00:38:54 – 00:58:21 - TRISHA CRUZ
cessation of operations of establishment or undertaking not due
What is important is Section 13
D0 174 - 2017
Section 13. Effect of Termination of Employment. The
termination of employment of the contractor’s/ subcontractor’s
employee prior to the expiration of the service agreement shall
be governed by Article 297, 298 and 299 of the Labor Code.
In case the termination of employment is caused by pre-
termination if the service agreement not due to authorized
causes under Article 298, the right of the contractor’s/
subcontractor’s employee to unpaid wages and other unpaid
benefits including unremitted legal mandatory contributions, e.g.,
SSS, PhilHealth, Pag-IBIG, ECC, shall be borne by the party at
fault, without prejudice to the solidary liability of the parties to
the service Agreement.
Where the termination results from the expiration of the service
agreement, or from the completion of the phase of the job or
work which the employee is engaged, the latter may opt to wait
for re-employment within three (3) months to resign and transfer
to another contractor-employer. Failure of the contractor to
provide new employment for the employee shall entitle the latter
to payment of separation benefits as may be provided by law or
the service agreement, whichever is higher, without prejudice to
his/her entitlement to completion bonuses or other emoluments,
including retirement benefits whenever applicable. The mere
expiration of the Service Agreement shall not be deemed as
termination of employment of the contractor’s/ subcontractor’s
employees who are regular employees of the latter.
There are some instances where the service contract is
terminated before the expiration date.
Example: The service contract is good for 1 year and before the 1
year it was cancelled that causes a lot of problem what are you
supposed to do if that’s your only client, where are you supposed
to put the workers, so you’re forced to pay.
2nd paragraph: In case the termination of employment is caused
by pre-termination if the service agreement not due to authorized
causes under Article 298, the right of the contractor’s/
subcontractor’s employee to unpaid wages and other unpaid
benefits including unremitted legal mandatory contributions, e.g.,
SSS, PhilHealth, Pag-IBIG, ECC, shall be borne by the party at
fault, without prejudice to the solidary liability of the parties to
the service Agreement.
Article 298. Closure of establishment and reduction of
personnel. The employer may also terminate the employment of
any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
Discussion: The one shall be liable is the party at fault. This is the
difficult part because no principal will admit that they are at fault.
3rd paragraph: Where the termination results from the expiration
of the service agreement, or from the completion of the phase of
the job or work which the employee is engaged, the latter may
opt to wait for re-employment within three (3) months to resign
and transfer to another contractor-employer. Failure of the
contractor to provide new employment for the employee shall
entitle the latter to payment of separation benefits as may be
provided by law or the service agreement, whichever is higher,
without prejudice to his/her entitlement to completion bonuses or
other emoluments, including retirement benefits whenever
applicable. The mere expiration of the Service Agreement shall
not be deemed as termination of employment of the contractor’s/
subcontractor’s employees who are regular employees of the
latter.
Discussion: In this case the contract is already expired.
So you can force your employer when there is no longer a
employer-employee relationship. So here within the 3 months
you can either resign or wait. If the employer doesn’t assign you
to another job within the 3 months then he is entitled to provide
for separation pay.
Section 14. Mandatory Registraton and Registry of Legitimate
Contractors. Consistent with the authority of the secretary of
labor and employment to restrict or prohibit the contracting out
of labor to protect the rights of workers, it shall be mandatory for
all persons or entities acting as contrators to register with the
regional office of the department of Labor and Employment
(DOLE) where it principally operates.
Failure to register shall give rise to the presumption that the
contractor is engaged in Labor- only contracting.
Section 15. Requirements for Registration. The verified
application for registration as a contractor shall be filed at the
DOLE Regional Office of the region where it seeks to principally
operate. Whenever applicable , the applicant shall provide in
the application from the following information:
a) The name and business address of the applicant and
the areas where it seeks to operate;
b) The names and addresses of officers, if the applicant is
a corporation, partnership, cooperative or a labor
organization;
c) The nature of the applicant’s business and the
industry or industries where the applicant seeks to
operate;
d) The number of regular workers and the total
workforce;
 e) The list of clients, if any, the number of personnel
assigned to each client, if any, and the service
provided to the client;
f) The description of the phases of the contract,
including the number of employees covered in each
phase, where appropriate; and
g) Proof of compliance with substantial capital
requirement as defined in Section 3 (L) of these Rules.
The application shall be supported by:
a) A certified true copy of a certificate of registration of
firm or business name from the Securities and
Exchange Commission (SEC), Department of Trade and
Industry (DTI), Cooperative Development Authority
(CDA), or from the DOLE if the applicant is a labor
organization;
b) A certified true copy of the license or business permit
issued by the local government unit or units where the
contractor operates;
c) A certified listing, with proof of ownership or lease
contract, of facilities, tools, equipment, premises
implements, machineries and work premises, that are
actually and directly used by the contractor in the
performance or completion of the specific job or work
contracted out. In addition, the applicant shall submit
a photo of the office building and premises where it
hold office;
d) A copy of audited financial statements if the applicant
is a corporation, partnership, cooperative, or a labor
organization, or a copy of the latest ITR if the applicant
is a sole proprietorship; and
e) A sworn disclosure that the registrant, its officer and
owners or principal stockholders or any of them, has
not been operating or previously operating as a
contractor under a different business name or entity
or with pending cases of violations of these Rules
and/or labor standards, or with a cancelled
registration. In case any of the foregoing has a
pending case, a copy of the complaint and the latest
status of the case shall be attached.
Discussion: The existence of the certificate of registration issued
by the Department of Labor is a presumption that you are a
legitimate contractor but that presumption can be overridden by
some indication that you are not a legitimate job contractor.
Example: In your application, you wrote down that you have
sufficient capital, you have the necessary equipment but upon
the issuance of the certificate you sold all the equipment, you
cease to be a legitimate contractor.
Paid- up Capital
There is a paid up capital of 3million (but I think he meant 5
million that is what is stated in DO 174)
Under the corporation it is authorized capital stock. This is the
capital that tell the government that this the capital I liked to use
to have this kind of business.
Example: 1 Million is the authorized capital stock, under the law
25% of that has to be subscribed. So in the 250,000 the
corporation assure that this will be paid. So 25% of 250,000 is
62,500 that’s the paid capital, the actual money you are going to
pay to the bank.
The paid-up capital is 3(5)million in order for you to be issued as
a job contractor.
Grounds for the cancellation of Registration
Section 23. Grounds for cancellation for Registration. The
regional director shall, upon a verified complaint, cancel or
revoke the registration of a contractor after due process,
based on any of the following grounds:
a) Misrepresentation of facts in the application;
b) Submission of falsified or tampered application or
supporting documents to the application for
registration;
c) Non-submission of service agreement between the
principal and the contractor when the required to
do so;
d) Non-submission of the required Semi-Annual reports
as provided in Section 22 (Semi-Annual reporting)
thereof;
e) Final findings that the contractor has engaged in
labor-only contracting and/or other illicit forms or
employment arrangements as provided in section 6
hereof:
f) Non-compliance with labor standards and working
conditions;
g) Findings of violation of Section 10
(Rights of contractor’s employees), and Section 11
(Required Contract);
h) Non-compliance with SSS, the HDMF, Pag-IBIG,
PhilHealth, and ECC Laws;
i) Collecting any fees not authorized by law and other
applicable rules and regulations ; and
j) Violations of any provisions of the Labor Code.
Discussion: The principal can require the man-power agency or
contractor to submit a copy of the payroll so that when you are
made solidarily liable you have some documents to prove that
you are fully paid or when the contractor does not pay, then
cancel your contract with the man-power agency.