Republic of the Philippines

HOUSE OF REPRESENTATIVES ae
Quezon City RECEIVE!
"01 JUL 2013
SIXTEENTH CONGRESS Dae :
First Regular Session tant
Sern :
House Bill No. WE

Intréduced by AKBAYAN Representatives Walden F. Bello and
Ibarra M. Gutierrez Ill

Explanatory Note

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

<Yf

WALDEN F. BELLO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session
=

oO

HOUSE BILL NO.

Introduced by AKBAYAN Representatives Walden F. Bello and
Ibarra M. Gutierrez Ill

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 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’ 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:


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:

1 WHERE THERE IS LABOR-ONLY CONTRACTING;OR

11 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. Anew 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

(B)

(Cc

oO

)

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;

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;

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;

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 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

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

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

Ill. | 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. Anew 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:

1. ‘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;

ll. 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;

Mz 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:

[5 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

I. 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
COMPLJED 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:

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

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

lll. 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);

lll. | ENGAGEMENT IN LABOR-ONLY CONTRACTING;

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

ve 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:

1. ENGAGING IN ALLOWABLE CONTRACTING ACTIVITIES;
AND

I COMPLIANCE WITH ADMINISTRATIVE REPORTING
REQUIREMENTS;

SEC. 6. Anew 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;

(c) | 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,
festrain 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 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;

(f) To dismiss, discharge or otherwise prejudice or discriminate against an
employee for having given or being about to give testimony under this Code;
(9) Tovviolate 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 EMPLOYEES, OR OTHER
NON-REGULAR CLASSIFICATION THOSE EMPLOYEES WHO ARE
REGULAR EMPLOYEES BY VIRTUE OF ARTICLE 280 OF THIS CODE.

‘The proyisions 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 (6) 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 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 fails]JUPON 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:

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.

es 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 legs 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) shalll 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
tegulations, 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,

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