Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

fe 891

House anno:

Introduced by TUCP Party-List Representative
Hon. Raymond Democrito C. Mendoza

EXPLANATORY NOTE

Contracting out of labor is being used to deprive workers of their universally
recognized as well as constitutionally guaranteed rights, departing from the spirit
and letter of the law.

The Philippine Constitution affirms “labor as primary social and economic force,”
and mandates the State to “protect the rights of workers and promote their
welfare.” Presidential Decree No. 442, otherwise known as the Labor Code of the
Philippines, needs to be in step with the State policy to “afford protection to
labor” considering jurisprudence and practice.

Prohibiting and criminalizing labor-only contracting is of utmost importance
because employers have been increasingly using labor-only contracting to avoid
their responsibilities under labor laws, more particularly workers rights to self-
organization, security of tenure, social security benefits and compensation
packages otherwise available to the workers in the client or principal companies.

DOLE Department Order No. 18-02, which liberalizes labor-only contracting, does
not encourage employers to provide workers with knowledge, skills, and attitudes
for productive, long-term engagement in the enterprise. Implementing rules must
conform to the provisions of the law.

Contractualization robs workers of their just share in the fruits of their labor in
work processes. Work arrangements and terms and conditions of employment
should contribute to decent work where workers and their families should be able
to live with dignity and improved quality of life.

Prohibiting and criminalizing labor-only contracting will give justice to the
contribution of workers in the profitability of companies and in economic
development. To give effect to the policy of protecting workers’ rights and
promoting their welfare, the passage of this bill is earnestly sought.

ey -

REP.|RAYMOND DEMOCRITO C. MENDOZA
‘TUCP Party-List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

Introduced by TUCP Partylist Representat
Hon. Raymond Democrito C. Mendoza

AN ACT
CRIMINALIZING LABOR-ONLY CONTRACTING,
AMENDING FOR THAT PURPOSE CERTAIN PROVISIONS OF
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. Short Title. - This Act shall be known as the “Criminalizing Labor-
Only Contracting Act of 2010.”

Section 2. Prohibition against Labor-Only Contracting. Article 106 the Labor
Code is hereby amended to read as follows:

“ARTICLE 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.

“LABOR-ONLY’ CONTRACTING IS HEREBY DECLARED PROHIBITED AND
CRIMINAL IN NATURE. FOR THIS PURPOSE, LABOR-ONLY CONTRACTING
SHALL REFER TO AN ARRANGEMENT WHERE THE CONTRACTOR OR
SUBCONTRACTOR MERELY RECRUITS, SUPPLIES OR PLACES WORKERS TO
PERFORM A JOB, WORK OR SERVICE FOR A PRINCIPAL, AND ANY OF THE
FOLLOWING ELEMENTS ARE PRESENT:

A. THE CONTRACTOR OR SUBCONTRACTOR DOES NOT HAVE SUBSTANTIAL
CAPITAL OR INVESTMENT WHICH RELATES TO THE JOB, WORK OR SERVICE
TO BE PERFORMED AND THE EMPLOYEES RECRUITED, SUPPLIED OR
PLACED BY SUCH CONTRACTOR OR SUBCONTRACTOR ARE PERFORMING
ACTIVITIES WHICH ARE DIRECTLY RELATED TO THE MAIN BUSINESS OF
THE PRINCIPAL; OR


B. THE CONTRACTOR DOES NOT EXERCISE THE RIGHT TO CONTROL OVER
THE PERFORMANCE OF THE WORK OF THE CONTRACTUAL EMPLOYEE.

“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.

“THE FOREGOING PROVISIONS SHALL BE WITHOUT PREJUDICE TO THE
APPLICATION OF ARTICLE 248(C) OF THE LABOR CODE, AS AMENDED.

“SUBSTANTIAL CAPITAL OR INVESTMENT’ REFERS TO CAPITAL STOCKS AND
SUBSCRIBED CAPITALIZATION IN THE CASE OF CORPORATIONS, TOOLS,
EQUIPMENT, IMPLEMENTS, MACHINERIES AND WORK PREMISES, ACTUALLY AND.
DIRECTLY USED BY THE CONTRACTOR OR SUBCONTRACTOR IN THE
PERFORMANCE OR COMPLETION OF THE JOB, WORK OR SERVICE CONTRACTED
our.

“THE “RIGHT TO CONTROL” SHALL REFER TO THE RIGHT RESERVED TO THE
PERSON FOR 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.

“A CRIMINAL COMPLAINT IN VIOLATION OF THIS ARTICLE SHALL FALL UNDER
THE CONCURRENT JURISDICTION OF THE MUNICIPAL OR REGIONAL TRIAL
Court.”

Section 3. Licensing. There shall be incorporated after Article 106 of the Labor
Code a new article to read as follows:

“ARTICLE 106-A. LICENSING OF JOB CONTRACTORS. - THE SECRETARY OF
LABOR AND EMPLOYMENT THROUGH THE REGIONAL OFFICE SHALL ISSUE
QUALIFIED APPLICANTS THE JOB CONTRACTOR'S LICENSE IN ACCORDANCE
WITH GUIDELINES PRESCRIBED FOR THE PURPOSE. THE APPLICANT MUST BE A
FILIPINO CITIZEN OR A CORPORATION OF WHICH ONE HUNDRED PERCENT
(100%) OF AUTHORIZED AND VOTING CAPITAL IS OWNED AND CONTROLLED BY
FILIPINO CITIZENS, A PARTNERSHIP, COOPERATIVE, CRAFT UNION OR ANY
OTHER ENTITY. SUCH A CONTRACTOR SHALL, LIKEWISE, COMPLY WITH THE
REQUIREMENTS OF OTHER GOVERNMENT AUTHORITIES.”

Section 4. Liability. Article 109 of the Labor Code is hereby amended to read as
follows: a

“ARTICLE 109. Solidary Liability. - The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision
of this Code.

“For purposes of determining the extent of their civil AND CRIMINAL liability
under this Chapter, they shall be considered as direct employers IF THE
CONTRACTOR OR SUBCONTRACTOR IS NOT AUTHORIZED BY THE SECRETARY OF
LABOR AND EMPLOYMENT OR HIS DULY AUTHORIZED REPRESENTATIVE TO
UNDERTAKE CONTRACTING ACTIVITIES.”

Section 5. False Repo:
read as follows:

1g- Article 119 of the Labor Code is hereby amended to

“ARTICLE 119. False reporting. - It shall be unlawful for any person to make
any statement, report, or record filed or kept pursuant to the provisions of this

3


Code knowing such statement, report or record to be false in any material
respect.

“NOTWITHSTANDING THE PROVISIONS OF ARTICLE 128 OF THIS CODE, AN
EMPLOYER'S FAILURE TO KEEP EMPLOYMENT RECORDS AND PRODUCE THEM
UPON REQUEST IS DEEMED AN ADMISSION OF THE CHARGES OR COMPLAINTS
TO WHICH SAID EMPLOYMENT RECORDS RELATE.”

Section 6. Separability Provisions. - If any provision or part thereof, or the
application thereof to any person or circumstances, is held invalid, the remainder,
or the application of such provision or part to other persons or circumstances,
shall not be affected thereby.

Section 7. Repealing Clause. - All provisions of existing laws, executive
orders, decrees, rules-and regulations or any part thereof which are contrary to or
inconsistent with the provisions of this Act are hereby repealed, amended or
modified accordingly.

Section 8. Effectivity. - This Act shall take effect fifteen (15) days after its
Publication in at least two newspapers of general circulation.

Approved,