Reaction Paper on DOLE’s DO 174-17*

*Prepared by: Renato ‘Ka Rene” Magtubo, Spokesperson, Nagkaisa! Labor Coalition; National Chairperson, Partido Manggagawa (PM); Co-Chair for Labor, Church-Labor Conference (CLC); and member, Technical Executive Committee of the National Tripartite Industrial Peace Council (NTIPC).

This reaction paper is based on the following premises:

1. Labor contracting or subcontracting in its various forms such as labor-only contracting, fixed-term employment, and outsourcing of jobs which are usually necessary or desirable to business operation of a company is now becoming the norm in employing workers despite four (4) Department Orders (DO’s) issued by the DOLE from 1997-2011, the latest of which is DO 18-A, series of 2011.

• Data from the 2012–2014 survey conducted by Philippine Statistics Authority (PSA) in 8, 399 establishments employing at least 20 workers shows that, as of 30 June 2014 the ratio of non-regular workers to total employment is 30 is to 100 (1, 335, 673 non-regulars out 4, 471, 785 total employment). And out of the 30 non-regular workers, 15 or 50% of them are agency-hired. Applying this utilization ratio of contractual or non-regular workers today to more than 900 thousand firms and establishments in the country, the ratio of non-regular employees to total employment and the ratio of agency-hired to non-regular employees would be much higher.

• Data released in August 2016 from the Bureau of Working Conditions (BWC) of the DOLE provides that there are 5, 150 registered contractors and subcontractors employing 416, 343 workers dispatched to 26, 194 principal employers. Questioned in a recent senate hearing on bills pertaining to labor contracting, DOLE representatives cannot state how many unions were being organized and collective bargaining agreements concluded on the more than 416, 343 workers employed by registered contractors or subcontractors. The truth is, as per labor organizers’ experienced, there is none. Contractual workers of contractors or subcontractors are afraid of exercising their right to unionize and collectively bargain because of the threat of separation from their contractor/subcontractor employers, or even from the principal employers where they are dispatched to work.

2. This widespread utilization of contractual or non-regular workers popularly termed as “contractualization” of labor can now be considered as an “epidemic”. It should be addressed effectively to stop its contagious effect in the country’s employment and for the protection of workers’ rights established under the labor code.

• The causes of the proliferation of contractual or non-regular forms of employment can be attributed to (a) corporate restructuring pursued by employers or “flexible” hiring and worker deployment arrangements brought about by the process of globalization, intensified global competition, and technological change (b) government policies aimed at increasing deregulation of labor markets that have transformed employment relationship, (c) inadequate or antiquated laws and regulations which have no associated penal provision with it when violated that would serve as deterrent to violators, and (d)  government’s failure to effectively implement and enforce compliance of existing laws and regulations relevant to labor contracting and regularization of employment.
• The implications are (a) eroding of protective formal employment contracts, statutory wages and benefits, social security coverage, workplace health and safety rules, and state guarantees concerning workers’ right to security of tenure, freedom of association and collective bargaining, (b) loss of influence, individually and collectively, over working conditions, the pace of work and wages, (c) the shift away from standard employment relationship (from direct hiring to agency-hiring) that affects men and women, with women carrying a higher risk of short hours, low pay and limited access to benefits, (d) major contribution to the persistent pay gap between men and women, and (e) creates insecurity and leads to increases in inequality and poverty.

3. In order to deliver a “cure” on the severe implications of the “epidemic” of contractualization plaguing the country’s employment, the underlying causes of the “disease” should be address effectively. The policy options (be it on law or regulation) to address the underlying causes of contractualization should not be framed as a “balancing act” or “win-win solution” between workers’ and employers’ interests.

• On the policy level, options should address (a) corporate restructuring pursued by employers or the “flexible” hiring and worker deployment arrangements that is, on the present day employers’ practices, are the outsourcing of jobs or portion of their production process to labor contractors or subcontractors even if such jobs are usually necessary or desirable to their business operations and to the detriment of workers’ rights and welfare; and (b) government’s failure to effectively implement and enforce compliance of laws and regulations relevant to labor contracting/subcontracting practices and regularization of employment, and to reform inadequate or antiquated laws and regulations which have no associated penal provision to it when violated that would serve as deterrent to violators.
• Furthermore, the policy options should be guided by the principle of social justice that is, giving more law to those who has less in life, and providing full protection to labor as guaranteed by the constitution.

4. Addressing the “epidemic” within the DOLE’s mandate needs a radical shift in the regulation of labor contracting and subcontracting practices.

• The new regulation should shift from a policy of “allowing and regulating” into “strictly prohibiting” labor contracting and subcontracting practices which are (a) detrimental to the promotion and protection of workers’ rights and welfare, and (b) that would put a stop in circumventing the regulation in the guise of exercising management prerogative and blatant violation because of the DOLE’s weakness in enforcing compliance.

“Strictly prohibiting” means prohibition in the practice of (a) labor-only-contracting, (b) contracting out jobs performed by union members and regular employees, (c) fixed-term employment, (d) contracting out regular jobs or functions as defined by the labor code, and (e) agency-hiring. Thus, employment relationship should strictly be observed between the principal employers and the workers, and labor contractors and subcontractors should only serve as agents of the principal employers.

Given these premises, the following are my reactions to the new DO:

1. The new DO is contrary to the presidential directive of ending contractualization and agency-hiring conveyed by President Duterte in his dialogue with labor leaders and senior officials of the DOLE, the secretary included last February 27.
2. The new DO fails to address two important issues, namely: (a) contracting out of regular jobs or functions as defined by the labor code, and (b) proliferation of manpower agencies acting as “middleman” employers between workers and principal employers.

• The first refers to contracting out or outsourcing of regular jobs supposed to be performed by regular employees with principal employers to third party manpower agencies or so called service providers. While it’s true that management can exercise its prerogative to do so, the DOLE secretary vested with powers under Article 106 can prohibit or restrict such exercise of management prerogative when the effect of which demolishes or renders futile workers’ exercise of their rights under the labor code. The classic example of this exercise of management prerogative which was not prohibited or restricted by the DOLE secretary then was the PAL outsourcing of regular jobs in its ticketing, catering and ground handling departments in 2011. The unabated contracting out or outsourcing of regular jobs in this case resulted into retrenchment of 2600 regular employees; depression of wages and benefits and contractual work arrangement (instead of regular employment) of workers opting to be hired under the third party service providers; and the reduction in the bargaining strength of the union (PALEA). This exercise of management prerogative of outsourcing regular jobs as defined by the labor code in their companies should be strictly prohibited or restricted using the DOLE secretary’s power vested in him by the labor code.
• The second refers to the proliferation of manpower agencies or so called service providers. While there may be special jobs and functions which are needed in a company in their production of goods and services which are unavailable in their present capacities or in a time when demand for such goods and services picks up in the market and as such their production capacities needs manpower augmentation, these situations however are exemptions to the norm. The norm is workers are directly hired by principal employers. Manpower agencies or service providers come into the picture of the employment relationship only to augment or support what the company of the principal employer is not capable of doing based on its production capacities at a certain period of time. What is unfortunately happening today that contributes to the epidemic of contractualization is that workers are not directly hired by principal employers but by manpower agencies or service providers and are dispatched to the former. The new DO has not aggressively put a stop on this “new norm” in employing workers.

3. In sum, the new DO does not effectively address the epidemic of contractual employment but instead continues to proliferate it, as such unacceptable.

Please address  reactions and comments to:

Ka Rene Magtubo
National Chairperson, Partido Manggagawa (PM)
Co-Chairperson, Church-Labor Conference (CLC)
Convenor, Nagkaisa! Labor Coalition
CP Number 0917 853 2905