THIRTEENTH CONGRESS OF THE REPUBLIC 
SECOND REGULAR SESSION 
OF THE PHILIPPINES 
5 AUG -4 P4 :X 
r 
. ... . 
INTRODUCED BY SENATOR MAGSAYSAY, JR 
EXPLANATORY NOTE 
Labor undergoes some kind of a transformation in its role in 
development. At this time, we see the employees becoming stockholders 
of big corporations, in fact, the controlling stockholders of the biggest 
airline company and the pioneer car rental company in America. 
As our country prepares itself for the challenges of the next 
millennium the capital contributions from labor and other non- 
traditional sources of capital must likewise be tapped. Labor capital is 
enormous and is a potentially powerful force in the economic 
development of our country. Maybe, labor capital could better handle 
labor intensive industries. And, as down-sizing of big companies become 
necessary for global competitiveness, the opportunities for labor continue 
to expand. 
Still, the State is called upon to protect labor, including labor 
capital. The Constitution states: 
"The State shall afford full protection to labor, local and 
overseas, organized 
and unorganized, and 
promote 
full 
employment and equality of employment opportunities for all. 
fwI 
The State shall regulate the relations between workers and 
employers, organized the right of labor to its just share in the fruits 
of production and the right of enterprises to reasonable returns on 
investments, and to expansion and growth." 
This legislation seeks 
to 
respond 
to 
the 
above-quoted 
constitutional tenet, while 
aggressively stimulating capital, by 
institutionalizing one of the vehicles for labor's added participation in the 
economic development of our country - the employees stock ownership 
program (ESOP) or the "stock paluwagan" plan, as the scheme is 
' 
sometimes referred to 
the academic community. At the same time, 
this legislation chalbnges existing capital, the country's employers, to 
consider the alternatives offered by labor as partners and investor in 
their business. 
Through the ESOP or "stock paluwagan" envisioned in this bill, we 
will get closer to employee empowerment, to the so-called quality 
improvement process and, therefore, to real preparedness for global 
competition. 
With the ESOP, the joint stakes of employers and 


employees in every business venture, the much needed capital for the 
development of our country will expand, while the employers and the 
employees would then be focused on improving the delivery and ensuring 
the quality of service. 
To promote the principles enunciated and specific objectives 
enumerated in Wis bill, voluntariness in the adoption of the ESOP is 
emphasized. Thus, all that is required of the employers under this 
legislation is their serious and earnest effort at studying the program by 
themselves or in consultation with their employees. In fact, the bill only 
defines in general terms what ESOP is, and then suggests what could be 
contained or covered by the ESOP. 
. 
Indeed, the bill hopes to strengthen business activities by allowing 
the businessmen, the opportunity to tap labor as a source of capital and, 
more importantly, non-capital investments which only they can provide, 
i.e., their interest in the best interest of their employers including 
themselves including themselves. In addition, the bill carries a package 
of incentives in the form of various tax holidays, some amount of 
flexibility in the negotiation of terms of collective bargaining agreements 
and, inevitably, goodwill recognition in their being labor-friendly entities, 
among others. 
In other words, as soon as a decision to participate in 
the program is reached, government assistance and support is provided 
to the employers in the form of incentives and facilitative processes 
which are embodied herein or to be adopted under rules and regulations. 
On the other hand, to tap labor as one huge source of capital and 
investments, and to harness their energy for increased productivity, the 
bill among other encourages ESOP to include therein employees’ 
acquisition at premium prices, representation and participation in the 
management and even first refusal right in case of business re- 
organinations. 
The times has come for the Filipino labor force to be fully 
recognized, not by the Government but by their opportunity to become 
eo-owners in the company they work for, and a hand in the management 
of said company in exchange for their loyalty, dedication, talent and 
efficiency. This salute to the greatness of Filipino labor likewise breathes 
life and sinews to the provisions on welfare upliftment mandated in the 
pages of OUT Constitution. 
Keeping an earnest desire in championing the cause of Filipino 
workforce, this bill is recommended for immediate cognizance by the 
Philippine Senate. 
A 
P 


THIRTEENTH CONGRESS OF THB REPUBLIC 
SECOND REGULAR SESSION 
5 AUE -4 
P4 :26 
OF THE PHILIPPINES 
/" 
C . A  
SENATE 2 0 7 *? 
RECEbVfiR BY:,- 
S.B. No. 
I 
INTRODUCED BY SENATOR MAGSAYSAY, JR. 
AN ACT 
PROMOTING 
THE 
RIGHTS 
OF 
FILIPINO 
LABOR 
BY 
INSTITUTIONALIZINGC 
THE 
EMPLOYEES 
STOCK OWNERSHIP 
PROGRAM, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the 
Philippines in Congress assembled 
SECTION 1. Title - This Act shall be cited as the "Employees 
Stock Ownership Program Act of 2005." 
1 
8EC. 2. Declaration of Policy - It is the declared policy of the 
State - 
a. To promote the principle of shared responsibility, between 
workers and employers, and the recognition of the right of 
enterprises to reasonable returns on investments and to 
expansion and growth and the right of labor to its just share 
in the fnzlts of production; 
To encourage employers to share with their employees the 
ownership and management of their ventures and the other 
investment opportunities available to them; 
c. 
To stimulate and invigorate the employees' added investments 
. 
in the bupiness of their employers in the form of additional 
time, effort, efficiency and part of their income through various 
schemes, including the employees stock option program 
institutionalized through this Act. 
b. 
8EC. 3. Purpoaes - The purposes of this Act are, as follows: 
a. To broaden the ownership of Philippine enterprises and all 
means of production; 
b. To generate additional capital and increase the level of 
investments in business and economic activities; and 
c. To improve the productivity, income security and asset 
position of Filipino labor and their families. 
SEC. 4. The Employees Stock Ownership Program - There is 
hereby institutionalbed an Employees Stock Ownership Program (ESOP), 
as follows: 
a. All enterprises, corporations, partnerships, cooperatives and 
other business entities, including government-owned and 
controlled corporations, hereinafter collectively referred to as 
"the employers", with at least five (5) years of existence and 


employees, are hereby encouraged to allocate, grant or cede a 
portion of their outstanding capital to their employees, 
workers’ cooperatives or labor unions, hereinafter collectively 
referred to as “the employees”. 
b. Within one (1) year from the date of the effectivity of this Act, 
and every year thereafter until an ESOP is adopted and 
instituted by the employers in their respective firms, the 
employers shall study the feasibility of adopting an ESOP for 
their respective fms and advise their employees of their 
specific findings, plans or programs, likewise reporting to or 
advising their employees of their decisions on the matter, such 
as, but not limited to the following: 
i. 
ii. 
Whether or not they have adopted any specific ESOP for 
their firms; 
Whether or not, if they have decided tc, adopt an ESOP 
program for their firms, they would need more time to 
study the details thereof; 
iii. 
If they are not yet through with their study, such 
information as the employers could provide on how the 
study is proceeding and the stage in which the study is; 
iv. 
If they are not yet prepared to adopt any ESOP, the 
reason or reasons therefor; or 
v. 
Such other advice or information consistent with the 
employers good faith efforts towards the adoption of the 
ESOP program for their firms. 
c. Pending the decision of the employers to adopt and ESOP, the 
employees shall have no right to demand the same, but they 
may request that documents or information relevant to report 
on the study made. 
. 
Provided, That nothing in this Act will prevent the employers from 
undertaking the study jointly with representatives of the employees, or 
from pursuing actions intended as compliance with the requirements of 
this Act throuj& negotiations with employees’ representatives in 
collective bargaining tables or otherwise. 
SEC. 6. ESOP Nature, Contents and Requirements. - An ESOP 
is a program consisting either in a contract or an agreement, stipulations 
or provisions in a collective bargaining agreement, or a firm offer upon 
acceptance by the employees, or the employees’ cooperative, union, 
association, union, association, agent or representative, allowing 
acquisition by the employees directly 
or through said employees’ 
cooperative, union or association, agent or representative, of part 
ownership of their companies, with all the rights and privileges 
appurtenant thereto. 
The other contents, structures and terms and conditions of an 
ESOP may vary, and may include, but need not be limited to, provisions 
on - 
a. The premium or reduced price at which the part ownership in 
the company or shares of stock representing the same are to be 
sold to the employees, and the other terms and conditions of 
such sale; 


b. The employees participation or representation in 
the 
management of the company; 
c. Job security consistent with the security of tenure g u m t e e  
under the Constitution; 
d. Right of the employees to first refusal in the event the company 
covered is sold; or 
e. Utilization of wages and other compensations and for the 
payment of shares or part ownership of the company, 
notwithstanding the provisions of Article 102 and other 
provisions of the Labor Code of the Philippines: Provided, That 
nothing in this Act shall be construed as a waiver of the 
employees' right to self-organization, collective bargaining and 
negotiation and peaceful concerted activities, including the 
right to strike, or as authority on the part of employers to 
comrnit unfair labor practice, nor shall any provision of thie, Act 
or any provision of the contract or agreement, the stipulations 
or provisions in a collective bargaining agreement, or the 
accepted firm offer not mutudy knowingly and intelligently 
agreed upon by and between the employer and the employees 
diminish or reduce any benefits and other privileges enjoyed by 
the employees under existing laws. 
SEC. 6. Effectiwe Date of Inclusion of Employees Within the 
* 
- 
Coverage of the Program - Voluntmy coverage of the employee within 
the coverage of the ESOP shall take effect on the date of his employment. 
8EC. '7. Registration - Each employer availing itself of the ESOP 
shall register the document embodying the same with the Department of 
Labor and Employment (DOLE) for monitoring and implementation 
purposes, in accordance with the rules and regulations that will be 
issued consistent with this Act. 
The ESOP document or agreement shall likewise be registered and 
approved by the Bureau of Internal Revenue to qualify an employer to the 
tax incentives provided under this Act. 
8EC. 8. lxtcentiwes to Enterprises, Firms and Entities as well 
as to Cooperatives adopting the ESOP. - The ESOP duly registered in 
accordance with the foregoing provisions of this Act shall be entitled to 
the following incentives: 
a. 
A thirty percent (30%) tax credit on income tax, for the 
reduction in price or discount on or contribution for the 
payment of the value of the ownership shares granted or given 
by the employers; 
Exemption from all forms of taxation of the transactions under 
the ESOP, including capital gains tax and taxes on dividend 
repayment schemes where dividend payments are retained as 
such for a period of at least five (5) 
years; 
c. 
On the part of the cooperatives, in addition to the tax 
exemptions provided for under R.A. 
No. 6938 or the 
Cooperative Code of the Philippines, exemptions from - 
i. 
b. 
capital gains tax or income on any gain resulting from 
any sale of stock owned by the cooperative or any 
distribution of gains there from to members; and 


ii. 
income tax on any dividends or interest arising from 
stocks owned by the cooperative or on any distribution 
of income there from to members. 
d. 
Exemption from income tax of any retirement or separation 
benefits, whether or not covered by a tax qualified plan, and 
retained in the ESOP for a period of not less than five (5) 
years; and 
Exemption of the shares of stocks in a corporation involved in 
the transactions from registration, but not the reporting, 
requirements under the Corporation Code. 
S W .  9. 
Publie Information Campaign - The DOLE, in 
coordination with the Philippine Information Agency, shall underteke 
information campaign and similar other educational training on 
employees stock option program, processes and privileges, rights and 
duties 
. 
SEC. 10. Penal Provisions - Any violation of this Act shall be 
punishable in accordance with the pertinent provisions of Presidential 
Decree No. 442, otherwise known as the ‘Labor Code of the Philippines”, 
as amended. 
e. 
SEC. 11. Implementing Rules and Regulations - The DOLE 
shall issue the necessary rules and regulations to implement the 
provisions of this Act. 
SEC. 12. Separability Clause - AU laws, decrees, executive 
orders, rules and regulations, and other issuances or parts thereof which 
are inconsistent with this Act are hereby repealed, amended or modified 
accordingly. 
SEC. la. Effectivity Clause - This Act shall take effect after 
fifieen (15) days following its complete publication in the Official Gazette 
or in at least two (2) newspapers of general circulation, whichever comes 
earlier. 
Approved,