Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No._ 1454

Introduced by Rep. Magtanggol T. Gunigundo |

EXPLANATORY NOTE

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

While we recognize subcontracting as a valid business practice, there is also a need to
protect workers from unscrupulous and unnecessary subcontracting. Hence, this
proposal to balance legitimate business interests with the need to protect workers from
insecure employment conditions.

Many of the concepts and processes contained in this bill reflects current practice as
provided in the Department of Labor and Employment's Department Order No. 18
series of 2002 (DO 18). However, while some refinements have been made to DO 18
provisions, core concepts have been retained such as the definition of subcontracted
work and labor only contracting, the recognition of rights of subcontracted workers and
the maintenance of a registration system for legitimate subcontractors

The salient innovations introduced by this bill in this regard include the following:
1) principals can engage a maximum of 10% of the total workforce the total number of
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. Since their adoption
the current provisions have been the subject of numerous interpretations through
implementing rules by the executive branch and jurisprudence by the judiciary. As such,


there is a need to revise the relevant provisions of the Labor Code so as to incorporate
these interpretations and, more importantly, create a coherent and consistent
framework of employment classification

This bill draws from 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, its salient points include the following:

1. The incorporation of the executive and judicial recognition that all classes of
employees are entitled to security of tenure.

2. The incorporation of the workers’ right to notice and hearing

3. The clarification of what constitutes regular, casual and project employment

Building on these concepts, this 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 (6) months when all
employers shall have enough time to ascertain whether a worker is fit for
retention or not.

3. Deliberate misclassification of employees for the purpose of misleading them
as to their rights is deemed an unfair labor practice.

With these proposed amendments to the Labor Code, this bill 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.

In view that this bill has already been extensively discussed and approved by the
Committee on Labor and Employment during the 14" Congress, the immediate
approval of this proposed measure is earnestly sought.

/egonige . GUNIGUNDO |

Representative
2” District, Valenzuela City


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Constitution Hills, Quezon City

FIFTEENTH CONGRESS
First Regular Session

1451

HOUSE BILL NO.

INTRODUCED BY REP. MAGTANGGOL T. GUNIGUNDO |

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

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 280-8 TO PRESIDENTIAL DECREE NO. 442, AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES

SECTION 4. Article 106 of the Labor Code is hereby amended as follows:

“LART. 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


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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 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 are 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 WHO
DECIDES TO FARM OUT A JOB OR SERVICE TO A SUBCONTRACTOR, THE
SUBCONTRACTOR WHO HAS THE CAPACITY TO INDEPENDENTLY
UNDERTAKE AND ACTUALLY UNDERTAKES THE PERFORMANCE OF THE
JOB, WORK OR SERVICE, AND THE CONTRACTUAL WORKERS WHO ARE
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 TO 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.”

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SEC. 2. Anew 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 THE 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, 13TH 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:

4, 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;

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

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3 SOLIDARILY LIABLE WITH THE CONTRACTOR IN THE EVENT OF ANY
4 VIOLATION OF ANY PROVISION OF THE LABOR CODE, INCLUDING THE
5 FAILURE TO PAY WAGES.
“THE PRINCIPAL SHALL BE DEEMED THE EMPLOYER OF THE
CONTRACTUAL EMPLOYEE IN ANY OF THE FOLLOWING CASES:
8 4, WHERE THERE IS LABOR-ONLY CONTRACTING; OR
9 2. IN THE ABSENCE OF THE WRITTEN CONTRACT REQUIRED BY ARTICLE
10 106-A; OR
u 3. IN CASES OF VIOLATION OF ARTICLE 106 - B.
12 “IN ADDITION, THE PRINCIPAL SHALL BE SOLIDARILY LIABLE WITH THE
13 SUBCONTRACTOR IN CASE THE CONTRACT BETWEEN THE PRINCIPAL AND
14 SUBCONTRACTOR IS PRETERMINATED FOR REASONS NOT ATTRIBUTABLE
1S TO THE FAULT OF THE SUBCONTRACTOR.”

16 SEC. 3. Anew Article 106-8 is hereby inserted in the Labor Code to read as follows’

7 “ART. 106-8. PROHIBITION AGAINST LABOR-ONLY SUBCONTRACTING. —
18 ENGAGING IN LABOR-ONLY CONTRACTING OR CONTRACTING WITH A
19 LABOR-ONLY CONTRACTOR IS STRICTLY PROHIBITED. FOR THIS
20 PURPOSE, LABOR-ONLY CONTRACTING REFERS TO AN ARRANGEMENT
21 WHERE THE SUBCONTRACTOR MERELY RECRUITS, SUPPLIES OR PLACES
22 WORKERS TO PERFORM A JOB, WORK OR SERVICE FOR A PRINCIPAL,
23 INCLUDING INSTANCES WHERE ANY OF THE FOLLOWING IS PRESENT:

24 (A) THE SUBCONTRACTOR DOES NOT HAVE SUBSTANTIAL CAPITAL AND
25 INVESTMENT WHICH RELATE TO THE JOB, WORK OR SERVICE TO BE
26 PERFORMED;

27 (B) THE EMPLOYEES RECRUITED, SUPPLIED OR PLACED BY SUCH
28 SUBCONTRACTOR ARE PERFORMING ACTIVITIES WHICH ARE

29 DIRECTLY RELATED TO THE MAIN BUSINESS OF THE PRINCIPAL; OR


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(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
BY ITSELF CONSTITUTE 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
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.”

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 ARE HEREBY DECLARED PROHIBITED
FOR BEING CONTRARY TO LAW OR PUBLIC POLICY:

(A) ENGAGING OR MAINTAINING BY THE PRINCIPAL OF
SUBCONTRACTED EMPLOYEES IN EXCESS OF TWENTY PERCENT
(20%) OF THE PRINCIPAL'S TOTAL WORKFORCE;

(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


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(D)

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;

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

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.

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

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

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


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ili, SUBCONTRACTOR WHICH OPERATES SOLELY FOR THE
PRINCIPAL.

5. CONTRACTING OUT OF A JOB, WORK OR SERVICE DIRECTLY
RELATED TO THE BUSINESS OR OPERATION OF THE PRINCIPAL
BY REASON OF A STRIKE OR LOCKOUT WHETHER ACTUAL OR
IMMINENT;

6. 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. \T SHALL BE MANDATORY FOR ALL PERSONS OR ENTITIES
ACTING AS SUBCONTRACTORS TO REGISTER UNDER A REGISTRATION
SYSTEM HEREBY ESTABLISHED TO GOVERN CONTRACTING
ARRANGEMENTS AND TO BE IMPLEMENTED 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:

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

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

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3. THE NATURE OF THE APPLICANT'S BUSINESS AND THE INDUSTRY OR
INDUSTRIES WHERE THE APPLICANT SEEKS TO OPERATE;

4, THE NUMBER OF REGULAR WORKERS; THE LIST OF CLIENTS, IF ANY;
HE NUMBER OF PERSONNEL ASSIGNED TO EACH CLIENT, IF ANY AND
‘THE SERVICES PROVIDED TO THE CLIENT;

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

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

“THE APPLICATION SHALL BE SUPPORTED BY THE FOLLOWING:

4. ACERTIFIED 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

2, ACERTIFIED 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 SUBCONTRACTOR 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.



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“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 DEVISE THE
NECESSARY FORMS FOR THE EXPEDITIOUS PROCESSING OF ALL
APPLICATIONS FOR REGISTRATION.

“(D.) ANNUAL REPORTING OF REGISTERED CONTRACTORS.
THE SUBCONTRACTOR SHALL SUBMIT IN TRIPLICATE COPIES AN ANNUAL
REPORT USING A PRESCRIBED FORM TO THE APPROPRIATE REGIONAL
OFFICE NOT LATER THAN THE 15™ OF JANUARY OF THE FOLLOWING
YEAR. THE REPORT SHALL INCLUDE THE FOLLOWING DOCUMENTS:

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

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

3. A SWORN STATEMENT SIGNED BY THE HIGHEST EXECUTIVE
OFFICER AND THE CHIEF FINANCIAL OFFICER THAT 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 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
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1. NON-SUBMISSION OF CONTRACTS BETWEEN THE PRINCIPAL AND THE
SUBCONTRACTOR WHEN REQUIRED TO DO SO;

2. NON-SUBMISSION OF SWORN DOCUMENTS STATED IN ARTICLE 106-D
(D);

|. ENGAGEMENT IN LABOR-ONLY CONTRACTING;

4. VIOLATION OF THE PROHIBITED ACTIVITIES PROVIDED BY THIS CODE;
NON-COMPLIANCE WITH LABOR STANDARDS AND WORKING
CONDITIONS.

“(R) RENEWAL OF REGISTRATION OF SUBCONTRACTORS. ALL
REGISTERED SUBCONTRACTORS MAY APPLY FOR RENEWAL OF
REGISTRATION EVERY TWO YEARS. FOR THIS PURPOSE, THE TRIPARTITE
INDUSTRIAL PEACE COUNCIL (TIPC) AS CREATED UNDER EXECUTIVE
ORDER NO. 403, SHALL SERVE AS THE OVERSIGHT COMMITTEE TO VERIFY
AND MONITOR THE FOLLOWING:

4. ENGAGING IN ALLOWABLE CONTRACTING ACTIVITIES; AND
2. 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 practice:

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(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;

(©) To ENGAGE ALABOR-ONLY CONTRACTOR OR TO contract out services
or functions being performed by [union] MEMBERS OF, OR POSITIONS
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 f financial or other
support to it or its organizers or supporters;

(@) 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 for
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) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attomey'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
ANDIOR TO CLASSIFY AS ASUAL, CONTRACTUAL, SUBCONTRACTED
EMPLOYEES, AGENCY EMPLOYEES, OR OTHER NON-REGULAR
CLASSIFICATION THOSE EMPLOYEES WHO ARE REGULAR EMPLOYEES BY
VIRTUE OF ARTICLE 280 OF THIS CODE.

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“The provisions of the preceding paragraph notwithstanding, only the officers and
agents of corporations, 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 employee] ALL EMPLOYEES SHALL ENJOY
SECURITY OF TENURE AND SHALL NOT BE TERMINATED except for a just
cause or when authorized by this Title. ALSO, DUE PROCESS IN EMPLOYMENT
RELATIONS REQUIRES ANY EMPLOYER WHO SEEKS TO DISMISS A
WORKER TO FURNISH HIM A WRITTEN NOTICE STATING THE PARTICULAR
ACTS OR OMISSION 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
REASONABLE PERIOD FROM RECEIPT OF SUCH NOTICE AND WITH THE
ASSISTANCE OF A REPRESENTATIVE IF HE SO DESIRES. DUE PROCESS
RQUIRES 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 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 the 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 oral 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 in 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


1 or service to be performed is seasonal in nature and the employment is for the

2 duration of the season]. THE PROVISIONS ON PERMISSIBLE AND LEGAL
3 SUBCONTRACTING AND LAWFUL CASUAL EMPPLOYMENT ARRANGEMENTS:
4 NOTWITHSTANDING, THE TOTAL NUMBER OF LAWFUL CASUAL
5 EMPLOYMENT AND LAWFUL CONTRACTUAL EMPLOYMENT CANNOT
6 EXCEED TWENTY PERCENT (20%) OF THE TOTAL WORKFORCE, INCLUDING
4 THE CASUAL AND CONTRACTUAL EMPLOYEES: PROVIDED, THAT THIS
8 SHALL IN NO CASE NOT BE INTERPRETED TO MEAN THAT LABOR-ONLY
9 CONTRACTING, ILLEGAL SUBCONTRACTING AND MISCLASSIFICATION OF
10 WORKERS AS CASUALS SHALL BE ALLOWED PROVIDED THEY DO NOT
n EXCEED TWENTY PERCENT (20%): PROVIDED, FURTHER, THAT THE
12 EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP AND THE
13 DETERMINATION OF WHETHER A POSITION IS REGULAR SHALL BE DONE
14 ON A POSITION PER POSITION AND EMPLOYEE PER EMPLOYEE BASIS, AND
15 WITHOUT REGARD TO THE TWENTY PERCENT (20%) TOTAL OF
16 ALLOWABLE MAXIMUM LEGAL CONTRACTUAL AND CASUAL EMPLOYMENT.
17 “An employment shall be deemed to be casual if it is not [covered by the preceding
18 paragraph] RELATED TO THE MAIN BUSINESS OF THE EMPLOYER: Provided,
19 That any employee who has rendered at least one year of service, whether such
20 service is continuous or broken, shall be considered a regular employee with respect
21 to the activity in which he is employed and his employment shall continue [while
22 such activity exists] UNLESS HE IS TERMINATED FOR A JUST CAUSE OR
23 WHEN AUTHORIZED BY THIS TITLE.”

24 SEC. 10. Project and Extra Employment. A new Article 280-A is hereby inserted in the

25 Labor Code to read as follows:

26 “ART. 280-A. PROJECT AND EXTRA EMPLOYMENT. - PROJECT
27 EMPLOYMENT REFERS TO THAT WHICH HAS BEEN FIXED FOR A SPECIFIC
28 PROJECT OR UNDERTAKING THE COMPLETION OR TERMINATION OF
29 WHICH HAS BEEN DETERMINED AND MADE KNOWN TO THE EMPLOYEE AT
30 THE TIME OF HIS ENGAGEMENT.

31 “EXTRA EMPLOYMENT REFERS TO ADDITIONAL WORK TO BE PERFORMED
32 IN RESTAURANT AND HOTEL ESTABLISHMENTS SPECIFICALLY FOR

33 BANQUET FUNCTIONS, SEMINARS AND SIMILAR FUNCTIONS WHERE THE


Cord sH. ew

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15
16
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18
19
20

21

22.
23
24
25
26
27
28
29
30

31

REGULAR EMPLOYEES CANNOT REASONABLY COPE WITH THE INCREASED
DEMANDS OF SUCH EVENTS.

“PROJECT AND EXTRA EMPLOYEES SHALL HAVE THE RIGHT TO SECURITY
OF TENURE AND ARE ENTITLED TO RESUME THEIR EMPLOYMENT IN THE
SAME OR SIMILAR POSITION UPON THE START OF THE NEXT PROJECT OR
OCCASION FOR EXTRA 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 280-8 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) THOSE APPOINTED
TO SENSITIVE POSITIONS IN THE ACADEME SUCH AS THE DEAN,
ASSISTANT DEAN, COLLEGE SECRETARY, AND THOSE OCCUPYING
PROFESSORIAL CHAIRS IN HIGHER EDUCATION INSTITUTIONS, AND THE
PRINCIPAL IN BASIC EDUCATION INSTITUTIONS; AND (4) THOSE EMPLOYED
AS MEMBERS OF THE 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 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,
EVEN UNDER THE GUISE OF AN EXTENSION, shall be considered a regular

employee.”

SEC. 13. Article 288 of the Labor Code is hereby amended to read as follows:

14


1 “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

3 ambiguous provisions of an existing collective bargaining agreement, any violation
4 of the provisions of this Code declared to be unlawful or penal in nature shall be
5 punished with a fine of not less than One Thousand Pesos (P1,000.00) nor more
6 than Ten Thousand Pesos (P10,000.00) or imprisonment of not less than three
7 months nor more than three years, or both such fine and imprisonment at the
8 discretion of the court
9 “ANY PRINCIPAL OR SUBCONTRACTOR WHO ENGAGES IN LABOR ONLY
10 CONTRACTING AND/OR VIOLATES ARTICLES 106, 106-A, 106-B, 106-C, 106-D
ul AND 106-E SHALL BE SOLIDARILY LIABLE TO INDEMNIFY EACH
12 SUBCONTRACTED EMPLOYEE NO LESS THAN FIFTY THOUSAND PESOS
13 (P50,000.00) WITHOUT PREJUDICE TO OTHER MONETARY AWARDS TO
14 WHICH SUCH SUBCONTRACTED EMPLOYEE MAY BE ENTITLED SUCH AS
15 BACKWAGES, MONETARY CLAIMS AND BENEFITS UNDER AN APPLICABLE
16 CERTIFIED BARGAINING AGREEMENT OR COMPANY POLICY, WHETHER
17 WRITTEN OR OTHERWISE.
18 “ANY EMPLOYER WHO DELIBERATELY CATEGORIZES OR OTHERWISE
19 TREATS REGULAR EMPLOYEES TO BE ANY NON-REGULAR EMPLOYEE
20 SHALL BE LIABLE TO INDEMNIFY EACH MISCLASSIFIED EMPLOYEE NO
21 LESS THAN FIFTY THOUSAND PESOS (P50,000.00) WITHOUT PREJUDICE TO
22 OTHER MONETARY AWARDS TO WHICH SUCH EMPLOYEE MAY BE ENTITLED
23 SUCH AS BACKWAGES, MONETARY CLAIMS AND BENEFITS UNDER AN
24 APPLICABLE CERTIFIED BARGAINING AGREEMENT.
25 “In addition to such penalty, any alien found guilty shall be summarily deported upon
26 completion of service of sentence.
27 “Any provision of law to the contrary notwithstanding, any criminal offense punished
28 in this Code, shall be under the concurrent jurisdiction of the Municipal or City Courts
29 and the Cours of First instance.”
30 SEC. 14. Implementing Rules and Regulations. - The Department of Labor and

31 Employment (DOLE) shall issue, within 60 days after the effectivity of this Act, the rules and
32 regulations for its effective implementation


ion of this Act is

SEC. 15. Separability Clause. - If, for any reason, any section or pro
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) national newspapers of general circulation.

Approved,

16