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Philippines - Key Questions on Labor Laws and Employment

Submitted by Firm:
SyCip Salazar Hernandez & Gatmaitan
Firm Contacts:
Rodelle B. Bolante

SyCipLaw Senior Partner Leslie C. Dy and Senior Associate Mark Kevin U. Dellosa provide an update on labor laws and employment rights in the Philippines in a special report published by Conventus Law.

Contractualization and Workers' Rights

SyCipLaw: Contractualisation may relate to the engagement of job contractors to perform services for a principal or the engagement of workers under short-term contracts.

1 - Job contracting

There has been an increase in contracting out or outsourcing of activities to job contractors in the past years. A contracting arrangement is an agreement whereby a client/principal farms out to a contractor the performance or completion of a specific job or work within a definite or predetermined period, regardless of whether such job or work is to be performed or completed within or outside the premises of the client/principal. The contractor, through its employees, will perform the contracted services.

While outsourcing or the contracting out of work is permitted under Philippine laws and has been recognized as a proprietary right of an entity in the exercise of a management prerogative, it is heavily regulated in the Philippines. Outsourcing arrangements must comply with the requirements of a permissible outsourcing arrangement under the Labor Code of the Philippines ("Labor Code") and Department Order No. 174, series of 2017 ("DO 174-17") issued by the Department of Labor and Employment ("DOLE"). Under DO 174-17, the following requisites should be present in order for a contracting arrangement to be permissible or legitimate:

a) the contractor is engaged in a distinct and independent business and undertakes to perform the job or work on its own responsibility, according to its own manner and method;

b) the contractor has substantial capital to carry out the job farmed out by the principal on his account, manner and method, investment in the form of tools, equipment, machinery and supervision;

c) in performing the work farmed out, the contractor is free from the control and/or direction of the principal in all matters connected with the performance of the work except as to the result thereto; and

d) the service agreement ensures compliance with all the rights and benefits for all the employees of the contractor or subcontractor under the labor laws.

Originally published by Conventus Law. Continue reading here.