The issuance by Labor Secretary Silvestre Bello of Department Order No. 174 has failed to still the intense agitation of the various trade union groups against what they bitterly call as the “contractualization” of the labor hiring system. A number of the trade union federations are even calling for the resignation of the good Secretary for his alleged failure to heed President Duterte’s election promise to stop “contractualization” within three months of the Duterte Administration.
DO 174 is a product of a nine-month series of DOLE workshops on what should be the appropriate regulatory framework on job contracting based on the basic laws outlined in Articles 106-109 of the Labor Code. The DO raises the registration and capital requirements that legitimate manpower agencies must meet ostensibly to weed out the fly-by-night agencies. The DO also calls for the strengthening of the labor inspectorate system to enable DOLE to monitor labor abuses associated with the contracting out of work by principals to these third-party agencies. However, the DO has given legitimacy to “manpower cooperatives” by prohibiting the operations of “in-house cooperative”, one that is set up and/or managed by a principal; hence, the so-called cooperatives run independently by outside entities are presumed to be legit.
Why are the unions so angry against DO 174? The answer is not difficult to find. The trade unions are adamantly opposed to any form of job outsourcing and labor contracting which they blame for their thinning union ranks and eroding bargaining power. They also claim that the twin practices of job/work outsourcing to outside subcontractors and suppliers and the contracting of the services provided by third-party manpower agencies have caused widespread abuse of workers’ rights such as the non-regularization of workers doing “regular and necessary” jobs, non-payment of correct wages and benefits, non-observance of labor standards such as health and safety standards, and non-remittance of mandatory employee contributions to the government-run Social Security System (SSS), Pag-Ibig Fund (housing insurance) and Philhealth (health insurance).
Employers, on the other hand, argue that business can not survive and grow in a competitive and globalized economic environment if they do not have the flexibility to outsource work and maintain a lean organization, including their ability to reduce the workforce when needed. The demand for products and services fluctuates in the market, and so is their requirement for manpower. Employers cannot afford to have a big pool of regular or permanent workers, who are often difficult to downsize or separate from the service during economic downturns.
The third actor in the industrial relations (IR) system – government – is naturally caught in the middle. The Department of Labor and Employment (DOLE) tries to maintain a balancing act by declaring that while it recognizes the employers’ prerogatives to outsource work and engage the services of manpower agencies to do non-core jobs, it also reaffirms all the basic rights of the workers under the Labor Code, including the right to tenure, due process and various mandated benefits such as the minimum wage.
The problem then is — how does one strengthen labor protection and institutionalize at the same time a regulatory framework on outsourcing and service contracting based on the declared DOLE policy of balancing the needs or interests of the two polarized industrial relations actors?
The unions have been denouncing the extensive growth of labor or service contracting in the last three to four decades in the industrial, service and even agricultural (based on the formal wage system, e.g., plantations) sectors. This growth means the proliferation too of the “manpower agencies”, which provide a whole range of services within the company (or principal’s) work or business premises ranging from the janitorial, security and catering (now all considered “justiciable” by the Supreme Court or non-contestable labor-contracting arguments) to virtually all areas of work – administrative, line production, packaging, messengerial, delivery, legal, IT, etc. In the 1980s and 1990s, the decision of firms on outsourcing was defined by the question: is it core or peripheral to the business? Today, it is difficult to distinguish whether the activity being outsourced is core or peripheral – because everything is virtually outsourceable, including marketing and HRD.
Why the phenomenal growth of labor or service contracting? Economic globalization is the answer given by Dr. Bach Macaraya, a professor of the UP School of Labor and Industrial Relations. According to Macaraya, the Labor Code is “centered on the promotion of the welfare of regular employment”, and yet, the reality under globalization is that regular employees are now a distinct minority and are getting fewer and fewer. There has been the widespread use by formal enterprises of labor contracting or job/service contracting to downsize regular employment so that these enterprises can respond more nimbly to the challenges of global competition.
Most of the agency hires are classified as non-regulars – either deployed as “project workers” or as “5-5 workers” or “endo’s” rotated in different work sites. This is the basis of the union lament – agency hiring is an instrument for casualization or “contractualization” of the workforce.
In turn, the growth of agency hiring contributes to the decline of unionism. According to a 2016 study by the Labor Education and Research Network, “union density” has “declined significantly from 26.2 percent in the 1980s to 8.5 percent in 2013”. Union decline is notably felt in terms of collective bargaining coverage – 600,000 workers covered by CBAs in the first half of the 1990s to around 300,000 or less despite the growth of the labor force.
So what can be done to arrest the decline of unionism and strengthen the right of workers to form associations freely and engage in concerted activities to advance their collective interests?
Obviously, this is not easy to answer given the realities in the labor market and the economy today.
However, the Constitution, under Section 3, Article XIII, is quite clear: all workers, regular or non-regular, formal or informal, have equal rights in the enjoyment of basic freedoms. No exceptions. These include the right to form associations for self defense and advance their common interests. Formulating the enabling laws and regulations so that all workers can enjoy these universal rights is a government task still waiting to be fulfilled.