1fi-
NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
)
)
SENATE
&(Uzp of tljp
*22 AUG-8 A10:28
RECEIVED BY:
Introduced by Senator Grace Poe
AN ACT
ERADICATING ABUSIVE CONTRACTUALIZATION PRACTICES AND 
PENALIZING EMPLOYERS AND CONTRACTORS WHO COMMIT SUCH 
ABUSES, AMENDING FOR THIS PURPOSE BOOK THREE, TITLE TWO AND 
BOOK SIX, TITLE I OF PRESIDENTIAL DECREE NO. 442, OTHERWISE 
KNOWN AS THE LABOR CODE OF THE PHILIPPINES, AS AMENDED
EXPLANATORY NOTE
Several provisions of the 1987 Philippine Constitution safeguard the rights of 
laborers. The most unequivocal of these provisions is Article XIII, Section 3, which 
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.
It shall guarantee the rights of all workers to self-organization, collective 
bargaining and negotiations, and peaceful concerted activities, including 
the right to strike in accordance with law. They shall be entitled to 
security of tenure, humane conditions of work, and a living wage. They 
shall also participate in policy and decision-making processes affecting 
their rights and benefits as may be provided by law..." (emphasis 
supplied)
Security of tenure is included among the rights of laborers and is 
operationalized in Article 294 of Presidential Decree No. 442, as amended, otherwise 
known as the Labor Code of the Philippines.
Contractualization is a perceived threat to a worker's right to security of 
tenure. Contractualization in the Philippine context has many meanings. On one 
hand, it can refer to the act of "contracting" under Articles 106 to 109 of the Labor


Code.1 Under these provisions, "there exists a trilateral relationship under which 
there is a contract for a specific job, work or service between the principal and the 
contractor or subcontractor, and a contract of employment between the contractor 
or subcontractor and its workers.//2 This form of contractualization emerged in the 
1980s as a response of firms to globalization.3 It "allows establishments to reduce 
costs by concentrating on their core business and outsourcing non-core activities."4
On the other hand, contractualization may also commonly refer to a wide 
spectrum of non-regular or illegitimate arrangements, which include "cabo" "job 
orders", "consultancies" and other forms of contractual arrangements that are 
purposefully designed to avoid or preempt the full application of security of tenure 
laws and the attendant benefits that flow from regular employment.
Part of the latter category of contractualization is the term known in our lingua 
franca as "Endo" or "5-5-5". It involves an arrangement wherein workers are made 
to work within a five-month timeframe so that they will not qualify as regular 
employees under the Labor Code.6
Endo is a highly abusive practice. First, the practice of repeated hiring for 5 
months at a time reduces their value as laborers, as substantial experience cannot 
be gained in a five-month period. Second, such practice removes any possibility for 
career advancement Third, It destroys any semblance of stability and security on 
the part of workers, many of whom are forced to hunt for jobs several times a year 
just to provide food for their families. Hence, this proposed Bill.
This measure seeks to amend the Labor Code in order to address, if not 
wholly eradicate, Endo. This Bill provides as follows:
1. Stricter measures against labor-only contracting, including a fine of 
P5,000,000.00 for those found to be labor-only contractors;
2. Any repeated hiring by an employer or contractor under an 
employment contract of short duration shall be prohibited. Additionally, 
those vyhose contracts have expired and have been re-hired under any 
arrangement, wiih or without written conTact, shall be considered as 
regular if the initial contract was for a period of at least six (6) months, 
or when the worker has accumulated an aggregate period of at least 
six (6) months from prior contracts or arrangements of shorter
1 Resurreccion, Pamela & Rosario, Ramon. (2012). Less-than-six-months contract periods: IS THE RETAIL 
INDUSTRY CIRCUMVENTING THE LAW? THE PHILIPPINE CASE. International Journal of Information 
Technology and Business Management. 7. 25-32. Accessed from: 
https://www.researchgate.net/publication/304169743_Less-than-six-
months_contract_periods_IS_THE_RETAIL_INDUSTRY_CIRCUMVENTING_THE_LAW_THE_PHILIPPI
NE_CASE
2 Section 3, Department of Labor and Employment Department Order No. 18-02, series of 2002.
3 Ibid.
4 Ibid.
6 Bernabe, Kirstin, Endonzo, Penelope P., & Pacia, Sara Isabelle. (01 May 2014). "Worker Hired, Fired Every 5 
Months". Philippine Daily Inquirer. Accessed from: https://newsinfo.inquirer.net/598582/worker-hired-fired- 
every-5-months


duration. Engagements with new employers shall also be covered by 
this provision under certain conditions, including if the previous and 
subsequent employer belong to one conglomerate.
Non-compliance thereto or any act to circumvent the provision shall be meted 
out with a fine of Five million pesos (P5,000,000.00).
For the future of our workers and employees who keep the economy afloat 
amidst these trying times. Immediate approval of this measure Is sought.
GRACE POE


NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
)
)
SENATE
s. Nol 0 7 0
^enatp
of tjje ferrrriorp
■22 AUG-8 A10 29
RECEIVED BV:
Introduced by Senator Grace Poe
AN ACT
ERADICATING ABUSIVE CONTRACTUALIZATION PRACTICES AND 
PENALIZING EMPLOYERS AND CONTRACTORS WHO COMMIT SUCH 
ABUSES, BY AMENDING FOR THIS PURPOSE BOOK THREE, TITLE TWO 
AND BOOK SIX, TITLE I OF PRESIDENTIAL DECREE NO. 442, OTHERWISE 
KNOWN AS THE LABOR CODE OF THE PHILIPPINES, AS AMENDED
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled:
1 
Section 1. Book III, Title II, Chapter III, Article 106 of the Labor Code, as
2 
amended, is hereby further amended as follows:
3 
"ARTICLE 106. Contractor or subcontractor. - Whenever an employer
4 
enters into a contract with another person for the performance of the
5 
former's work, the employees of the contractor and of the latter's
6 
subcontractor, if any, shall be paid in accordance with the provisions of this
7 
Code.
8 
In the event that the contractor or subcontractor fails to pay the wages
9 
of his employees in accordance with this Code, the employer shall be jointly
10 
and severally liable with his contractor or subcontractor to such employees to
11 
the extent that he is liable to employees directly employed by him.
12 
The Secretary of Labor and Employment may, by appropriate
13 
regulations, restrict or prohibit the contracting-out of l^or to protect the
14 
rights of workers established under this Code. In so prohibiting or restricting,
15 
he may make appropriate distinctions between labor-only contracting and job
16 
contracting as well as differentiations with these types of contracting and
17 
determine who among the parties involved shall be considered the employer


1 
for purposes of this Code, to prevent any violation of circumvention of any
2 
provision of this Code.
3 
There is "labor-only" contracting where the person supplying workers
4 
to an employer does not have substantial capital or investment in the form of
5 
tools, equipment, machineries, work premises, among others, OR IF SUCH
6 
CAPITAL OR INVESTMENT BEARS NO DIRECT RELATION TO THE
7 
PERFORMANCE OF THE DESIRED ACTIVITIES BY THE EMPLOYEES
8 
SUPPLIED TO THE EMPLOYER and the workers recruited and placed by
9 
such person are performing activities which are directly related to the
10 
[principal] business of such employer. In such cases, the person or
11 
intermediary shall be considered merely as an agent of the employer who
12 
shall be responsible to the workers in the same manner and extent as if the
13 
latter were directly employed by him.
14 
IN ALL CASES WHERE LABOR-ONLY CONTRACTING IS
15 
PRESENT, THE WORKERS SHALL BE DEEMED REGULAR EMPLOYEES
16 
OF THE EMPLOYER IN ACCORDANCE WITH LAW, RETROACTIVE TO
17 
THE DATE THEY WERE FIRST DEPLOYED TO SAID EMPLOYER,
18 
WITHOUT PREJUDICE TO ANY CRIMINAL, CIVIL, OR
19 
ADMINISTRATIVE CASE AGAINST THE LABOR-ONLY CONTRACTOR
20 
AND THE EMPLOYER.
21 
THE SECRETARY OF LABOR AND EMPLOYMENT SHALL IMPOSE
22 
A FINE OF UP TO FIVE MILLION PESOS (P5,000,000.00) AGAINST
23 
ANY LABOR-ONLY CONTRACTOR. THE SECRETARY OF LABOR AND
24 
EMPLOYMENT SHALL ALSO HAVE THE POWf:R TO PREVENTIVELY OR
25 
PERMANENTLY CLOSE THE OPERATIONS OF 
ANY LABOR-ONLY
26 
CONTRACTOR."
27 
Sec. 2. Book VI, Title I, Chapter III, of the Labor Code, as amended, is
28 
hereby amended by adding a new article as follows:
29 
"ARTICLE 295-A. INITIAL AND SUBSEQUENT
30 
ENGAGEMENTS. - ANY REPEATED HIRING BY AN EMPLOYER OR
31 
CONTRACTOR UNDER 
AN EMPLOYMENT CONTRACT OF SHORT
32 
DURATION SHALL BE PROHIBITED.


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
"AN EMPLOYEE WHOSE INITIAL ENGAGEMENT HAS EXPIRED 
AND HAS A SUBSEQUENT ENGAGEMENT UNDER ANY 
ARRANGEMENT, WITH OR WITHOUT A WRITTEN CONTRACT, 
WOULD AUTOMATICALLY RENDER THE EMPLOYMOMT REGULAR: (1) 
WHEN THE INITIAL CONTRACT THAT EXPIRED WAS FOR A PERIOD 
OF AT LEAST SIX (6) MONTHS, OR (2) ¥/HEN THE WORKER HAS 
ACCUMULATED AN AGGREGATE PERIOD OF AT LEAST SIX (6) 
MONTHS FROM PRIOR CONTRACTS OR ARRANGEMENTS OF 
SHORTER DURATION.
"SUBSEQUENT ENGAGEMENT OF THE EMPLOYEE WITH A NEW 
EMPLOYER SHALL BE DEEMED COVERED BY THE PRECEDING 
PARAGRAPH AND THE EMPLOYEE IS DEEMED TO HAVE ATTAINED 
REGULAR EMPLOYMENT IN THE PROPER CASES WHEN: (1) THE 
OWNERSHIP OF AT LEAST FIFTY PERCENT (50%) OF THE TOTAL 
STOCKHOLDING OR OTHER PROPRIETARY INTEREST OF THc PRIOR 
AND THE SUBSEQUENT EMPLOYERS BELONG TO ONE PERSON OR 
ENTITY, NATURAL OR JURIDICAL, OR ANY OF THE LATTER'S 
SUBSIDIARIES, IF ANY, OR (2) ONE EMPLOYER EXERCISES 
CONTROL OR DOMINATION OF FINANCES, POLICIES AND BUSINESS 
PRACTICES OVER THE OTHER EMPLOYER, OR (3) THE PRIOR AND 
SUBSEQUENT EMPLOYERS ARE CONTROLLED BY ONE PERSON OR 
ENTITY, NATURAL OR JURIDICAL, OR ANY OF THE LATTER'S 
SUBSIDIARIES, IF ANY. FOR PURPOSES OF THIS LAW, PRIOR AND 
SUBSEQUENT EMPLOYERS BELONGING TO A SINGLE 
CONGLOMERATE SHALL BE DEEMED AS COVERED BY THIS 
PROVISION.
"ARTICLE 280-B. PENALTIES FOR NON-COMPLIANCE. - AN 
EMPLOYER WHO FAILS TO IMPLEMENT THE PRECEDING 
PROVISION, OR WHO INTENDS TO CIRCUMVENT THE PRECEDING 
PARAGRAPH BY INDICATING OTHERWISE IN THEIR CONTRACT 
WITH THEIR EMPLOYEE OR BY ANY OTHER METHOD SHALL BE 
PENALIZED BY UP TO FIVE MILLION PESOS (P5,000,000.00). IN


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
ADDITION, THE EMPLOYEE SHALL BE CONSIDERED AS A REGULAR
EMPLOYEE RETROACTIVE TO THE DATE V.HEN THEY ARE DEEMED
TO HAVE ATTAINED REGULAR EMPLOYMENT AS PER THE
IMMEDIATELY PRECEDING PROVISION/'
Sec. 3. Rules and Regulations. — The Secretary of Labor and Employment 
shall promulgate the necessary implementing rules and regulations within one 
hundred and twenty (120) days from the effectivity of tiiis Act.
Sec. 4. Repealing Clause. — All laws, decrees, rules, and regulations, or parts 
thereof, which are contrary to, or inconsistent with, this Act are hereby repealed or 
modified accordingly.
Sec. 5. Separability Clause. - If any clause, sentence, section or part of this 
Act shall be adjudged by a court of competent jurisdiction to be invalid, such 
judgment shall not affect, impair or invalidate the remainder of this Act, but shall be 
confined in its operation to the clause, sentence, paragraph, section, or part thereof 
directly involved in the controversy.
Sec. 6. Effectivity. — This Act shall take effect fifteen (15) days after Its 
publication in the Official Gazette or in at least two (2) national newspapers of 
general circulation.
Approved,