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BEST PRACTICES GUIDE TO VALID
JOB CONTRACTING & SUBCONTRACTING
-----------------------------------------------------------------------------------------------------What Decision-Makers Must Know About Contracting Outsourced Services
-----------------------------------------------------------------------------------------------------9:00 am to 5:00 pm, Thursday, April 16, 2015
EDSA Shangri-La Hotel, Mandaluyong City, Philippines
COURSE OUTLINE
I.
Constitutional Bases of Contracting & Subcontracting
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Laws, Rules and Regulations Governing Contracting & Subcontracting
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Promotion of Welfare (Section 18, Article 2)
Full Protection to Labor (Section 3, Article 13)
Guarantee for Rights to Self-Organization (Section 3, par 2, Article 13)
Promotion of Full employment (Section 9, Article 2)
Promotion of Social Justice (Section 1, Article XIII)
Article 106 of the Labor Code, as amended
Article 107 of the Labor Code, as amended
Article 108 of the Labor Code, as amended
Article 109 of the Labor Code, as amended
D.O. 18-A, Series of 2011, Rules Implementing Articles 106-109 of the Labor
Code, as amended
Article 248 (c) of the Labor Code, as amended, which disallows contracting out of
services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their rights to selforganization;
Article 280 of the Labor Code, as amended which classifies employees into
regular, project or seasonal employees;
Article 2180 of the Civil Code, under which the principal, in a civil suit for
damages instituted by an injured person, can be held liable for any negligent acts
of the employees of a labor-only contractor;
Republic Act No. 5487 and its implementing rules, which regulate the operation
of security agencies;
Jurisprudence interpreting the foregoing laws;
Department Circular No. 1, Series of 2012;
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)
D. O. No. 19, Series of 1993, for subcontracting arrangements in the construction
industry; and
Contractual stipulations provided these are not in conflict with Labor Code
provisions, jurisprudence, and D. O. Nos. 18-A and 19.
Important Definitions
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Contracting
Subcontracting
Contractor
In-house agency
Principal
Right to control
Solidary liability
IV.
What is Permissible Contracting?
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V.
Nature of relationship of the parties on permissible contracting
Permissible contracting is expressly allowed by law
Requisites of legitimate job contracting or subcontracting
Concept of independent contractor
Difference between subcontractor and private recruitment and placement agency
(PRPA)
Labor-Only Contracting
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Definition of labor-only contracting
Labor-only contracting is expressly prohibited
Distinction between permissible contracting and labor-only contracting
Power of the Secretary of Labor to determine existence of labor-only contracting
Criteria for the existence of labor-only contracting
The presumption is that a contractor is a labor-only contractor
Elements of labor-only contracting
Substantial capitalization
Performance of directly related jobs
Right to Control
DOLE Certification that an entity is a job contractor
Effect of labor-only contracting
Principal may still be held liable even in the absence of labor-only contracting
VI.
Bond Requirement in Job Contracting
VII.
Concept of Reimbursement
VIII.
Prohibited Activities Other Than Labor-Only Contracting
IX.
Payment of Wages of Employees in Contracting Arrangement
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b.
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f.
Payment of wages as element of employer-employee relationship
Payment of wages need not be made directly to prove this element
Pay slip to prove who paid the worker’s wage
Joint and several liability for non-payment of wages
The court takes judicial notice of the practice of employer of not issuing pay slip
to evade liabilities
Status in contracting relationship determines parties’ liability for payment of
wages
X.
Dismissal from Employment of Employees in Contracting Arrangement
XI.
Concept of Floating Status, Off-Detail or Reserve Status
XII.
Rules on Registration, Renewal and Revocation of Registration
XIII.
Rules Governing Contracting in Construction Industry
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Department Order (DO) No. 19-93 is the prevailing rules on contracting in
construction industry
Coverage
Practice of contracting and sub-contracting in the construction industry is
recognized by law
Workers, where job contracting is permissible, are employees of the contractor
Classification of employees employed in the construction industry
Definition of project employees
Definition of non-project employees
Definition of probationary employees
Meaning of regular employees
Definition of casual employees
Indicators of project employment
Security of tenure of project employees
Statutory benefits of construction employees
Wage rates shall depend on the skills or level of competence but not lower than
the prescribed minimum wage
Basis in determining rates for workers paid by results
Liability of the construction company and general contractors to the workers in
their employ
Wage increases shall be borne by the principal and the contract shall be deemed
amended accordingly
Completion of project or phase thereof and its effect on employment status of
workers
Bonus upon completion of the project or phase thereof when there is such an
undertaking
Project employees, as a rule, are not entitled to separation pay if separation is
due to completion of project
Instance when project employees become entitled to separation pay
Situation when project employees become regular
Meaning of “day” in day certain
Instance where there is no regularization notwithstanding one-year duration of
employment
Reckoning period for the completion of the project
Dismissal from employment of project employee
Separation pay of employees
Seminar Contact Person:
Anna Andaya – Program Leader
Center for Global Best Practices
Manila Lines: (+63 2) 556-8968 or 69
Manila Telefax: (+63 2) 842-7148 or 59
Cebu Lines: (+63 2) 512-3106 or 07
Email: anna@cgbp.org
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