Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

THIRTEENTH CONGRESS,
First Regular Session

House Bill No. __ 939

Introduced by Representative Juan Miguel F, Zubiri

EXPLANATORY NOTE

Even as the Constitution provides in no unclear terms the right of workers to security of tenure,
employment practices that abrogate this right persist. Preventing workers from becoming regular
employees and the denial by employers of the existence of employee-employer relationship are but
two of the grave employment practices inconsistent with the workers’ right to security of tenure
Such practices are usually effected through the classification of regular employees as “casual”,
“renewal” of employment contract every six months; firing of employees and hiring of new ones
every five or six months; labor-only contracting; and hiring of “agency workers”.

In general, these unfair labor practices violate the right of workers to just and humane
employment terms and conditions, to self-organization and collective bargaining. ‘The non-
recognition of workers as regular employees, for instance, is tantamount to withholding from
them benefits accorded to regular employees, including the right to join unions and engage in
collective bargaining, Similarly, these labor practices violate the right of regular members in the
sense that they weaken the latter’s bargaining unit because they cannot recruit workers who
should have been regular employees.

Unfortunately, the legal provisions at present do not deter unscrupulous employers from
committing, anti-labor practices. Furthermore, the law on subcontracting is even vague and
admits interpretation inconsistent with the provision of the law on regular employment.

‘This legislation therefore intends to correct the significant omissions and loopholes in our laws by
amending relevant sections in our Labor Code. Specifically, it seeks to: (1) render the
misclassification of regular employees into other kinds of employees as an unfair labor practice
and provide penalties thereof, and (2), harmonize .the laws on subcontracting and regular
employment. Through these, we hope to secure and. strengthen the Constitutionally guaranteed
tight of our workers to security of tenure.

s-bjl is earnestly sought



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

THIRTEENTH CONGRESS
First Regular Session

House Bill!No. 999

Introduced by Representative duan Miguel F Zubiri -
$$ arcaiity Representative Juan Miguel @. Zubiri 00

AN ACT
STRENGTHENING THE CONSTITUTIONAL RIGHT TO SECURITY OFT

URE

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

SECTION 1. Short Title This Act shall be known as the SECURITY OF TENURE
ACT OF 2004. :

SECTION 2. Labor-only contracting. Art 106 shall be amended to read as follows:

“Art. 106. Contractor or sub-contractor. ~ 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.

In the event that the contractor or sub-contractor 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 sub-contractor 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 as well as differentiation 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 person supplying workers to an
employer does not have substantial capital for] AND investment in the form of tools,
equipment, machinery, work premises, among others, and the workers recruited and



placed by such person are performing activities which are directly related to the principal
business of such employer or WHERE THE PRINCIPAL EMPLOYER HAS THE
RIGHT OF CONTROL OVER MEANS BY WHICH THE PURPORTED AGENCY OR
CONTRACTUAL EMPLOYEE — PERFORMS_~—SsTHE ~—_—ACTIVITIES,
NOTWITHSTANDING THE FACT THAT THE AGENCY OR CONTRACTOR HAS
SUBSTANTIAL CAPITAL AND/OR INVESTMENT IN THE FORM OF TOOLS,
EQUIPMENT, MACHINERIES, WORK PREMISES, AMONG OTHERS.” 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 SUCH PRINCIPAL EMPLOYER.

IN THE PERFORMANCE OF ITS JOB, THE LEGITIMATE
SUBCONTRACTOR MUST USE - ITS OWN EQUIPMENT, FACILITIES,
MACHINERIES AND TOOLS AND CANNOT RELY ON THE PRINCIPAL
CONTRACTO. THE USE OF THE SUBCONTRACTOR OF THE EQUIPMENT,
FACILITIES, MACHINERIES AND TOOLS OF THE PRINCIPAL IS AN
INDICATION THAT THE SUBCONTRACTOR HAS NO SUBSTANTIAL CAPITAL
AND INVESTMENT.

THE EMPLOYER AND THE LABOR-ONLY CONTRACTOR OR
SUBCONTRACTOR WHO VIOLATE THE FOREGOING PROVISION SHALL BE
SOLIDARY LIABLE TO PAY INDEMNITY OF NO LESS THAN P50,000.00 TO
EACH EMPLOYEE UNDER THE LABOR-ONLY CONTRACTOR OR
SUBCONTRACTO, WITHOUT PREJUDICE TO THE OTHER MONETARY
AWARDS SUCH AS BACKWAGES, MONETARY CLAIMS, AND CBA BENEFITS.

SECTION 3. Lawful classification of regular employment, Art. 280 of the Labor Code

shall be amended as follows:

“ART. 280. Regular and Casual Employment; Penalty in Case of Violation - The
provisions of written contract to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employee shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary and desirable in the
usual trade or business 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 engagement of the employee, or where the work or services to
be performed is seasonal in nature and the employment is for the duration of the season

SEASONAL AND PROJECT EMPLOYEES SHALL HAVE THE RIGHT TO
SECURITY OF TENURE, SUBJECT TO THE PROVISIONS ON PROBATIONARY.
EMPLOYMENT, AND ARE ENTITLED TO RESUME THEIR EMPLOYMENT IN
THE SAME OR SIMILAR POSITION UPON THE START OF THE NEXT SEASON
OR PROJECT, AS THE CASE MAY BE; PROVIDED THAT, DURING THE TIME
THAT THEIR SERVICES ARE NOT ACTUALLY AVAILED OF BY THE


ESTABLISHMENT, THEY SHALL BE CONSIDERED TO BE ON AUTHORIZED
LEAVE WITHOUT PAY.

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 shall continue while
such activity exists] CASUAL EMPLOYMENT SHALL HAVE THE RIGHT TO
SECURITY OF TENURE AND MAY BE TERMINATED ONLY FOR JUST OR
AUTHORIZED CAUSES. HOWEVER, THEIR POSITION, NOT BEING
NECESSARY OR DESIRABLE TO THE USUAL TRADE OR BUSINESS OF THE
EMPLOYER, MAY BE ELIMINATED IF THE SERVICES ATTACHED THERETO
ARE NO LONGER AVAILED OF BY THE EMPLOYER. PROVIDED THAT IF THE
POSITION HAS BEEN IN EXISTENCE FOR MORE THAN ONE YEAR, IT SHALL
BE CONSIDERED AS REGULAR IN NATURE, SUBJECT TO THE PROVISIONS
ON PROBATIONARY EMPLOYMENT. TERMINATION WILL THEN BE
ALLOWED ONLY IF THERE IS JUST OR AUTHORIZED CAUSE.

THE PRINCIPAL EMPLOYER MUST DIRECTLY HIRE WORKERS WHO
ARE PERFORMING ACTIVITIES WHICH ARE USUALLY NECESSARY OR
DESIRABLE TO THE USUAL TRADE OR .BUSINESS OF THE EMPLOYER,
WITHOUT PREJUDICE TO THEIR PROPER CLASSIFICATION AS REGULAR,
SEASOSNAL, PROJECT, OR EMPLOYEES HIRED FOR A_ SPECIFIC
UNDERTAKING, AS PROVIDED FOR IN THE FIRST PARAGRAPH. THE
PRINCIPAL EMPLOYER CANNOT HIRE THROUGH SUBCONTRACTORS,
LABOR CONTRACTORS, OR OTHER SIMILAR AGENCIES AND “MANPOWER”
SERVICE PROVIDERS, WORKERS PERFORMING ACTIVITIES WHICH ARE
USUALLY NECESSARY OR DESIRABLE TO THE USUAL TRADE OR BUSINESS
OF THE EMPLOYER, REGARDLESS OF THE AMOUNT OF INVESTMENT AND
CAPITAL OF THE SUBCONTRACTOR OR LABOR CONTRACTOR,

LIKEWISE, IN NO CASE SHALL REGULAR EMPLOYMENT BE SUBJECT
TO A TERM, 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 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 SUBJECT TO PARAGRAPH 2 HEREOF.

HOWEVER, TERM EMPLOYMENT SHALL BE ALLOWED FOR
OVERSEAS FILIPINO WORKERS, SHOULD THE VALID CONTRACT OF
EMPLOYMENT SO PROVIDED FOR A TERM.

EMPLOYEES WHO ARE REGULAR, REGARDLESS OF THE ORAL OR
WRITTEN AGREEMENTS TO THE CONTRARY, SHALL BE CONSIDERED PART.



OF THE APPROPRIATE COLLECTIVE BARGAINING UNIT AND MAY
EXERCISE THE RIGHT TO SELF-ORGANIZATION AND COLLECTIVE
BARGAINING.

AN EMPLOYER WHO VIOLATES THE FOREGOING SHALL BE LIABLE
TO PAY AN INDEMNITY OF P50,000.00 TO EACH EMPLOYEE, WITHOUT
PREJUDICE TO THE OTHER MONETARY AWARDS SUCH AS BACKWAGES,
MONETARY CLAIMS, AND CBA BENEFITS.

SECTION 4. Non-recognition of regular status as unfair labor practice. Art. 248 (Unfair
labor practices of employers) shall be amended as follows:

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

(a) To interfere with, restrain or coerce employees in the exercise of their right to self
organization;

(b) To require as a condition for employment that a person or an employee shall not join
a labor organization or shall withdraw from one to which he belongs;

(©) To contract out services or functions being performed by union members when such
will interfere with, restrain or coerce employees in the exercise of their right to self-
organization,

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

(e) To discriminate in regard to hire or tenure of employment or any term or condition of
employment in order to encourage or discourage membership in any labor organizati
Nothing in this Code or in any other law shall prevent the parties from requiring
membership in a recognized collective bargaining agent as a condition for employment,
except of those employees who are already members of another union at the time of the
signing of the collective bargaining agreement. Employees belonging to 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 non-members of
the recognized collective bargaining agent:

(1) 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 agents as part of
the settlement of any issue in collective bargaining or any other dispute, or

(i) To violate a collective bargaining agreement.



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

@) TO CLASSIFY AS CASUAL, CONTRACTUAL, SUBCONTRACTOR’S OR
LABOR-ONLY CONTRACTOR’S EMPLOYEES, AGENCY EMPLOYERS, AND
OTHER NON-REGULAR WORKERS THOSE EMPLOYEES WHO ARE REGULAR
EMPLOYEES BY VIRTUE OF THE ACTIVITIES THEY PERFORM AND OTHER
CIRCUMSTANCES WHICH MAKE THEIR EMPLOYMENT REGULAR.

SECTION 5. Repealing Clause. ~ Art. PD 442, as amended, otherwise known as the
Labor Code of the Philippines, and all other acts, laws, rules and regulations are hereby repealed,
modified, or amended accordingly

SECTION 6. Separability Clause. ~ If any part, section or provision of this Act shall be
held invalid or unconstitutional, the other provisions shall not be affected thereby

SECTION 7. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of general circulation.

Approved