DOLE chief signs new order on contracting, subcontracting

After nine months of numerous dialogues and consultations with employers and workers, the Department of Labor and Employment (DOLE) has finally approved Department Order (DO) No. 174 on contracting and subcontracting on Thursday. (Photo: KING RODRIGUEZ/Presidential Photo)

MANILA—After nine months of numerous dialogues and consultations with employers and workers, the Department of Labor and Employment (DOLE) has finally approved Department Order (DO) No. 174 on contracting and subcontracting on Thursday.

In a press conference, Labor and Employment Secretary Silvestre Bello III signed the new DO, which “prohibits labor-only contracting and specifies other illicit forms of employment arrangements.”

“As one song goes, the wait is over. And yes, the long wait is indeed over. I have already signed the Department Order of Contracting and Subcontracting superseding DOLE Department Order No. 18-A,” he said in his speech.

Bello added that the order, reaffirms the Constitutional and statutory right to security of tenure of workers; applies to all parties in an agreement where employer-employee relationship exists; allows only permissible contracting and subcontracting as defined; re-enforces the rights of workers to labor standards, self-organization, collective bargaining and security of tenure and requires mandatory registration of contractors and subcontractors and provides clear procedures for cancellation of registration.

Aside from labor-only contracting, DO 174 also bans, the principal to engage in “Cabo”; contracting out of job or work through an in-house agency; contracting out of job or work through an in-house cooperative which merely supplies workers to the principal; contracting out of a job or work by reason of a strike or lockout whether actual or imminent; contracting out of a job or work wing performed by union members and such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization as provided in Article 259 of the Labor Code, as amended.

Likewise, the order prohibits requiring contractor’s/subcontractor’s employees to perform functions which are currently being performed by the regular employees of the principals; requiring contractor’s/subcontractor’s employees 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 or contractor from liability as to payment of future claims; or require the employee to become member of a cooperative.

It also prevents repeated hiring by the contractor/subcontractor of employees under an employment contract of short duration; requiring employees under contracting/subcontracting arrangement to sign a contract fixing the period of employment to a term shorter than the term of the Service Agreement, unless the contract is divisible into phases for which substantially different skills are required and this is made known to the employee at the fine of engagement and such other practices, schemes or employment arrangements designed to circumvent the right of workers to security of tenure.

Cabo refers to a person or groups of persons or to a labor group which, under the guise of a labor organization, coopertaive or any entity, 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.

Bello noted that DO 174 has shortened the validity of the certificate of registration of contractors and subcontractors from three (3) years to two (2) years and it also increased the registration fee from PHP25,000 to PHP100,000.

At the same time, the DOLE chief explained that he has no power to prohibit all forms of contractualization and fixed employment, “This matter is a function of legislation.”

“While he has quasi-legislative power, the Secretary of Labor cannot, through rules and regulations, amend or supplant existing provisions of law (Labor Code),” he added.

With this, Bello said that the DO will be useless, if it will not be honestly and effectively enforced, as he directed Undersecretaries Joel Maglungsod and Bernard Olalia to review the enforcement framework of labor laws and standards.

“The Department would like to underscore though that a DO, however well-crafted p, loses its utility and purpose if not well-implemented,” he said.

“Also, I have already requested the creation of 200 plantilla positions in addition to the existing pool of labor laws compliance officers. We will create regional inspection teams, to be supervised by Manglunsod and Olalia that directly report to the Office of the Secretary,” the DOLE chief furthered.

The new DO will be effective 15 days after its publication.