covered  by  the  requirements  of  the  
DO18-­‐A.    The  requirements  for  registraAon  includes  full  
disclosure  and  payment  of  P25,000.00  registraAon  or  
renewal  fee.  
 
Must  be  independent  an  employer  and  complies  with  the  following:    
 

1)  Minimum  capitalizaAon  requirement  of  at  least  P3  Million  fully  paid  
up  capital  for  all  subcontractors  whether  corporaAon,  partnership  
and  cooperaAve;  and  a  net  worth  of  at  least  P3  Million  for  single  
proprietorship  
2)  Proof  of  ownership  or  lease  agreement  on  tools,  equipment,  
machineries  and  work  premises  
3)  Payment  of  P25,000.00  registraAon  fee  
4)  Proof  of  financial  capacity  to  pay  the  wages  and  benefits  of  the  
workers  in  every  service  contract  using  the  Net  Financial  
ContracAng  Capacity  (NFCC)  formula  in  government  procurement  
5)  Control  over  the  performance  of  the  work  of  the  employee  
deployed  or  assigned  to  render  the  contracted  work  or  services.    
6)  Not  engaged  in  labor-­‐only  contracAng  arrangement  as  
provided  in  SecAon  6    
7)  Not  engaged  in  prohibited  acAviAes  enumerated  in  SecAon  
7    
8)  Observes  the  rights  of  the  workers  as  provided  in  SecAon  8  
9)  Observes  the  required  contracts  under  SecAon  9  
10)  Not  delisted  from  the  registry  of  legiAmate  contractor/
subcontractor  
YES.    
 
Ø  CooperaAves  may  engage  in  subcontracAng  provided  they  
comply  with  the  requirements  on  legiAmate  subcontracAng  
under    DO  18-­‐A.    What  is  prohibited  is  the  use  of  cooperaAves  
to  circumvent  the  law,  and  such  pracAce  is  a  prohibited  
acAvity  that  is  subject  to  the  same  sancAons  under  the  DO.  
§  NO.    Job  Order  employees  directly  hired  by  the  
government  are  receiving  above  the  minimum  
standards  or  20%  more,  which  is  similar  to    the    
casual  loading  concept  in  Australia.      Employees  of  
janitorial  and  security  agencies    are  covered.  

§  YES  cabo  system  is  covered  and  it  is  clearly  
prohibited.  
 
 
  
 
 
NO.    The  NCR  Broadcast  Industry  TriparAte  Council  
have  a  dra\  guidelines  on  the  engagement  through  
the  “talent  system”.    However  if  they    are  hired  
through  a  third  party  or  there  is  a  middle  man  that  
negoAates  and  deploy  them  to  the  network,  such  
arrangement  may  fall  under  the  subcontracAng  
arrangement.  
 
 
Ø  The  concept  of  “security  of  tenure”  is  hinged  on  an  employer’s  
regulated  right  to  hire  and  fire  an  employee.      

Ø  The  Labor  Code  recognizes  opAons  to  terminate  the  employment  
relaAonship  by  either  the  employer  or  the  employee.    TerminaAon  
of  employment  at  the  iniAaAve  of  the  employer  must  be  due  to  just  
or  authorized  causes  and  with  due  process.    The  two  facets  of  this  
legal  provision  are:  (1)  the  legality  of  the  act  of  the  dismissal;  and  
(2)  the  legality  in  the  manner  of  dismissal.    The  illegality  of  the  act  of  
dismissal  consAtutes  discharge  without  just  or  authorized  cause;  
while  illegality  in  the  manner  of  dismissal  is  dismissal  without  due  
process  or  noAce  requirement.  (ArAcles  282,  283  and  284  of  the  
Labor  Code,  as  amended)    
Ø  A  contractual  employee  works  for  the  duraAon  of  the  
Service  Agreement  between  the  principal  and  the  
contractor,  unless  the  arrangement  is  divisible  into  phases  
for  which  substanAally  different  skills  are  required  and  this  
is  made  known  to  the  employee  at  the  Ame  of  engagement.    
Ø  A  contractor’s  employees,  whether  deployed  or  assigned  as  
reliever,  seasonal,  week-­‐ender,  temporary,  or  promo  
jobbers,  are  enAtled  to  all  the  rights  and  privileges  as  
provided  in  the  Labor  Code,  to  include:  (a)  safe  and  healthful  
working  condiAons;  (b)  labor  standards  such  as  service  
incenAve  leave,  rest  days,  overAme  pay,  holiday  pay,  13th  
month  pay,  and  separaAon  pay  as  may  be  provided  in  the  
Service  Agreement  or  under  the  Labor  Code;  (c)  reArement  
benefits  under  the  SSS  or  reArement  plans  of  the  contractor,  
if  there  are  any;  (d)  social  security  and  welfare  benefits;  (e)  
self-­‐organizaAon,  collecAve  bargaining  and  peaceful  
concerted  acAviAes;  and  (f)  security  of  tenure.        
  
§  YES.    Direct  contractual  workers  of  the  principal  are  
enAtled  to  separaAon  benefits  if  so  provided  in  their  
contracts.  
 
§  YES.  Direct  contractual  workers  of  the  principal  are  
enAtled  to  reArement  benefits  under  the  SSS  
scheme  unless  the  employer  has  a  be:er  reArement  
package.  
 
 
 
 
YES.  
 
For  one,  the  expiraAon  of  the  employment  engagement  in  
contractual  arrangement  is  predetermined.  
 
Wage  rates  and  “top  of”  benefits  are  different  as  regular  
employees  observed  the  company  pay  scale  while  contractual  
engagement  may  or  may  not  be  based  on  the  company  pay  
scale.  However  it  should  not  be  below  the  minimum  
standards.  
 
 
  
 
Ø  In  opAons  afforded  to  allow  the  ER-­‐EE  to  determine  by  
themselves,  in  a  “firm-­‐level  approach”  through  collecAve  
bargaining  agreement  negoAaAon,  or  “industry-­‐level  
approach”  through  Voluntary  Code  of  Good  PracAces,  
funcAons  that  can  or  cannot  be  subcontracted.  
They  can  file  a  complaint  for  cancellaAon  of  the  contractor’s  
registraAon  before  the  DOLE  Regional  Office.    DO18-­‐A  provides  
for:  
 
Ø  Grounds  for  cancellaAon  of  contractor’s  cerAficate  of  
registraAon  
Ø  Summary  procedure  and  periods  for  cancellaAon  of  
cerAficate  of  registraAon.  

Ø  Requires  the  principal,  as  the  indirect  employer  or  the  user  
of  the  services  of  the  contractor,  to  observe  the  provisions  
of  the  Rules.  
5  December  2011    
(15  days  a\er  its  publicaAon  in  the  Philippine  Star  on  
19  November  2011)  
 
Now,  we  buckle  down  to  work…    
 
For  your  quesAons,  the  Q&A  can  be  accessed  in  DOLE  
CARAGA…  THANK  YOU.