Background

DO18-A, Series of 2011, is a product of 5 years attempt to amend DO18-02.

Extensive tripartite consultations with the following labor groups: APL, AFW, AGLO, BMP, MAKABAYAN, FFW, TUCP, TUPAS, NAFLU, and LMLC, NCL, and AIHRWU, with the employers groups through the ECOP and PALSCON.

Total of 6 tripartite consultations, in addition to separate sectoral and organizational sittings, were conducted since July 2011 right after the reconstitution of the TIPC.

 

New Issuances

Strikes a balance between the need of business for numerical and functional flexibility, on one hand, and observance of labor standards and workers’ rights, on the other.

Recognizes subcontracting as a legitimate business undertaking, and regulates it to induce legitimate, responsible and ethical subcontracting, with enterprise competitiveness enhancement and decent jobs in mind.

 

Track of Issuances

To curb abuses and ensure full compliance with workers’ rights to security of tenure, labor standards, and occupational health and safety standards, by tightening the requirements to allow only legitimate, responsible and ethical contractors to do subcontracting of jobs, work or services

To equally afford protection to the principal or “user enterprise” and the workers

To remove the litigiousness in the arrangement

 

Coverage

All parties to contracting or subcontracting which is define as an arrangement where a principal or “user enterprise”, farms out the performance or completion of a specific job, work or service of its business to a contractor or subcontractor or “third party” within a definite or predetermined period, regardless of whether the job, work or service is to be performed or completed within or outside the premises of the principal.

The contractor or subcontractor must be legitimate, (substantially capitalized, registered, not LOC), employs its own employees to carry out the job, work or service covered by the Service Agreement.
 
 
Ten (10) Essential Points
  1. Recognizes subcontracting as a legitimate business undertaking, and regulates the “supply side” to induce legitimate, responsible and ethical subcontracting
  2. Prohibits contractors/subcontractors from engaging as private recruitment and placement agencies to clearly establish E-E relationship in a legitimate subcontracting arrangement with the subcontractor.
  3. Prohibits labor-only contracting (and shifts the E-E relationship to the principal or “user enterprise” in case of a finding of LOC).
  4. Sets clear criteria for legitimate contracting or subcontracting by providing:

(a) Minimum standard to determine substantial capitalization (P3 Million paid up capital or net worth);

(b) Proof of ownership or lease contract for the tools, equipment, machineries and work premises that are actually and directly used for the subcontracted work or services must be shown, which is subject to verification inspection;

(c) Registration with the DOLE; and

(d) Presence of “control test” element in employer-employee relationship between the subcontractor and the employees deployed to carry out the subcontracted services

  1. Directs mandatory registration of subcontractors by reiterating that non-registration will give rise to presumption of LOC; provides a registration system with built-in mechanism to detect and deter re-entry of cancelled registrant or recidivist violators of labor standards with full disclosure requirement; and requires a P25,000.00 registration fee (for both new & renewal of registration)
  2. Increase intended to put value to the Certificate of Registration which stands as DOLE guarantee to the “user enterprise” and to the workers that the registrant is a legitimate subcontractor and substantially capitalized.
  3. Reiterates the rights of the contractor’s employees, whether deployed or assigned as reliever, seasonal, week-ender, temporary, or promo jobbers, to all the rights and privileges as provided in the Labor Code, to include:

(a) safe and healthful working conditions;

(b) labor standards such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay

(c) separation pay as may be provided in the Service Agreement or under the Labor Code;

(d) retirement benefits under the SSS, or retirement plans of the contractor, if there are any;

(e) social security and welfare benefits;

(f) self-organization, collective bargaining and peaceful concerted activities; and

(g) security of tenure.

  1. Provides a summary proceedings for the cancellation of certificate of registration in case of violation of the Rules.
  2. Reiterates the right to security of tenure of the contractor’s employees and clearly set-out the “due process” requirement in termination of employment to remove the litigiousness in the process.
  3. Ensures compliance by clarifying that the principal and subcontractor is subject to routine inspection regardless of the number of employees and provides for tripartite engagement in the region-based tripartite monitoring team in the implementation of DO 18-A, Series of 2011, with “opt-out” provision for voluntary compliance through TAV-Kapatiran and Incentivizing Compliance Program.

 

» DO 18-A, series of 2011: Issues and Concerns