IMPLEMENTING ARTICLES 106 TO 109

OF THE LABOR CODE

Comparison of LOC Definitions from the
Omnibus Rules Implementing Labor Code to E0 51

JAY S. ALBARECE
Regional Legal Counsel
ALU- TUCP Northern Mindanao Region
The 1987 Constitution
 PD 444
or the Labor Code of the Philippines
PD 442 or The Labor Code of the Philippines

Article 106. Contractor or sub-contractor. Whenever an employer enters into a

contract with another person for the performance of the former's work, the employees
of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance
with the provisions of this Code.

In the event that the contractor or sub-contractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or sub-contractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
PD 442 or The Labor Code of the Philippines
Article 106. Contractor or sub-contractor.

The Secretary of Labor and Employment may, by appropriate regulations, restrict

or prohibit the contracting out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting as well as differentiations within these types of
contracting, and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
PD 442 or The Labor Code of the Philippines
Article 106. Contractor or sub-contractor.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
PD 442 or The Labor Code of the Philippines
A = No Substantial Capital
B = No Substantial Investment in the form of tools, equipments, etc.
C = Workers placed are performing activities which are directly related to the principal
business of the

LOC = (A v B) & C
PD 442 or The Labor Code of the Philippines
• Employees of the contractor and subcontractor shall be paid wages and benefits in
accordancce with the Labor Code.
• Principal employer is jointly and severally liable with the contractor or subcontractor
in case the latter fails to pays the wages of its employees.
• "labor-only" contracting is where the contractor does not have substantial
capital or investment AND the workers recruited are performing activities
which are directly related to the principal business of the emlployer.
• The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers, or the violation or
circumvention of any provision of this Code.
• The SOLE may make appropriate distinctions between labor-only contracting as well
as differentiations within the types of contracting, and determine who among the
parties involved shall be considered the employer.
 Can dolphins file a case in court?

Yes, but through their stewards per ruling of the

Supreme Court in the case of Resident Marine
Mammals of the Protected Seascape Tañon
Strait et. al. V. Secretary Angelo Reyes et al., No.
G.R. No. 181527.
Can the Union question the legitimacy of a labor contractor
and ask for the regularization of contractual workers?
No, per the SC Decision in CAGAYAN ELECTRIC POWER & LIGHT
COMPANY, INC. (CEPALCO) and CEPALCO ENERGY SERVICES
CORPORATION (CESCO), formerly CEPALCO ENERGY SERVICES &
TRADING CORPORATION (CESTCO), VS. CEPALCO EMPLOYEE'S LABOR
UNION-ASSOCIATED LABOR UNIONS-TRADE UNION CONGRESS OF
THE PHILIPPINES (TUCP), RESPONDENT, in G.R. No. 211015 and G.R.
No. 213835, dated June 20, 2016.
[ G.R. No. 211015, June 20, 2016 ]

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND

CEPALCO ENERGY SERVICES CORPORATION (CESCO), FORMERLY CEPALCO
ENERGY SERVICES & TRADING CORPORATION (CESTCO), PETITIONERS, VS.
CEPALCO EMPLOYEE'S LABOR UNION-ASSOCIATED LABOR UNIONS-TRADE
UNION CONGRESS OF THE PHILIPPINES (TUCP), RESPONDENT.

[G.R. No. 213835]

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO
ENERGY SERVICES CORPORATION (CESCO), FORMERLY CEPALCO ENERGY
SERVICES & TRADING CORPORATION (CESTCO), PETITIONERS, VS. CEPALCO
EMPLOYEE'S LABOR UNION-ASSOCIATED LABOR UNIONS-TRADE UNION
CONGRESS OF THE PHILIPPINES (TUCP), RESPONDENT.
The case:
These are petitions for review on certiorari assailing the CA decisions
absolving petitioners CEPALCO and CEPALCO Energy Services Corporation
(CESCO), formerly CEPALCO Energy Services & Trading Corporation, from
the charges of Unfair Labor Practice (ULP) filed by respondent CEPALCO
Employee's Labor Union-Associated Labor Unions-Trade Union Congress of
the Philippines, but nonetheless, pronouncing that CESCO was engaged in
labor-only contracting and that, in consequence, the latter's employees are
actually the regular employees of CEPALCO in the same manner and extent
as if they were directly employed by CEPALCO.
The facts of the case and Union's contention:
On February 19, 2007, CEPALCO and CESCO entered into a Contract for
Meter Reading Work. As a result, several employees and union members
of CEPALCO were either relieved, assigned in floating positions, and
replaced with CESCO workers, prompting respondent to file a complaint
for ULP against petitioners as the intention was for CEPALCO to evade its
responsibilities under the CBA and labor laws, and that it would ultimately
result in the dissipation of respondent's membership in CEPALCO, thus
violative of Article 259 (c) of the Labor Code. It further averred that for
engaging in labor-only contracting, the workers placed by CESCO must be
deemed regular rank-and-file employees of CEPALCO.
The Facts:

Among others, petitioner CEPALCO argued that the case is only a labor
standards issue, and that respondent is not the proper party to raise the
issue regarding the status of CESCO's employees and, hence, cannot seek
that the latter be declared as CEPALCO's regular employees.
The Labor Arbiter’s Decision:
In August 20, 2008, the Labor Arbiter (LA) dismissed the complaint for
lack of merit. The LA found that petitioners have shown by substantial
evidence that CESCO carries on an independent business of contracting
services, in this case for CEPALCO's meter-reading work, and that CESCO
has an authorized capital stock of P100,000,000.00, as well as equipment
and materials necessary to carry out its business. Also, there is no factual
basis to say that CEPALCO committed ULP as there can be no splitting or
erosion of the existing rank-and-file bargaining unit that negates
interference with the exercise of CEPALCO workers' right to self-organize.
The NLRC’s Decision:

On appeal by respondent, the National Labor Relations Commission

(NLRC) affirmed the LA's ruling in toto, finding that the evidence proffered
by respondent proved inadequate in establishing that the service contract
amounted to the interference of the right of the union members to self-
organization and collective bargaining. Thus, respondent union filed a
Petition fore Certiorari with the Court of Appeals.
Pending resolution of its petition with the CA, or on January 5, 2010,
CEPALCO and CESCO entered into another Contract of Service, this time for
the warehousing works of CEPALCO. Alleging that three (3) union members
were replaced by CESCO workers, respondent filed another complaint for
ULP against petitioners, similarly decrying that CEPALCO was engaged in
labor-only contracting and, thus, committed ULP. The LA dismissed the
case for lack of merit, citing its earlier decision and applying the principle
of res judicata under the rule on conclusiveness of judgment. At any rate,
it found that respondent failed to present substantial evidence that
CEPALCO's contracting out of the warehousing works constituted ULP.
Respondent Union also elevated the case to the Court of Appeals.
The CA Decision:

The CA partially granted both respondent's certiorari petition and reversed

and set aside the assailed NLRC issuances. The CA found that CESCO was
engaged in labor-only contracting but found no substantial evidence that
CEPALCO was engaged in ULP, there being no showing that when it
contracted out the meter-reading activities to CESCO, CEPALCO was
motivated by ill will, bad faith or malice, or that it was aimed at interfering
with its employees' right to self-organize.
Issue before the SC Court:

Among others, petitioner asked the question:

Is respondent a party-in-interest given that the CA's declaration that

CESCO's employees of CESCO are considered regular employees will only
benefit said employees who are not impleaded in these casess
On the real-party in interest:
Petitioners correctly argue that respondent is not a real party-in-
interest and hence, had no legal standing insofar as these matters are
concerned. This is because respondent failed to demonstrate how it stands
to be benefited or injured by a judgment on the same, or that any personal
or direct injury would be sustained by it if these reliefs were not granted.
If at all, it would be the employees of CESCO who are entitled to seek
the foregoing reliefs since in cases of labor-only contracting, "the person or
intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him."
Disposition:

Thus, as prayed for by petitioners, the Court must set aside the portions
of the assailed CA Decisions declaring: (a) the workers hired by CESCO,
pursuant to the contracts subject of these cases, as regular employees of
CEPALCO; and (b) the latter responsible to said workers in the same
manner and extent as if they were directly employed by it. This
pronouncement not only squares with the rules on real party-in-interest
and legal standing, but also with the precept that no one shall be affected
by any proceeding to which he is a stranger, and that strangers to a case
are not bound by any judgment rendered by the court.
Disposition:

WHEREFORE, the petitions are PARTLY GRANTED. The portions of the

Decisions and Resolutions of the Court of Appeals (CA) in CA-G.R. SP No.
03169-MIN and CA-G.R. SP No. 04296-MIN declaring that the workers
hired by CESCO, pursuant to the contracts subject of these cases, are
regular employees of CEPALCO, and that the latter is responsible to said
workers in the same manner and extent as if those workers were directly
employed by CEPALCO are hereby DELETED The rest of the CA Decisions
stand.
THE IMPLEMENTING DO's
D.O.VOLUTION

DO 3 - 2001 (Sec. Sto. Tomas)

REVOKING DEPARTMENT ORDER NO. 10, SERIES OF 1997, 
AND CONTINUING TO PROHIBIT LABOR-ONLY CONTRACTING

DO 10 -1997 (Sec. Quisumbing)

New Rule implementing Articles 106 to 109 of
Book III of the Labor Code
May 8, 2001
Omnibus Rules Implementing The May 30, 1997
Labor Code of the Philippines

Jan. 19, 1975/

May 27, 1988

Labor Code of the Philippines

May 1, 1974
D.O.VOLUTION

DO 174 - 2017
RULES IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, AS AMENDED

DO 18-A - 2011 March 16, 2017

RULES IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, AS AMENDED
November 14, 2011

DO 18 - 2002
RULES IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, AS AMENDED
February 21, 2002
There is also EO 51 issued by President Duterte during the Labor
Day Celebrations
on May 1, 2018
Is a contractor presumed legitimate?

No. The law presumes a contractor to be a labor-only contractor

and the employees are not expected to prove the negative fact that
the contractor is a labor-only contractor (PETRON CORPORATION, VS.
ARMZ CABERTE, G.R. No. 182255, G.R. No. 182255, June 15, 2015)
Is a contractor presumed legitimate?
Yes, if it is registered with the DOLE. The absence of registration
merely gives rise to the presumption that the contractor is engaged
in labor-only contracting. Conversely, in the absence of evidence to
the contrary, flowing from the presumption of regularity in the
performance of official functions, the existence of registration in
favor of a contractor is a strong badge of legitimacy in favor of the
contractor. (CONSOLIDATED BUILDING MAINTENANCE, INC. VS.
ROLANDO ASPREC, JR., et.al, G.R. No. 217301G.R. No. 217301, June
06, 2018)
Omnibus Rules Implementing the Labor Code
BOOK THREE, Conditions of Employment
RULE VIII, Payment of Wages

SECTION 8. Job Contracting. — There is job contracting permissible under the Code if
the following conditions are met:

(a) The contractor carries on an independent business and undertakes the

contract work on his own account 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.
cralaw
Omnibus Rules Implementing the Labor Code
BOOK THREE, Conditions of Employment
RULE VIII, Payment of Wages

SECTION 9. Labor-only contracting. — (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:

(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
Omnibus Rules Implementing the Labor Code
BOOK THREE, Conditions of Employment
RULE VIII, Payment of Wages

SECTION 9. Labor-only contracting. — Xxxx .

(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent as
if the latter were directly employed by him.

(c) For cases not falling under this Rule, the Secretary of Labor and Employment
shall determine through appropriate orders whether or not the contracting out
of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
Omnibus Rules Implementing the Labor Code
• Contracting is permitted if contractor carries out and independent business
under his own responsibility AND has substantial capital and investment

• A person who supplies labor is deemed deemed labor-only

contracting if he does not have substantial capital or investment
AND the workers recruited or supplied are performing activities
which are necessary to the business or operations of the principal

• Labor-only contractor is a mere agent or intermediary of the principal

• SOLE may prescribe conditions and restrictions

Did Sen. Herrera and Cong. Veloso author the law
allowing labor-only contracting in the country?
Did Sen. Herrera and Cong. Veloso author the law
allowing labor-only contracting in the country?

They did not. They authored RA 6715, which has

nothing to do with Art. 106 to 109 of PD 444.
 Herrera-Veloso Law
• Republic Act No. 6715
• March 2, 1989
• AN ACT TO EXTEND PROTECTION TO LABOR, STRENGTHEN THE CONSTITUTIONAL RIGHTS OF
WORKERS TO SELF-ORGANIZATION, COLLECTIVE BARGAINING AND PEACEFUL CONCERTED
ACTIVITIES, FOSTER INDUSTRIAL PEACE AND HARMONY, PROMOTE THE PREFERENTIAL USE OF
VOLUNTARY MODES OF SETTLING LABOR DISPUTES, AND REORGANIZE THE NATIONAL LABOR
RELATIONS COMMISSION, AMENDING FOR THESE PURPOSES CERTAIN PROVISIONS OF
PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF
THE PHILIPPINES, APPROPRIATING FUNDS THEREFORE AND FOR OTHER PURPOSES
• 40 Sections amending the PD 444
• Not one section deals with Contracting or Sub-contracting
 DO 10-97
• New Rule Implementing Article 106 to 109 of Book III of the
Labor Code
• Issued by Secretary Quisumbing on March 30, 1997
• Added 25 new sections to the original 8 sections, to Rule VIII-
A to the Omnibus Rules Implementing the Labor Code.
 DO 10-97
• Introduced guiding principles, definition of terms,
enumeration of permissible contracting, list of prohibited
activities for being contrary to law public policy (i.e. cabo,
displacement of regular workers, taking advantage of the
economic situation or bargaining strength of contractual
workers, in-house, contracting out during a strike,
contracting-out results to splitting of bargaining unit, etc.),
need for contract, rights of contractual employees,
requirement for registration, etc.
 DO 10-97
• Solidary liability of principal in case contractor is unregistered
or has an expired registration, engaged in prohibited activities
or guilty of ULP.
• Workers of LOC deemed part of the bargaining unit
• Workers are placed on a “workers' pool” upon termination of
contract but not considered terminated for a period of six
months unless worker finds work elsewhere.
Why are they being blamed for the proliferation of
contracting and sub-contracting in the country?
Why are they being blamed for the proliferation of
contracting and sub-contracting in the country?

Because they authored RA 6715, which did

nothing about Art. 106 to 109 of PD 444.
DO 03- 01
 DO 03- 01
• Revoking Department Order No. 10, Series of 1997, and Continuing
to Prohibit Labor-Only Contracting
• Issued by Secretary Patricia Santo Tomas on May 8, 2001
• Consists of four sections only
 DO 03- 01

Section 1. Revocation of Department Order No. 10 . - Department

Order No. 10, Series of 1997, otherwise known as the rules implementing
Article 106 to 109 of Book III of the Labor Code, is hereby revoked effective
immediately.
 DO 03- 01
Section 2. Prohibition against labor-only contracting. - Labor-only
contracting is hereby declared prohibited. There is labor-only contracting
where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and the following
elements are present:
(a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own
account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or
subcontractor is performing activities, which are directly related to the main
business of the principal.
 DO 03- 01
Section 3. Non-impairment of existing contracts; Non-diminution of
benefits. Subject to the provisions of the Civil Code and existing
jurisprudence, nothing herein shall impair the rights or diminish the
benefits being enjoyed by parties to existing contracting or subcontracting
arrangements.

Section 4. Effectivity.  - This Order shall be effective fifteen days after

publication in two newspapers of general circulation until a new set of
guidelines implementing Articles 106 to 109 of the Labor Code shall have
been promulgated. Such new guidelines shall be formulated upon prior
consultations with all sectors concerned, particularly the Tripartite
Industrial Peace Council (TIPC) established under Executive Order No. 49,
Series of 1998. 
 Why is Labor Day celebrated on May 1?
1 May was chosen by trade union and labour movements to be
International Workers' Day to commemorate the 1886 Haymarket affair in
Chicago. In that year beginning on 1 May, there was a general strike for the
eight-hour workday. Violence during the demonstrations led to the deaths
of seven police officers and at least four civilians; sixty police officers were
injured, as were an unknown number of civilians.Hundreds of labour
leaders and sympathizers were later rounded-up and four were executed by
hanging, after a trial that was seen as a miscarriage of justice.The following
day on 5 May in Milwaukee Wisconsin, the state militia fired on a crowd of
strikers killing seven, including a schoolboy and a man feeding chickens in
his yard. (https://en.wikipedia.org/wiki/International_Workers%27_Day)
DO 18-02
 DO 18-02
• Rules Implementing Articles 106 to 109 of the Labor Code as
Amended
• Issued by SOLE Patricia A. Santo Tomas on February 21, 2002
• Has 20 sections.
 DO 18-02
• Has guiding principles, definition of terms, provisions on in-
house agency, a positive list of permissible contracting,
negative list of prohibited activities for being contrary to law
public policy (i.e. cabo, displacement of regular workers,
taking advantage of the economic situation or bargaining
strength of contractual workers, in-house, contracting out
during a strike, contracting-out results to splitting of
bargaining unit, etc.), rights of contractual workers after
termination of contract, requirements for registration,
cancellation of registration, etc.
 How much capital is substantial capital?

It is P3M under DO 18-A and P5M under DO-174. But in

CEPALCO case P100M is not substantial.
DO 18-A
 DO 18-A
• Rules Implementing Articles 106 to 109 of the Labor Code, as
Amended
• Issued by SOLE Rosalinda Dimapils-Baldoz on November 14, 2011
• Has 41 Sections
• Subtantial capital means at least P3,000,000.00
• Registry for Legitimate Labor Contractors
 Was Asiapro Cooperative declared a labor-only
contractor in the case Republic of the Philippines vs.
Asiapro, G.R. NO. 172101, November 23, 2007?
There was no such declaration. The issue is whether or not
the SSS and SSC has jurisdiction over the case given
Asiapro's defense that there is no employer-employee relations
between the cooperative and its members-workers.
 Is Asiapro Cooperative a labor-only contractor?

It depends. Necessesity and desirability of the activities

contracted, substantial investment in tools and equipments,
machineries, work-place, etc., and control and supervision over
the workers supplied, are the factors considered in
determinating the presence of LOC.
DO 174
 DO 174-A

• Rules Implementing Articles 106 to 109 of the Labor Code.

as Amended
• Repealed DO 18-A as Rule Implementing 106-109
• Paid-up capital increased to 5M from 3M
• Sec. 6, more illicit forms of employment arrangements
• Mentioned in-house cooperatives
• Increased Registration / renewal fee
What happened to the case of the 10,000 PLDT
contractual workers ordered regularized by Sec.
Bello?

Their case is now with the Supreme Court.

 What happened to the 10,000 workers ordered
regularized by Sec. Bello?

Most of the workers were terminated, others

were tranferred to other contractors, while some
were regularized.
PD 442 or The Labor Code of the Philippines
There is "labor-only" contracting where:

the person supplying workers does not have substantial

capital or investment in the form of tools, equipment,
machineries, work premises, among others,
and
the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer.
Omnibus Rules Implementing the Labor Code
[A]n employer shall be deemed to be engaged in labor-only
contracting where such person:

does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other
materials;
and

the workers recruited and placed by such person are performing

activities which are directly related to the principal business or
operations of the employer in which workers are
habitually employed.
 DO 10-97
Labor-only contracting" is an arrangement where the
contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a
principal and the following elements are present:

the contractor or subcontractor does not have substantial capital

or investment to actually perform the job, work or service
under its own account and responsibility; and

the employees recruited, supplied or placed by such contractor

or subcontractor are performing activities which are directly
related to the main business of the principal.
 DO 03-01
There is labor-only contracting where the contractor or
subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal, and the following elements are
present:
the contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its
own account and responsibility; and
the employees recruited, supplied or placed by such contractor or
subcontractor is performing activities, which are directly related to
the main business of the principal.
 DO 18-02
Labor-only contracting refer to an arrangement where the
contractor merely recruits, supplies or places workers and any
of the following elements are present:

the contractor does not have substantial capital or investment

which relates to the job, work or service to be performed
and the employees are performing activities which are directly
related to the main business of the principal; or

the contractor does not exercise the right to control over

the performance of the work of the contractual employee.
 DO 18-A
Labor only contracting shall refer to an arrangement where:

the contractor does not have substantial capital or investments in

the form of tools, equipment, machineries, work premises, among
others, and the employees are performing activities which are
usually necessary or desirable to the operation of the company,
directly related to the main business of the principal; or

the contractor does not exercise the right to control over the
performance of the work of the employee.
 DO 174
Labor-only contracting, refers to an arrangement where:

the contractor or subscontractor does not have substantial capital, or

does not have investments in the form of tools, equipment,
machineries, supervision, work premises, among others, and the
employees are performing activities which are directly related to the
main business operation of the principal;
or
the contractor or subcontractor does not exercise the right of control
over the performance of the work of the employee.
 Executive Order 51 - 2018

• IMPLEMENTING ARTICLE 106 OF THE LABOR CODE OF THE

PHILIPPINES, AS AMENDED, TO PROTECT THE RIGHT TO SECURITY
OF TENURE OF ALL WORKERS BASED ON SOCIAL JUSTICE IN THE
1987 PHILIPPINE CONSTITUTION

• Issued by President Rodrigo R. Duterte on May 1, 2018

Executive Order 51 - 2018
What happened to the Security of Tenure Bill or End
Endo Bill?

Vetoed. Dead.
What happened to the Security of Tenure Bill or End
Endo Bill?

Resurected as SB 806
 Senate Bill (SB) 1826
• The “Act Strengthening Workers' Right to Security of Tenure”
• Certified as Urgent by Pres. Duterte on September 25, 2019
• Passed by Senate on May 22, 2019
• Congress adopts Senate version on May 28, 2019
• Rejected by both labor and business groups on May 29, 2019
• Vetoed by President Duterte on July 26, 2019
• Its PDF copy has disappeared from the internet
• Refiled as SBN No. 806
SBN 806
PD 442 or The Labor Code of the Philippines
Article 106. Contractor or sub-contractor.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers
in the same manner and extent as if the latter were directly employed by him.
 SBN 806
Article 106. Labor-only contracting is prohibited.

There is labor-only contracting where the job contractor, whether licensed or not,
merely recruits and supplies, or places workers to a contractee regardless of
whether or not he/she has substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others,OR the workers recruited or
supplied or placed by such person are performing activities, which are directly
related to the principal business of such contractee OR are under the control and
supervision of the contractee. In such cases, the job-contactor shall be considered
merely an agent and teh contractee shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him/her.
Thank you