Almost 2 million workers are expected to benefit from the passage of a measure that seeks to address the problems of labor-only contracting in the Philippines, the vice chairman of the House Committee on Labor and Employment said on Wednesday.
The House of Representatives on Tuesday approved on second reading House Bill (HB) 6908 strengthening the security of tenure of workers by amending Presidential Decree (PD) 442, or the Labor Code of the Philippines.
The bill is expected to be approved on third reading next week.
Rep. Vicente S.E. Veloso of the Third District of Leyte, vice chairman of the House Committee on Labor and Employment and sponsor of the bill, admitted that not all kinds of contracting are prohibited under HB 6908.
“While we cannot eliminate all kinds of contracting, almost 2 million regular and agency-hired workers are expected to benefit from the passage of these amendments,” Veloso said.
The measure prohibits labor-only contracting and defines its existence when of the following is present: the contractor does not have substantial capital or investment in the form of tools, equipment, machineries and work premises, among others; and the contractor has no control over the workers’ methods and mean of accomplishing their work; and the contractor’s workers are performing activities which are directly related to the principal business of the employer.
The bill also introduces a new provision requiring all persons or entities doing business as job contractors to obtain a license from the Department of Labor and Employment, listing requirements for such licensing, determining the period of validity of the license and stating the responsibility of the licensee to submit an annual report.
The term “job contractor” refers to a sole proprietorship, corporation, partnership, association, cooperative or any other organization that performs a specific work, job or service for a principal employer. The term “principal employer” refers to the person or entity, including the government, that contracts out a specific work, job or service.
The bill also seeks to amend Article 106 of PD 44 titled “Contractor” so that whenever an employer enters into a contract with a person for the performance of the former’s work, the employees of the contractor shall be paid in accordance with the Labor Code and other laws.
The contracting out of the same work contracted out by the employer is prohibited.
It also declares that violation of substantive or procedural due process is equivalent to illegal dismissal. In addition, the entitlements of an illegally dismissed employee are broadened by ensuring the payment of social-welfare contributions and benefits to said employee.
The bill also simplifies and clarifies the classification of employees by mandating regular employment, as the general rule and prohibiting fixed-term employment except in cases of overseas Filipino workers (OFWs), workers on probation, relievers who are temporary replacements of absent regular employees whose engagements shall not exceed six months, project employees and seasonal employees.
It provides that the rights and benefits of relievers, project and seasonal employees are on a par with regular employees consistent with the principle that all workers must be treated alike both as to rights enjoyed and obligations assumed.
It also provides that a probationary employee who has rendered at least one month of service is entitled to a termination pay equivalent to one-half month salary.
In the event the contractor fails to pay the wages, allowances and benefits of his employees based on the Labor Code and other laws, the employer shall be jointly and severally liable with the contractor 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 under him.
The labor secretary, upon consultation with the National Tripartite Industrial Peace Council, shall by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Labor Code. He may make appropriate distinctions between labor-only contracting which is hereby prohibited, and legitimate job contracting, which is permitted in accordance with the Labor Code.
Also, Article 294 of the Labor Code, titled “Security of Tenure,” is amended so that, in cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized. An illegally dismissed employee is entitled to immediate reinstatement even pending appeal and without loss of seniority rights and benefits, full back wages and accrued benefits provided by law, company policy of collective
Article 295, titled “Regular Employment,” is amended so that a regular employee is one who has been hired for an indefinite period. No employment with a fixed term or definite period shall be allowed, except in cases of OFWs, workers on probation, relievers who are temporary replacements or absent regular employees whose engagements shall not exceed six months, project employees and seasonal workers.
Relievers, project and seasonal employees shall enjoy the rights of regular employees for the duration of the engagement, project or season, respectively.
All other forms of discontinuous employment are prohibited. Clauses in employment contracts providing for a fixed term or definite period of employment are void. Workers under such arrangements are deemed regular employees reckoned from the first day of employment.
Moreover, Article 296, titled “Probationary Employment,” is amended so that probationary employment shall not exceed six months from the date the employee started working. It may be terminated for a just cause when he fails to qualify as a regular employee.
The bill inserted a new Article 303-A, titled “Administrative Penalties,” which cites the penalties, the Department of Labor and Employment shall impose on erring principal employers, job contractors, manpower agencies, workers’ cooperatives and any other similar entities.
At present, there is no imposable penalty for engaging in labor-only contracting, except the simple declaration of ostensible employees of the contractor as employees of the principal employer.
Contribution to GDP
A labor group said on Wednesday that sustaining the country’s economic growth in the coming months may depend on how well employers will treat their workers.
In a text message, Associated Labor Union-Trade Union Congress of the Philippine (ALU-TUCP) Spokesman Alan Tanjusay said workers were still able to help grow GDP by 6.7 percent in 2017 despite being faced with unfavorable working conditions.
On Tuesday the National Economic Development Authority said the GDP expansion last year was “a promising development,” since it came close to the 6.9-percent GDP expansion in 2016, which was an election year.
During election years, GDP growth usually soars due to increased consumption spending before significantly declining the following year.
“If workers were able to produce this GDP despite their worsening [work] conditions, how much GDP could they have produced if the conditions were conducive to workers and their families.” Tanjusay said.
Citing data from the Philippine Statistic Authority, the Philippine Institute for Development Studies (PIDS) noted that labor productivity—GDP per employed person—of workers has been improving in the last 20 years.
As of last year, the PIDS said the industrial sector has the highest labor productivity, followed by the services and the agriculture sectors.
Despite their contributions to the economy, ALU-TUCP National President Michael Mendoza said workers still do not get the fair treatment they deserve from the government and the private sector.
“Wages remain so low that it cannot sustain a family to a decent living. Regular jobs that are supposed to aid workers to a life above poverty are replaced by rampant practice of short-term contractualization work arrangement,” Mendoza said.
“Government’s social safety nets that are supposed to keep them from deeper poverty are inadequate. Workers still lack access to quality health, education and other social services necessary to remain productive and safe,” he added.
ALU-TUCP called on employers to address these concerns to further boost labor productivity in the Philippines.