Government-sanctioned contractualization


I wish to commend Party-list Reps. Emmi de Jesus and Luz Ilagan of Gabriela for recently filing House Bill 4396, which seeks to end labor contractualization by amending the Labor Code.

Their bill, titled An Act Prohibiting Labor-only Contracting and Regulating Job Contracting and Sub-contracting, seeks to stop contractual employment by rendering the contractor a redundant agent, while strengthening the relationship between the principal employer and employee.

“Security of tenure provisions prevent employer from terminating employee except for just causes. Contracts made to fix employment durations to violate the bill’s provisions will be ruled null and void. Probationary employment is fixed at six months, after which period converts to regular employment,” the bill added.

Violators can be fined up to P500,000 or imprisonment of up to two years, it said.

In filing the bill, the lawmakers said their bill aims to remove the power wielded by labor secretaries to legalize contractual employment, adding, “President Aquino’s labor secretary, Rosalinda Baldoz, even issued Department Order 18-A Series of 2011 toward this end.”

Ilagan said the government’s justification for promoting contractualization to attract foreign capital and create jobs is pure hogwash.

“Contractual employment egged on capitalists to lay off workers more easily and led to the shameful finding by the International Labor Organization that the Philippines has the highest unemployment rate in all of Southeast Asia. Unemployment, in fact, is exploding under the Aquino administration from 4.37 million in 2011 to 4.49 million in 2013 while job generation dropped from 1.2 million in 2011 to a mere 317,000 in the same year,” Ilagan said.

On the other hand, de Jesus said “the rampant scourge of contractualization is not only demeaning and costly for young underemployed job applicants constantly hunting for jobs, but also threatens the life and health of workers.”

Having the bill passed into law would be an uphill battle for sure.

For years now, I have been pilloried for supposedly passing a law that provides for the contractualization of labor and services in the country. This is a bald-faced lie that many people have come to accept as gospel truth and it has probably cost me a couple of elections.

The truth is there is no contractualization law and I certainly never authored one. I wouldn’t be so stupid as to even think of crafting a measure allowing contractualization. I was secretary-general and now president of the Trade Union Congress of the Philippines and I was elected for two terms in the Senate on the strength of my advocacy for workers rights. My track record in legislation would prove this.

There has never been a law passed that allows for labor-only contacting. Labor-only contracting has always been illegal since the time of President Marcos and it still is, affirmed by no less than the Supreme Court.

In fact, what I did author when I was a senator was a measure similar to the Gabriela lawmakers’ current bill, which strengthens the constitutional provision on the security of tenure of workers.

My Senate bill, which was eventually incorporated in the revised Labor Code, provided for the mandatory regularization of employees who have rendered six months of continuous service.

Under the Revised Labor Code, a worker may undergo a probationary period not to exceed six months and one day; thereafter the worker must be entitled to all benefits, rights and privileges of a regular employee. That is the provision of the bill I authored.

Companies that try to circumvent this measure by using labor-only contracting agencies (which impose five-month contracts) are violating the Labor Code. And any victim of labor-only contracting can report it to the Labor department. Victims, as per regulations, do not even need to submit their names to lodge a complaint and ask for an investigation of the guilty company.

Of course, we do know it is not that easy, and that laws are merely pieces of paper if not implemented. Had the law been strictly implemented to begin with, the Gabriela lawmakers would find no need to file another bill strengthening the law against contractualization.

But like they said, the government is even sanctioning contractualization because of the Department of Labor and Employment’s department orders providing exemptions.

Contractualization actually became rampant after DOLE issued Department Order No. 10 in 1997, under then Secretary Leonardo Quisumbing. This D.O. provided for “flexible” work arrangements “for the purpose of increasing efficiency and streamlining operations.” With D.O. 10 contracting and subcontracting arrangements were allowed by law under certain exceptions.

D.O.10 was revoked in 2001 by D.O. No. 3 of Dole, but the latter honored existing contractual contracts. In 2002 though D.O. 10 was effectively restored by another Dole order, D.O. No. 18-02.

Then DO 18-A, issued by Baldoz, set more guidelines to regulate the contractualization.

All these department orders unfortunately opened the floodgates for contractualization and became justifications for union busting and the replacement and retrenchment of regular workers with casual and contractual workers.


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  1. You think that by abolishing contractualization, you could increase the employment rate? Think again. As if there are enough jobs to fill. Employees have a tendency to be complacent (lazy) when they become regular or have security of tenure.

    • casmero mahilum on

      i beg to disagree with mr. lao’s opinion. By opposing the abolition of contractualization of labor by reasoning that it could not increase employment rate, Mr. Lao has protected the interest of business and not of the workers. He even branded workers as lazy people when they got regular. Mr. Lao must be reminded that the most lazy people are those owners of capital who have no direct participation in production and who only use the laborers to amass wealth of their own. They are the ones who survive and live a prosperous life out of workers’ toil.

  2. Ruben V. Calip on

    Congratulations, po former senator Herrera. You are so still very sharp as when you and the late Blas Ople were together in the Senate.
    Napaka unfair talaga ang ginawa sa inyo ng mga pulahang labor unions–pinakalat ng nag autor kayo ng bill para payagan ang mga Hudas na may-ari ng mga malls, supermarket at iba pang negosyo na magCONTRACTUALIZATION.
    Mga salabaheng negosyante ang mga iyan. Mga hin naniniwala sa democratic capitalism. Katumbas rin nila ang mga komunistang inaapi ang mga ordinaryong mamamayan.