LABOR MANUEL

25:00 30:00

25:00 Who contracts out a particular job or undertaking to another entity called contractor, who enter
hired workers to perform the service primarily or ultimately for the principal. And that has no, that is not
dependent to the place of work. So contracting can be exist regardless of whether the work is perform or
to be performed within the premises of the principal or outside the premises of the principal. The location
of the work is not material, as long as you are covered by that description of that trilateral relationship,
and then there is contracting. Why is it called trilateral relationship?

26:00 There are three entities: the principal, the contractor, and the employees hired by the contractor.
How many contracts are involved? Two contracts, the employment contract between the contractor and
the employees, and the service agreement between the contractor and the principal. The two contracts
are separate to each other they are interrelated but separated from each other. Is there a direct contract
relationship between the principal and the employees of the contractor? None. The employees have debt
with the contractor but not with the principal. Their contractual link is to the contractor not with the
principal. Is contracting prohibited by the Labor Code? No. What is stated in the labor code, a person
authority given to the secretary of Labor-

27:00 to regulate the contract in general and so regulating to restrict or prohibit contracting and
therefore in so doing, there are categories of contracting and distinctions and included in the distinctions
are the implications as to the relationships and responsibilities of the parties and that is the reason for
the department orders that have been issued by the department of labor. What will happen if the
contracting arrangement is not legitimate? In a contracting arrangement not legitimate, then you destroy
the trilateral nature of the relationship, you convert the trilateral agreement into by a partisan or part
time relationship where the principal becomes directly link contractually to the employees hired by the
contractor.

28:00 and therefore the principal shall be liable as direct employer of the employees concerned. On the
other hand, if the contracting is legitimate, what is the extent of the liability of the principal? The principal
is not absolved of the liability. Even if the contracting arrangement is legitimate, the principal, shall be
considered as inter employer when it comes to the payment of wages, if there is a failure on the part of
the contractor to pay the wages for work performed. So that is the extent of the liability of the principal.
As stated as employer, payment of wages for work performed under the contract. Is there a need of
insolvency as a condition that will give rise-

29:00 to the principal of the liability? No. The wording of the law is very clear. Failure on the part of the
contractor to pay, there is no need for insolvency as long as there is a failure on the part of the contractor
to pay the wages for work performed then the principal is liable to pay for such wages. Can the principal
use as an excuse the fact that the principal has truly paid the contractor under the service agreement?
No. That cannot be a defense on the part of the principal. The principal should have require the contractor
to impose upon and done bond should address the need to recover the labor spent to the contractor.
Article 106 gives us the liability of the principals for the payment of wages.

30:00 Article 109 is broader on the nature of the solidarity liability of the principal. Under Article 109,
based on the wording of the law, the principal shall be liable for any violation on any provision of the labor
code. It is as broad as that. However, the Supreme Court, in the case of Rosewood, limited the liability of
the principal under Article 109 to situations where the principals is at fault meaning the principal connive
with the contractor in the prohibition or violation. Otherwise, if there is no fault on the part of the
principal, there is no connivance between the contractors, the liability of the principal shall not, or the
fault of the contractor shall not give rise to the solidary liability of the principal, under Article 109. What
is a lex loci Contracting?

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