HOUS. *F Re ORCSENTATIVES
RECEIVED
Republic of the Philippines ,
HOUSE OF REPRESENTATIV:
Quezon City

SEVENTEENTH CONGRESS.
First Regular Session

House Bill No. 341

Introduced by AKBAYAN Representative Tomasito S. Villarin

Arguably, the gravest threat to our workers’ right of 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.

May 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, as amended
(DO 18). While some refinements have been made to DO 18
provisions, core concepts have been retained such as the definition of
contracted work and labor-only contracting, the recognition of rights
of subcontracted workers and the maintenance of registration system
for legitimate contractors.

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 this 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 the 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.1234 dated
9 June 2011 of the House of Representatives Committee on Labor and
Employment during the 15 Congress. During the 16t Congress, this
bill was likewise filed by Akbayan’s representatives.

However, due to lack of material time, this bill was not passed during
the last Congress. Hence, the early approval of this bill is earnestly

sought.

c
ye

TOMASITO S. VILLARIN


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

341

House Bill No.

Introduced by AKBAYAN Representative Tomasito S. Villarin

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 repealed
and substituted 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 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 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 ‘abor-only’ 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 and 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. CONCEPT AND NATURE OF SUBCONTRACTING
ARRANGEMENTS. - IN LEGITIMATE SUBCONTRACTING,
THERE EXISTS 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 WHICH
DECIDES TO FARM OUT A JOB OR SERVICE TO A
SUBCONTRACTOR, THE SUBCONTRACTOR WHICH HAS
THE CAPACITY TO INDEPENDENTLY UNDERTAKE AND
ACTUALLY UNDERTAKES THE PERFORMANCE OF THE
JOB,WORK OR SERVICE, AND THE CONTRACTUAL
WORKERS ENGAGED BY THE SUBCONTRACTOR TO
ACCOMPLISH THE JOB, WORK OR SERVICE.

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

(A) A PRINCIPAL AGREES TO PUT OUT OR FARM OUT
WITH 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, TASK, JOB OR
PROJECT.”


SEC.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
RIGHTS AND PRIVILEGES DUE 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,
THIRTEENTH MONTH PAY AND SEPARATION PAY;

3. RETIREMENT BENEFITS;

4. SOCIAL SECURITY AND WELFARE BENEFITS;

5. SELF-ORGANIZATION, COLLECTIVE BARGAINING AND
PEACEFUL CONCERTED ACTIVITIES; AND

6. SECURITY OF TENURE.

“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 BY 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 VIOLATION OF ANY PROVISION 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:

L WHERE THERE IS LABOR-ONLY CONTRACTING;OR

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

Ill. IN CASES OF VIOLATION OF ARTICLE 106 - B.

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

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

“ART. 106-B. PROHIBITION AGAINST LABOR-ONLY
SUBCONTRACTING. - 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 RELATES TO THE JOB,
WORK OR SERVICE TO BE PERFORMED;

(B) THE EMPLOYEES RECRUITED, SUPPLIED OR PLACED BY
SUCH SUBCONTRACTOR ARE PERFORMING ACTIVITIES
WHICH USUALLY NECESSARY OR DESIRABLE OR
DIRECTLY RELATED TO THE USUAL BUSINESS OF THE
PRINCIPAL; OR

(C) THE PRINCIPAL 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
INVESTMENT’ 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 OF 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
ITSELF CONSTITUTION SUBSTANTIAL CAPITAL AND
INVESTMENT.

“AS USED IN THIS CODE, THE ‘RIGHT TO CONTROL’ IN
SUBCONTRACTING ARRANGEMENTS SHALL REFER TO THE
RIGHT RESERVED TO THE PERSON 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 THAT
END.”

SEC. 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
SHALL BE PROHIBITED FOR BEING CONTRARY TO LAW OR
PUBLIC POLICY:

(A) ENGAGING OR MAINTAING BY THE PRINCIPAL OF
SUBCONTRACTED EMPLOYEES IN EXCESS OF TWENTY
PERCENT (20%) OF THE PRINCIPAL’S TOTAL WORKFORCE
PROVIDED THAT SUCH SUBCONTRACTED EMPLOYEES DO
NOT PERFORM WORK THAT IS NECESSARY OR
DESIRABLE OR DIRECTLY RELATED TO THE USUAL
BUSINESS OR TRADE OR BUSINESS OF THE EMPLOYER;

(B) 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 GROUP OF
PERSONS OR TO A LABOR GROUP WHICH, IN THE GUISE
OF A LABOR ORGANIZATION OR COOPERATIVE, SUPPLIES
WORKERS TO AN EMPLOYER 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:

IL IN ADDITION TO HIS ASSIGNED FUNCTIONS,
REQUIRING THE CONTRACTUAL EMPLOYEE TO
PERFORM FUNCTIONS WHICH ARE CURRENTLY
BEING PERFORMED BY THE REGULAR
EMPLOYEES OF THE PRINCIPAL OR OF THE
SUBCONTRACTOR;

I 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 WELFARE BENEFITS, OR A
QUITCLAIM RELEASING THE PRINCIPAL OR
SUBCONTRACTOR FROM ANY LIABILITY AS TO
THE PAYMENT OF FUTURE CLAIMS; AND

Ill. 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
ENGAGEMENT.

(E) CONTRACTING OUT OF A JOB, WORK OR SERVICE
‘THROUGH AN IN-HOUSE AGENCY WHICH REFERS TO A:

L

IL.

Ill.

SUBCONTRACTOR ENGAGED IN THE SUPPLY OF
LABOR WHICH IS OWNED, MANAGED AND
CONTROLLED BY THE PRINCIPAL; OR

SUBCONTRACTOR IN WHICH THE PRINCIPAL OWNS
OR OTHERWISE REPRESENTS ANY SHARE OF
STOCK; OR

SUBCONTRACTOR WHICH OPERATES SOLELY FOR
THE PRINCIPAL.


(F) CONTRACTING OUT OF A JOB, WORK OR SERVICE THAT
IS NECESSARY AND DESIRABLE OR DIRECTLY RELATED
TO THE BUSINESS OR OPERATION OF THE PRINCIPAL;

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

SEC. 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 HEREBY ESTABLISHED TO
GOVERN CONTRACTING ARRANGEMENTS AND TO BE
IMPLMENTED 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 LISTED 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:

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

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

I. THE NATURE OF THE APPLICANT’S BUSINESS AND THE
INDUSTRY OR INDUSTRIES WHERE THE APPLICANT
SEKKS TO OPERATE;

IV. 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;

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

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

“THE APPLICATION SHALL BE SUPPORTED BY THE FOLLOWING:

I. 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

tl. 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 SUBCONTRACTORS 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 APPROVE
‘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 DEVICE THE NECESSARY
FORMS FOR THE EXPEDITIOUS PROCESSING OF ALL
APPLICATIONS FOR REGISTRATION.

“(D.) ANNUAL REPORTING OF REGISTERED CONTRACTORS.
THE SUBCONTRACTOR SHALL SUBMIT IN TRIPLICATED COPIES
AN ANNUAL REPORT USING A PRESCRIBED FORM TO THE
APPROPRIATE REGIONAL OFFICE NOT LATER THAN THE
FIFTEENTH OF JANUARY OF THE FOLLOWING YEAR. THE
REPORT SHALL INCLUDE THE FOLLOWING DOCUMENTS:

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

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

Ill. A SWORN STATEMENT SIGNED BY THE HIGHEST
EXECUTIVE OFFICER AND THE CHIEF FINANCIAL
OFFICER THA 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 THE BUREAU OF 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;

Il. NON-SUBMISSION OF THE ANNUAL REPORT
INCLUDING THE DOCUMENTS LISTED UNDER
ARTICLE 106 (D);


Ill. ENGAGEMENT IN LABOR-ONLY CONTRACTING;

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

v. 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 (2) YEARS. FOR
THIS PURPOSE, THE TRIPARTITE INDUSTRIAL PEACE
COUNCIL (TIPC) AS CREATED UNDER EXECUTIVE ORDER
NO. 49, SHALL SERVCE AS THE OVERSIGHT COMMITTEE
TO VERIFY AND MONITOR THE FOLLOWING:

L ENGAGING IN ALLOWABLE CONTRACTING
ACTIVITIES; AND

Il. COMPLIANCE WITH ADMINISTRATIVE REPORTING
REQUIREMENTS;

SEC. 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 THE
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.

SEC. 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
practices:

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


(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;

(0) To ENGAGE A LABOR-ONLY CONTRACTOR OR TO contract
out services, function being performed by [union] MEMBERS OF, OR
POSITION 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];

(@) 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;

(ec) To discriminate in regard to wages, hours of 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
of 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;

() 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]

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

(J) TO DENY THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP AND/OR TO CLASSIFY AS CASUAL,
CONTRACTUAL, SUBCONTRACTED EMPLOYEES, AGENCY

44


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
officer and agents of corporation, associations or partnerships who
have actually participated in, authorized or ratified unfair labor
practices shall be held criminally liable.”

SEC. 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 employeeJALL
EMPLOYERS SHALL ENJOY SECURITY OF TENURE AND SHALL
NOT BE TERMINATED except for a just cause or when authorized by
this Title. ALSO, THE RIGHT TO NOTICE IN EMPLOYMENT
RELATIONS REQUIRES ANY EMPLOYER WHO SEEKS TO DISMISS
A WORKER TO FURNISH HIM A WRITTEN NOTICE STATING THE
PARTICULAR ACTS OR OMMISSIONS CONSTITUTING THE
GROUNDS FOR HIS DISMISSAL. IN CASES OF ABANDONMENT
OF WORK, THE WRITTEN 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
PERIOD OF FIVE (5) CALENDAR DAYS FROM RECEIPT OF SUCH
NOTICE AND WITH THE ASSISTANCE OF A REPRESENTATIVE IF
HE SO DESIRES. THE RIGHT TO NOTICE REQUIRES THE
EMPLOYER TO AFFORD THE WORKER AMPLE OPPORTUNITY TO
BE HEARD AND TO DEFEND HIMSELF WITH THE ASSISTANCE
OF HIS REPRESENTATIVE IF HE SO DESIRES.

“an employee who is [unjustly] dismissed from work IN VIOLATION
OF ANY OF HIS RIGHTS UNDER THIS ARTICLE, INCLUDING THE
RIGHT TO NOTICE AS ELABORATED IN THE PRECEDING
PARAGRAPH 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 time of his actual reinstatement.”

SEC. 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 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 OR DIRECTLY RELATED

49


TO 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].

“An employment shall be deemed to be casual if it is not USUALLY
NECESSARY OR DESIRABLE OR [covered by the preceding
paragraph] RELATED TO THE USUAL BUSINESS OF THE
EMPLOYER; 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 IN and his employment shall continue [while
such activity exists] UNLESS HE IS TERMINATED FOR A JUST
CAUSE OR WHEN AUTHORIZED BY THIS TITLE.”

SEC. 10. A new Article 280-A is hereby inserted in the Labor Code to
read as follows:

“ART. 280-A. PROJECT, EXTRA AND SEASONAL 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 ESTABLISHEMENTS
SPECIFICALLY FOR BANQUET FUNCTIONS, SEMINARS AND
SIMILAR FUNCTIONS WHERE THE REGULAR EMPLOYEES
CANNOT REASONABLY COPE WITH THE INCREASED DEMANDS
OF SUCH EVENTS.

“SEASONAL EMPLOYMENT REFERS TO THE PERFORMANCE OF
AGRICULTURAL WORK THAT IS SEASONAL IN NATURE AND THE
EMPLOYMENT IS FOR THE DURATION OF THE PLANTING OR
HARVESTING SEASON.

“PROJECT, EXTRA AND SEASONAL EMPLOYEES SHALL HAVE
THE RIGHT TO SECURITY OF TENURE AND ARE ENTITLED TO
RESUME THEIR EMPLOYMENT IN THE SAME OR SIMLAR
POSITION UPON THE START OF THE NEXT PROJECT OR
OCCASION FOR EXTRA OR SEASONAL 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.”


SEC.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) SEASONAL EMPLOYEES, (4) IN
INDUSTRIES THAT ARE CERTIFIED BY THE PRESIDENT IN AN
EXECUTIVE ORDER, AS ALLOWABLE, DUE TO EXISTING AND
SUBSTANTIAL LOSSES IN THE INDUSTRY AS A WHOLE BROUGHT
ABOUT BY AN INABILITY TO PRICE GOODS COMPETITIVELY IN
THE MARKET DESPITE RESORT TO ALL REASONABLE
MEASURES; PROVIDED, THAT SUCH CERTIFICATION SHALL BE
FOR A PERIOD OF AT MOST THREE (3) YEARS: PROVIDED
FURTHER, THAT THE PRESIDENT MAY RENEW THE
CERTIFICATION UPON EXPIRY SHOULD THE CIRCUMSTANCES
SUBSIT FOR A SIMILAR PERIOD AND SUBJECT TO SIMILAR
RENEWALS; (5) OVERSEAS FILIPINO WORKERS; (6) THOSE
HIRED TO PLAY PROFESSIONAL SPORTS; (7) THOSE APPOINTED
‘TO SENSITIVE POSITIONS IN EDUCATIONAL INSTITUTIONS SUCH
AS DEAN, ASSISTANT DEAN, PRINCIPAL AND COLLEGE
SECRETARY; AND (8) THOSE EMPLOYED AS MEMBERS OF
MANAGERIAL STAFF, OTHER THAN THE FOREGOING
EXCEPTIONS, ANY STIPULATION FIXING A PERIOD OF
EMPLOYMENT SHALL BE VOID.”

SEC. 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 failsJUPON FAILUREto 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, EVEN
UNDER THE GUISE OF AN EXTENSION, shall be considered a
regular employee.”

THE TERMINATION OF PROBATIONARY EMPLOYEES SHALL NOT
BE VALID IF DONE TO PRECLUDE ACQUISITION OF SECURITY
OF TENURE BY THE EMPLOYEE. THE PRESENCE OF ANY OF
THE FOLLOWING CIRCUMSTANCES SHALL CREATE A
REBUTTABLE PRESUMPTION OF THE INTENT TO CIRCUMVENT
THE RIGHT TO SECURITY OF TENURE OF PROBATIONARY
EMPLOYEES:

14


1. TERMINATION OF ALL OR ALMOST ALL OF THE
PROBATIONARY EMPLOYEES AT THE END OF THE
PROBATIONARY PERIOD AND THE SUBSEQUENT HIRING OF
EMPLOYEES PERFORMING THE SAME WORK OR TASK AND/OR
OCCUPYING THE SAME POSITION AS THOSE VACATED BY THE
PREVIOUS PROBATIONARY EMPLOYEES.

2. MAINTAINING PROBATIONARY EMPLOYEES IN EXCESS OF
THIRTY PERCENT (30%) OF THE TOTAL WORKFORCE.
HOWEVER, NEWLY-CREATED COMPANIES/EMPLOYERS ARE
EXEMPTED FROM OBSERVING THE FOREGOING PERCENTAGE
RESTRICTION WITHIN ONE (1) YEAR FROM THE START OF
THEIR BUSINESS OPERATIONS.

SEC. 13. Article 2888 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 three 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
SUBCONTRACTED EMPLOYEE MAY BE ENTITLED SUCH AS
BACKWAGES, MONETARY CLAIMS AND BENEFITS UNDER AN
APPLICABLE CERTIFIED BARGAINING AGREEMENT OR
COMPANY POLICY, WHETHER WRITTEN OR OTHERWISE.

“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
AGREEMENT.


“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 Court s and Courts of First
Instance.”

SEC. 14. Implementing Rules and Regulations. — The Department
of Labor and Employment (DOLE) shall issue, within sixty (60) days after
the effectivity of this Act, the rules and regulations for its effective
implementation.

SEC. 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.

SEC, 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.

SEC. 17. 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 publications.

Approved,