Republic of the Philippines
HOUSE OF REPRESENTATIVES
Constitution Hills, Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No,_ 303

Introduced by AKBAYAN Party-List Representatives Walden F. Bello
and Arlene J. Bag-a0

EXPLANATORY NOTE

Arguably, the gravest threat to our workers’ right to security of tenure comes from the
current trend towards contractualization and de-regularization. Workers settle for
intermittent and short term employment affecting not only their ability to earn
livelihood but also their productivity and quality of work.

The present proposal recognizes subcontracting as a valid business practice but also
protects workers from unscrupulous and unnecessary subcontracting. Hence, it balances
legitimate business interests with the need to protect workers from insecure
employment conditions.

Many of the concepts and processes contained in the proposal reflects current practice
as provided by the Department of Labor and Employment’s Department Order No. 18
series of 2002 (DO 18). While some refinements have been made to DO 18 provisions,
core concepts have been retained such as the definition of subcontracted work and
labor only contracting, the recognition of rights of subcontracted workers and the
maintenance of a registration system for legitimate subcontractors

The salient innovations introduced by this bill in this regard include the following: 1)
Principals can engage a maximum of 20% subcontracted employees; 2) Violation of
contracting rules is made an unfair labor practice; and 3) Violation of contracting rules is
penalized by a fine.

These proposals on the matter of subcontracting are made within the framework of a
need to revise the provisions on security of tenure and regular employment of
Presidential Decree No. 442, otherwise known as the Labor Code. There is a need to
incorporate the numerous interpretations of these provisions made through the years
by the Executive through implementing rules and by the Judiciary through
jurisprudence, in order to create a coherent and consistent framework of employment
classification.

The bill, therefore, includes proposals drawing from these executive and judicial
pronouncements on security of tenure in order to create a holistic and harmonious set
of rules regarding classes and rights of employees. In particular, the bill incorporates the
executive and judicial recognition that all classes of employees are entitled to security of
tenure, institutionalizes the workers’ right to notice and hearing and clarifies what
constitutes regular, casual, and project employment.


Building on these concepts, the bill seeks to introduce the following innovations:

1) Employment may be fixed by the term of the project, task or work to be
performed but may not be bound to a mere reference to a time;

2) The period of probationary employment is fixed at six months when all
employers shall have enough time to ascertain whether a worker is fit for
retention or not; and

3) __ Deliberate misclassification of employees for the purpose of misleading them as
to their rights is deemed an unfair labor practice.

With these amendments to the Labor Code, the proposal seeks to balance the
legitimate business interests of the employer with the need for protection of workers
from the prejudice of non-regularization. After all, for as long as the employer profits
through and by the labor of its employees, it is but fair to recognize the workers’ right to
remain employed absent any legal cause for his dismissal.

This legislative proposal is based on Committee Report No. 2179 of the House
Committee on Labor and Employment during the 14" Congress. However, due to lack
of material time, this bill was not passed by the last Congress. Hence, the early approval
of this bill is earnestly sought.

WALDEN F. BELLO

LOA |
ARLENEJ. BAG-AO


Republic of the Philippines
HOUSE OF RERPESENTATIVES
Constitution Hills, Quezon City

FIFTEENTH CONGRESS
First Regular Session

303

House Bill No.

Introduced by AKBAYAN Party-List Representatives Walden F. Bello
and Arlene J. Bag-a0

AN ACT STRENGTHENING THE SECURITY OF TENURE OF WORKERS IN
THE PRIVATE SECTOR, AMENDING FOR THE PURPOSE ARTICLES 248,
279, 280, 281 AND 288, AND INTRODUCING NEW ARTICLES 106, 106-A,
106-B, 106-C,106-D, 106-E, 280-A AND 280-B TO PRESIDENTIAL DECREE
NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF
THE PHILIPPINES

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

SECTION 1. Article 106 of the Labor Code is hereby amended as follows:

“[ART. 106. Contractor or 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 the latter's
subcontractor, if any, shall be paid in accordance with the provisions of
this Code.

“In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his 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, 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 and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

“There is ‘labor-only’ contracting where the persons 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 placed by such persons are performing activities
which are directly related 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 him.]

“ART. 106. —- CONCENPT AND NATURE OF SUBCONTRACTING
ARRANGEMENTS. ~ IN LEGITIMATE SUBCONTRACTING, THERE EXISTES A
TRILATERAL RELATIONSHIP UNDER WHICH THERE IS A CONTRACT FOR A
SPECIFIC JOB, WORK OR SERVICE BETWEEN THE PRINCIPAL AND THE
SUBCONTRACTOR, AND A CONTRACT OF EMPLOYMENT BETWEEN THE
SUBCONTRACTOR AND ITS WORKERS. HENCE, THERE ARE THREE
PARTIES INVOLVED IN THESE ARRANGEMENTS: THE PRINCIPAL WHO
DECIDES TO FARM OUT A JOB OR SERVICE TO A SUBCONTRACTOR, THE
SUBCONTRACTOR WHO HAS THE CAPACITY TO INDEPENDENTLY
UNDERTAKE AND ACTUALLY UNDERTAKES THE PERFORMANCE OF THE
JOB, WORK OR SERVICE, AND THE CONTRACTUAL WORKERS WHO ARE
ENGAGED BY THE SUBCONTRACTOR TO ACCOMPLISH THE JOB WORK
OR SERVICE.

“FOR PURPOSES OF THIS CODE, ‘SUBCONTRACTING’ REFERES TO AN
ARRANGEMENT WHEREBY:

(A) A PRINCIPAL AGREES TO PUT OUT OR FARM OUT TO A
SUBCONTRACTOR THE PERFORMANCE OR COMPLETION OF A SPECIFIC
JOB, WORK OR SERVICE WITHIN A DEFINITE OR PREDETERMINED
PERIOD, REGARDLESS OF WHETHER SUCH JOB, WORK OR SERVICE IS TO
BE PERFORMED OR COMPLETED WITHIN OR OUTSIDE THE PREMISES OF
THE PRINCIPAL; OR

(B) A PERSON, PARTNERSHIP, ASSOCIATION OR CORPORATION
WHICH, NOT BEING A PRINCIPAL, CONTRACTS WITH A
SUBCONTRACTOR FOR THE PERFORMANCE OF ANY WORK, TAKS, JOB
OR PROJECT.”

SECTION 2. A new Article 106-A is hereby inserted in the Labor Code to read as
follows:

“ART. 106 — A. RIGHTS AND LIABILITIES OF PARTIES. — (A.) THE
SUBCONTRACTED EMPLOYEE. IN ALL CASES, SUBCONTRACTED
EMPLOYEES SHALL BE ENTITLED TO ALL THE RIGHTS AND PRIVILEGES
DURE REGULAR EMPLOYEES INCLUDING THE FOLLOWING:

1. SAFE AND HEALTHFUL WORKING CONDITIONS;

2. LABOR STANDARDS SUCH AS SERVICE INCENTIVE LEAVES, REST

DAYS, OVERTIME PAY, HOLIDAY PAY, 13™ MONTH PAY AND

SEPARATION PAY;

RETIREMENT BENEFITS;

SOCIAL SECURITY AND WELFARE BENEFITS;

5. SELF-ORGANIZTION, COLLECTIVE BARGAINING CONCERTED
ACTIVITIES; AND.

6. SECURITY OF TENURE.

ft al

“IN ADDITION, SUBCONTRACTED EMPLOYEES SHALL HAVE THE RIGHT
TO A WRITTEN CONTRACT WHICH SHALL INCLUDE THE FOLLOWING
TERMS AND CONDITIONS:


1. THE SPECIFIC DESCRIPTION OF THE JOB, WORK OR SERVICE TO BE
PERFORMED B THE CONTRACTUAL EMPLOYEE;

2. THE PLACE OF WORK AND TERMS AND CONDITIONS OF
EMPLOYMENT, INCLUDING A STATEMENT OF THE WAGE RATE
APPLICABLE TO THE INDIVIDUAL CONTRACTUAL EMPLOYEE;

3. THE TERM OR DURATION OF EMPLOYMENT, WHICH SHALL BE CO-
EXTENSIVE WITH THE CONTRACT OF THE PRINCIPAL AND
SUBCONTRACTOR, OR WITH THE SPECIFIC PHASE FOR WHICH THE
CONTRACTUAL EMPLOYEE IS ENGAGED, AS THE CASE MAY BE.

“THE SUBCONTRACTED EMPLOYEE SHALL BE INFORMED BY THE
SUBCONTRACTOR OF THE FOREGOING TERMS AND CONDITIONS
ON OR BEFORE THE FIRST DAY OF HIS EMPLOYMENT.

“(B.) THE PRINCIPAL AND THE SUBCONTRACTOR. THE LEGITIMATE
SUBCONTRACTOR SHALL BE CONSIDERED THE EMPLOYER OF THE
CONTRACTUAL EMPLOYEE FOR PURPOSES OF ENFORCING THE
PROVISIONS OF THE LABOR CODE AND OTHER SOCIAL LEGISLATION IN
ALL CASES OF SUBCONTRACTING, HOWEVER, THE PRINCIPAL SHALL BE
SOLIDARILY LIABLE WITH THE CONTRACTOR IN THE EVENT OF ANY
VILOATION OF ANY PROIVISION OF THE LABOR CODE, INCLUDING THE
FAILURE TO PAY WAGES.

“THE PRINCIPAL SHALL BE DEEMED THE EMPLOYER OF THE
CONTRACTUAL EMPLOYEE IN ANY OF THE FOLLOWING CASES:

1, WHERE THERE IS LABOR-ONLY CONTRACTING; OR

2. IN THE ABSENCE OF THE WRITTEN CONTRACT REQUIRED BY ARTICLE
106-A; OR

3. _IN CASES OF VIOLATION OF ARTICLE 106-8.

“IN ADDITION, THE PRINCIPAL SHALL BE SOLIDARILY LIABLE WITH THE
SUBCONTRACTOR IN CASE THE CONTRACT BETWEEN PRINCIPAL AND
SUBCONTRACTOR IS PRETERMINATED FOR REASONS NOT
ATTRIBUTABLE TO THE FAULT OF THE SUBCONTRACTOR.”

SECTION 3. A new Article 106-B is hereby inserted in the Labor Code to read as
follows:

“ART. 106-B. PROHIBITION AGAINST LABOR-ONLY CONTRACTING. —
ENGAGING IN LABOR-ONLY CONTRACTING OR CONTRACTING WITH A
LABOR-ONLY CONTRACTOR IS STRICTLY PROHIBITED. FOR THIS
PURPOSE, LABOR-ONLY CONTRACTING REFERS TO AN ARRANGEMENT
WHERE THE SUBCONTRACTOR MERELY RECRUITS, SUPPLIES OR PLACES
WORKERS TO PERFORM A JOB, WORK OR SERVICE FOR A PRINCIPAL,
INCLUDING INSTANCES WHERE ANY OF THE FOLLOWING IS PRESENT:

(A) THE SUBCONTRACTOR DOES NOT HAVE SUBSTANTIAL CAPITAL AND
INVESTMENT WHICH RELATE TO THE JOB, WORK OR SERVICE TO BE
PERFORMED;

(8) THE EMPLOYEES RECRUITED, SUPPLIED OR PLACED BY SUCH
SUBCONTRACTOR ARE PERFORMING ACTIVITIES WHICH ARE
DIRECTLY RELATED TO THE MAIN BUSINESS OF THE PRINCIPAL; OR


(C) THE PRINICIPAL HAS THE RIGHT TO CONTROL, WHETHER EXERCISED
OR NOT, NOT ONLY THE END TO BE ACHIEVED, BUT ALSO THE
MANNER AND MEANS TO BE USED IN REACHING THAT END.

“AS USED IN THIS CODE, ‘SUBSTANTIAL CAPITAL AND INVESTEMENT’ IN
SUBCONTRACTING ARRANGEMENTS REFERS TO TOOLS, EQUIPMENT,
IMPLEMENTS, MACHINERIES AND WORK PREMISES, ACTUALLY AND
DIRECTLY USED BY THE SUBCONTRACTOR IN THE PERFORMANCE OR
COMPLETION OF THE JOB, WORK OR SERVICE CONTRACTED OUT. THE
USE OF THE SUBCONTRACTOR OR THE EQUIPMENT, FACILITIES,
MACHINERIES, AND TOOLS OF THE PRINCIPAL IS AN INDICATION THAT
THE SUBCONTRACTOR HAS NO SUBSTANTIAL CAPITAL AND
INVESTMENT. THE EXISTENCE OF CAPITAL STOCKS AND SUBSCRIBED
CAPITALIZATION IN RELATION TO CORPORATIONS ENGAGED IN
SUBCONTRACTING DOES NOT BY ITSELF CONSTITUTE SUBSTANTIAL AND
INVESTMENT.

“AS USED IN THIS CODE, THE ‘RIGHT TO CONTROL’ IN
SUBCONTRACTING ARRANGEMENTS SHALL REFER TO THE RIGHT
RESERVED TO THE PERSON FOR WHOM THE SERVICES OF THE
CONTRACTUAL WORKERS ARE PERFORMED, TO DETERMINE NOT ONLY
THE END TO BE ACHIEVED, BUT ALSO THE MANNER AND MEANS TO BE
USED IN REACHING THE END.”

SECTION 4. A new Article 106-C is hereby inserted in the Labor Code to read as
follows:

“ART. 106-C. PROHIBITIONS IN SUBCONTRACTING ARRANGEMENTS —
REGARDLESS OF COMPLIANCE WITH THE IMMEDIATELY PRECEDING
ARTICLE, THE FOLLOWING ACTS ARE HEREBY DECLARED PROHIBITED FOR
BEING CONTRARY TO LAW OR PUBLIC POLICY:

(A) ENGAGING OR MAINTAINING BY THE PRINCIPAL OF SUBCONTRACTED
EMPLOYEES IN EXCESS OF TWENTY (20%) OF THE PRINCIPAL'S TOTAL
WORKFORCE;

(8) CONTRACTING OUT OF A JOB, WORK OR SERVICE WHEN THE SAME
RESULTS IN THE TERMINATION OF REGULAR EMPLOYEES AND
REDUCTION OF WORK HOURS OR REDUCTION OR SPLITTING OF THE
BARGAINING UNIT;

(C) CONTRACTING OUT OF WORK WITH A ‘CABO’. FOR THIS PURPOSE,
‘CABO’ REFERS TO A PERSON OR GOURP OF PERSONS OR TO A LABOR
GROUP WHICH, IN THE GUISE OF A LABOR ORGANIZATION OR
COOPERATIVE, SUPPLIES WORKERS TO AN EMPLOOYER, WITH OR
WITHOUT ANY MONETARY OR OTHER CONSIDERATION, WHETHER IN
THE CAPACITY OF AN AGENT “OF THE EMPLOYER OR AS AN
OSTENSIBLE INDEPENDENT CONTRACTOR;

(D) TAKING UNDUE ADVANTAGE OF THE ECONOMIC SITUATION OR LACK
OF BARGAINING STRENGTH OF THE CONTRACTUAL EMPLOYEE, OR
UNDERMINING HIS SECURITY OF TENURE OR BASIC RIGHTS, OR
CIRCUMVENTING THE PROVISIONS OF REGULAR EMPLOYMENT, IN
ANY OF THE FOLLOWING INSTANCES:

1. IN ADDITION TO HIS ASSIGNED FUNCTIONS, REQUIRING THE
CONTRACTUAL EMPLOYEE TO PERFORM FUNCTIONS WHICH ARE


WHICH ARE CURRENTLY BEING PERFORMED BY THE REGULAR
EMPLOYEES OF THE PRINCIPAL OR OF THE SUBCONTRACTOR;

2. REQUIRING HIM TO SIGN, AS A PRECONDITION TO EMPLOYMENT OR
CONTINUED EMPLOYMENT, AN ANTEDATED RESIGNATION LETTER; A
BLANK PAYROLL; A WAIVER OF LABOR STANDARDS INCLUDING
MINIMUM WAGES AND SOCIAL OR WELFARE BENEFITS; OR A
QUITCLAIM RELEASING THE PRINCIPAL, SUBCONTRACTOR FROM ANY
LIABILITY AS TO PAYMENT OF FUTURE CLAIMS; AND

3. REQUIRING HIM TO SIGN A CONTRACT FIXING THE PERIOD OF
EMPLOYMENT TO A TERM SHORTER THAN THE TERM OF THE
CONTRACT BETWEEN THE PRINCIPAL AND THE SUBCONTRACTOR,
UNLESS THE LATTER CONTRACT IS DIVISIBLE INTO PHASES FOR WHICH
SUBSTANTIALLY DIFFERENT SKILLS ARE REQUIRED AND THIS IS MADE
KNOWN TO THE EMPLOYEE AT THE TIME OF THE ENGAGEMENT.

4. CONTRACTING OUT OF A JOB, WORK OR SERVICE THROUGH AN IN-
HOUSE AGENCY WHICH REFERS TO A:

i, SUBCONTRACTOR ENGAGED IN THE SUPPLY OF LABOR WHICH IS
OWNED, MANAGED OR CONTROLLED BY THE PRINCIPAL; OR
SUBCONTRACTOR IN WHICH THE PRINCIPAL OWNS OR OTHERWISE
REPRESENTS ANY SHARE OF STOCK; OR

iii, SUBCONTRACTOR WHICH OPERATES SOLELY FOR THE PRINCIPAL.

5. CONTRACTING OUT OF A JOB, WORK OR SERVICE DIRECTLY RELATED
TO THE BUSINESS OR OPERATION OF THE PRINCIPAL BY REASON OF A
STRIKE OR LOCKOUT WHETHER ACTUAL OR IMMINENT;

6. CONTRACTING OUT OF A JOB, WORK OR SERVICE BEING PERFORMED
BY OR PREVIOUSLY PERFORMED BY REGULAR EMPLOYEES AND/OR
MEMBERS OF THE BARGAINING UNIT.”

SECTION 5. A new Article 106-D is hereby inserted in the Labor Code to read as

follows:

“ART. 106-D. REGISTRATION OF SUBCONTRACTORS. - (A.)
MANDATORY REGISTRATION. IT SHALL BE MANDATORY FOR ALL
PERSONS OR ENTITIES ACTING AS SUBCONTRACTORS TO REGISTER
UNDER A REGISTRATION SYSTEM HEREBY ESTABLISHED TO GOVERN
CONTRACTING ARRANGEMENTS AND TO BE IMPLEMENTED BY THE
REGIONAL OFFICES OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT.

“NON-REGISTERED PERSONS OR ENTITIES ACTING AS
SUBCONTRACTORS SHALL BE DEEMED AS LABOR-ONLY CONTRACTORS.
MERE REGISTRATION, WITHOUT A SHOWING OF COMPLIANCE WITH
ALL REQUIREMENTS FOR LEGITIMATE SUBCONTRACTING AND
AVOIDANCE OF ALL PROHIBITIONS OF SUBCONTRACTING, SHALL NOT
INDICATE LEGITIMATE SUBCONTRACTING.

“(B.) REQUIREMENTS FOR REGISTRATION. A SUBCONTRACTOR MAY BE

USTED IN THE REGISTRY OF SUBCONTRACTORS UPON COMPLETION
AND SUBMISSION OF AN APPLICATION FORM PROVIDED BY THE
DEPARTMENT. IN THE APPLICATION FORM, THE APPLICANT
SUBCONTRACTOR SHALL PROVIDE THE FOLLOWING INFORMATION:


1. THE NAME AND BUSINESS ADDRESS OF THE APPLICANT AND THE
AREA OR AREAS WHERE IT SEEKS TO OPERATE;

2. THE NAMES AND ADDRESSES OF OFFICERS, IF THE APPLICANT IS A
CORPORATION, PARTNERSHIP, COOPERATIVE OR UNION;

3. THE NATURE OF THE APPLICANT'S BUSINESS AND THE INDUSTRY OR
INDUSTRIES WHERE THE APPLICANT SEEKS TO OPERATE;

4. THE NUMBER OF REGULAR WORKERS; THE LIST OF CLIENTS, IF ANY;
THE NUMBER OF PERSONNEL ASSIGNED TO EACH CLIENT, IF ANY
AND THE SERVICES PROVIDED TO THE CLIENT;

5. THE DESCRIPTION OF THE PHASES OF THE CONTRACT AND THE
NUMBER OF EMPLOYEES COVERED IN EACH PHASE, WHERE
APPROPRIATE; AND

6. A COPY OF AUDITED FINANCIAL STATEMENTS IF APPLICANT IS A
CORPORATION, PARTNERSHIP, COOPERATIVE OR A UNION, OR
COPY OF THE LATEST INCOME TAX RETURN IF THE APPLICANT IS A
SOLE PROPRIETORSHIP.

“THE APPLICATION SHALL BE SUPPORTED BY THE FOLLOWING:

1. A CERTIFIED COPY OF A CERTIFICATE OF REGISTRATION OF FIRM OR
BUSINESS NAME FROM THE SECURITIES AND EXCHANGE
COMMISSION (SEC), DEPARTMENT OF TRADE AND INDUSTRY (DTI),
COOPERATIVE DEVELOPMENT AUTHORITY (CDA), OR FROM THE
DOLE IF THE APPLICANT IS A UNION; AND.

2. A CERTIFIED COPY OF THE LICENSE OR BUSINESS PERMIT ISSUED BY
THE LOCAL GOVERNMENT UNIT OR UNITS WHERE THE
SUBCONTRACTOR OPERATES.

“THE APPLICATION SHALL BE VERIFIED AND SHALL INCLUDE AN
UNDERTAKING THAT THE SUBCONTRACTOR SHALL ABIDE BY ALL
APPLICABLE LABOR LAWS AND REGULATIONS.

“(C.) FILING AND PROCESSING OF APPLICATIONS. THE APPLICATION
AND ITS SUPPORTING DOCUMENTS SHALL BE FILED IN TRIPLICATE IN
THE REGIONAL OFFICES WHERE THE APPLICANT PRINCIPALLY
OPERATES. NO APPLICATION FOR REGISTRATION SHALL BE ACCEPTED
UNLESS ALL THE FOREGOING REQUIREMENTS ARE COMPLIED WITH.
THE SUBCONTRACTOR SHALL BE DEEMED REGISTERED UPON PAYMENT
OF A REGISTRATION FEE TO BE DETERMINED BY THE REGIONAL OFFICE.

“WHERE ALL THE SUPPORTING DOCUMENTS HAVE BEEN SUBMITTED,
THE REGIONAL OFFICE MAY DENY OR APPROVIE THE APPLICATION
WITHIN SEVEN (7) WORKING DAYS AFTER ITS FILING.

“UPON REGISTRATION, THE REGIONAL OFFICE SHALL RETURN ONE SET
OF THE DULY-STAMPED APPLICATION DOCUMENTS TO THE APPLICANT,
RETAIN ONE SET FOR ITS FILE, AND TRANSMIT THE REMAINING SET TO
THE BUREAU OF LOCAL EMPLOYMENT. THE BUREAU SHALL DEVISE THE
NECESSARY FORMS FOR THE EXPEDITIOUS PROCESSING OF ALL
APPLICATIONS FOR REGISTRATION.

“(D.) ANNUAL REPORTING OF REGISTERED CONTRACTORS. THE
SUBCONTRACTOR SHALL SUBMIT IN TRIPLICATE COPIES AN ANNUAL
REPORT USING A PRESCRIBED FORM TO THE APPROPRIATE REGIONAL



OFFICE NOT LATER THAN THE 15™ OF JANUARY OF THE FOLLOWING
YEAR. THE REPORT SHALL INCLUDE THE FOLLOWING DOCUMENTS:

1. A LIST OF CONTRACTS ENTERED WITH THE PRINCIPAL DURING THE
SUBJECT REPORTING PERIOD;

2. THE NUMBER OF WORKERS COVERED BY EACH CONTRACT WITH
THE PRINCIPAL;

3. A SWORN STATEMENT SIGNED BY THE HIGHEST EXECUTIVE OFFICER
AND THE CHIEF FINANCIAL OFFICER THAT THE SUBCONTRACTOR
HAS REMITTED ALL KINDS OF PAYMENTS AND PREMIUMS TO THE
SOCIAL SECURITY SYSTEM (SSS), THE HOME DEVELOPMENT MUTUAL
FUND (HDMF), PHILHEALTH, EMPLOYEES COMPENSATION
COMMISSION (ECC), AND BUREAU INTERNAL REVENUE (BIR) FOR
ALL CONTRACTUAL EMPLOYEES PERTAINING TO THE REPORTING
PERIOD.

“THE REGIONAL OFFICE SHALL RETURN ONE SET OF THE DULY-STAMPED
REPORT TO THE SUBCONTRACTOR, RETAIN ONE SET FOR ITS FILE, AND
TRANSMIT THE REMAINING SET TO THE BUREAU OF LOCAL
EMPLOYMENT WITHIN FIVE (5) DAYS FROM RECEIPT THEREOF.

“(E.) DELISTING OF CONTRACTORS OR SUBCONTRACTORS. THE
REGIONAL DIRECTOR SHALL CANCEL THE REGISTRATION OF
SUBCONTRACTORS BASED ON ANY OF THE FOLLOWING GROUNDS:

1. NON-SUBMISSION OF CONTRACTS BETWEEN THE PRINCIPAL AND
THE SUBCONTRACTOR WHEN REQUIRED TO DO SO;

2, NON-SUBMISSION OF SWORN DOCUMENTS STATED IN ARTICLE 106-
D(D);

3. ENGAGEMENT IN LABOR-ONLY CONTRACTING;

4. VIOLATION OF THE PROHIBITED ACTIVITIES PROVIDED BY THIS
CODE;

5. NON-COMPLIANCE WITH LABOR STANDARDS AND WORKING
CONDITIONS.

“(F.) RENEWAL OF REGISTRATION OF SUBCONTRACTORS. ALL
REGISTERED SUBCONTRACTORS MAY APPLY FOR RENEWAL OF
REGISTRATION EVERY TWO YEARS. FOR THIS PURPOSE, THE TRIPARTITE
INDUSTRIAL PEACE COUNCIL (TIPC) AS CREATED UNDER EXECUTIVE
ORDER NO. 403, SHALL SERVE AS THE OVERSIGHT COMMITTEE TO
VERIFY AND MONITOR THE FOLLOWING:

1. ENGAGING IN ALL ALLOWABLE CONTRACTING ACTIVITIES; AND
2. COMPLIANCE WITH ADMINISTRATIVE REPORTING REQUIREMENTS.”

SECTION 6. A new Article 106-E is hereby inserted in the Labor Code to read as.
follows:

“ART. 106-E. DUTY TO PRODUCE COPY OF CONTRACT. ~ THE PRINCIPAL
OR SUBCONTRACTOR SHALL PRODUCE A COPY OF THE CONTRACT
BETWEEN THE PRINCIPAL AND CONTRACTOR IN THE COURSE OF
INSPECTION, THE SUBCONTRACTOR SHALL ALSO PRODUCE A COPY OF
THE CONTRACT OF EMPLOYMENT OF SUBCONTRACTED WORKERS


WHEN DIRECTED TO DO SO BY THE REGIONAL DIRECTOR OR HIS
AUTHORIZED REPRESENTATIVE.

“A COPY OF THE CONTRACT BETWEEN THE SUBCONTRACTED EMPLOYEE
AND THE SUBCONTRACTOR SHALL BE FURNISHED THE CERTIFIED
BARGAINING AGENT, IF THERE IS ANY.”

SECTION 7. Article 248 of the Labor Code is hereby amended to read as follows:

“art. 248. Unfair labor practices of employers. — It shall be unlawful for
an employer to commit any of the following unfair labor practice:

(a) To interfere with, restrain or coerce employees in the exercise of
their right to self-organizatior
(b) To require as a condition of employment that a person or an
employee shall not join a labor organization or shall withdraw from one
to which he belongs;

(c) To ENGAGE A LABOR-ONLY CONTRACTOR OR TO contract out
services or functions being performed by [union] MEMBERS OF, OR
POSITIONS COVERED BY, THE BARGAINING UNIT AND/OR REGULAR
RANK-AND-FILE AND SUPERVISORY EMPLOYEES [when such will
interfere with, restrain or coerce employees in the exercise of their rights
to self-organization);

(d) To initiate, dominate, assist or otherwise interfere with the
formation or administration of any labor organization, including the
giving of financial or other support to it or its organizers or supporters;

(e) To discriminate in regard to wages, hours or work and other terms
and conditions of employment in order to encourage or discourage
membership in any labor organization. Nothing in this Code or in any
other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at
the time of the signing of the collective bargaining agreement.
Employees of an appropriate bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept the
benefits under the collective bargaining agreement: Provided, that the
individual authorization required under Article 242, paragraph (0) of this
Code shall not apply to the non-members of the recognized collective
bargaining agent;

(f) To dismiss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony
under this Code;

(g) To violate the duty to bargain collectively as prescribed by this
Code;

(h) To pay negotiation or attorney's fees to the union or its officers or
agenst as part of the settlement of any issue in collective bargaining or
any other dispute; [or]

(i) To violate a collective bargaining agreement [.]; OR

() TO DENY THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP AND/OR TO CLASSIFY AS CASUAL, CONTRACTUAL,
SUBCONTRACTED EMPLOYEES, AGENCY EMPLOYEES, OR OTHER NON-
REGULAR CLASSIFICATION THOSE EMPLOYEES, OR OTHER NON-



REGULAR CLASSIFICATION THOSE EMPLOYEES WHO ARE REGULAR
EMPLOYEES BY VIRTUE OF ARTICLE 280 OF THIS CODE.

“The provisions of the preceding paragraph notwithstanding, only the
officers and agents of corporations, associations or partnerships who
have actually participated in, authorized or ratified unfair labor practices
shall be held criminally liable.”

SECTION 8. Article 279 of the Labor Code is hereby amended to read as follows:

“ART. 279. Security of Tenure. ~ [In cases of regular employment, the
employer shall not terminate the services of an employee] ALL
EMPLOYEES SHALL ENJOY SECURITY OF TENURE AND SHALL NOT BE
TERMINATED except for a just cause or when authorized by this Title.
ALSO, DUE PROCESS IN EMPLOYMENT RELATIONS REQUIRES ANY
EMPLOYER WHO SEEKS TO DISMISS A WORKER TO FURNISH HIM A
WRITTEN NOTICE STATING THE PARTICULAR ACTS OR OMISSION
CONSTITUTING THE GROUNDS FOR HIS DISMISSAL IN CASES OF
ABANDONMENT OF WORK, THE WRITEEN NOTICE SHALL BE SERVED AT
THE WORKERS’ LAST KNOWN ADDRESS. DUE PROCESS ENTITLES THE
WORKER AN OPPORTUNITY TO ANSWER THE ALLEGATIONS STATED
AGAINST HIM IN THE NOTICE OF DISMISSAL WITHIN A REASONABLE
PERIOD FROM RECEIPT OF SUCH NOITICE AND WITH THE ASSISTANCE
OF A REPRESENTATIVE IF HE SO DESIRES. DUE PROCESS REQUIRES THE
EMPLOYER TO AFFORD THE WORKER AMPLE OPPORTUNITY TO BE
HEARD AND TO DEFEND HIMSELF WITH THE ASSISTANCE OF HIS
REPRESENTATIVES, IF HE SO DESIRES.

“An employee who is [unjustly] dismissed from work IN VIOLATION OF
ANY OF HIS RIGHTS UNDER THIS ARTICLE shall be entitled to IMMEDIATE
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.”

SECTION 9. Article 280 of the Labor Code is hereby amended to read as follows:

“ART. 280. 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]. THE PROVISIONS OF
PERMISSIBLE AND LEGAL SUBCONTRACTING AND LAWFUL CASUAL
EMPLOYMENT ARRANGEMENTS NOTWITHSTANDING, THE TOTAL
NUMBER OF LAWFUL CASUAL EMPLOYMENT AND LAWFUL
CONTRACTUAL EMPLOYMENT CANNOT EXCEED TWENTY PERCENT
(20%) OF THE TOTAL WORKFORCE, INCLUDING THE CASUAL AND
CONTRACTUAL EMPLOYEES: PROVIDED, THAT THIS SHALL IN NO CASE
NOT BE INTERPRETED TO MEAN THAT LABOR-ONLY CONTRACTING,


ILLEGAL SUBCONTRACTING AND MISCLASSIFICATION OF WORKERS AS
CASUALS SHALL BE ALLOWED PROVIDED THEY DO NOT EXCEED TWENTY
PERCENT (20%): PROVIDED, FURTHER, THAT THE EXISTENCE OF
EMPLOYER-EMPLOYEE RELATIONSHIP AND THE DETERMINATION OF
WHETHER A POSITION IS REGULAR SHALL BE DONE ON A POSITION PER
POSITION AND EMPLOYEE PER EMPLOYEE BASIS, AND WITHOUT
REGARD TO THE TWENTY PERCENT (20%) TOTAL OF ALLOWABLE
MAXIMUM LEGAL CONTRACTUAL AND CASUAL EMPLOYMENT.

“An employment shall be deemed to be casual if it is not [covered by the
preceding paragraph] RELATED TO THE MAIN BUSINESS OF THE
EMPLOYER: Provided, That any employee who has rendered at least one
year of service, whether such service is continous or broken, shall be
considered a regular employee with respect to the activity in which he is
employed and his employment shall continue [while such activity exists]
UNLESS HE IS TERMINATED FOR A JUST CAUSE OR WHEN AUTHORIZED
BY THIS TITLE.”

SECTION 10. Project and Extra Employment. A new Article 280-A is hereby
inserted in the Labor Code to read as follows:

“ART. 280-A. PROJECT AND EXTRA EMPLOYMENT. — PROJECT
EMPLOYMENT REFERS TO THAT WHICH HAS BEEN FIXED FOR A SPECIFIC
PROJECT OR UNDERTAKING THE COMPLETION OR TERMINATION OF
WHICH HAS BEEN DETERMINED AND MADE KNOWN TO THE EMPLOYEE
AT THE TIME OF HIS ENGAGEMENT.

“EXTRA EMPLOYMENT REFERS TO ADDITIONAL WORK TO BE
PERFORMED IN RESTAURANT AND HOTEL ESTABLISHMENTS
SPECIFICALLY FOR BANQUET FUNCTIONS, SEMINARS AND SIMILAR
FUNCTIONS WHERE THE REGULAR EMPLOYEES CANNOT REASONABLY
COPE WITH THE INCREASED DEMANDS OF SUCH EVENTS.

“PROJECT AND EXTRA EMPLOYEES SHALL HAVE THE RIGHT TO SECURITY
OF TENURE AND ARE ENTITLED TO RESUME THEIR EMPLOYMENT IN THE
SAME OR SIMILAR POSITION UPON THE START OF THE NEXT PROJECT
OR OCCASION FOR EXTRA EMPLOYMENT, AS THE CASE MAY BE:
PROVIDED, THAT, DURING THE TIME THAT THEIR SERVICES ARE NOT
ACTUALLY AVAILED OF, THEY SHALL BE CONSIDERED TO BE ON
AUTHORIZED LEAVE WITHOUT PAY.”

SECTION 11. A new Article 280-B is hereby inserted in the Labor Code to read as
follows:

“ART. 280-B. PROHIBITION AGAINST FIXED TERM EMPLOYMENT. — NO
EMPLOYER SHALL HIRE ANY EMPLOYEE FOR A FIXED PERIOD, EXCEPT:
(1) PROJECT EMPLOYEES; (2) EXTRA EMPLOYEES; (3) THOSE APPOINTED.
TO SENSITIVE POSITIONS IN THE ACADEME SUCH AS THE DEAN,
ASSISTANT DEAN, COLLEGE SECRETARY, AND THOSE OCCUPYING
PROFESSORIAL CHAIRS IN HIGHER EDUCATION INSTITUTIONS, AND THE
PRINCIPAL IN BASIC EDUCATION INSTITUTIONS; AND (4) THOSE
EMPLOYED AS MEMBERS OF THE MANAGERIAL STAFF, OTHER THAN
THE FOREGOING EXCEPTIONS, ANY STIPULATION FIXING A PERIOD OF
EMPLOYMENT SHALL BE VOID.”

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SECTION 12. Article 281 of the Labor Code is hereby amended to read as
follows:

“ART. 281. 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 as a regular employee in accordance
with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to
work after the probationary period, EVEN UNDER THE GUISE OF AN
EXTENSION, shall be considered a regular employee.”

SECTION 13. Article 288 of the Labor Code is hereby amended to read as follows:

“ART. 288. Penalties. — Except as otherwise provided in this Code, or
unless the acts complained of hinge on a question of interpretation or
implementation of ambiguous provisions of an existing collective
bargaining agreement, any violation of the provisions of this Code
declared to be unlawful or penal in nature shall be punished with a fine
of not less than One Thousand Pesos (P 1,000.00) nor more than Ten
Thousand Pesos (P 10,000.00) or imprisonment of not less than three
months nor more than 3 years, or both such fine and imprisonment at
the discretion of the court.

“ANY PRINCIPAL OR SUBCONTRACTOR WHO ENGAGES IN LABOR ONLY
CONTRACTING AND/OR VIOLATES ARTICLES 106, 106-A, 106-B, 106-C,
106-D, AND 106-E SHALL BE SOLIDARILY LIABLE TO INDEMNIFY EACH
SUBCONTRACTED EMPLOYEE NO LESS THAN FIFTY THOUSAND PESOS (P
50,000.00) WITHOUT PREJUDICE TO OTHER MONETARY AWARDS TO
WHICH SUCH EMPLOYEE MAY BE ENTITLED SUCH AS BACKWAGES,
MONETARY CLAIMS AND BENEFITS UNDER AN APPLICABLE CERTIFIED
BARGAINING AGREEMENT.

“ANY EMPLOYER WHO DELIBERATELY CATEGORIZES OR OTHERWISE
TREATS REGULAR EMPLOYEES TO BE ANY NON-REGULAR EMPLOYEE
SHALL BE LIABLE TO INDEMNIFY EACH MISCLASSIFIED EMPLOYEE NO
LESS THAN FIFTY THOUSAND PESOS (P 50,000.00) WITHOUT PREJUDICE
TO OTHER MONETARY AWARDS TO WHICH SUCH EMPLOYEE MAY BE
ENTITLED SUCH AS BACKWAGES, MONETARY CLAIMS AND BENEFITS
UNDER AN APPLICABLE CERTIFIED BARGAINING AGENT.

“in addition to such penalty, any alien found guilty shall be summarily
deported upon completion of service of sentence.

“Any provision of law to the contrary notwithstanding, any criminal
offense punished in this Code, shall be under the concurrent jurisdiction
of the Municipal or City Courts and Courts of First Instance.”

SECTION 14. Implementing Rules and Regulations. _ The Department of Labor

and Employment (DOLE) shall issue, within 60 days after the effectivity of this Act, the
rules and regulations for its effective implementation.

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SECTION 15. Separability Clause. —if, for any reason, any section or provision of
this Act is held unconstitutional or invalid, the other sections or provisions hereof shall
not be affected thereby and shall continue to be in full force and effect.

SECTION 16. Repealing Clause. — All laws, decrees, executive orders, rules and
regulations, or parts thereof inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.

SECTION 17. Effectivity Clause. ~ This Act shall take effect fifteen (15) days after
its publication in the Official Gazette or at least two (2) national newspapers of general
circulation.

Approved,

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