PRIMER ON DO-18-A The fight of the Filipino workers against contractualization is an integral part in the struggle of all other sectors

for genuine social change and progress. With the onslaught of labor flexibilization, the call for vigilance against its implementation in every factory, office or workplace is ever more strengthened. This primer serves to enlighten the worker on the recent maneuvers of the Department of Labor and Employment, particularly through DO-18-A to further legitimize contractualization. It aims to critique the salient provisions of DO-18-A and discuss how it further affects and disenfranchises the Filipino worker. This primer serves as a guide for purposes of discussion and education to equip the everyday worker and union member with the knowledge that they might need, to wage an effective fight against contractualizaton and labor flexibilization and to not be deceived by anti-worker policies clad in pro-worker rhetorics and to further strengthen our call for job security and a living wage.

What is contracting and subcontracting?

There is contracting or subcontracting when an employer, referred to as the principal, farms out the performance of a part of its business to another, referred to as the contractor or subcontractor. For the purpose of undertaking the principal's business that is farmed out, the contractor or subcontractor then employs its own employees. Another version of contracting and subcontracting is called, outsourcing. In outsourcing, a company contracts with another company to provide services that might otherwise be performed by in-house employees. Often the tasks that are outsourced could be performed by the company itself, but due to the financial advantages gained from outsourcing, the latter option is sustained. The Philippines is considered to be one of the top labor outsourcing hubs for the global outsourcing industry. Local outsourcing on the other hand, is widely practiced in the banking and finance industry and recently top-billed broadsheets and newscasts when it was used as a scheme to lay-off thousands of Philippine Airlines employees. Contracting and subcontracting are considered synonymous under Philippine labor law. The BSP Circular 268 which regulates “outsourcing” in the banking industry also doesn’t distinguish between the three schemes. Contracting, subcontracting and outsourcing have long deprived workers of their right to job security, benefits, right to organization and right to grievance. This practice, has indeed reached alarming levels in our country, where jobs are scarce and the army of surplus labor is increasing by the year. What is DO-18-A? DO-18-A is the latest department order released by the Department of Labor and Employment to further implement contracting and subcontracting. It was issued and signed by the Secretary of the Department of Labor th th and Employment on the 14 of November 2011 and was rendered effective on the 5 of December 2011. While the basic law that governs contracting and subcontracting of labor is the Labor Code of the Philippines, particularly Articles 106 to 109, since the Labor Code’s effectivity, the DOLE has released several department orders that implement such regulations and arrangements provided for in the Labor Code. Among these are DO-10 which was issued in 1997 but was revoked by DO-3 in 2001. DOLE also released DO-19 in 1993 which governs contracting and subcontracting arrangements in the construction industry and most recently DO-182002 which was then released to more effectively and systematically implement contracting and subcontracting as a legitimate labor practice. This latest department order, DO-18-A, claims to be the most worker-friendly amongst

the “trilateral relationship” is tweaked by creating a direct employer-employee relationship between the contractor and the worker. However. and (b) A contractual relationship between the principal and the contractor as governed by the provisions of the Civil Code. Trilateral relationship in contracting arrangements. no employer-employee relationship exists between the worker and the contractor. on as many levels and tiers as it possibly can. contractors also farm-out through smaller contracting agencies the labor for the project the principal contracted them. Under DO-18-A. that all responsibilities and safeguards provided for in this department order shall only apply to the last three participating entities in the subcontracting system. which DOLE claims will provide a solution to the problems on job security posed by contracting and subcontracting. if one of the parties in the “trilateral relationship” are found to be practicing “laboronly contracting”. However. Further. the trilateral relationship as purported in the department order “cascades”. The “trilateral relationship” delineates the kinds of relationship and liabilities arising from such arrangement. “Section 5. including the failure to pay wages. shifting away the responsibilities from the principal employer. In the event of any violation of any provision of the Labor Code. providing them a regularized status. Solidary liability. DO-18-A deserves a second and closer look. the “trilateral relationship” proves disadvantageous to the worker. . this is the major difference of the new DO-18-A from DO-18-2002. by the simple practice of multi-level subcontracting (as evinced by the ETON Tragedy. work or service being contracted. and between the worker and the principal employer. Under the previous department order. According to the Bureau of Labor Relations. as it is not able to simulate what is commonly practiced in the industry which is multi-level subcontracting. In DO-18-2002. the concept of the “Trilateral Relationship” between principal. Meaning. the new employer-employee relationship between the worker and the contractor serves to diminish the liability of the principal and downplay his accountability with the worker. What are DO-18-A’s salient provisions? 1. where Eton Properties. as regard to liabilities. contractor and contractual employee was introduced. provisioning for further safeguards for contractual employees. In legitimate contracting or subcontracting arrangement there exists: (a) An employer-employee relationship between the contractor and the employees it engaged to perform the specific job. and this set-up can go on. to the extent of the work performed under the employment contract. while as with DO-18-2002. Liability will thus not attach or may be easily evaded. creating a direct employer-employee relationship between the contractor and contractual employee and protecting workers and principal employers from fly-by-night contractors. created a multiple subcontracting chain composed of 19 contractors for one construction project). According to the Department of Labor and Employment. This goes without saying. there exists a solidary liability on the part of the principal and the contractor for purposes of enforcing the provisions of the Labor Code and other social legislation. Further. BLR explains that the relationship will affect the contractor or employer next preceding those with a trilateral relationship. DO-18-A ensures solidary liability of both contractor and principal in occasions of violation of the labor code and the prohibitions in the department order itself.all department orders.

3. . While as compared to DO-18-2002. provided the provisions of these Rules are observed. Collective bargaining and/or Industry Tripartite Council (ITC). 4. BLR elucidates on the implementation of DO-18-A through an elementary honesty system. at the end of the day. 32 and 33 provides an ambiguous amount of power to the TIPC to regulate the functions which may or may not be deemed as inherent. on the functions or processes that can or cannot be contracted out to a legitimate contractor. By including cooperatives under Sec 14. and the TIPC. under the DO 18-A. Section 33. DO-18-A alarmingly does not prohibit contracting through “in-house” agencies. the BLR in its discussion actually confesses to not having a system to support such an undertaking and actually encourages mere self-assessment and incentivized compliance. DO-18-A is now mum on the wildly propagated practice and excluded it from its prohibitions. making the monitoring system essentially inutile. With a poor ratio of only 193 inspectors to 783. Sec. of inspectors. compliance with is not mandatory. 2.j) the contracting out of inherent functions. through a voluntary code of good practices. Section 23 of the department order only provides delisting and cancellation of registration as immediate penalty for erring contractors. while DO-18-A provides rules on the detection of non-compliance with the Labor Code and other prohibitions through rigid surprise inspections. or under Sec.In fine. unless the contractor is proven to be practicing LOC. inspection for one company may only be done every sixteen (16) years . fastening its scheme on an ILO study that concludes that with the current no. Nothing herein shall preclude the parties in collective bargaining agreements (CBAs) to determine the functions that can or cannot be farmed out or contracted out to a legitimate contractor. However. the principal is freed or liberated from its obligations from the violations of rights on contractual workers. For example while Sec. under DO 18-02. 6). the prerogative to comply and to determine what should be complied with still largely remains with the contractor. the employer. DO-18-A becomes further divisive. While it may be said that DO-18-A unlike DO-18-2002 purports to provide the measures to be undertaken in cases of violations of the labor code and sections of the department order. which in practice is very difficult due to the tedious legal process that involves it. As a result. In industries with established Industry Tripartite Councils (ITCs). including the terms and conditions of the workers’ engagement under the arrangement. and noncompliance won’t be punitive in nature. They plan to provide a Seal of Tripartite Excellence on contractors who voluntarily comply with the stipulations of the department order. DO-18-A re-lists more prohibitions and practices that are against good customs and public policies. the tripartite partners may agree. “in-house” agencies are considered Labor Only Contracting (LOC). 7(3.000 establishments nationwide. Contracting through “in-house agencies” was outrightly mentioned as one of the prohibitions on contracting and subcontracting in DO-18-2002 (Sec. In fact. 7 (1) prohibits the reduction of the bargaining unit. in favor of workers. DO18-A still fails to provide punitive measures in cases of such breach. Also. DO-18-A is all talk and no walk.

once the . DO-18-A was drafted and issued to supply what DO-1802 lack with regard to protection of the rights of industry bigwigs who engage in contracting. as this would create an absurdity where employees are bargaining with their co-employees. DO-18-A basically leaves no rights for workers while rendering the most capacitated entity to compensate the worker in cases of breach of the labor code and this DO. DO-18-A mostly serves to protect the interests of principal employers. the workers in a cooperative are not allowed to form unions. big companies are further emboldened and encouraged to practice contracting. How does DO-18-A step on the rights of workers? 2. the latter is wholly liberated from all liability. it is the principal employer that is shielded from all legal responsibilities and accountabilities that might arise from farming out its functions.000 ( three million pesos) in order to be a registered and recognized contractor. contrary to the stipulations on the department order of the rights granted to them. Through such safeguards.000. without any liability. that such provision was created to avoid a similar instance that occurred with Coca-Cola Bottlers Philippines Inc. subcontracting and outsourcing. the contractor. DOLE professes that this department order was made to “equally afford protection to the principal or the “user enterprise”. absolves the principal employer from any kind of accountability over the contracted employee. DO-18-A supersedes DO-18-2002 and is now rendered the authority in the implementation of contracting and subcontracting. As earlier mentioned. subcontracting and outsourcing. This blatant protection of the interests of principal employers is impliedly admitted to by the BLR when it mentioned in the discussion for DO-18-A. DO-18-A coddles the principal employers and leaves the contractual worker for dead. except only under the circumstance where such contractor is proven to be a labor-only contractor (LOC). transforming them into real. DO 18-A supplants that the employer-employee relationship will now strictly exist between the worker and the contractor which in effect further dilutes the already elusive relationship between the principal employer and the worker. 5. subcontracting and outsourcing with impunity. and the worker”. While the principal employer gains so much profit from contracting. What are its implications on other DOs/laws regarding contracting and subcontracting? 1. Further. its hands are immediately washed clean. as discussed in the forum conducted by the BLR on DO-18-A. since DO-18-A establishes the employeremployee relationship between the contractor and the contractual employee and not the principal employer. where it shouldered compensation for workers due to farming out of a project to a fly-by-night contractor. DOLE through DO 18-A.While cooperatives as are employees who compete with non-cooperative members by farming out cheaper labor. One of the highlights of DO-18-A which wasn’t present in DO-18-2002 is the requirement of a start-up capital of at least P3. Thus under DO-18-A. However. But in truth. legitimate contractors. requiring of them registration and register fee and a standardized “substantial capital” of at least 3 Million pushes the cooperatives to exhaust the business-side of the undertaking and pursue more profit. such provision was concocted in order to prevent cases in which the principal employers become bound to pay compensation for the workers due to incapacity of the contractor. However.

determining core and non-core functions are management prerogatives. Not DOLE or this department order will be the authority on such. as most of it are not mandatory but are merely reliant on the Service Agreement to be created between the employee and employer or the CBA to be signed in such cases where the workers are successfully able to unionize. DO-18-A paves the way for extensive contracting. 5.. Non-core functions are defined as those functions that may be legitimately contracted or outsourced by a company Under the Philippine Labor Code and DO-18-02. It relies on CBAs or its bestowed arbitrary authority to the TIPC to determine core and non-core functions that may be farmed-out or outsourced. legal due process takes a lengthy period of time. Given the very complicated task of unionizing and the meager statistics of unionized contractual employees. In practice. It creates and enforces no substantive rights. subcontracting and outsourcing therefore. Under contracting. effort and money which is burdensome for most workers. However. but regional/industrial tripartite councils as earlier mentioned. subcontracting and outsourcing. Further. DO-18-A merely mimics and reiterates the rights of workers as already established and stipulated in the Labor Code. DOLE DO 18-A is nothing but impending doom to workers’ rights to job security and right to unionize. At the end of . the mere reliance on an entirely legal process to seek remedy against blundering contractors and principal employers as DO-18-A presupposes is to an extent horrendous. in DO-18-A determination of core and non-core functions are no longer management prerogative but instead fall under the authority of the TIPC or are reliant on what will be negotiated in a CBA. the job security of regular employees as well as those employed under contractors are continually under the threat of violation and extinction. the legal battle ultimately falls on the shoulders of the worker individually. the acquisition of the rights provided to workers under DO-18-A fall on their power of to assert themselves. The contractor on the other hand will merely experience delisting and will only be required to register anew in order to be a legitimate contractor once again. Under such a premise mass lay-offs through “outsourcing” as done in Philippine Airlines recently (where three of its departments were outsourced) can be legitimately practiced. The mere statement of such benefits in the department order is in no way a guaranty that workers will finally get the economic benefits they need. DO-18-A creates a legal process in order for workers to receive redress for their grievances against contractors or principal employers. By protecting principal employers. 4. in reality. However.worker is disadvantaged. Also. It deceives the worker and makes it believe that the DOLE DO 18-A granted more rights. as its concern is limited to ascertaining legitimate contracting. will prove advantageous for no one else but big employers who are persistently expanding its list of functions eligible to be contracted or outsourced. The BLR admits to not caring about which functions will be considered “core” or “non-core” or “inherent” or “noninherent”. Further liberalizing the methods of determining core and non-core functions. 3.

which under the current state of Philippine labor. Further. DO-18-A only provides more leeway for principal employers to lay-off workers and union bust on the pretext that they will be regularized with the contractor or in-house agency. the unions who are allowed to engage in the dialogue. When all workers are provided for in tripartite councils are just token representations. or to employ unfair labor practices such as non-provision of benefits and non-payment of minimum wage. often used to coax workers to believing that their rights and interests are voiced-out. Tripartism creates nothing but a dangerous illusion that unities achieved through it have the seal and approval of workers despite its blatant disparity from what workers truly desire. It aims to present “good contractualization” which in any given case is still detrimental to the rights of workers to security of tenure. 33 and other sections is highly troublesome as we are not alien to the fact that at the height of BSP Circular 268. Affirming the role of the regional/industrial TIPCs gives . is a huge stone to carry. more and more regular employees will lose their jobs due to lay-offs. on the justification that outsourced employees remain to be regular workers due to the employer-employee relationship created by DO-18-A between worker and contractor. much like what happened in drafting this department order. Also. 7. Affirming the oversight power of TIPCs and legitimizing it through this department order. BLR openly admitted that DO-18-A was drafted to prevent legislation that will illlegalize contracting and subcontracting. doubt is cast on the effectivity of tripartism as a means of representing the workers. principal employers may continue to outsource vital and inherent functions. it is the interests of those big companies’ or capitalists’ that are taken into consideration. relegating regular workers to the contractor or in-house agency that might not provide an equal or higher wage. Given such a situation. reliance and provisioning of ambiguous authority to the TIPC as stipulated in Sec. where they will be burdened with the tasks of forming another union and re-bargaining for their rights. are unions who upon their assessment are willing and capable of capitulating or compromising the rights of the workers they claim to represent in favor of the employers. is merely at the mercy of his “user agreement” or contract with the principal employer. In what ways does DO-18-A strengthen tripartism? What are its implications? Given that only a very small part of the Philippine labor force is unionized. the Banking Industry Tripartite Council was more than liberal in their interpretation of what “inherent functions” were and enforced the farming-out of every single one of them. the worker is shackled to his employer who is the contractor. The ballooning reserve labor force will continue to place leverage on employers to depress wages. Because unions are few. will only provide TIPCs with more elbow room to assign liberal and pro-employer interpretations of this department order. Implementation of DO-18-A leads to further depression of wage Due to protection of the principal employers and other anti-worker policies that further entice principals to engage in contractualization. 6. who on the other hand. Tripartism is in fact. and a smaller number are federated and consolidated. Thus.the day. At the end of the day. There can never be such a thing as ethical contractualization. discriminately calling on a few unions to speak for the vast majority of other unionized and nonunionized workers do not seem representative.

as it dilutes each and every possible source of agitation for contractual employees. conjuring up a concept such as “ethical or good contractualization. their rights can be protected. By DOLE. subcontracting and outsourcing produces a cheap and abundant labor force which is an essential in neo-liberal globalization. by creating a department order that sugarcoats contactualization. it takes away another platform in the campaign against contractualization. Amend the labor code in such a way that will repeal the over and extensive power of the Secretary of the Department of Labor and Employments to issue department orders that are substantive in nature and assume the force of law. Labor flexibilization in fulfilling the neo-liberal agenda of the ongoing imperialist crisis can never be neutral.them the power to lord over ways of implementing wider contractualization in favor of employers at the dire expense of workers. Contractualization is the main aid in the fulfillment of this goal. deeper and wider in which to bury the Filipino worker The truth of the matter is. Labor flexibilization requires work organization and employment schemes to maximize profit gain. Demand the repeal of DO-18-A Lobby for a law that will illegalize contracting and subcontracting. and that is the interest of the imperialists. Labor flexibilization garners super profits for capitalists but in turn exploits workers. contractualization will always be a scheme to defeat the Filipino labor force and treat them as cash cows for big capitalists and monocapitalists. How do we stand against DO-18-A? Contractualization will remain to be the hand of the government in trying to maximize labor flexibilization coalescing with deregulation. DOLE’s issuance of DO-18-A is nothing but mere politicking to coax workers into believing that in contractualization. allies of labor organizations. liberalization and privatization. and labor advocates remains to be the wager of a steadfast and vigilant fight against labor flexibilization and all its schemes. Therefore the task at hand as workers. as mentioned earlier.” it attempts to takes away the focus of workers from the real order of the day which is the fight against labor flexibilization. It takes the fight of unions for security of tenure to a whole new ante. In whatever form or name. It is highly biased and protects only one interest. Unionize more industries and sectors Launch fora and symposia on the effects of DO-18-A and contractualization in a union and industry level Join mobilizations against contractualization . Support the Regular Employment Bill 3. 5. 4. Labor flexibilization through contracting. It will always be executed at the expense of workers in various countries and various industries who fall prey to their governments who act in cahoots with big capitalists to depress labor. poses barriers to unionization and raises the rate of unemployment. We must: 1. while at the same time digging a whole. members of workers’ associations and unions. there is no “good contractualization”. 6. By seemingly “ensuring” economic benefits for workers and security of tenure. 2.

It is the task of every union member. . to relinquish the fight for security of tenure and to serve and secure the profit-gaining interests of employers. so must we be more vigilant and persevering in attempting to shed light on the matter. to settle for meager benefits. While DOLE launches more elaborate tactics to put the workers in the dark. to see through it pretenses and expose it for what it is for. employee and organizer to see the perils that DO-18-A hold. a ploy to deceive Filipino workers into thinking that contractualization is not the enemy.

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