Department Order No. 174, Series of 2017

1 Department Order No. 174, Series of 2017 Republic of the PhilippinesDEPARTMENT OF LABOR AND EMPLOYMENTREGULAR EMPLOYEECASUAL EMPLOYEESEASONAL EMPLOYEEPROJECT EMPLOYEEPROBATIONARY EMPLOYEEEMPLOYERDIRECTLY HIREEMPLOYEEREGULAR EMPLOYEECASUAL EMPLOYEESEASONAL EMPLOYEEPROJECT EMPLOYEEPROBATIONARY EMPLOYEEEMPLOYERHIRE THROUGH PEAEMPLOYEEREGULAR EMPLOYEECASUAL EMPLOYEESEASONAL EMPLOYEEPROJECT EMPLOYEEPROBATIONARY EMPLOYEEEMPLOYERENGAGE A CONTRACTOREMPLOYEECONTRACTOR S EMPLOYEESWORKER(CONTRACTOR & SUBCONTRACTOR)Employment ContractCOMPANYPRINCIPALREGULAR EMPLOYEESEASONAL EMPLOYEEPROJECT EMPLOYEECASUAL EMPLOYEEPROBATIONARY EMPLOYEES erviceAgreement CONTRACTING AND SUBCONTRACTINGWORKER(CONTRACTOR & SUBCONTRACTOR)Employment ContractCOMPANYPRINCIPALREGULAR EMPLOYEESEASONAL EMPLOYEEPROJECT EMPLOYEECASUAL EMPLOYEEPROBATIONARY EMPLOYEES erviceAgreement CONTRACTING AND , ,anativeofCamarinesNorteIn2013, ,hefoundajobasabaggeratalargesupermarket chain, Action Plan2 18-A1 Strictly enforce compliance to Labor Standards3 Pursue legislative agendaNational Action Plan2 18-A Five(5)FocusGroupDiscussionsessions.

2 Three(3)area-wideLaborSummits. Seventeen(17)sectoralmeetings. NationalTripartiteIndustrialPeaceCouncil meeting(1)Visayas-wideFGDon9-10 September2016inCebuCity;(2)Luzon-wideFGD on19-20 September2016inAngelesCity,Pampanga;(3)N ationalCapitalRegionFGDon23-24 September2016inPasayCity,MetroManila;(4) Mindanao-wideFGDon26-27 September2016inDavaoCity;and(5)FGDwithAc ademiciansandExpertson30 September2016inQuezonCity,MetroManila.(1 )Luzonon17 October2016attheOccupationalSafetyandHea lthCenter,QuezonCity;(2)Mindanaoon11 November2016attheApoViewHotel,DavaoCity; and(3)Visayason18 November2016attheGoldenPrinceHotel, ,5laborsectordialogues,and5 TripartiteExecutiveCommitteemeetingsNEW PROVISIONSR eiteratestheprohibitionagainstLOCbasedon statutorydefinitionandjurisprudenceExpan dsillicitformsofemploymentarrangements:1 )contractingoutofworktoanin-housecoopera tive:2)requiringemployeestobecomemembers ofcooperative.

3 And3)otherschemes,practicesorarrangement sdesignedtocircumventtheworker srighttosecurityoftenureRemovestheprovis ionthatemploymentcontractisco-terminuswi ththeserviceagreementNEW PROVISIONS IncaseofterminationduetoexpirationofServ iceAgreement,failureofcontractortoprovid enewemploymenttotheemployeewithin3months shallentitlethelattertopaymentofseparati onbenefits Addsasgroundforcancellationofregistratio nviolationsofanyprovisionsoftheLaborCode ReducestheperiodwithinwhichRegionalDirec torsshallresolvefiledcomplaintsfrom10day sto7days Blacklistscontractorwhoseregistrationhas beencancelledincludinganyofitsofficersto operateorapplyfornewregistrationascontra ctorundereitherthesameordifferentnameNEW PROVISIONS Increasesthesubstantialcapitalrequiremen tfromP3 MtoP5M IncreasesregistrationfeefromP25, , Shortensthevalidityofthecertificateofreg istrationofcontractorsfrom3yearsto2years DepartmentOrder 174-17 Department ,whichistotallyprohibited,referstoanarra ngementwhere:a.

4 (i)Thecontractororsubcontractordoesnotha vesubstantialcapital;or(ii)Thecontractor orsubcontractordoesnothaveinvestmentsint heformoftools,equipment,machineries,supe rvision,workpremises,amongothers;and(iii )Thecontractor sorsubcontractor semployeesrecruitedandplacedareperformin gactivitieswhicharedirectlyrelatedtothem ainbusinessoperationoftheprincipal; ,laboronlycontractingshallrefertoanarran gementwhere:(a)Thecontractordoesnothaves ubstantialcapitalorinvestmentsintheformo ftools,equipment,machineries,workpremise s,amongothers,andtheemployeesrecruitedan dplacedareperformingactivitieswhichareus uallynecessaryordesirabletotheoperationo fthecompany,ordirectlyrelatedtothemainbu sinessoftheprincipalwithinadefiniteorpre determinedperiod,regardlessofwhethersuch job,workorserviceistobeperformedorcomple tedwithinoroutsidethepremisesoftheprinci pal;or(b)Thecontractordoesnotexercisethe righttocontrolovertheperformanceofthewor kof1 Prohibits labor-only contracting, and specifies other illicit forms of employment CONTRACTING (DO NO.)

5 174) ,whichistotallyprohibited,referstoanarra ngementwhere:a) , ,equipment,machineries,supervision,workp remises,amongothers, sorsubcontractor semployeesrecruitedandplacedareperformin gactivitieswhicharedirectlyrelatedtothem ainbusinessoperationoftheprincipal;orb) CONTRACTING (Omnibus Rules)SECTION9,RuleVII, (a)Anypersonwhoundertakestosupplyworkers toanemployershallbedeemedtobeengagedinla bor-onlycontractingwheresuchperson:Doesn othavesubstantialcapitalorinvestmentinth eformoftools,equipment,machineries,workp remisesandothermaterials;and(2) CONTRACTING (DO NO. 10)(f)"Labor-onlycontracting"prohibitedu nderthisRuleisanarrangementwherethecontr actororsubcontractormerelyrecruits,suppl iesorplacesworkerstoperformajob,workorse rviceforaprincipalandthefollowingelement sarepresent: Thecontractororsubcontractordoesnothaves ubstantialcapitalorinvestmenttoactuallyp erformthejob,workorserviceunderitsownacc ountandresponsibility;and Theemployeesrecruited, CONTRACTING (DO NO.

6 18-02) ,labor-onlycontractingshallrefertoanarra ngementwherethecontractororsubcontractor merelyrecruits,suppliesorplacesworkersto performajob,workorserviceforaprincipal,a ndanyofthefollowingelementsarepresent:(i )Thecontractororsubcontractordoesnothave substantialcapitalorinvestmentwhichrelat estothejob,workorservicetobeperformedand theemployeesrecruited,suppliedorplacedby suchcontractororsubcontractorareperformi ngactivitieswhicharedirectlyrelatedtothe mainbusinessoftheprincipal;or(ii) CONTRACTING (DO NO. 18-A) ,laboronlycontractingshallrefertoanarran gementwhere: Thecontractordoesnothavesubstantialcapit alorinvestmentsintheformoftools,equipmen t,machineries,workpremises,amongothers,a ndtheemployeesrecruitedandplacedareperfo rmingactivitieswhichareusuallynecessaryo rdesirabletotheoperationofthecompany,ord irectlyrelatedtothemainbusinessoftheprin cipalwithinadefiniteorpredeterminedperio d,regardlessofwhethersuchjob,workorservi ceistobeperformedorcompletedwithinorouts idethepremisesoftheprincipal;or CONTRACTING (SC RULING)CaseThirdPartyCapital/InvestmentW orkersDeployedLOCN erivs.

7 NLRC, July 23, 1993 Building Care CorporationP1,000, operator & janitor NoPhilippine Fuji Xerox Corporation vs. NLRC, March 5, 1996 ,000, ,officeequipment, operatorYesVinoyavs. NLRC, February 2, 2000 Peninsula Manpower Company ,000paidupcapitalSales representativeYesSMC vs. MAERC, July 10, 2003 MaercIntegrated Services ,toolsandequipmentamountingtomorethanP4 MWashing & Segregating Empty Bottles workersYesDOLE vs. Esteva, Cannery Multi-Purpose P6,600paidupProcessing YesLABOR-ONLY CONTRACTING (SC RULING)CaseThirdPartyCapital/InvestmentW orkersDeployedLOCS asanvs. NLRC October 17, 2008 Helpmate, ,939, and MessengersNoCoca Cola vs. Agito, February 13, 2009 InterserveManagement and Manpower Resources, Inc. ServicevehiclesandequipmentvaluedatP510, 000andP200,000 SalesmenYesAliviadovs. Proctor & Gamble, March 9, 2010 Promm-Gem, Inc. Sales and Promotions Services Promm-Gem P500,000paidupcapital,assetsworthP1,151, ,threeregisteredvehicles,markers,tapes,l inersandcutters;SAPS-P31,250paidupcapita lMerchandisersNoYesNorkisTrading vs.

8 Buena Vista, October PanaghiusasaKauswaganMulti-Purpose CooperativeMachineriesandequipmentworthP 344, and operatorsYesLABOR-ONLY CONTRACTING (SC RULING)TOTALITYOFTHECIRCUMSTANCES thecontractoriscarryingonanindependentbu siness thenatureandextentofthework theskillrequired thetermanddurationoftherelationship therighttoassigntheperformanceofspecifie dpiecesofwork thecontrolandsupervisionoftheworkers thepoweroftheemployerwithrespecttothehir ing,firingandpaymentoftheworkersofthecon tractor thecontrolofthepremises thedutytosupplypremises,tools,appliances ,materialsandlabor themode, 174-17 Department , , , ,worksorserviceswhennotdoneingoodfaithan dnotjustifiedbytheexigenciesofthebusines ssuchasthefollowing:(ii)Requiringthemtos ign,asapreconditiontoemploymentorcontinu edemploymentxxx,oraquitclaimreleasingthe principal, labor-only contracting, and specifies other illicit forms of employment arrangementsPRACTICES, PRACTICES (DO NO.)

9 174) ,thefollowingareherebydeclaredprohibited forbeingcontrarytothelaworpublicpolicy: Whentheprincipalfarmsoutworktoa Cabo . Contractingoutofjoborworkthroughanin-hou seagency. PRACTICES (DO NO. 174) Contractingoutofajoborworkbyreasonofastr ikeorlockoutwhetheractualorimminent. Contractingoutofajoborworkbeingperformed byunionmembersandsuchwillinterferewith,r estrainorcoerceemployeesintheexerciseoft heirrightstoself-organizationasprovidedi nArticle259oftheLaborCode,asamended. Requiringthecontractor s/subcontractor PRACTICES (DO NO. 174) Requiringthecontractor s/subcontractor semployeestosign,asapreconditiontoemploy mentorcontinuedemployment,anantedatedres ignationletter;ablankpayroll;awaiverofla borstandardsincludingminimumwagesandsoci alorwelfarebenefits;oraquitclaimreleasin gtheprincipalorcontractorfromliabilityas topaymentoffutureclaims;orrequiretheempl oyeetobecomememberofacooperative.

10 PRACTICES (DO NO. 174) Requiringemployeesunderacontracting/subc ontractingarrangementtosignacontractfixi ngtheperiodofemploymenttoatermshortertha nthetermoftheServiceAgreement,unlessthec ontractisdivisibleintophasesforwhichsubs tantiallydifferentskillsarerequiredandth isismadeknowntotheemployeeatthetimeofeng agement. Suchotherpractices, implementation of the provisions of the Labor Codea) Appointment of additional Labor Laws Compliance Officersb) Accreditation of labor and employers organizationc) Constitution of Regional Audit Teamd) Review of DO 131-B (LLCS)OPERATIONAL CONCERNSEFFECTS OF DO 174, Series OF 2017 EXISTING CERTIFICATE OF REGISTRATION?EXISTING SERVICE AGREEMENT?EXISTING EMPLOYMENT CONTRACT?PENDING LABOR STANDARDS CASES?Thankyou!