LEGAL

RESEARC
H
[ENDING JOBS OR ENDING
SHIERLY C. BA-AD
ROY GABON
CONTRACTUALIZATION:
SERGIO WILLIAM
GAYO
BALANCING ON A TWO-
NERIZA OSDON
ARCHIE

EDGED POSITION]
SUMALINDAO

The state shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living, and an
improved quality of life for all.
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TABLE OF CONTENTS

I . INTRODUCTION ------- 2

II . DEFINITION OF TERMS ------- 4

III. PHILIPPINE LABOUR LAWS

AND LANDSCAPES ------- 5

IV. DISENTING OPINION ------- 10

V. CONCLUSION ------- 18

VI. REFERENCES ------- 21

I.INTRODUCTION

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The state shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full employment, a
rising standard of living, and an improved quality of life for all. 1 An unequivocal
order of President Duterte during his campaign and on the aftermath of the 2016
election is the immediate end of contractualization --- the most appealing rhetoric
that had persuaded the workers to his side but a bittersweet expression that earned
him opposition from the capitalists.

The exploitative practice of labor contracting is a continuing legacy of the

country’s feudal and colonial history. It dates back from the cabo system – a labor
arrangement that proliferated during Spanish colonialism. Cabos acted as labor
negotiators and suppliers to companies and project or contract-based (pakyao)
jobs. The system was commonly practiced in small-time construction companies,
maritime companies that hired stevedores, and in haciendas that hired seasonal
plantation workers.2

Contractualization relatively caused cheaper labor cost in the country which

abets investors in pouring down their investments in the country. Looking at
current labour force, 59.7% of individuals working in private establishments are
temporary, contractual or seasonal workers.3 Despite being one of the sectors with
highest contribution to employment opportunity, contractualization becomes one
of the many ways that companies utilized to deprive the laborers of the benefits
being enjoyed by regular employees. On the other hand, contractualization
provided a solution to ease income necessities of the marginalized laborers,
although a temporary one.

1
Section 9, Article 1, 1987 Constitution
2
“Contractualization: a Neoliberal policy , https://www.ibon.org/well-in-fact-contractualization/;
November 12, 2019
3
Percent Distribution of Employed Persons by Nature of Employment, by Sex, and class of workers APR
2019, Philippine Statistics Authority, April 2019 Labour Force Survey,
(http://www.psa.gov.ph/content/statistical-tables-labor-force-survey-lfs-april-2019), November 8, 2019

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This paper aims to analyse economic policies and framework that will be
affected or benefited if contractualization is prohibited. It examines, legal
standpoint of two sectors of the labor market – the management and the workforce
– and discover contrasting views on the issue of contractualization and endo.
Furthermore, this will examine labour laws and sector litigation involved in the
formulation of a coherent policy on dealing with “endo” practices. Lastly, the
paper aims to present past litigations and cases involving contract laborers, how
National Labor Relations Commission deal with it and the stringent measures
applied in assessing these cases.

II. DEFINITION OF TERMS

Contracting or Subcontracting – refers to an arrangement whereby a principal

agrees to farm out to a contractor the performance or completion of a specific job
or work within a definite or predetermined period, regardless of whether such job
or work is to be performed or completed within or outside the premises of the
principal

Employment rate – refers to the proportion of employed prsons to the total labor
force

Endo or End of Contract – the termination of a worker’s fixed short –term

employment

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Labor force – refers to the population 15 years old and over who contribute to the
production of goods and services in the country. It comprises the employed and
unemployed

Department of Labor and Employment – commonly abbreviated as DOLE, is

the executive department of the Philippine Government mandated to formulate
policies, implement programs and services, and serve as the policy-coordinating
arm of the Executive Branch in the field of labor and employment. It is tasked
with the enforcement of the provisions of the Labor Code.

III. PHILIPPINE LABOR LAWS AND LANDSCAPE

a. Philippine Employment Data

The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.4 Philippine GDP dropped to 5.8%
at the end of 3rd quarter presumed to be an impact of loosen monetary policy of the
central bank and the continued decline and uncertainty of the global trade in terms
of clothing, metal and of transport equipment industry.

On the macroeconomic level, 94.9% employment rate was recorded on the

end of April 2019, upon which males at age 25 to 34 comprise 26% of the total
workforce (see figure 1).Region VIII registered 95.7%, 0.8% higher than the
national figure. More than half the employed persons are working in the services
sector making up to 58.5% of the employed population, followed by the

4
Section 8, Article 2, 1987 Constitution

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agricultural sector composed of 22.3% which declined to a percentage compared

to year 2018 of the same month.

More than half of the employed persons are wage and salary workers. Wage
and salary workers are those who work for private households, private
establishments, government or government corporations and those who work with
pay in own family-operated farm or business. As of April 2019, this sub-sector
made up to 63.3% of the total employed persons.

FIGURE 1 . Percent Distribution f Employed Persons

by Sex and Age Group : April 2019
5%
15% 65 and Over
12% 55-64
16% 4% 10% 45-54
35-44
25-34
18%
19% 15-24
25% 28%

23%

23%

Table 1, illustrates distribution of employed persons by Nature of

Employment, by Sex and class of workers for the month of April of the current
year. According to the aforementioned table, more than seven million of the
employed population is work on a short-term or seasonal basis and approximately
1,169,000 changes employers on a day to day or week to week basis. These
numbers contributes to 21.29% of the employment population, a hefty number
which presumably contributes to the contractual labourer.

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Ta b le 1. Pe rc e nt Distrib ution of Emp loy e d Pe rsons b y

Na ture o f Emp loo yme n, b y Se x a nd Cla ss of Wo rke r : Ap ril 2019
Na ture o f Emp loyme nt Worke d fo r Diffe re nt
Pe rma ne nt Jo b / Sho rt-te rm o r Emp lo ye rs o n Da y to
Busine ss/ Unp a id se a so na l a nd Da y or We e k to
Se x a nd Cla ss o f Worke r Tota l Fa mily Work Unp a id Fa mily Work We e k Ba sis

Bo th Se xe s
Num b e r in tho u sa nd s 42,242 33,249 7,825 1,169

To ta l 100 100 100 100

Wa g e a nd Sa la ry Worke rs 63.3 60.3 70.9 100
Wo rke d fo r p riv a te ho u se ho ld s 4.3 3.9 5.4 8.9
Wo rke d fo r p riv a te e sta b lishm e nts 49.7 45.9 59.7 90.7
Wo rke d fo r g o ve rnm e n t a n d
g o ve rnm e n t c o ntro lle d c o rp o ra tio n 9.1 10.3 5.4 -
Wo rke d w ith p a y in o w n fa m ily-
o p e ra te d fa rm o r b usine ss 0.2 0.2 0.3 0.4
Se lf-e mp loy e d without a ny p a id
e mp loy e e 27.6 31 17.4 -
Emp loy e r in o wn fa mily -o p e ra te d fa rm
o r b usine ss 2.7 3.3 0.8 -
Wo rke d witout p a y in own fa mily-
o p e ra te d fa rm or b usine ss 6.4 5.5 11 -

b. Philippine Labour Laws and Bills on Constractualization

Presidential Decree No. 442 – “Labour Code of the Philippines”, an act

in response to the constitutional mandate contained in Section 3, of Article XVIII,
“ The State shall afford protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed and regulate the relations
between workers and employers. The State shall assure the rights of workers to
self-organization collective bargaining, security of tenure and just and humane
conditions of work.”

Republic Act No. 10396 – “An Act Strengthening and Expanding the
Conciliation-Mediation as a Voluntary Mode of Dispute Settlement for all Labor
Cases” states that except as provided in Title VII-A, Boo V of this Code, as

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amended or as may be excepted by the Secretary of labor and Employment, all

issues arising from labor and employment shall be subject to mandatory
conciliation-mediation. The labor arbiter or the appropriate DOLE agency or
office that has jurisdiction over the dispute shall entertain only endorsed or
referred cases by the dully authorized officer

Republic Act No. 10741 –“An Act Strengthening the Operations of

National Labor Relations Commission”, strengthens the NLRC’s role in the
implementation of program and policy coordination in relation with labour.

Republic Act No. 10691 – “Public Employment service Act of 1999” –

defines the role of DOLE, LGU, accredited NGOs in the establishment and
operation of Public Employment Service Office and the operation of Job
placement offices in the educational institutions (EIs)

Executive Order No.51 – Implementing Article 106 of the Labor Code of

the Philippines, as amended, to protect the right to security of tenure of all workers
based on social justice in the 1987 Philippine Constitution.

Department Order No.174 – Rules Implementing Articles 106 to 109 of

the Labor Code, as amended.

Labor Code, 1974 – Legalized labor contracting through DOLE

regulations and guidelines for companies

Policy Instruction 20, 1976 – Provided definition and rights of project and
non-project construction employees

Departmental Order 19, 1993 – Affirmed subcontracting in construction

through employment conditions and liabilities

Departmental Order 10, 1997 – Affirmed ‘permissible’ contracting and

recognized legitimacy of trilateral employment relations

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Departmental order 18-a 2011 – Added more requirement to existing

contracting guidelines, didn’t prohibit contracting itself

Departmental Order 174, 2017 – Subcontracting is still allowed repeats

existing provisions with minor tweaks

House bill 6908, 2017 – mostly reiterates what’s already said, inserts
article on “stricter” licensing for job contractors in labor code

Executive order 51, 2018 – Subcontracting is still allowed, so=called

prohibitation against “illegal” contracting

IV. DISSENTING OPINION ON THE ENDO OR

CONTRACTUALIZATION ISSUE

Other than the legislative and the executive department of the government,
charged for the enactment and enforcement of laws respectively, the two major
proponents of the contractualization issue are the labour group and the business
sector of the country.

Business sector as the employer and is deemed to be the source of abuse

of contractualization is against the eradication of contractualization. One of the
many reasons of the aforementioned sector is the availability of labour force and
the shorten process of availing contract workers. On the other end of the spectrum
is the labour sector, known as the abused side, where termination of

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contractualization is the prevailing cry. The major reason of the said group is the
rampant abuse and curtailment of benefits that the law bestows them.

A. LABOUR SECTOR AND CONTRACTUALIZATION – THE

PROS

STAFFING FLEXIBILITY FOR COMPANIES

Today, big and small corporations are being asked to supply several
requirements which include flexible working arrangements for their employees.
Providing temporary work is probably the best step they could take in order to
offer the required flexibility while meeting their own needs. Employing both a mix
of permanent and temporary workers will result into a more efficient and effective
workplace. This practice also leads to a flexible job market that represents greater
prospects for both companies and workers.5

Flexible staffing is a practice to fill vacancies in employment. Normally, a

business would hire a new permanent employee if they do not have enough on
staff, but flexible staffing services as an alternative. Instead, it is possible to hire
independent contractors, part-time employees, or temporary employees to fill a
staff out. The advantages are that there are fewer restrictions and legal

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requirements when working with these kinds of employees and the commitment is
much less. In some cases, it may also be cheaper to choose flexible staffing over
traditional employment strategies. Other times, employers may end up paying
more for the convenience of flexible staffing.6

Corporations would allow flexible staffing that will give them more control
over personnel. That translates to an advantage over competitors whose rigid labor
structure makes them more vulnerable to economic highs and lows.7

GROWTH IN ECONOMY

Contractualization has been devised by previous lawmakers in order to

address and tackle the issue of poor economic growth in the country. Many
individuals have argued that the time is right to end this practice because of the
improving status of the Philippine economics but there are also others who have
debated that it is simply not enough to sustain the country in the long term.
Creating job opportunities albeit temporarily will help cater into the growth of
economics here in Philippines even more.8

LABOR CONTRACTING

In labor contracting, the genuine employer enters into a service contract

with a labor contractor to hire employees or laborers in such number as his
business or workplace may need. This kind of labor contractor has no sufficient
capital to maintain his own workforce or equipment to be used by the employees

6
“Flexible Staffing”www.migthyrecruiter.com
7
“ The Many Benefits of Flexible Staffing Strategy” www.roberthalf.com
8
‘The Pros and Cons of Contractualization’ Pinoybisnes.com

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and laborers he hires and deploys to work with the genuine employer. He only
provides labor. Under the service contract, which the genuine employer and the
labor-only contractor sign, the labor-only contractor is the employeer of the
workers he deploys to the genuine employer. The arrangement is illegal under
Article 106 of the Labor Code.

When a worker is recruited and supplied or placed by such person are

performing activities which are directly related to the principal business of such
contractee, or are under direct control and supervision of the contractee. In all case
where labor contracting is present, the workers shall be deemed regular employees
of the contractee in accordance with law without prejudice to any criminal, civil,
or administrative case against the labor-only contractor and the contractee. 9

B. BUSINESS SECTOR AND CONTRACTUALIZATION – THE

ANTI’S

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Representative Jericho Nograles: PBA Partylist

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STRINGENT REQUIREMENTS

Cancellation of endo would most likely post stringent requirements for the
employers before new regular employees may be hired. Hiring regular employees
in favour of contractual employees, entails a lot of costs perhaps more than double
than what a contractual employee will get sans benefit. To escape from the
responsibility of carrying the load and additional cost of hiring regular manpower,
firms would rather overload their current roster of regular employees with work in
lieu of hiring regular employees.10

Some employer requires their applicants to acquire medical certificate

before hiring them. Philippine HIV and AIDS Policy Act prohibits the rejection of
a job application solely or partially on the basis of actual, perceived, or suspected
HIV status. It prohibits the rejection of job application, termination of
employment, or other discriminatory policies in hiring, provision of employment
and other related benefits, promotion or assignment of an individual solely or
partially on tje basis of actual, perceived or suspected HIV status. Access to
personal data relating to an employee's hepatitis B status is bound by the rules of
confidentiality and strictly limited to medical personnel or if legally required
(DOLE Department Advisory No. 05-20).

In addition, medical examination results should not be used to deny

employment when the denial of employment would constitute discrimination.11

ISSUES WITH BENEFITS

Big corporations and companies in the country have come under fire
because of maintaining the practice of contractualization and endo. Many
organizations working for the welfare of workers and employees being subjected

10
“Contractualization: Pros and Cons” Emmanuel J. Lopez (Philstar.com) May 27, 2016
11
"Labour & Employment" www.gettingthedealthrough.co

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to them have made their thoughts known and protested about the lack of benefits
and bonuses workers are receiving because they are not being regularized. It
prevents the employee from enjoying the full benefits of regular employee
(e.g.13th month pay). It refrains them from getting government mandated SSS,
PhilHealth and Pag-ibig coverage, among other mandatory requirements. It allows
companies to utilize the skills and talents in the workfield without properly
compensating them.12 ECCP President Guenter Taus said “Without
contractualization, companies would be enforced to make all employees regular,
which is just not practical and would kill the business.”

It is disappointing to know that Contractualization or Contractual Employment

becomes a remedy for most of the businesses to save their costs specially on
human resources. For businesses, keeping an employee will not only let them
spend on daily wage but on benefits as well such as government mandated
benefits. ( Philhealth, PAG-IBIG, etc.) As much as possible, they avoid
regularizing employees as this entails additional expenses because an employer
must give. This is one evidence that businesses can lessen their costs because they
are not required to pay benefits and high amount of salaries to their workers. This
situation is not advantageous to the employees since it does not give the security
of tenure.

Some government agencies also engage in Contractualization or Contractual

employment. Even government hospitals have contractual employees as “Job-
Order (JO) employees. Workers do no not have same benefits as to regular
employees, even hospitalization benefits. Sad truth, they work in hospitals same
as regulars but they don’t have a chance of getting a hospitalization benefits.

PRODUCTIVITY

12
“Contractual Companies in the Philippines Commit to Regularize their Workers” 2019, Change.org, PBC

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Contract manufacturing is resorted to by a principal, generally, a

foreign company, because it needs only a low volume of production and it is a
cheaper alternative as opposed to building its own facility in the country. Under
that contractual agreement, the principal can sell its products in the contrary at a
lower price as opposed to producing them itself or reporting them. These
businesses that used to access these services will likely get the work done by their
existing employees or by adding a few workers. But the effect is reduced
employment and decreased output.

However, such high cost is not commensurate with the fact that there is an
enormous supply of lab0r seeking jobs at low wages poverty and lack of kills of
many such workers also implies that their productivity often cannot match the high
cost of mandated minimum wages. Factor in the various forms of benefits that
employers are required for regular employees, then the gap in wage and
productivity got even wider. Definitely, a fall in employment arising from the
termination of endo will come about. Some companies will reduce their operations
due to higher costs. Also, some workers will no longer be hired. The negative
impact will be severe for those losing their jobs.

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V. CONCLUSION

Labour force is one of the moving forces of the economy, thus, laws
are promulgated to protect this sector. The business sector on the otherhand is like
an oil that fuels the machinery of the economy as this sector provides the venue for
exchange of economic materials. Both the labour sector and the business sector is
essential to a country and the inexistent of one is impossible, as impossible as
taking one out in favour of the other. The labor force coexists with the business
sector, as labor is the main input for a business to efficiently work.

The main clamour of the labor sector is the exploitation of legal loopholes
of the employers in terms of benefits, tenure, salary and even gender.

Educational attainment is one of the major requirements for employment.

According to research, education is directly proportional to holding higher
position, income and even regularization matters on the educational attainment of
an employee. On the current data on education indicator, 92% on children age five
enrol to primary education and only 74.2% of these children finishes primary
education, 74.0% proceed to secondary and only 62.9% finishes secondary level.
Less than half enters college and atleast 20% finishes college. Due to lower
educational attainment, most workers make do of contractual jobs or temporary
jobs than nothing. Due to higher supply of labour, their salary decreases by virtue
of basic economic model. Despite lower salary received and insecure employment
condition, blue collar workers make do and maximize contractual status. Because
of this condition, employers peep through the legal loopholes to exploit the need
for work of educationally incapable individuals.

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Moreover, the business sector has different environment, products and

labour requirements. Taking for example universities whose employees, lecturers
to be specific are only needed during school days, as their basic responsibility is to
teach students. During summer time, where students don’t come to office, the
presence of the lecturers are not needed, thus, regularization is not rampant and
necessary.

Although there are legal implications of endo because a company

cannot just practice labor contracting wittingly or unwittingly without having in
their company a roster of regular employees, it has nonetheless contributed a lot to
the total employment and national income by way of short-term employment
opportunities. While endo has deprived many laborers of the opportunity to enjoy
the full benefit of being a regular employee, the stringent measure normally
applied to a regular applicant is relaxed in favor of an endo worker, resulting in a
bigger participation of the entire employment sector.

The government as the main agent in promoting its citizens

economic development should weigh every policy that will promote
improvements of both labour and business sector, as this two must coexist.
Deceptive contractorship should not be mistaken for independent contractorship
which is perfectly legal. This is entrepreneurship, protected and supported by law.
It promotes specialization and competition. Striking against deceptive
contractorship might mistakely dampen or kill entrepreneurism .

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V. REFERENCES

Books

Isagani A. Cruz, Carlo L. Cruz, (2014). Philippine Political Law. Quezon

Avenue, Quezon City, Philippines

Hector S. De Leon, Hector S. De Leon Jr., (2017). Philippine

Constitutional Law – Principles and Case. C.M. Recto Avenue, Manila,
Philippines

J.C. Chan (2009), Labor Laws. Manila, Philippines

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Electronic References

 “Contractualization which meaning do we mean”,

https://business.inquirer.net
 “Labour & Employment" , www.gettingthedealthrough.com
 “Contractual Companies in the Philippines Commit to Regularize
their Workers” 2019, www.Change.org
 “Contractualization: a Neoliberal policy , https://www.ibon.org/well-
in-fact-contractualization/; November 12, 2019

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