Labor Law _E_Independent contracting vs. Labor Only Contracting

Question 1

1)
Independent Contracting arrangements

vs

Labor Only contracting

2)
What are the 2 kinds of Independent Contractors?

Answer 1

1)
Remember

a) If there is job-contracting arrangement (the valid contract), then:
* There is NO employment contract between the principal/company and the worker/independent contractor. It is simply a civil contract for services.
* The employee of an independent contractor are NOT the principal’s employees.

b) If there is a LABOR-only

2)
a) Trilateral working arrangement - those engaged in legitimate job contracting OR
b) Bilateral working arrangement - those who have unique skills and talents that sent them apart from ordinary employees

Question 2

When is there a valid Contracting (or Sub-contracting) arrangements?

MemAid: elements are
I ARM FREE CAPITAL TEM WORK R&B

Answer 2

There is a job-contracting permissible by law where the contractor/agency carries on an
Independent business and undertakes the contract work on his
Account, under his own
Responsibility, using his own
Manner & methods,
FREE from the control of the principal in all matters connected with the performance of work excepting the results thereof. He has his own
CAPITAL or investment , in the form of
Tools,
Equipment,
Machinery,
WORK premises. The agreement between the contractor and principal assures the former’s employees of all
Rights and
Benefits under the law.

Question 3

What are the elements of Labor-only Contracting which is PROHIBITED by law?

MemAid: No Cap Direct OR No Control

Answer 3

For labor-only contracting to exist, DOLE Order #174 provides two ways of proving it

First method - (NO CAP + DIRECT)
The contractor or sub-contractor DOES NOT HAVE substantial CAPITAL or investment to actually perform the job, work or service under its own account and responsibility PLUS

The employees recruited, supplied or placed by such contractors are performing activities which are DIRECTLY Related to the main business of principal.

Second method - (NO Control)
The contractor has NO CONTROL over the conduct of the work to be done by his employees.

Question 4

What are the effects of Labor-only Contracting and
Valid Job contracting arrangements?

Answer 4

If Labor-only contracting: Illegal
The principal is deemed the direct employer and is made liable to the employees of the contractor for a more COMPREHENSIVE purpose.
The Labor only contractor is deemed Merely an AGENT.

If Job-contracting: Legal
The principal is considered an Indirect employer, and is made SOLIDARY LIABLE only for a limited purpose

Question 5

Provide 2 salient features of the DOLE Dept. Order #174

Answer 5

1. Mandatory Registration of Independent Contractors for mgt and monitoring
2. Failure to register gives rise to presumption that contractor is engaged in Labor Only Contracting

Question 6

What cannot be validly Sub-Contracted out under DOLE DO #174? (illegal to be subcontracted)

Answer 6

1. When the principal farms out work to a Cabo
2. Contracting out work through an in-house agency
3. Contracting out work through an in-house cooperative
4. Contracting out work by reason of strike/lockout
5. Such other practices or schemes designed to circumvent the right of workers to security of tenure