Question & AnswerQ&A (DOLE DEPARTMENT ORDER NO. 10, S. 1997)
The main objective is to regulate contracting and subcontracting arrangements, allowing legitimate contracting but prohibiting labor-only contracting to promote employment, protect workers' welfare, enhance industrial peace, and uphold workers' rights to self-organization and collective bargaining.
Labor-only contracting is an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job for a principal, without substantial capital or investment of its own and where the workers perform activities directly related to the principal's main business. This is prohibited under the Rule.
The parties are the principal (employer who farms out the job), the contractor or subcontractor (person or entity engaged to perform the job), and the workers employed by the contractor or subcontractor.
The contractor or subcontractor must carry on an independent business and perform work under its own responsibility, have substantial capital or investment directly used in the work, and ensure workers' entitlement to labor rights and welfare benefits.
Permissible works include temporary or occasional needs to meet abnormal demand, expert or technical services, promotional services, work not integral to the principal's main business (like janitorial or security), specialized skills beyond the regular workforce, and substitute services for absent employees with proper conditions.
Prohibitions include labor-only contracting, contracting out work that displaces regular employees or reduces their hours, contracting with 'cabo' arrangements, making employees sign resigned or waivers as employment conditions, using in-house agencies controlled by the principal, contracting during strike or lockout, and contracting without business exigency causing bargaining unit reduction.
They are entitled to all rights and privileges due regular employees, such as proper working conditions, service incentive leave, rest days, overtime pay, holiday benefits, health and safety standards, social and welfare benefits, security of tenure, and rights to self-organization and collective bargaining.
The principal is jointly and severally liable with the contractor or subcontractor for unpaid wages to contractual employees to the extent of work performed under the contract, similar to its responsibility to direct employees.
When the contractor is not registered or delisted, commits prohibited acts under Section 7, is found guilty of unfair labor practices, or when violations of the Labor Code are established by the Regional Director.
The contract must state the specific job or service description, place of work, terms and conditions of employment including wage rates, and the term or duration of employment coextensive with the principal-contracting agreement or contract phase.
The employee-employer relationship is suspended (not terminated) for six months during which the employees form a manpower pool. If the contract is not renewed or the employees find other jobs within this period, the relationship is considered terminated.
They must complete an application including the business name, officers, business nature, contracts, capital/assets used, and submit certified SEC or DTI registration and local business permits. An undertaking to comply with labor laws is also required.
The contractor may be delisted from the registry and subject to enforcement actions. This includes cancellation of registration for failure to file annual reports for three years or committing prohibited activities or unfair labor practices.
Probationary employment is limited to authorized learnership or apprenticeship periods for learnable jobs; otherwise, it must not exceed six months from the start of actual work.
Yes, termination before expiration is allowed only for just or authorized causes with due process, or upon completion of the contract phase for which they were engaged, subject to prior notice and compliance with labor standards.