Security of Tenure Act

: then ot thos 25 JUL -2 P4:11 TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session RECENT SENATE S. No._ 7 INTRODUCED BY SENATOR IV EJERCITO AN ACT STRENGTHENING THE SECURITY OF TENURE OF WORKERS IN THE PRIVATE SECTOR, AMENDING FOR THE PURPOSE ARTICLES 106, 107, 108, 109, AND 294 OF PRESIDENTIAL DECREE NO. 442 OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, AS AMENDED EXPLANATORY NOTE For as long as anyone can remember, the Filipino worker has always struggled to make his status of employment regular or permanent. Every single day, he or she goes to work, there is a constant threat of being removed or instantly terminated at will by employers. This is an ordinary day in a life of a contractual worker--filled with uncertainty and anxiety. Somehow, some way, employers with no regards to the plight of workers seems to have circumvented the law in the name of profit and personal convenience. Short-term labor contracts have been the norm rather than the exception. Contractualization has become more prevalent than ever and has become not only a relief but an escape from responsibility. Today and recent years, contractualization has hid itself in a new name: "ENDO". ENDO has infamously forced itself in the Philippine lexicology stands for "end of contract". For employers, it is a period of employment. From the viewpoint and standpoint of an

employee or worker, it is borrowed time--a job with a death sentence. This bill seeks not only to bring comfort to the minds and hearts of our workers and employees but most importantly, assure them that their rights to security of tenure are protected. Labor-only contracting shall be prohibited and those found in violation of such, shall be heavily fined and their licenses revoked. To further this noble cause, the bill clarifies that regardless of employment status of an employee, his/her employment may only be terminated for a just or authorized cause. More so, it emphasizes that the expiration of service agreement between the principal and the contractor shall not be a valid cause for termination of employment. This measure provides for stricter requirements before a license may be granted to a would-be legitimate contractor. A bond shall be required to be furnished and a higher paid-up capital must be invested by a contractor who must also only engage in a specialized job, work, or service. Through this legislation, we aim not only to give protection to workers by strengthening their security of tenure. May this contribute to our fight against the injustices committed against workers and help alleviate them from poverty In view of the foregoing, the passage of this bill is earnestly sought. JV EJERCITO

TWENTIETH CONGRESS OF THE 25 JUL -2 P4:11 REPUBLIC OF THE PHILIPPINES First Regular Session SENATE s. No.*7 INTRODUCED BY SENATOR JV EJERCITO STRENGTHENING THE SECURITY OF TANURE OF WORKERS IN THE PRIVATE SECTOR, AMENDING FOR THE PURPOSE ARTICLES 106, 107, 108, 109, AND 294 OF PRESIDENTIAL DECREE NO. 442 OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, AS AMENDED Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Security of Tenure Act".

Sec. 2. Article 106 of the Labor Code is hereby amended as follows:

"Art. 106. [Contracter or subcontractor.] LEGITIMATE CONTRACTOR. - A LEGITIMATE CONTRACTOR REFERS TO ANY LICENSED PERSON OR ENTITY ENGAGED IN A LEGITIMATE CONTRACTING ARRANGEMENT PROVIDING SERVICES FOR A SPECIALIZED JOB OR UNDERTAKING UNDER A SERVICE AGREEMENT FOR A DEFINITE OR PREDETERMINED PERIOD, REGARDLESS SUCH WORK IS TO BE PERFORMED OR COMPLETED WITHIN OR OUTSIDE THE PREMISES OF THE PRINCIPAL.

THE SECRETARY OF LABOR AND EMPLOYMENT, BASED ON THE RECOMMENDATION OF THE NATIONAL TRIPARTITE INDUSTRIAL PEACE COUNCIL (NTIPC), UNDER ART. 290 (C) OF THE LABOR CODE, AS AMENDED, SHALL DETERMINE BY APPROPRIATE REGULATIONS SPECIFIC ACTIVITIES WHICH MAY BE CONTRACTED OUT. Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the LEGITIMATE contractor [and of the tatter's subcontractor, if any,] shall be paid in accordance with the provisions of this Code. In the event that the LEGITIMATE contractor [or subcontracter] fails to pay the wages AND OTHER WAGE- RELATED BENEFITS of his employees in accordance with this Code, the employer shall be jointly and severally liable with his LEGITIMATE contractor [or subcontractor] 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. [The Secretary of Labor and Empleyment 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 between appropriate distinctions labor only contracting and job 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.]

[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 empleyer. In such cases, the person or intermediary shall be considered merety 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.]"

Sec. 3. A new article, Article 106-A, is hereby inserted after Article 106, to read as

follows: "ART. 106-A. CONDITIONS OF LEGITIMATE CONTRACTING. CONTRACTING ALLOWED UNDER THE PRECEDING ARTICLE SHALL BE DONE ONLY IF THE PERSON OR ENTITY ACTING AS CONTRACTOR OBTAINS A LICENSE FROM THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND ONLY IF IT PERFORMS A JOB, WORK, OR SERVICE IDENTIFIED BY THE SECRETARY OF LABOR AND EMPLOYMENT, BASED ON THE RECOMMENDATION OF THE NATIONAL TRIPARTITE INDUSTRIAL PEACE COUNCIL (NTIPC), UNDER ART. 290 (C) OF THE LABOR CODE, AS AMENDED. SUCH LICENSE SHALL BE ISSUED AND MAINTAINED ONLY IF THE APPLICANT: A. HAS A PAID-UP CAPITAL OF AT LEAST TEN MILLION PESOS (P10,000,000.00), WHICH MAY BE INCREASED BY THE SECRETARY OF

LABOR AND EMPLOYMENT AS DEEMED APPROPRIATE THROUGH TRIPARTITE CONSULTATION; B. ENGAGES IN AN IDENTIFIED SPECIALIZED JOB, WORK, OR SERVICE WHICH ARE NOT DIRECTLY RELATED TO THE MAIN BUSINESS OF THE PRINCIPAL; C. FURNISHES A BOND UNDER ARTICLE 108 OF THIS CODE EQUAL TO TWENTY-FIVE PERCENT (25%) OF THE TOTAL CONTRACT COST; AND D. PAYS A LICENSE FEE OF FIFTY THOUSAND PESOS (P50,000.00), WHICH MAY BE INCREASED BY THE SECRETARY OF LABOR AND EMPLOYMENT AS DEEMED THROUGH TRIPARTITE APPROPRIATE CONSULTATION; THE LICENSE SHALL BE VALID FOR A PERIOD OF TWO (2) YEARS AND MAY BE RENEWED UPON COMPLIANCE WITH THE REQUIREMENTS PRESCRIBED AND OTHER REQUIREMENTS AS MAY BE DETERMINED BY THE DOLE. PROVIDED, THAT THE JOB, WORK, OR SERVICE TO BE PERFORMED CONTINUES TO BE DETERMINED BY THE SECRETARY OF LABOR AND EMPLOYMENT AS VALID For CONTRACTING, BASED ON THE RECOMMENDATION OF THE NATIONAL TRIPARTITE INDUSTRIAL PEACE COUNCIL (NTIPC)."

Sec. 4. Article 107 of the Labor Code is hereby deleted and replaced as follows:

"ART. 107. ABSOLUTE PROHIBITION AGAINST

LABOR-ONLY CONTRACTING. THERE IS LABOR- ONLY CONTRACTING WHEN THE CONTRACTOR MERELY RECRUITS, SUPPLIES, OR PLACES WORKERS TO PERFORM A JOB OR WORK FOR A PRINCIPAL. LABOR-ONLY CONTRACTING, WHICH IS TOTALLY PROHIBITED, REFERS TO AN ARRANGEMENT WHERE: 1. a. THE CONTRACTOR DOES NOT HAVE SUBSTANTIAL CAPITAL, OR b. THE CONTRACTOR DOES NOT HAVE INVESTEMENTS IN THE FORM OF TOOLS, EQUIPMENT, MACHINERIES, WORK SUPERVISION, PREMISES, AMONG OTHERS, AND EMPLOYEES c. THE CONTRACTOR'S RECRUITED AND PLACED ARE PERFORMING ACTIVITIES WHICH ARE DIRECTLY RELATED TO THE MAIN BUSINESS OPERATION OF THE PRINCIPAL; OR 2. THE CONTRACTOR DOES NOT EXERCISE THE RIGHT TO CONTROL OVER THE PERFORMANCE OF THE WORK OF THE EMPLOYEE. THE LICENSE OF THE CONTRACTOR ENGAGED IN LABOR-ONLY CONTRACTING SHALL BE REVOKED. IN ADDITION, A FINE OF FIVE MILLION PESOS (P5,000,000.00) SHALL BE IMPOSED.

PROPRIETORS, PARTNERS, OFFICERS, AND/OR DIRECTORS DIRECTLY OR INDIRECTLY RESPONSIBLE FOR THE COMMISSION OF LABOR- ONLY CONTRACTING SHALL BE PROHIBITED FROM FURTHER ENGAGING IN THE BUSINESS OF CONTRACTING."

Sec. 5. Article 108 of the Labor Code is hereby amended as follows:

"Art. 108. Posting of bond. - [An employer or indirect employer may] THE PRINCIPAL SHALL require the contractor [or subcontractor] to furnish a bond [equal te the cost of labor under contract] EQUAL TO TWENTY- FIVE PERCENT (25%) OF THE TOTAL CONTRACT cosT, on condition that the bond will answer for the wages AND WAGE-RELATED BENEFITS due the employees should the contractor [or subcontractor, as the case may be,] fail to pay the same."

Sec. 6. Article 109 is hereby amended as follows:

"Art. 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every PRINCIPAL [employer or indirect employer] shall be held responsible with his contractor [er subcontracter] for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers."

Sec. 7. Article 294 of the Labor Code is hereby amended as follows:

"Art. 294. Security of tenure. [In cases of regular employment, the employer shall not terminate] [t]The services of an employee, IRRESPECTIVE OF EMPLOYMENT STATUS OR POSITION, SHALL NOT BE TERMINATED except for a just cause or when authorized

by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his/HER full backwages, inclusive of allowances, and to his/HER other benefits or their monetary equivalent computed from the time his/HER compensation was withheld from him/HER up to the time of his actual reinstatement. THE MERE EXPIRATION OF THE SERVICE AGREEMENT UNDER ARTICLE 106 OF THIS CODE SHALL NOT BE DEEMED AS A TERMINATION OF EMPLOYMENT OF THE CONTRACTOR'S EMPLOYEES WHO ARE REGULAR EMPLOYEES OF THE LATTER.

Sec. 8. Separability Clause. - If any portion or provision of this Act is declared

unconstitutional, the remainder of this Act or any provisions not affected thereby shall remain in force and effect.

Sec. 9. Repealing Clause. - Any law, presidential decree or issuance, executive

order, letter of instruction, rule or regulation inconsistent with the provisions of this Act is hereby repealed or modified accordingly.

Sec. 10. Effectivity. - This Act shall take effect fifteen (15) days after its publication

in the Official Gazette or in a newspaper of general circulation. Approved,