How contractualization became the norm among Philippine businesses

There are two narratives as to how contractualization became so pervasive in the Philippines. Many labor groups have in the past routinely blamed the late senator and labor leader (a pillar of the Trade Union Congress of the Philippines) Ernesto “Boy” Herrera for paving the way for labor contractualization with amendments he introduced in 1989 to the Labor Code.

According to them, a very limited contractualization regime—in the past, limited to janitorial services and similar short-term business arrangements —became the norm as a result of the sweeping new provisions; hence, the tag  “Herrera Law.”  However, when Herrera died in October 2015, his son Ernest—making a clarification validated by ex-Labor Secretary Ruben Torres—told reporters (including the BusinessMirror) at his wake it was most unfair to blame the late senator for the runaway proportions with which contractualization had been abused across many sectors.

In fact, Ernest explained, the senator authored a bill mandating regularization of employees who have rendered six months of continuous service—a provision subsequently included in the revised Labor Code.

Ernest blamed the implementation by the Department of Labor and Employment (Dole) as part of the culprit. DOLE circulars, he said, had greenlighted so-called labor-only contracting agencies that dangle “take it or leave it” five-month contracts to desperate jobseekers. In a later interview (not with the BusinessMirror), Ernest insisted, “the record shows my dad was very critical and fought against these department orders favoring labor-only contracting.’’

One of the harshest critics of labor-only contracting, the Ecumenical Institute for Labor Education and Research (EILER), had pointed to Articles 106 to 109, of what it called the Herrera Law, as the source of the labor secretary’s power to issue orders that will promote hiring of contractuals and other nonregular workers. An example given was Department Order 18-A issued in 2011.

EILER said in one forum this has since become a nightmare that vastly expanded the once-limited work arrangement for janitorial and other casual jobs to becoming the routine, or default labor arrangement cutting “across all economic sectors, from manufacturing to wholesale and retail trade up to business-process outsourcing.”



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