Duterte orders clampdown on illegal contracting and subcontracting of workers

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Metro Manila (CNN Philippines, May 1) — President Rodrigo Duterte signed an executive order clamping down on illegal contracting and ensuring worker rights to security of tenure on Tuesday, Labor Day.

"I remain firm in my commitment to end 'endo' and illegal contractualization," Duterte said in his speech before businessmen in Cebu City.

Labor groups have criticized the practice of what they call "endo" or "end of contract." Endo happens when employees are let go after five months so that they will not be regularized. This arrangement will free up the employer from the cost of regular employee benefits. The Labor Code require employers to regularize employees on the sixth month.

Duterte pointed out the EO's protection on security of tenure under Section 2.

It reads: "Contracting or sub-contracting, when undertaken to circumvent the workers' right to security of tenure, self organization, and collective bargaining and peaceful concerted activities pursuant to the 1987 constitution, is hereby strictly prohibited."

"I hope that with all that I can do legally, there could be an impact sa inyong reklamong non-security of tenure," Duterte said.

Security of tenure refers to the right of employees not to be dismissed or removed without just and authorized cause. The executive order reiterates the Department of Labor and Employment (DOLE) Order No. 174 issued in 2017, which prohibits the dismissal of employees without a valid reason from the employer.

Labor Secretary Silvestre Bello III clarified the EO does not ban contracting, only unlawful contracting and subcontracting.

He said contracting is allowed for seasonal jobs and project-based work.

The Employers Confederation Of The Philippines (ECOP), while saying the EO balances the concerns of employers and employees, expressed concern over the executive order's wording.

"ECOP finds worrisome the exact definition of 'security of tenure' among others and the possible loose or abused rules of engagement in the enforcement of certain prohibitions," it said in a statement.

The executive order will take effect 15 days after publication.

Does EO address worker concerns?

Duterte also ordered the Labor Department to submit a list of companies suspected of engaging in labor-only contracting commonly known as contractualization.

"Your days are numbered, " the President warned non-compliant employers.

He added, "I warned you before and I'll warn you again, stop endo and illegal contractualization. I will see to it that our laws are strictly enforced. The government will not rest until we end this shameful labor practice."

Labor-only contracting is already prohibited in Labor Code and DOLE Order 174, or the implementing rules on three articles of the Labor Code

Contractualization refers to the outsourcing of work that is essential or a key role in a business operation.

It also refers to the hiring of employees from a contracting agency — for example a manpower agency that supplies security guards to companies — that does not have substantial capital or investments in tools and supervision.

Some lawmakers expressed apprehension over the EO, saying existing labor laws already contain the prohibition.

Bayan Muna Representative Carlos Zarate said the Duterte administration should sign an order prohibiting all forms of job contracting.

"Walang silbi ang EO na nilagdaan dahil ang pagbabawal sa labor-only contracting ay nasa labor code na. Gusto lang ng EO na ito ay pahupain ang galit ng mga manggagawa sa pagtalikod ni Pangulong Duterte sa pangako nyang wakasan ang endo at kontraktwalisasyon," he said in a statement.

[Translation: The EO has no use because the prohibition of labor-only contractualization is already in the labor code. The EO was signed to appease the rage of workers against Dutete's inability to end endo and contractualization.]

Anakpawis Representative Ariel Casilao, meanwhile, said the existing laws against labor-only contractualization have been continuously circumvented and abused by business owners.

He added the EO does not address the concerns of workers who wants to scrap the hiring through contracting agencies.

"What the workers demanded is total prohibition of contractualization by virtue of direct hiring... Dapat nailagay sana sa EO na pangunahing prinsipyo ng gobyerno ang direct hiring as a basic principle of employment," he said in a statement.

Labor law expert Ed Chico said DOLE Order 174 is merely a reiteration of previous department orders.

He added the EO does not address the real problem, which is endo.

"Actually yun nga ang problema ko kasi ang EO ng Pangulo, reiteration of what the Labor Code already provides, of existing DOs (department Orders) already issued by DOLE. Unfortunately the EO does not address the issue of '555,'" he told CNN Philippines.

"555" is a form of endo wherein an employee is terminated on their fifth month on the job to deny benefits given to regular employees who reach their sixth month on the job.

Labor code revision

Following the signing of the EO, the President also urged Congress to do its part to help workers by entirely revising the "outdated" Labor Code.

"I believe that in order to implement an effective and lasting solution to the problems brought upon by contractualization, Congress needs to enact a law amending the labor code... An executive order is not enough," he said.

Chico supported Duterte's call, saying the president can only prohibit labor-only contracting, but he cannot impose sanctions.

"This is something only Congress can do. So congress should be able to come up with the necessary legislation that will impose the necessary penalties. In fact, pwedeng gawing penal in nature so the law will have teeth," he said.

A bill to end endo has been passed at the House of Representatives, while the counterpart bill is still pending in the Senate.

Senate Labor Committee Chair Joel Villanueva said the Senate will push through with enacting a law that will end labor abuses and promote workers' right to security of tenure.

"Let me emphasize that addressing the abuses and ensuring compliance by businesses with labor standards and occupational safety and health standards through clear and fair legislation is not anti-business," he said in a statement.