Informal work arrangements ("on call employment") may mean regular employment.

“Benevolence, it is said, does not operate as a license to circumvent labor laws.”

This is all too familiar. You may not know it, but you, too, may be in this situation now or in the past. If not yet, then good for you, you can still prepare for it.

The scenario: You are kind, so when someone comes to you, or has been introduced to you, and earnestly seeks your favour to allow him or her to stay where he could have roof over his or her head, and in return he or she would help in the chores around the house or your little business, you tend to say yes not so much because you need a hand, or he or she possesses the skills you need, if you happen to need one, but out of magnanimity. This, despite your apprehensions given the many horrible and outrageous stories of homeowners or business owners being victimized by the very persons they fed, clothed, and sheltered. Life, indeed, can be cruel.

Fast forward to not-so-distant future. You may have had a little disagreement with your foster friend, or the latter may have violated your relationship, or have done something that would make you rethink keeping him or her, then you decide to kick him or her out of the house or your little business. Days later, you get a summons from the National Labor Relations Commission (NLRC) directing you to answer a complaint for illegal dismissal filed by your erstwhile foster friend. Surprised, you squeak “He was never my employee!” But, was he or was he not?

The case below, although it does not exactly fit the above scenario, discusses how, even given the scenario above, similar relationships are interpreted under the labor laws.

The central question is: would such an arrangement ripen into an employer-employee relationship that would bind a benevolent host to the consequences under the labor code and other labor laws and rules?

Article 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. (PD 442, The Labor Code of the Philippines)

 

The Brief Facts

Esita, the complainant, claims he was an employee of Opulencia, the respondent. Esita explains that he worked as compressor operator in the ice plant owned by opulencia for many years. Opulencia, in denying Esita’s claim, alleges that the latter was merely allowed to work as peon of contractors they had engaged to do major repairs on his Tanauan ice plant. He continues that “while he refused the insistent pleas of Esita for employment in the ice plants due to lack of vacancy, he nonetheless allowed him to stay in the premises of the ice plant for free and to collect fees for crushing or loading ice of the customers and dealers of the ice plant. Opulencia claims that in addition, Esita enjoyed free electricity and water, and was allowed to cultivate crops within the premises of the ice plant to augment his income.”

The Labor arbiter ruled that there existed an employer-employee relationship and ordered Opulencia to pay Esita separation pay, underpayment of wages, 13^th month pay, allowances, etc. Opulencia appealed the labor arbiter’s decision to NLRC, which the latter affirmed with modification on the monetary award.

Hence, this Petition.

Raised in this Petition are the following issues:

“that public respondents have no jurisdiction over the instant case;

that Esita's work in the repair and construction of Dr. Opulencia's residence could not have ripened into a regular employment;

that petitioners' benevolence in allowing Esita to stay inside the company's premises free of charge for humanitarian reason deserves commendation rather than imposition of undue penalty;

that Esita's name does not appear in the payrolls of the company which necessarily means that he was not an employee; and, that Esita's statements are inconsistent and deserving of disbelief.”

The Court’s ruling.

“The instant petition lacks merit, hence, must be dismissed.

xxx While the Labor Arbiter and the NLRC may subsequently be found without jurisdiction over a case when it would later appear that no employer-employee relationship existed between the contending parties, such is not the situation in this case where the employer-employee relationship between the petitioners and Esita was clearly established. If the argument of petitioners were to be allowed, then unscrupulous employers could readily avoid the jurisdiction of the Labor Arbiters and NLRC, and may even elude compliance with labor laws only on the bare assertion that an employer-employee relationship does not exist.

Petitioners further argue that "complainant miserably failed to present any documentary evidence to prove his employment. There was no time sheet, pay slip and/or payroll/cash voucher to speak of. Absence of these material documents are necessary fatal to complainant's cause."

We do not agree. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored considering that it should take much weightier proof to invalidate a written instrument. 2 Thus, as in this case where the employer-employee relationship between petitioners and Esita was sufficiently proved by testimonial evidence, the absence of time sheet, time record or payroll has become inconsequential.

xxx The petitioners point out that even granting arguendo that Esita was indeed a mechanic, he could never be a regular employee because his presence would be required only when there was a need for repair. We cannot sustain this argument. This circumstance cannot affect the regular status of employment of Esita. An employee who is required to remain on call in the employer's premises or so close thereto that he cannot use the time effectively and gainfully for his own purpose shall be considered as working while on call. 8 In sum, the determination of regular and casual employment 9 is not affected by the fact that the employee's regular presence in the place of work is not required, the more significant consideration being that the work of the employee is usually necessary or desirable in the business of the employer. More importantly, Esita worked for 9 years and, under the Labor Code, "any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to that activity in which he is employed . . . ." 10

In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate crops to augment his income, there is no doubt that petitioners should be commended; however, in view of the existence of an employer-employee relationship as found by public respondents, we cannot treat humanitarian reasons as justification for emasculating or taking away the rights and privileges of employees granted by law. Benevolence, it is said, does not operate as a license to circumvent labor laws. If petitioners were genuinely altruistic in extending to their employees privileges that are not even required by law, then there is no reason why they should not be required to give their employees what they are entitled to receive. Moreover, as found by public respondents, Esita was enjoying the same privileges granted to the other employees of petitioners, so that in thus treating Esita, he cannot be considered any less than a legitimate employee of petitioners.

WHEREFORE, there being no grave abuse of discretion on the part of public respondents, the instant petition is DISMISSED. Accordingly, the restraining order we issued on 13 May 1991 is LIFTED.

SO ORDERED.

OPULENCIA ICE PLANT AND STORAGE AND/OR DR. MELCHOR OPULENCIA vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), LABOR ARBITER, G.R. No. L-98368 December 15, 1993

Read the full text of the case here.

Jurisdiction is determined by the allegations of the Complaint.

Determination of jurisdiction over a dispute sometimes gets dicey when by relationship of the parties a proposition in favor of one is conveniently apparent. Consider, for example, a case brought by employees against an employer questioning the validity of a provision in their Collective Bargaining Agreement (CBA). Without saying where the case is filed and without more, one reading this would be swayed to think that it is a labor dispute. But is it?

In the case below, a group of employees belonging to a union filed a case questioning the validity of a provision in their CBA. Does this, without more, make out a labor dispute, consequently giving the labor arbiter jurisdiction?

Here’s what the Court has to say:

“Jurisdiction of the court is determined on the basis of the material allegations of the complaint and the character of the relief prayed for irrespective of whether plaintiff is entitled to such relief.¹⁴”

“Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the labor arbiter and the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears.¹⁹”

 

Facts

On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement³ incorporating the terms and conditions of their agreement for the years 2000 to 2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

x x x x

3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be fifty-five (55) for females and sixty (60) for males. x x x.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the Issuance of Temporary Restraining Order and Writ of Preliminary Injunction⁷ with the Regional Trial Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against respondent for the invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners' application for a TRO and, thereafter, required the parties to submit their respective memoranda.

On August 9, 2004, the RTC issued an Order⁸ upholding its jurisdiction over the present case.

The RTC issued a TRO on August 10, 2004,⁹ enjoining the respondent for implementing Section 144, Part A of the PAL-FASAP CBA.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer for a Temporary Restraining Order and Writ of Preliminary Injunction¹² with the Court of Appeals (CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be annuled and set aside for having been issued without and/or with grave abuse of discretion amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled that:

WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE CASE BELOW and, consequently, all the proceedings, orders and processes it has so far issued therein are ANNULED and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No. 04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration,¹³ which was denied by the CA in its Resolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.

The Court’s Ruling

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations of the complaint and the character of the relief prayed for irrespective of whether plaintiff is entitled to such relief.¹⁴

In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners' cause of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality with men under Section 14, Article II, 1987 of the Constitution and, within the specific context of this case, with the male cabin attendants of Philippine Airlines.

26. Petitioners have the statutory right to equal work and employment opportunities with men under Article 3, Presidential Decree No. 442, The Labor Code and, within the specific context of this case, with the male cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate against women employees with respect to terms and conditions of employment solely on account of their sex under Article 135 of the Labor Code as amended by Republic Act No. 6725 or the Act Strengthening Prohibition on Discrimination Against Women.

28. This discrimination against Petitioners is likewise against the Convention on the Elimination of All Forms of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention that the Philippines ratified in 1981. The Government and its agents, including our courts, not only must condemn all forms of discrimination against women, but must also implement measures towards its elimination.

29. This case is a matter of public interest not only because of Philippine Airlines' violation of the Constitution and existing laws, but also because it highlights the fact that twenty-three years after the Philippine Senate ratified the CEDAW, discrimination against women continues.

31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from service is invidiously discriminatory against and manifestly prejudicial to Petitioners because, they are compelled to retire at a lower age (fifty-five (55) relative to their male counterparts (sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish, differentiate or classify cabin attendants on the basis of sex and thereby arbitrarily set a lower compulsory retirement age of 55 for Petitioners for the sole reason that they are women.

37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP 2000-2005 CBA must be declared invalid and stricken down to the extent that it discriminates against petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee of equality between men and women, Petitioners should be adjudged and declared entitled, like their male counterparts, to work until they are sixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the extent that it discriminates against Petitioners; x x x x

From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised is whether Section 144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the petitioners' primary relief in Civil Case No. 04-886 is the annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedly discriminates against them for being female flight attendants. The subject of litigation is incapable of pecuniary estimation, exclusively cognizable by the RTC, pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended.¹⁵ Being an ordinary civil action, the same is beyond the jurisdiction of labor tribunals.

The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the application of the Constitution, labor statutes, law on contracts and the Convention on the Elimination of All Forms of Discrimination Against Women,¹⁶ and the power to apply and interpret the constitution and CEDAW is within the jurisdiction of trial courts, a court of general jurisdiction.xxx

Patricia Halagueña, et al. vs. Philippine Airlines Incorporated, G.R. No. 172013 October 2, 2009

Read the full text of the case here.

 

 

You have been hired and made to sign a contract stating you are a project employee, but you have been working indefinitely with the company. Are you considered a project employee so that the company may terminate your employment citing end-of-project or season, and without need for just or authorized cause?

The case below discusses the determining factors for a project employee, and how one who started as a project employee may eventually become a regular employee.

Duration of project employment
should be determined at the time of
hiring

In the instant case, the appointments issued to petitioner indicated that he was hired for specific projects. This Court is convinced however that although he started as a project employee, he eventually became a regular employee of PNCC.

Under Article 280 of the Labor Code, as amended, a project employee is one whose "employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season." Thus, the principal test used to determine whether employees are project employees is whether or not the employees were assigned to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged for that project.³³

In the case at bar, petitioner worked continuously for more than two years after the supposed three-month duration of his project employment for the NAIA II Project. While his appointment for said project allowed such extension since it specifically provided that in case his "services are still needed beyond the validity of the contract, the Company shall extend his services," there was no subsequent contract or appointment that specified a particular duration for the extension. His services were just extended indefinitely until "Personnel Action Form – Project Employment" dated July 7, 1998 was issued to him which provided that his employment will end a few weeks later or on August 4, 1998. While for first three months, petitioner can be considered a project employee of PNCC, his employment thereafter, when his services were extended without any specification of as to the duration, made him a regular employee of PNCC. And his status as a regular employee was not affected by the fact that he was assigned to several other projects and there were intervals in between said projects since he enjoys security of tenure.

Failure of an employer to file
termination reports after every
project completion proves that an
employee is not a project employee

As a rule, the findings of fact of the CA are final and conclusive and this Court will not review them on appeal.³⁴ The rule, however, is subject to the following exceptions:

The jurisdiction of the Court in cases brought before it from the appellate court is limited to reviewing errors of law, and findings of fact of the Court of Appeals are conclusive upon the Court since it is not the Court’s function to analyze and weigh the evidence all over again. Nevertheless, in several cases, the Court enumerated the exceptions to the rule that factual findings of the Court of Appeals are binding on the Court: (1) when the findings are grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to that of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.³⁵

In this case, records clearly show that PNCC did not report the termination of petitioner’s supposed project employment for the NAIA II Project to the DOLE. Department Order No. 19, or the "Guidelines Governing the Employment of Workers in the Construction Industry," requires employers to submit a report of an employee’s termination to the nearest public employment office every time an employee’s employment is terminated due to a completion of a project. PNCC submitted as evidence of its compliance with the requirement supposed photocopies of its termination reports, each listing petitioner as among the employees affected. Unfortunately, none of the reports submitted pertain to the NAIA II Project. Moreover, DOLE NCR verified that petitioner is not included in the list of affected workers based on the termination reports filed by PNCC on August 11, 17, 20 and 24, 1998 for petitioner’s supposed dismissal from the NAIA II Project effective August 4, 1998. This certification from DOLE was not refuted by PNCC. In Tomas Lao Construction v. NLRC,³⁶ we emphasized the indispensability of the reportorial requirement:

Moreover, if private respondents were indeed employed as "project employees," petitioners should have submitted a report of termination to the nearest public employment office every time their employment was terminated due to completion of each construction project. The records show that they did not. Policy Instruction No. 20 is explicit that employers of project employees are exempted from the clearance requirement but not from the submission of termination report. We have consistently held that failure of the employer to file termination reports after every project completion proves that the employees are not project employees. Nowhere in the New Labor Code is it provided that the reportorial requirement is dispensed with. The fact is that Department Order No. 19 superseding Policy Instruction No. 20 expressly provides that the report of termination is one of the indicators of project employment.³⁷

 

What should determine an employee-complainant’s cause or causes of action?

In the case below, the Petitioner, Samar-Med, asserts that it was a mistake for CA to reverse the finding of NLRC that Gutang was dismissed for a cause. It raises, as an issue, among others, that Gutang in his complaint did not include illegal dismissal as among his causes of action.

The Court held:

“Firstly, petitioner’s contention that the validity of Gutang’s dismissal should not be determined because it had not been included in his complaint before the NLRC is bereft of merit. The complaint of Gutang was a mere checklist of possible causes of action that he might have against Roleda. Such manner of preparing the complaint was obviously designed to facilitate the filing of complaints by employees and laborers who are thereby enabled to expediently set forth their grievances in a general manner.¹² But the non-inclusion in the complaint of the issue on the dismissal did not necessarily mean that the validity of the dismissal could not be an issue. The rules of the NLRC require the submission of verified position papers by the parties should they fail to agree upon an amicable settlement, and bar the inclusion of any cause of action not mentioned in the complaint or position paper from the time of their submission by the parties. In view of this, Gutang’s cause of action should be ascertained not from a reading of his complaint alone but also from a consideration and evaluation of both his complaint and position¹³ paper.” (italics added)

Samar-Med Distribution vs. National Labor Relations Commission, et al., G.R. No. 162385 July 15, 2013

Read the full text of the case here.

Is a bank deposit coupled with a deed of assignment executed by an appellant-employer in favor of the employee substantial compliance with the requirement of appeal bond?

“The posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the decision of the LA. The intention of the lawmakers to make the bond a mandatory requisite for the perfection of an appeal by the employer is clearly limned in the provision that an appeal by the employer may be perfected "only upon the posting of a cash or surety bond." The word "only" makes it perfectly plain that the lawmakers intended the posting of a cash or surety bond by the employer to be the essential and exclusive means by which an employer's appeal may be perfected. The Labor Code requires an employer who wishes to appeal from the decision, which includes a monetary award, of a labor arbiter to post cash or surety bond, in order to perfect the appeal.” xxx

In the case discussed below, the Petitioner (employer), in complying with the requirement of the appeal it filed assailing the decision of the Labor Arbiter, made a deposit for the amount of the award with its bank, and surrendered to the NLRC the passbook representing the deposit and a deed of assignment in favour of the employee.

The question that the employee took to the Court is whether the said deposit secured in a passbook account along with a deed of assignment constitute substantial compliance with the requirement of the law, thus employer has perfected its appeal. Otherwise, the decision appealed from would have become final and executory, because not having complied with the statutory jurisdictional requirement in perfecting an appeal, the Commission had not acquired jurisdiction, and the period within which to perfect an appeal did not stop by the filing of the defective appeal.

The Court held:

The petition is bereft of merit.

Article 223¹¹ of the Labor Code provides that an appeal by the employer to the NLRC from a judgment of a labor arbiter which involves a monetary award may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the NLRC, in an amount equivalent to the monetary award in the judgment appealed from. Section 4 of the New Rules of Procedure of the NLRC echoes the provision, viz.:

SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. a) The appeal shall be filed within the reglementary period as provided in Section 1 of this Rule; shall be verified by appellant himself in accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required appeal fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be accompanied by memorandum of appeal in three (3) legibly typewritten copies which shall state the grounds relied upon and the arguments in support thereof; the relief prayed for, and a statement of the date when the appellant received the appealed decision, resolution or order and a certificate of non-forum shopping with proof of service on the other party of such appeal. A mere notice of appeal without complying with the other requisites aforestated shall not stop the running of the period for perfecting an appeal.

b) The appellee may file with the Regional Arbitration Branch or Regional Office where the appeal was filed, his answer or reply to appellant’s memorandum of appeal, not later than ten (10) calendar days from receipt thereof. Failure on the part of the appellee who was properly furnished with a copy of the appeal to file his answer or reply within the said period may be construed as a waiver on his part to file the same.

c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these Rules, the Commission shall limit itself to reviewing and deciding specific issues that were elevated on appeal. (emphasis supplied)

Further, Sec. 6 of the same Rules provides:

SECTION 6. BOND. In case the decision of the Labor Arbiter or the Regional Director involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The appeal bond shall either be in cash or surety in an amount equivalent to the monetary award, exclusive of damages and attorney’s fees.

In case of surety bond, the same shall be issued by a reputable bonding company duly accredited by the Commission or the Supreme Court, and shall be accompanied by:

a) a joint declaration under oath by the employer, his counsel, and the bonding company, attesting that the bond posted is genuine, and shall be in effect until final disposition of the case.

b) a copy of the indemnity agreement between the employer-appellant and bonding company; and

c) a copy of security deposit or collateral securing the bond.

A certified true copy of the bond shall be furnished by the appellant to the appellee who shall verify the regularity and genuineness thereof and immediately report to the Commission any irregularity.

Upon verification by the Commission that the bond is irregular or not genuine, the Commission shall cause the immediate dismissal of the appeal.

No motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a bond in a reasonable amount in relation to the monetary award.

The filing of the motion to reduce bond without compliance with the requisites in the preceding paragraph shall not stop the running of the period to perfect an appeal. (emphasis and underscoring supplied)

Clearly, an appeal from a judgment as that involved in the present case is perfected "only" upon the posting of a cash or surety bond. Accessories Specialist, Inc. v. Alabanza enlightens:¹²

The posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the decision of the LA. The intention of the lawmakers to make the bond a mandatory requisite for the perfection of an appeal by the employer is clearly limned in the provision that an appeal by the employer may be perfected "only upon the posting of a cash or surety bond." The word "only" makes it perfectly plain that the lawmakers intended the posting of a cash or surety bond by the employer to be the essential and exclusive means by which an employer's appeal may be perfected. The word "may" refers to the perfection of an appeal as optional on the part of the defeated party, but not to the compulsory posting of an appeal bond, if he desires to appeal. The meaning and the intention of the legislature in enacting a statute must be determined from the language employed; and where there is no ambiguity in the words used, then there is no room for construction.1avvphi1

The filing of the bond is not only mandatory but also a jurisdictional requirement that must be complied with in order to confer jurisdiction upon the NLRC. Non-compliance therewith renders the decision of the LA final and executory. This requirement is intended to assure the workers that if they prevail in the case, they will receive the money judgment in their favor upon the dismissal of the employer's appeal. It is intended to discourage employers from using an appeal to delay or evade their obligation to satisfy their employees' just and lawful claims. (citations omitted, italics in the original; emphasis and underscoring supplied)

"Cash," means a sum of money; cash bail (the sense in which the term "cash bond" is used) is a sum of money posted by a criminal defendant to ensure his presence in court, used in place of a surety bond and real estate.¹³

In the present case, the Deed of Assignment, as well as the passbook, which petitioner submitted to the NLRC is neither a cash nor a surety bond. Petitioner’s appeal to the NLRC was thus not duly perfected, thereby rendering the Labor Arbiter’s Decision final and executory.

WHEREFORE, the petition is DENIED.

SO ORDERED.

Mindanao Times Corporation vs. Mitchel R. Confesor, G.R. No. 183417 February 5, 2010

Read the full text of the case here.

Department Order No. 18-A Series of 2011: Rules on Contracting and Subcontracting Arrangements

Department Order No. 18-A
Series of 2011

RULES IMPLEMENTING ARTICLES 106 TO 109 OF THE LABOR CODE, AS AMENDED

By virtue of the power vested in the Secretary of Labor and Employment under Articles 5 and 106 to 109 of the Labor Code of the Philippines, as amended, the following regulations governing contracting and subcontracting arrangements are hereby issued:

Section 1. Guiding principles. Contracting and subcontracting arrangements are expressly allowed by law and are subject to regulations for the promotion of employment and the observance of the rights of workers to just and humane conditions of work, security of tenure, self-organization and collective bargaining. Labor-only contracting as defined herein shall be prohibited.

Section 2. Coverage. These Rules shall apply to all parties of contracting and subcontracting arrangements where employer-employee relationships exist. It shall also apply to cooperatives engaging in contracting or subcontracting arrangements.

Contractors and subcontractors referred to in these Rules are prohibited from engaging in recruitment and placement activities as defined in Article 13(b) of the Labor Code, whether for local or overseas employment.

Section 3. Definition of terms. The following terms as used in these Rules, shall mean:

(a) “Bond/s” refers to the bond under Article 108 of the Labor Code that the principal may require from the contractor to be posted equal to the cost of labor under contract. The same may also refer to the security or guarantee posted by the principal for the payment of the services of the contractors under the Service Agreement.

(b) “Cabo” refers to a person or group of persons or to a labor group which, in the guise of a labor organization, cooperative 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.

(c) “Contracting” or “Subcontracting” refers to an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.

(d) “Contractor” refers to any person or entity, including a cooperative, engaged in a legitimate contracting or subcontracting arrangement providing either services, skilled workers, temporary workers, or a combination of services to a principal under a Service Agreement.

(e) “Contractor’s employee” includes one employed by a contractor to perform or complete a job, work, or service pursuant to a Service Agreement with a principal. It shall also refer to regular employees of the contractor whose functions are not dependent on the performance or completion of a specific job, work or service within a definite period of time, i.e., administrative staff.

(f) “In-house agency” refers to a contractor which is owned, managed, or controlled directly or indirectly by the principal or one where the principal owns/represents any share of stock, and which operates solely or mainly for the principal.

(g) “Net Financial Contracting Capacity (NFCC)1” refers to the formula to determine the financial capacity of the contractor to carry out the job, work or services sought to be undertaken under a Service Agreement. NFCC is current assets minus current liabilities multiplied by K, which stands for contract duration equivalent to: 10 for one year or less; 15 for more than one (1) year up to two (2) years; and 20 for more than two (2) years, minus the value of all outstanding or ongoing projects including contracts to be started.

1 Refers to the formula set out in the Implementing Rules and Regulations of Republic Act No. 9184, or An Act Providing for the Modernization, Standardization and Regulation of the Procurement Activities of the Government and For Other Purposes.

(h) “Principal” refers to any employer, whether a person or entity, including government agencies and government-owned and controlled-corporations, who/which puts out or farms out a job, service or work to a contractor.

(i) “Right to control” refers to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

(j) “Service Agreement” refers to the contract between the principal and contractor containing the terms and conditions governing the performance or completion of a specific job, work or service being farmed out for a definite or predetermined period.

(k) “Solidary liability” refers to the liability of the principal, pursuant to the provision of Article 109 of the Labor Code, as direct employer together with the contractor for any violation of any provision of the Labor Code.

It also refers to the liability of the principal, in the same manner and extent that he/she is liable to his/her direct employees, to the extent of the work performed under the contract when the contractor fails to pay the wages of his/her employees, as provided in Article 106 of the Labor Code, as amended.

(l) "Substantial capital” refers to paid-up capital stocks/shares of at least Three Million Pesos (P3,000,000.00) in the case of corporations, partnerships and cooperatives; in the case of single proprietorship, a net worth of at least Three Million Pesos (P3,000,000.00).

(m) “Trilateral Relationship” refers to the relationship in a contracting or subcontracting arrangement where there is a contract for a specific job, work or service between the principal and the contractor, and a contract of employment between the contractor and its workers. There are three (3) parties involved in these arrangements: the principal who decides to farm out a job, work or service to a contractor; the contractor who has the capacity to independently undertake the performance of the job, work or service; and the contractual workers engaged by the contractor to accomplish the job, work or service.

Section 4. Legitimate contracting or subcontracting. Contracting or subcontracting shall be legitimate if all the following circumstances concur:

(a) The contractor must be registered in accordance with these Rules and carries a distinct and independent business and undertakes to perform the job, work or service on its own responsibility, according to its own manner and method, and free from control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

(b) The contractor has substantial capital and/or investment; and

(c) The Service Agreement ensures compliance with all the rights and benefits under Labor Laws.

Section 5. Trilateral relationship in contracting arrangements; Solidary liability. In legitimate contracting or subcontracting arrangement there exists:

(a) An employer-employee relationship between the contractor and the employees it engaged to perform the specific job, work or service being contracted; and

(b) A contractual relationship between the principal and the contractor as governed by the provisions of the Civil Code.

In the event of any violation of any provision of the Labor Code, including the failure to pay wages, there exists a solidary liability on the part of the principal and the contractor for purposes of enforcing the provisions of the Labor Code and other social legislation, to the extent of the work performed under the employment contract.

However, the principal shall be deemed the direct employer of the contractor’s employee in cases where there is a finding by a competent authority of labor-only contracting, or commission of prohibited activities as provided in Section 7, or a violation of either Sections 8 or 9 hereof.

Section 6. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor only contracting shall refer to an arrangement where:

(a) The contractor does not have substantial capital or investments in the form of tools, equipment, machineries, work premises, among others, and the employees recruited and placed are performing activities which are usually necessary or desirable to the operation of the company, or directly related to the main business of the principal within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal; or

(b) The contractor does not exercise the right to control over the performance of the work of the employee.

Section 7. Other Prohibitions. Notwithstanding Section 6 of these Rules, the following are hereby declared prohibited for being contrary to law or public policy:

A. Contracting out of jobs, works or services when not done in good faith and not justified by the exigencies of the business such as the following:

(1) Contracting out of jobs, works or services when the same results in the termination or reduction of regular employees and reduction of work hours or reduction or splitting of the bargaining unit.

(2) Contracting out of work with a “Cabo”.

(3) Taking undue advantage of the economic situation or lack of bargaining strength of the contractor’s employees, or undermining their security of tenure or basic rights, or circumventing the provisions of regular employment, in any of the following instances:

(i) Requiring them to perform functions which are currently being performed by the regular employees of the principal; and

(ii) Requiring them 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, contractor or from any liability as to payment of future claims.

(4) Contracting out of a job, work or service through an in-house agency.

(5) Contracting out of a job, work or service that is necessary or desirable or directly related to the business or operation of the principal by reason of a strike or lockout whether actual or imminent.

(6) Contracting out of a job, work or service being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization as provided in Art. 248 (c) of the Labor Code, as amended.

(7) Repeated hiring of employees under an employment contract of short duration or under a Service Agreement of short duration with the same or different contractors, which circumvents the Labor Code provisions on Security of Tenure.

(8) Requiring employees under a 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 time of engagement.

(9) Refusal to provide a copy of the Service Agreement and the employment contracts between the contractor and the employees deployed to work in the bargaining unit of the principal’s certified bargaining agent to the sole and exclusive bargaining agent (SEBA).

(10) Engaging or maintaining by the principal of subcontracted employees in excess of those provided for in the applicable Collective Bargaining Agreement (CBA) or as set by the Industry Tripartite Council (ITC).

B. Contracting out of jobs, works or services analogous to the above when not done in good faith and not justified by the exigencies of the business.

Section 8. Rights of contractor’s employees. All contractor’s employees, whether deployed or assigned as reliever, seasonal, week-ender, temporary, or promo jobbers, shall be entitled to all the rights and privileges as provided for in the Labor Code, as amended, to include the following:

(a) Safe and healthful working conditions;

(b) Labor standards such as but not limited to service incentive leave, rest days, overtime pay, holiday pay, 13th month pay, and separation pay as may be provided in the Service Agreement or under the Labor Code;

(c) Retirement benefits under the SSS or retirement plans of the contractor, if there is any;

(d) Social security and welfare benefits;

(e) Self-organization, collective bargaining and peaceful concerted activities; and

(f) Security of tenure.

Section 9. Required contracts under these Rules.

(a) Employment contract between the contractor and its employee.

Notwithstanding any oral or written stipulations to the contrary, the contract between the contractor and its employee shall be governed by the provisions of Articles 279 and 280 of the Labor Code, as amended. It shall include the following terms and conditions:

i. The specific description of the job, work or service to be performed by the employee;

ii. The place of work and terms and conditions of employment, including a statement of the wage rate applicable to the individual employee; and

iii. The term or duration of employment that must be co-extensive with the Service Agreement or with the specific phase of work for which the employee is engaged.

The contractor shall inform the employee of the foregoing terms and conditions of employment in writing on or before the first day of his/her employment.

(b) Service Agreement between the principal and the contractor. The Service Agreement shall include the following:

i. The specific description of the job, work or service being subcontracted.

ii. The place of work and terms and conditions governing the contracting arrangement, to include the agreed amount of the services to be rendered, the standard administrative fee of not less than ten percent (10%) of the total contract cost.

iii. Provisions ensuring compliance with all the rights and benefits of the employees under the Labor Code and these Rules on: provision for safe and healthful working conditions; labor standards such as, service incentive leave, rest days, overtime pay, 13th month pay and separation pay; retirement benefits; contributions and remittance of SSS, Philhealth, PagIbig Fund, and other welfare benefits; the right to self-organization, collective bargaining and peaceful concerted action; and the right to security of tenure.

iv. A provision on the Net Financial Contracting Capacity of the contractor, which must be equal to the total contract cost.

v. A provision on the issuance of the bond/s as defined in Section 3(m) renewable every year.

vi. The contractor or subcontractor shall directly remit monthly the employers’ share and employees’ contribution to the SSS, ECC, Philhealth and Pagibig.

vii. The term or duration of engagement. The Service Agreement must conform to the DOLE Standard Computation and Standard Service Agreement, which form part of these Rules as Annexes “A” and “B”.

Section 10. Duties of the principal. Pursuant to the authority of the Secretary of Labor and Employment to restrict or prohibit the contracting of labor to protect the rights of the workers and to ensure compliance with the provisions of the Labor Code, as amended, the principal, as the indirect employer or the user of the services of the contractor, is hereby required to observe the provisions of these Rules.

Section 11. Security of tenure of contractor’s employees. It is understood that all contractor’s employees enjoy security of tenure regardless of whether the contract of employment is co-terminus with the service agreement, or for a specific job, work or service, or phase thereof.

Section 12. Observance of required standards of due process; requirements of notice. In all cases of termination of employment, the standards of due process laid down in Article 277(b) of the Labor Code, as amended, and settled jurisprudence on the matter2, must be observed. Thus, the following is hereby set out to clarify the standards of due process that must be observed:

2 King of Kings Transport, Inc., Claire dela Fuente, and Melissa Lim, vs. Santiago O. Mamac, G.R. No. 166208, (29 June 2007); and Felix B. Perez and Amante G. Doria v. Philippine Telegraph and Telephone Company and Jose Luis Santiago, G.R. No. 152048, (7 April 2009), (en banc Decision).

I. For termination of employment based on just causes as defined in Article 282 of the Code, the requirement of two written notices served on the employee shall observe the following:

(A) The first written notice should contain:

(1) The specific causes or grounds for termination;

(2) Detailed narration of the facts and circumstances that will serve as basis for the charge against the employee. A general description of the charge will not suffice;

(3) The company rule, if any, that is violated and/or the ground under Art. 282 that is being charged against the employee; and

(4) A directive that the employee is given opportunity to submit a written explanation within a reasonable period.

“Reasonable period” should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employee an opportunity to study the accusation, consult a union official or lawyer, gather data and evidence, and decide on the defenses against the complaint.

(B) After serving the first notice, the employer should afford the employee ample opportunity to be heard and to defend himself/herself with the assistance of his/her representative if he/she so desires, as provided in Article 277(b) of the Labor Code, as amended.

“Ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him/her and submit evidence in support of his/her defense, whether in a hearing, conference or some other fair, just and reasonable way. A formal hearing or conference becomes mandatory only when requested by the employee in writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify it.

(C) After determining that termination of employment is justified, the employer contractor shall serve the employee a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) the grounds have been established to justify the severance of their employment. The foregoing notices shall be served on the employee’s last known address.

II. For termination of employment based on authorized causes defined in Article 283 of the Labor Code, the requirement of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate regional office of the Department of Labor and Employment at least thirty days before the effectivity of the termination, specifying the ground or grounds for termination.

III. If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the termination is brought about by the failure of a probationary employee to meet the reasonable standards of the employer, which was made known to the employee at the time of his/her employment, it shall be sufficient that a written notice is served upon the employee within a reasonable time prior to the expiration of the probationary period.

Section 13. Effect of termination of employment. The termination of employment of the contractor employee prior to the expiration of the Service Agreement shall be governed by Articles 282, 283 and 284 of the Labor Code.

In case the termination of employment is caused by the pre-termination of the Service Agreement not due to authorized causes under Article 283, the right of the contractor employee to unpaid wages and other unpaid benefits including unremitted legal mandatory contributions, e.g., SSS, Philhealth, Pag-ibig, ECC, shall be borne by the party at fault, without prejudice to the solidary liability of the parties to the Service Agreement.

Where the termination results from the expiration of the service agreement, or from the completion of the phase of the job, work or service for which the employee is engaged, the latter may opt for payment of separation benefits as may be provided by law or the Service Agreement, without prejudice to his/her entitlement to the completion bonuses or other emoluments, including retirement benefits whenever applicable.

Section 14. Mandatory Registration and Registry of Legitimate Contractors. Consistent with the authority of the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor to protect the rights of workers, it shall be mandatory for all persons or entities, including cooperatives, acting as contractors, to register with the Regional Office of the Department of Labor and Employment (DOLE) where it principally operates.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.

Accordingly, the registration system governing contracting arrangements and implemented by the Regional Offices of the DOLE is hereby established, with the Bureau of Working Conditions (BWC) as the central registry.

Section 15. Requirements for registration. The application for registration as a contractor shall be filed at the DOLE Regional Office in the region where it seeks to principally operate. The applicant shall provide in the application form the following information:

(a) The name and business address of the applicant and the areas where it seeks to operate;

(b) The names and addresses of officers, if the applicant is a corporation, partnership, cooperative or a labor organization;

(c) The nature of the applicant’s business and the industry or industries where the applicant seeks to operate;

(d) The number of regular workers and the total workforce;

(e) The list of clients, if any, the number of personnel assigned to each client, if any, and the services provided to the client;

(f) The description of the phases of the contract, including the number of employees covered in each phase, where appropriate; and

(g) Proof of compliance with substantial capital requirement as defined in Section 3(l) of these Rules.

The application shall be supported by:

(a) A certified true copy of a certificate of registration of firm or business name from the Securities and Exchange Commission (SEC), Department of Trade and Industry (DTI), Cooperative Development Authority (CDA), or from the DOLE if the applicant is a labor organization;

(b) A certified true copy of the license or business permit issued by the local government unit or units where the contractor operates;

(c) A certified listing, with proof of ownership or lease contract, of facilities, tools, equipment, premises implements, machineries and work premises, that are actually and directly used by the contractor in the performance or completion of the job, work or service contracted out. In addition, the applicant shall submit a photo of the office building and premises where it holds office;

(d) A copy of audited financial statements if the applicant is a corporation, partnership, cooperative or a labor organization, or copy of the latest ITR if the applicant is a sole proprietorship; and

(e) A sworn disclosure that the registrant, its officers and owners or principal stockholders or any one of them, has not been operating or previously operating as a contractor under a different business name or entity or with pending cases of violations of these Rules and/or labor standards, or with a cancelled registration. In case any of the foregoing has a pending case, a copy of the complaint and the latest status of the case shall be attached.

The application shall be verified. It shall include a DOLE certification of attendance to orientation seminar on these Rules and an undertaking that the contractor shall abide by all applicable labor laws and regulations.

Section 16. Filing and processing of application. The application with all supporting documents shall be filed in triplicate in the Regional Office where the applicant principally operates. No application for registration shall be accepted unless all the requirements in the preceding Section are complied with.

Section 17. Verification inspection. Within two (2) working days upon receipt of the application with complete supporting documents, the authorized representative of the Regional Director shall conduct a verification inspection of the facilities, tools, equipment, and work premises of the applicant.

Section 18. Approval or denial of the application. The Regional Office shall deny or approve the application within one (1) working day after the verification inspection.

Applications that fail to meet the requirements set forth in Section 15 of these Rules shall be denied.

Section 19. Registration fee. Payment of registration fee of Twenty-Five Thousand Pesos (P25,000.00) shall be required upon approval of the application.

Upon registration, the Regional Office shall return one set of the duly-stamped application documents to the applicant, retain one set for its file, and transmit the remaining set to the Bureau of Working Conditions (BWC) within five (5) days from registration.

Section 20. Validity of certificate of registration of contractors. The contractor shall be deemed registered only on the date of issuance of its Certificate of Registration.

The Certificate of Registration shall be effective for three (3) years, unless cancelled after due process. The same shall be valid in the region where it is registered.

In case the contractor has Service Agreements or operates outside the region where it is registered, it shall request a duly authenticated copy of its Certificate of Registration from the registering Regional Office and submit the same to the DOLE Regional Office where it seeks to operate, together with a copy of its Service Agreement/s in the area, for purposes of monitoring compliance with these Rules.

Section 21. Renewal of registration. All registered contractors shall apply for renewal of their Certificates of Registration thirty (30) days before the expiration of their registration to remain in the roster of legitimate service contractors. The applicant shall pay a registration renewal fee of Twenty-Five Thousand Pesos (P25,000.00) to the DOLE Regional Office.

Copies of all the updated supporting documents in letters (a) to (e) of Section 15 hereof shall be attached to the duly accomplished application form, including the following:

(a) Certificate of membership and proof of payment of SSS, Philhealth, BIR, ECC and Pag-Ibig contributions for the last three (3) years, as well as loan amortizations; and

(b) Certificate of pending or no pending labor standards violation case/s with the National Labor Relations Commission (NLRC) and Department of Labor and Employment (DOLE). The pendency of a case will not prejudice the renewal of the registration, unless there is a finding of violation of labor standards by the DOLE Regional Director.

Section 22. Semi-annual reporting. The contractor shall submit in triplicate its subscribed semi-annual report using a prescribed form to the appropriate Regional Office. The report shall include:

(a) A list of contracts entered with the principal during the subject reporting period;

(b) The number of workers covered by each contract with the principal;

(c) Proof of payment of remittances to the Social Security System (SSS), the Pag-Ibig Fund, Philhealth, Employees Compensation Commission (ECC), and Bureau of Internal Revenue (BIR) due its employees during the subject reporting period and of amortization of declared loans due from its employees; and

(d) A certified listing of all cases filed against the contractor before the NLRC

The Regional Office shall return one set of the duly-stamped report to the contractor, retain one set for its file, and transmit the remaining set to the Bureau of Working Conditions (BWC) within five (5) days from receipt thereof.

Section 23. Grounds for cancellation of registration. The Regional Director shall, upon a verified complaint, cancel or revoke the registration of a contractor after due process, based on any of the following grounds:

(a) Misrepresentation of facts in the application;

(b) Submission of a falsified or tampered application or supporting documents to the application for registration;

(c) Non-submission of Service Agreement between the principal and the contractor when required to do so;

(d) Non-submission of the required semi-annual report as provided in Section 22 (Semi-annual reporting) hereof;

(e) Findings through arbitration that the contractor has engaged in labor-only contracting and/or the prohibited activities as provided in Section 7 (Other Prohibitions) hereof;

(f) Non-compliance with labor standards and working conditions;

(g) Findings of violation of Section 8 (Rights of contractor’s employees) or Section 9 (Required contracts) of these Rules;

(h) Non-compliance with SSS, the HDMF, Pag-Ibig, Philhealth, and ECC laws; and

(i) Collecting any fees not authorized by law and other applicable rules and regulations.

Section 24. Due process in cancellation of registration. Complaint/s based on any of the grounds enumerated in the preceding Section against the contractor shall be filed in writing and under oath with the Regional Office which issued the Certificate of Registration.

The complaint/s shall state the following:

(a) The name/s and address/es of the complainant/s;

(b) Name and address of the contractor;

(c) The ground/s for cancellation;

(d) When and where the action complained of happened;

(e) The amount of money claim, if any; and

(f) The relief/s sought.

Upon receipt of the complaint, the Regional Director shall direct the contractor, with notice to the complainant, to file a verified answer/counter affidavit within ten (10) calendar days without extension, incorporating therein all pertinent documents in support of his/her defenses, with proof of service of a copy to the complainant. Failure to file an answer/counter affidavit shall constitute a waiver on the part of the respondent. No motion to dismiss shall be entertained.

The Regional Director or his duly authorized representative may conduct a clarificatory hearing within the prescribed ten (10) calendar days within which to file a verified answer/counter affidavit.

Within the said ten (10) calendar days period, the contractor shall make the necessary corrections/rectifications on the violations that are immediately rectifiable upon its own initiative in order to be fully compliant.

The Regional Director may avail himself of all reasonable means to ascertain the facts of the case, including conduct of inspection, where appropriate, and examination of informed persons.

The proceedings before the Regional Office shall be summary in nature.

The conduct of hearings shall be terminated within fifteen (15) calendar days from the first scheduled clarificatory hearing. The Regional Director shall resolve the case within ten (10) working days from the date of the last hearing. If there is no necessity to conduct a hearing, the case shall be resolved within ten (10) working days from receipt of the verified answer/counter affidavit.

Any motion for reconsideration from the Order of the Regional Director shall be treated as an appeal.

Section 25. Appeal. The Order of the Regional Director is appealable to the Secretary within ten (10) working days from receipt of the copy of the Order. The appeal shall be filed with the Regional Office which issued the cancellation Order. The Office of the Secretary shall have thirty (30) working days from receipt of the records of the case to resolve the appeal. The Decision of the Secretary shall become final and executory after ten (10) days from receipt thereof by the parties. No motion for reconsideration of the Decision shall be entertained.

Section 26. Effects of cancellation of registration. A final Order of cancellation shall divest the contractor of its legitimate status to engage in contracting/subcontracting.

Such Order of cancellation shall be a ground to deny an application for renewal of registration to a contractor under the Rules.

The cancellation of the registration of the contractor for engaging in labor-only contracting or for violation of any of the provisions of these Rules involving a particular Service Agreement will not, however, impair the validity of existing legitimate jobcontracting arrangements the contractor may have entered into with other principals prior to the cancellation of its registration. Any valid and subsisting Service Agreement shall be respected until its expiration; thereafter, contracting with a delisted contractor shall make the principal direct employer of all employees under the Service Agreement pursuant to Articles 106 and 109 of the Labor Code.

Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7. 8 or 9 of the Rules. A finding by competent authority of labor-only contracting shall render the principal jointly and severally liable with the contractor to the latter's employees, in the same manner and extent that the principal is liable to employees directly hired by him/her, as provided in Article 106 of the Labor Code, as amended.

A finding of commission of any of the prohibited activities in Section 7, or violation of either Sections 8 or 9 hereof, shall render the principal the direct employer of the employees of the contractor or subcontractor, pursuant to Article 109 of the Labor Code, as amended.

Section 28. Retaliatory measures. Pursuant to Article 118 of the Labor Code, as amended, it shall be unlawful for the principal, contractor, or any party privy to the contract or services provided to refuse to pay or reduce the wages and benefits, and discharge or in any manner discriminate against any worker who has filed any complaint or instituted any proceeding on wages (under Title II, Book III of the Labor Code), labor standards violation, or has testified or is about to testify in such proceedings.

Section 29. Enforcement of labor standards and working conditions. Consistent with Article 128 (Visitorial and Enforcement Power) of the Labor Code, as amended, the Regional Director through his/her duly authorized representatives, shall conduct routine inspection of establishments engaged in contracting arrangement regardless of the number of employees engaged by the principal or by the contractor.

They shall have access to employer’s records and premises at any time of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of the Labor Code and of any labor law, wage order, or rules and regulations issued pursuant thereto.

The findings of the duly authorized representative shall be referred to the Regional Director for appropriate action as provided for in Article 128, and shall be furnished the collective bargaining agent, if any.

Based on the visitorial and enforcement power of the Secretary of Labor and Employment in Article 128 (a), (b), (c), and (d), the Regional Director shall issue compliance orders to give effect to the labor standards provisions of the Labor Code, other labor legislation, and these Rules.

Section 30. Duty to produce copy of contract between the principal and the contractor. The principal or the contractor shall be under an obligation to produce a copy of the Service Agreement in the ordinary course of inspection. The contractor shall likewise be under an obligation to produce a copy of any contract of employment when directed to do so by the Regional Office Director or his/her authorized representative.

Section 31. Tripartite implementation and monitoring of compliance; Use of registration fees. A region-based tripartite monitoring team on the observance of labor standards in contracting and subcontracting arrangements shall be constituted as a subcommittee of the Regional Tripartite Industrial Peace Council (RTIPC) within fifteen (15) days from the effectivity of these Rules. It shall submit a quarterly regional monitoring report to the DOLE Secretary and to the National Tripartite Industrial Peace Council (NTIPC). The Bureau of Working Conditions (BWC) shall ensure the implementation of this provision, and shall conduct capacity building to the members of the regional tripartite monitoring team.

For this purpose, a portion of the collected registration fees shall be used in the operation of the region-based tripartite monitoring team, including in the development of an internet-based monitoring system and database. It shall likewise be used for transmittal of the monthly report of all registered contractors to the Bureau of Local Employment (BLE), and in generating labor market information.

Section 32. Oversight function of the National TIPC. The National Tripartite Industrial Peace Council (NTIPC) as created under Executive Order No. 49, Series of 1998, as amended, shall serve as the oversight committee to verify and monitor the following:

(a) Engagement in allowable contracting activities; and

(b) Compliance with administrative reporting requirements.

Section 33. Collective bargaining and/or Industry Tripartite Council (ITC). Nothing herein shall preclude the parties in collective bargaining agreements (CBAs) to determine the functions that can or cannot be farmed out or contracted out to a legitimate contractor, including the terms and conditions of the workers’ engagement under the arrangement, provided the provisions of these Rules are observed.

In industries with established Industry Tripartite Councils (ITCs), the tripartite partners may agree, through a voluntary code of good practices, on the functions or processes that can or cannot be contracted out to a legitimate contractor.

Section 34. Financial Relief Program; Tripartite Co-Regulation Engagement. A Financial Relief Program or Unemployment Assistance Fund shall be established for employees under a Service Agreement or employees in transition from one Service Agreement to the next. For this purpose, the National Tripartite Industrial Peace Council (NTIPC), upon the effectivity of this issuance, shall constitute a Local Service Provider Tripartite Working Group (LSP-TWG) composed of representatives of the stakeholders in the industry. The LSP-TWG shall:

(a) Recommend the mechanics and details in setting up the Financial Relief Program or Unemployment Assistance Fund with proposed funding sources before end of June 2012; and

(b) Draw-up the terms of a Tripartite Co-Regulation Engagement in ensuring full compliance with labor laws for approval/endorsement by the NTIPC, including a proposed Table of Progressive Rate of Increases in the minimum capitalization requirement at reasonable intervals to ensure that only legitimate contractors can engage in subcontracting arrangement.

Section 35. Enrollment in DOLE programs on improving compliance with labor standards. For purposes of ensuring compliance with labor standards, the principal and subcontractors covered by these Rules are encourage to enroll and participate in the DOLE Kapatiran Work Improvement for Small Enterprise (WISE)-TAV Program (Department Advisory No. 06, dated 07 March 2011) and/or in the Incentivizing Compliance Program (Department Order No. 115-11).

Section 36. Contracting or subcontracting arrangements in the Construction and Other Industries. Contracting or subcontracting arrangements in the Construction Industry, under the licensing coverage of the Philippine Construction Accreditation Board (PCAB), shall be covered by the applicable provisions of these Rules and shall continue to be governed by Department Order No. 19, Series of 1993 (Guidelines Governing the Employment of Workers in the Construction Industry); Department Order No. 13, Series of 1998 (Guidelines Governing the Occupational Safety and Health in the Construction Industry); and DOLE-DPWH-DILG-DTI and PCAB Memorandum of Agreement-Joint Administrative Order No. 1, Series of 2011 (on coordination and harmonization of policies and programs on occupational safety and health in the construction industry).

In industries covered by a separate regulation of the DOLE or other government agency, contracting or subcontracting therein shall be governed by these Rules unless expressly provided otherwise.

Section 37. Prohibition on DOLE officials or employees. Any official or employee of the DOLE or its attached agencies is prohibited from engaging or having any interest in any contracting or subcontracting business.

Section 38. Non-impairment of existing contracts; Non-diminution of benefits. Subject to the provisions of Articles 106 to 109 of the Labor Code, as amended, the applicable provisions of the Civil Code and existing jurisprudence, nothing herein shall impair the rights or diminish the benefits being enjoyed by the parties to existing contracting or subcontracting arrangements.

The effectivity of Certificates of Registration acquired under Department Order No. 18, Series of 2002, issued on 21 February 2002, shall be respected until expiration.

Section 39. Supersession. All rules and regulations issued by the Secretary of Labor and Employment inconsistent with the provisions of these Rules are hereby superseded.

Section 40. Separability Clause. If any provision or portion of these Rules are declared void or unconstitutional, the remaining portions or provisions hereof shall continue to be valid and effective.

Section 41. Effectivity. This Department Order shall be effective fifteen (15) days after completion of its publication in a newspaper of general circulation.

Manila, Philippines, 14 November 2011.

ROSALINDA DIMAPILIS-BALDOZ
Secretary