Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
EIGHTEENTH CONGRESS
First Regular Session

4845

HOUSE BILL NO.

Introduced by HON. JOY MYRA S. TAMBUNTING

EXPLANATORY NOTE

Labor contracting is an exploitative practice which dates back to the Spanish colonial era’s cabo
system. A cabo is defined to be a person or group of persons or a labor group which, in the guise
of a labor organization, supplies workers to an employer, with or without any monetary or other
consideration whether in the capacity of an agent of the employer or as an ostensible independent
contractor.

Through years, this practice has continued and has since evolved to various forms of labor
contracting practices. Contractualization has been institutionalized across all economic sectors
and at present, continues to proliferate in various forms of market-oriented and flexible hiring
schemes, Philippine Statistics Authority claims that an estimate of 7 million Filipino workers are
found to be in “employment conditions that fall under either the exploitative end of contract
(ENDO) or labor-only contracting (LOC) arrangements!".

Although we recognize legitimate concerns and interests of business as to the need for flexible
labor practices, it is important that we ensure that the rights of the workers are protected and
that they don't fall prey to exploitative schemes and arrangements.

Pursuant to the constitutional mandate to protect the rights and promote the welfare of laborers,
this proposed measure seeks to amend the current legal framework that deals with unjust labor
practices.

This proposed measure is based on House Bill No. 6908 which was a product of concerted efforts
of representatives from the 17® Congress.

On behalf of the people of Parafiaque City’s Second District, and for the common good of the
Filipino people, the approval of the said measure is earnestly sought.

nd District, Parafiaque City

1 As cited in Abenir, M. (2019). Contractualization and the rights of workers. Rappler.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4845

Introduced by HON. JOY MYRA S. TAMBUNTING

AN ACT STRENGTHENING THE SECURITY OF TENURE OF WORKERS, AMENDING FOR
‘THE PURPOSE PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN
AS THE "LABOR CODE OF THE PHILIPPINES"

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Article 106 of Presidential Decree No. 442, as amended, otherwise known as the
“Labor Code of the Philippines", is hereby amended to read as follows:

"ART. 106. Contractor Lor subcontractor]. - Whenever an employer enters into a
contract with another person for the performance of the former's work, the
employees of the contractor [and of the latter's subcontractor, if any,] shall be
paid in accordance with the provisions of this Code AND OTHER LAWS.

“THE CONTRACTING OUT OF THE SAME WORK CONTRACTED OUT BY
‘THE EMPLOYER IS HEREBY PROHIBITED.

“In the event that the contractor [or subcontractor] falls to pay the wages,
ALLOWANCES AND BENFFITS of his employees in accordance with this Code
AND OTHER LAWS, the employer shall be jointly and severally liable with [his]
THE contractor [or subcontractor] to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.

"The Secretary of Labor AND EMPLOYMENT [may], UPON CONSULTATION
WITH THE NATIONAL TRIPARTITE INDUSTRIAL PEACE COUNCIL, SHALL
by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting,
WHICH IS HEREBY PROHIBITED, and LEGITIMATE job contracting, WHICH
IS HEREBY PERMITTED, IN ACCORDANCE WITH THIS CODE. [as well as]
(d) Differentiations AND RESTRICTIONS within these types of contracting,
[and] AS WELL AS THE [determine] DETERMINATION OF who among the
parties involved shall be considered the employer [for purposes of] UNDER this


Code, SHALL BE DISTINCTLY PROVIDED FOR IN THE REGULATIONS to
prevent any violation or circumvention of any provision of this Code.

"There is ‘labor-only' contracting 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] OR HAS NO
CONTROL OVER THE WORKERS' METHODS AND MEANS OF
ACCOMPLISHING THEIR WORK OR the workers recruited and placed by such
persons are performing activities which are directly related AND NECESSARY to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly

employed by tum.”

SEC. 2. A new article, Article 106-A, 1s hereby inserted after Article 106 of the same decree, to
read as follows:

"ART. 106-A. LICENSING OF JOB CONTRACTORS. — ALL PERSONS OR
ENTITIES DOING BUSINESS AS JOB CONTRACTORS SHALL OBTAIN A
LICENSE FROM THE DEPARTMENT OF LABOR AND EMPLOYMENT
THROUGH ITS REGIONAL OFFICES. THE TERM ‘JOB CONTRACTOR’
REFERS TO A SOLE PROPRIETORSHIP, CORPORATION, PARTNERSHIP,
ASSOCIATION, COOPERATIVE OR ANY OTHER ORGANIZATION THAT
PERFORMS A SPECIFIC WORK. JOB OR SERVICE FOR A PRINCIPAL
EMPLOYER. THE TERM ‘PRINCIPAL EMPLOYER’ REFERS TO THE PERSON
OR ENTITY, INCLUDING THE GOVERNMENT, THAT CONTRACTS OUT A
SPECIFIC WORK, JOB OR SERVICE.

"THE. LICENSE SHALL BE ISSUED TO QUALIFIED JOB CONTRACTORS
UPON COMPLIANCE WITH THE FOLLOWING REQUIREMENTS:

(A) AN INDEPENDENT BUSINESS, SEPARATE AND DISTINCT FROM THE
PRINCIPAL EMPLOYER;

"(B) PAID-UP CAPITAL OR CAPITALIZATION OF AT LEAST FIVE MILLION
PESOS (P5,000,000.00) WHICH MAY BE ADJUSTED AS DEEMED
APPROPRIATE THROUGH TRIPARTITE CONSULTATION EVERY THREE
(3) YEARS;

"(C) AN UNDERTAKING OF FINANCIAL CAPACITY, AND COMPLIANCE
WITH ALL LABOR LAWS AND REGULATIONS;

"(D) SUFFICIENT KNOWLEDGE, EXPERIENCE. SKILLS OR COMPETENCE
IN THE FIELD OF THE CONTRACTED JOB, WORK OR SERVICE;

"(E) EMPLOYMENT OF REGULAR EMPLOYEES, AND POSSE.SSION OF
EQUIPMENT, MACHINERIES OR TOOLS NECESSARY TO PERFORM OR
COMPLETE THE JOB, WORK OR SERVICE CONTRACTED OUT;


‘SEC. 3.

"(F) CONTROL OVER THE PERFORMANCE AND COMPLETION OF THE
CONTRACTED JOB, WORK OR SERVICE; AND

"(G) PAYMENT OF A LICENSE FEE OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) WHICH MAY BE ADJUSTED AS DEEMED APPROPRIATE
THROUGH TRIPARTITE CONSULTATION.

THE LICENSE SHALL BE VALID FOR A PERIOD OF THREE (3) YEARS. NO
LICENSE SHALL BE RENEWED UNLESS THE JOH CONTRACTOR SHALL
DEMONSTRATE THAT IT HAS NET FINANCIAL CONTRACTING CAPACITY
(NFCC) TO CARRY ON ITS BUSINESS BASED ON FACTORS SUCH AS, BUT
NOT LIMITED TO, THE NUMBER OF ITS EMPLOYEES AND THE NATURE
OF ITS BUSINESS.

“A LICENSED JOB CONTRACTOR SHALL SUBMIT AN ANNUAL REPORT
WHICH MUST INCLUDE, BUT NOT LIMITED TO, PROOF OF PAYMENT OF
‘THE APPROPRIATE SOCIAL AND OTHER WELFARE BENEF1TS TO ITS
EMPLOYEES.

"CONTRACTORS OR SIMILAR ENTITIES WHO ENGAGE IN JOB
CONTRACTING WITHOUT A LICENSE SHALL BE PENALIZED IN
ACCORDANCE WITH THIS CODE."

Article 294 of the same decree is hereby further amended to read as follows:

"ART, 294. Security of tenure. — In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or when
authorized by this Title. [An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges
and to his full back wages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement. ]

"A DISMISSAL WITHOUT JUST OR AUTHORIZED CAUSE OR WITHOUT
OBSERVANCE OF PROCEDURAL DUE PROCE.SS IS DLEGAL. THE
EMPLOYEE WHO IS FOUND ILLEGALLY DISMISSED BASED ON LACK OF
JUST OR AUTHORIZED CAUSE IS ENTITLED TO IMMEDIATE
REINSTATEMENT EVEN PENDING APPEAL AND WITHOUT LOSS CF
SENIORITY RIGHTS AND BENEFITS, FULL BACKWAGES AND ACCRUED
BENEFITS, AND REMUNERATIONS PROVIDED BY LAW, COMPANY
POLICY OR COLLECTIVE BARGAINING AGREEMENT COMPUTED FROM
‘THE TIME COMPENSATION WAS WITHHELD UP TO THE TIME OF ACTUAL
REINSTATEMENT. AWARD OF BACKWAGES SHALL INCLUDE THE
EMPLOYER'S SHARE OF CONTRIBUTIONS TO THE SOCIAL SECURITY
SYSTEM, PHILIPPINE HEALTH INSURANCE CORPORATION, AND HOME
DEVELOPMENT MUTUAL FUND WHICH SHALL BE REMITTED, TOGETHER
WITH THE EMPLOYEE'S SHARE, TO THE AFORESAID AGENCIES FREE


SEC. 4,

FROM INTEREST AND PENALTIES FOR LATE REMITTANCE. IN THE EVENT
THAT THE EMPLOYEE IS GAINFULLY EMPLOYED DURING THE
PENDENCY OF THE CASE FOR ILLEGAL DISMISSAL AND THE EMPLOYEE
WAS ABLE TO CONTRIBUTE TO THE SOCIAL SECURITY SYSTEM,
PHILIPPINE HEALTH INSURANCE CORPORATION, AND HOME
DEVELOPMENT MUTUAL FUND AN AMOUNT NEEDED TO UPDATE HIS
EMPLOYEE CONTRIBUTIONS SHALL BE DEDUCTED FROM HIS
BACKWAGES. ACTUAL, MORAL, EXEMPLARY AND OTHER FORMS OF
DAMAGES MAY ALSO BE AWARDED. AN EMPLOYEE WHOSE DISM1SSAL
IS DECLARED ILLEGAL BASED EXCLUSIVELY ON LACK OF PROCEDURAL
DUE PROCESS IS ENTITLED TO REASONABLE NOMINAL DAMAGES AND
(COSTS OF SUIT. THE EMPLOYER SHALL HAVE THE BURDEN OF PROVING
THAT THE TERMINATION IS WITH CAUSE AND DUE PROCESS."

Article 295 of the same decree is hereby amended to read as follows:

"ART. 295. Regular [and casual] employment. - The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular [where the employee
has been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season]. A REGULAR EMPLOYEE IS ONE
WHO HAS BEEN HIRED FOR AN INDEFINITE PERIOD. NO EMPLOYMENT
WITH A FIXED TERM OR DEFINITE PERIOD SHALL BE ALLOWED EXCEPT
IN CASES OF OVERSEAS FILIPINO WORKERS, WORKERS ON
PROBATION, RELIEVERS WHO ARE TEMPORARY REPLACEMENTS OF
ABSENT REGULAR EMPLOYEES WHOSE ENGAGEMENTS SHALL NOT
EXCEED SIX (6) MONTHS, PROJECT EMPLOYEES, AND SEASONAL
WORKERS.

“RELIEVERS, PROJECT, AND SEASONAL EMPLOYEES SHALL ENJOY THE
RIGHTS OF REGULAR EMPLOYEES FOR THE DURATION OF THE
ENGAGEMENT, PROJECT OR SEASON, RESPECTIVELY. PROJECT
EMPLOYMENT REFERS TO AN EXISTING PROJECT OR UNDERTAKING
THE NATURE OF WHICH IS TEMPORARY AND THE COMPLETION OR
TERMINATION HAS BEEN DETERMINED AND MADE KNOWN TO THE
EMPLOYEE AT THE TIME OF THE ENGAGEMENT. SEASONAL
EMPLOYMENT IS BASED ON THE EXISTENCE OF A SEASON IN A TYPE OF
WORK. A SEASON IS THAT ESTABLISHED IN AGRICULTURAL WORK OR
ESTABLISHED PERIODS OF INCREASED WORK DEMAND INHERENT TO
THE INDUSTRY AS DETERMINED BY THE DEPARTMENT OF LABOR AND
EMPLOYMENT IN CONSULTATION WITH THE NATIONAL TRIPARTITE
INDUSTRIAL PEACE COUNCIL.


"FOR RELIEVERS, PROJECT, AND SEASONAL EMPLOYMENT, WORKERS
ARE CALLED TO WORK FROM TIME TO TIME AND TEMPORARILY LAID-
OFF DURING THE COMPLETION OF THE ENGAGEMENT, PROJECT OR
OFF-SEASON BUT ARE IN THE WORK POOL ON LEAVE WITH OR
WITHOUT PAY STATUS IN BETWEEN ENGAGEMENTS, PROJECTS OR
SEASONS. RELIEVERS, PROJECT, AND SEASONAL WORKERS ARE
ENTITLED TO THE RIGHT OF FIRST REFUSAL TO THE TASK, WORK OR
PROJECT WHICH IS THE SUBJECT MATIER OF THE EMPLOYMENT. THEY
SHALL ALSO ENJOY THE RIGHT OF FIRST REFUSAL IN THE HIRING FOR
OPEN REGULAR POSITIONS.

“ALL OTHER FORMS OF DISCONTINUOUS EMPLOYMENT ARE
PROHIBTED. CLAUSES IN EMPLOYMENT CONTRACTS PROVIDING FOR A
FIXED TERM OR DEFINITE PERIOD OF EMPLOYMENT ARE VOID.
WORKERS UNDER SUCH ARRANGEMENTS ARE DEEMED REGULAR
EMPLOYEES RECKONED FROM THE FIRST DAY OF EMPLOYMENT.

[An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shail continue while such activity exists.]"

‘SEC. 5. Article 296 of the same decree is hereby amended to read as follows:

“ART. 296. Probationary employment. — Probationary employment shall not exceed six (6) months
from the date the employee started working [, unless it is covered by an apprenticeship
agreement stipulating a longer period]. The services of an employee who has been engaged on
a probationary basis may be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards WHICH SHALL BE made known by the
employer to the employee IN WRITING at the time of his engagement. An employee who is
allowed to work after a probationary period shall be considered a regular employee.

“EXCEPT WHEN THE TERMINATION IS FOR JUST CAUSE, A PROBATIONARY
EMPLOYEE WJIO HAS RENDERED AT LEAST ONE (1) MONTH OF SERVICE IS ENTITLED
TO A TERMINATION PAY OF ONE-HALF (1/2) MONTH SALARY."

SEC. 6. A new article, Article 303-A. is hereby inserted after Article 303 of the same decree to
read as follows:

“ART. 303-A. ADMINISTRATIVE PENALTIES. - THE DEPARTMENT OF
LABOR AND EMPLOYMENT SHALL IMPOSE THE FOLLOWING:

1. A FINE OF THIRTY THOUSAND PESOS (P30,000.00) FOR A
PERSON OR ENTITY OPERATING AS A JOB CONTRACTOR
WITHOUT A LICENSE, PROVIDED THAT SAID PERSON OR ENTITY
DOES NOT COMMIT ANY OTHER ACT DESCRIBED AS LABOR-ONLY
CONTRACTING UNDER ARTICLE 106 OF THIS CODE;


2. A FINE FOR A PERSON OR ENTITY OPERATING AS A JOB
CONTRACTOR WITHOUT A LICENSE AND ALSO COMMITS ANY OF
THE ACTS DESCRIBED AS LABOR-ONLY CONTRACTING UNDER
ARTICLE 106 OF THIS CODE. SAID FINE SHALL BE THIRTY
THOUSAND PESOS (P30,000.00) ASSESSED PER EMPLOYEE
ENGAGED UNDER A LABOR-ONLY CONTRACTING ARRANGEMENT
BUT NOT TO EXCEED THE TOTAL AMOUNT OF FIVE MILLION
PESOS (P5,000,000.00). IN ADDITION, SAID PERSON OR ENTITY
WHICH ENGAGED IN LABOR-ONLY CONTRACTING SHALL BE
BARRED FROM APPLYING FOR FUTURE LICENSES. THIS
DISQUALIFICATION SHALL EXTEND TO THE RESPONSIBLE
PARTNERS, DIRECTORS OR OFFICERS OF THE LIABLE
PARTNERSHIP, CORPORATION OR COOPERATIVE;

3. A FINE FOR A LICENSED JOB CONTRACTOR WHICH COMMITS
ANY OF THE ACTS DESCRIBED AS LABOR-ONLY CONTRACTING
UNDER ARTICLE 106 OF THIS CODE. SAID FINE SHALL BE THIRTY
THOUSAND PESOS (P30,000.00) ASSESSED PER EMPLOYEE
ENGAGED UNDER A IABOR-ONLY CONTRACTING ARRANGEMENT
BUT NOT TO EXCEED THE TOTAL AMOUNT OF FIVE MILLION
PESOS (P5,000,000.00). IN ADDITION, THE LICENSEE SHALL
HAVE ITS OPPERATION CLOSED ON THE PROJECT IN WHICH THE
VIOLATION WAS COMMITTED AND SHALL BE BARRED FROM
APPLYING FOR FUTURE LICENSES. ANY SUCCEEDING OFFENSE
COMMITTED SHALL RESULT IN THE REVOCATION OF THE
LICENSE AND CLOSURE OF THE OPERATIONS OF THE JOB
CONTRACTOR. THIS DISQUALIFICATION SHALL EXTEND TO THE
RESPONSIBLE PARTNERS, DIRECTORS OR OFFICERS OF THE
LIABLE PARTNERSHIP, CORPORATION OR COOPERATIVE;

4. A FINE FOR A PERSON OR ENTITY WHO ENGAGES FIXED-TERM
EMPLOYEES IN VIOLATION OF ARTICLE 296 OF THIS CODE. SAID
FINE SHALL BE THIRTY THOUSAND PESOS (P30,000.00)
ASSESSED PER EMPLOYEE ENGAGED UNDER THE PROHIBITED
FIXED-TERM ARRANGEMENT BUT NOT TO EXCEED THE TOTAL
AMOUNT OF FIVE MILLION PESOS (P5,000,000.00).

"THE ABOVE FINES SHALL BE IMPOSED JOINTLY AND SEVERALLY
AGAINST THE PRINCIPAL EMPLOYER, AND CONTRACTOR, MANPOWER
AGENCY, WORKERS’ COOPERATIVE OR ANY OTHER SIMILAR ENTITY OR
THE LATTER'S RESPONSIBLE PARTNERS, DIRECTORS OR OFFICERS
ENGAGED IN THE PROHIBITED ARRANGEMENTS DESCRIBED ABOVE.
THE FINES SHALL BE IMPOSED WITHOUT PREJUDICE TO OTHER
DAMAGES THAT MAY BE IMPOSED UNDER THIS CODE AND OTHER LAWS
AND REGULATIONS."


SEC. 7. Implementing Rules and Regulations. ~ Within sity (60) days from the effectivity ofthis
Act, the Secretary of Labor and Employment shall promulgate the necessary rules and regulations
for the effective implementation of this Act.

SEC. 8. Separabilty Clause. - If any provision or part of this Act is dectared invalid or
unconstitutional, the remaining parts or provisions not affected shall remain in full force and
effect.

SEC. 9 Repealing Clause. - All laws, decrees, order, rules and regulations and other issuances or
parts thereof which are inconsistent with the provisions of this Act are hereby repealed or
amended accordingly.

‘SEC. 10. Effectivity. -This Act shall take effect fifteen (15) days after its publication in the Official.
Gazette or in any newspaper of general circulation.

Approved,