Professional Documents
Culture Documents
PART I:
A.
B.
Definition of Terms
Prohibited Acts
2.1.
Labor-only Contracting
a. contracting out a job, work or service when not done in good faith and not
justified by the exigencies of the business
b. contracting with a cabo
c. contracting with an in-house agency
d. contracting because of a strike or lockout whether actual or imminent
e. contracting that constitutes ULP under Art. 248
2.3.
Exploitative Acts
The principal shall be deemed the employer of the contractual employee in any
of the following cases, as declared by competent authority:
1. where there is labor-only contracting; or
2. where the contracting arrangement falls within the prohibitions under these rules.
4.
Solidary Liability
Registration of Contractors/Subcontractors
Failure to register shall give rise to the presumption that the contractor is
engaged in labor-only contracting.
PART II:
A.
BASES IN JURISPRUDENCE
B.
On the other hand, there is permissible job contracting when (i.e. when
contracting or subcontracting is considered legitimate):
a. the contractor caries on an independent business and undertakes the contract
work on his own account and under his own responsibility according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and
b. the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business; and
c. the agreement between the principal and the contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-organization, security of tenure,
and social and welfare benefits.
Substantial Capital or Investment in the form of tools, equipment, machineries,
work premises, among others, defined.
Substantial capital refers to the adequacy of resources actually or directly used
by the contractor or subcontractor in the performance or completion of the job, work,
service contracted out. Substantial capital need not be coupled with investment in tools
or equipment. One is not a labor-only contractor if one has substantial capital although
without investment in tools, equipment, etc. The law does not require both substantial
capital and investment in the form of tools, equipment, machineries, etc. This is clear
from the use of the conjunction or (Neri vs. NLRC, G.R. Nos. 97008-09, July 23, 1993).
Where the contractor is a going concern duly registered with the SEC with
substantial capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed,
such contractor cannot be considered as engaged in labor-only contracting being a
highly capitalized venture (Filipinas Synthetic Fiber vs. NLRC, G.R. No. 113347, June
14, 1996).
However, in Vinoya vs. NLRC, G.R. No. 126586, February 2, 2000, the Court
clarified that it was not enough to show substantial capitalization or investment in the
form of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. In determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not necessarily confined
to: whether the contractor was carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of specified pieces of work; the control and supervision of the
workers; the power of the employer with respect to the hiring, firing and payment of the
workers of the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment.
This is further elucidated in the case of San Miguel Corporation vs. MAERC
Integrated Services, Inc., G.R. No. 144672, July 10, 2003, where the contractor was
declared to be a labor-only contractor despite the finding that the contractor had
investments amounting to P4,608,080.00 consisting of buildings, machinery and
equipment. The Court said:
While the (contractors) investments in the form of buildings, tools and equipment
amounted to more than P4 Million, we cannot disregard the fact that it was the (principal
employer) which required the (contractor) to undertake such investments under the
understanding that the business relationship between the (principal employer) and the
(contractor) would be on a long term basis. Nor do we believe (contractor) to have an
independent business. Not only was it set up specifically to meet the pressing needs of
(principal employer) which was then having labor problems in its segregation division,
none of its workers was also ever assigned to any other establishment, thus convincing us
that it was created solely to service the needs of (principal employer).
Workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer, defined.
The workers are deemed to be performing activities which are directly related to
the main business of the principal where the duties performed by the workers are
dependent and integral steps in or aspects of the essential operations of the principal.
Hence, if the duties performed by the worker are not integral steps in or aspects
of the essential operations of the principal, then the arrangement should not fall within
the ambit of labor-only contracting. The arrangement should be allowed as job
contracting.
In the case of Kimberly Independent Labor Union vs. Drilon, 185 SCRA 190,
1990, the Court held that the workers who are performing janitorial and yard
maintenance service are not regular employees of the principal but remain to be
employees of the independent contractor inasmuch as the duties performed by the
workers were not integral steps in or aspects of the operations of the principal engaged
in the manufacture of consumer products.
C.
LIABILITY OF PRINCIPAL