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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

0271

House Bill No.

Introduced by DIWA Party-list Representative Hon. Michael Edgar Y. Aglipay

EXPLANATORY NOTE

‘This proposed bill, based on the Committee Report No. 551 of the Committee on Labor
and Employment of the 17" Congress, aims to strengthen the job security of the workforce or
the security of tenure of every worker and amends the Labor Code to address the long-standing
problem of contractualization and abuse on labor rights as well as work conditions.

The main objective of this measure is to end the problem with "Endo" and "5-5-5."
This bill will prohibit employers to employ or contract workers for limited period, or "fixed-
term" employment. Employing a person for the same job on several occasions, but only
offering a five-month contract with each agreement or more commonly known as "5-5-5" is
also strictly prohibited.

‘The security of the work tenure will be strengthen with the proposed change in the
definition of prohibited labor-only contracting as well as the prohibition of sub-contracting to
minimize the contractualization. A contractor who is "labor-only” is considered illegal if an
employer does not have sufficient capital or equipment, has no control over the duties of his or
her worker, or if the nature of the contractor is directly linked to the main business. The bill
also provides the procedure for licensing of legitimate contractors to prevent abuse of the
contract.

‘The approval of this bill will be a big step towards achieving our goal of terminating
contractualization and abusive working conditions

MICHA\ . AGLIPAY
Representative, DIWA Party-list

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
Third Regular Session

House Bill No. 0271

Introduced by DIWA Party-list Representative Michael Edgar Y. Aglipay

AN ACT

‘TO STRENGTHEN THE SECURITY OF TENURE OF WORKERS, AMENDING
FOR THE PURPOSE PRESIDENTIAL DECREEE 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 Republic of the Philippines in
Congress assembled:

SECTION |. Short Title. This Act shall be known as “Security of Tenure Act,”

SEC. 2. 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:

“ARTICLE 106, Contractor [or-subeontractor|. - Whenever an employer enters into a
contract with another person for the performance of the formers work, the employees

of the contractor [and-of the tatter’s-subeontraetor, 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-subeontractor] fails to pay the wages,
ALLOWANCE AND BENEFITS 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

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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 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 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 person 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 him.”

SEC. 3. A new article, Article 106-A, is hereby inserted after Article 106 of the same
decree, to read as follows: 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-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
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;

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

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

(G)PAYMENGT 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 JOB 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 BUSIESS.

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

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

SEC. 4. Article 294 of the same decree is hereby further amended to read as follows:

“ARTICLE 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. [ “

A_ DISMISSAL WITHOUT JUST OR AUTHORIZED CAUSE OR
WITHOUT OBSERVANCE OF PROCEDURAL DUE PROCESS IS ILLEGAL. 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 OF
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 (SSS), PHILIPPINE HEALTH INSURANCE CORPORATION

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(PHILHEALTH), AND HOME DEVELOPMENT MUTUAL FUND (PAGIBIG)
WHICH, SHALL BE REMITTED. TOGETHER WITH THE EMPLOYEE’S SHARE.
TO THE AFORESAID AGENCIES FREE 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 SSS, PHILHEALTH AND PAGIBIG 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 DISMISSAL
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 JUST CAUSE AND DUE PROCESS.”

SEC. 5. Article 295 of the same decree is hereby further amended to read as follows:

“ART. 295. Regular and casual employment. The provisions of written agreement to
the contrary notwithstanding and regardiess of the oral agreement of the parties, an

employment shall be deemed to be regular [where-the-employee-has-been-engaged-to

50 e e d 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 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 TO TIME AND TEMPORARILY
LAID-OFF DURING THE COMPLETION OF THE ENGAGEMENT, PROJECT OR

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OFF-SEASON BUT ARE IN THE WORK POOL ON LEAVE WITH OR WITHOUT
PAY STATUS IN BETWEEN ENGAGEMENTS, PROJECTS OR SEASONS.
RELIEVERS, PROJECTS, AND SEASONAL WORKERS ARE ENTITLED TO THE
RIGHT OF FIRST REFUSAL TO THE TASK, WORK OR PROJECT WHICH IS
‘THE SUBJECT MATTER 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
PROHIBITED. CLAUSES IN EMPLOYMENT CONTRACTS PROVIDING FOR A
FIXED TERM OR DEFINITE PERIOD OF EMPLOYMENY ARE VOID.
WORKERS UNDER SUCH ARRANGEMENTS ARE DEEMED REGULAR
EMPPLOYEES RECKONED FROM THE FIRST DAY OF EMPLOYMENT.

SEC. 6. Article 296 of the same decree is hereby further 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

i ]. 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 made
known by the employer to the employee 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 WHO HAS RENDERED AT LEAST ONE (1)
MONTH OF SERVICE IS ENTITLED TO A TERMINATION PAY OF ONE-HALF
(1/2) MONTH SALARY.”

SEC. 7. A new article, Article 303-A, 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

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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. _AFINE FORA LICENSE 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 LABOR-ONLY CONTRACTING ARRANGEMENT
BUT NOT TO EXCEED THE TOTAL AMOUNT OF FIVE MILLION PESOS
(P5,000,000.00). IN ADDITION, THE LICENSE SHALL HAVE ITS
OPERATION 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 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 ARTICLES 295 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. 8. Implementing Rules and Regulations. Within sixty (60) days from the efectivity of this
Act, the Secretary of Labor and Employment, shall promulgate the necessary rules and
regulations for the effective implementation of this Act.

SEC. 9. Separability Clause. If any provision of this Act shall be held unconstitutional or
invalid, the remaining provisions which are not affected thereby shall continue to be full force

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SEC. 10. Repealing Clause. All laws, decrees, executive orders, rules and regulations, and
other issuances, or parts thereof, contrary to or inconsistent with this Act are hereby modified,
amended or repealed accordingly.

SEC. 11. Effectivity. 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,

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