Guidelines for Construction Worker Employment

Coverage and scope of application

The order applies to all operations and undertakings in the construction industry and its subdivisions, namely: general building construction, general engineering construction, and special trade construction, based on the classification code of the Philippine Construction Accreditation Board of the Construction Industry Authority of the Philippines.
The order applies to companies and entities involved in demolition works.
The order applies to those falling within the construction industry as determined by the Secretary of Labor and Employment.
The order uses the construction-industry employment framework of project employees and non-project employees.

Employment status: project vs non-project

Employees in the construction industry are generally categorized as (a) project employees and (b) non-project employees (Section 2.1).
Project employees are those employed in connection with a particular construction project or phase and whose employment is co-terminus with that project or phase (Section 2.1).
Non-project employees are those employed without reference to any particular construction project or phase (Section 2.1).

Indicators and treatment of project employees

Indicators that an employee is a project employee include: the duration of the undertaking is reasonably determinable (Section 2.2).
An indicator exists when the specific/identified work/service is defined in an employment agreement and made clear to the employee at hiring (Section 2.2).
An indicator exists when the employee’s work is in connection with the particular project/undertaking for which the employee is engaged (Section 2.2).
An indicator exists when, while not employed and awaiting engagement, the employee is free to offer services to any other employer (Section 2.2).
An indicator exists when termination in the particular project/undertaking is reported to DOLE Regional Office having jurisdiction over the workplace within 30 days after separation, using the prescribed form for employees' terminations/dismissals/suspensions (Section 2.2).
An indicator exists when the employer’s undertaking includes a completion bonus for the project employee, as practiced by most construction companies (Section 2.2).

Project completion and rehiring rules

The order treats project completion as phase-based: not all employees are separated at the same time because some phases complete earlier (Section 2.3).
Completion of a phase is treated as completion of the project for employees employed in that phase (Section 2.3).
Upon completion of the project or a phase, a project employee may be rehired for another undertaking if rehiring conforms with law and the issuance, and the last day of service in the preceding project must be indicated in the employment agreement (Section 2.3).

Types of non-project employees

The order recognizes three (3) types of non-project employees: probationary, regular, and casual (Section 2.4).
Probationary employees become entitled to regularization upon completion of the probationary period, and must be informed of the reasonable standards for regular employment at engagement (Section 2.4).
Regular employees include those appointed as such, those who completed the probationary period, and those appointed to fill regular positions vacated due to death, retirement, resignation, or termination of regular holders (Section 2.4).
Casual employees are employed to perform work not related to the main line of business of the employer, and those employed for at least one year, whether continuous or broken, become regular with respect to the activity they serve and remain employed as long as the activity exists unless terminated sooner for a just or authorized cause, or voluntarily by the employee (Section 2.4).

Contracting and subcontracting framework

The order recognizes contracting out phases of a construction project as permitted by law, including wage legislations and wage orders, and by industry practice (Section 2.5).
The order states that the Labor Code and its Implementing Regulations allow contracting out under certain conditions (Section 2.5).
When job contracting is permissible, construction workers are generally considered employees of the contractor or sub-contractor, subject to Article 109 of the Labor Code, as amended (Section 2.5).

Conditions of employment: security of tenure

Project employees who become regular enjoy security of tenure under Article 280 of the Labor Code, as amended (Section 3.1).
Where regular project employees are terminated for a cause/causes, they are not entitled to separation pay under the rule stated in the issuance (Section 3.1).
The issuance directs that just causes are enumerated under Article 282 of the Labor Code (Section 3.1).
Where services of regular employees are terminated for any authorized causes under Article 283, they are entitled to separation pay (Section 3.1).

Separation pay outcomes for project employees

Project employees are not entitled to separation pay if termination results from completion of the project or any phase where they are employed (Section 3.2).
Project employees are not entitled to separation pay if termination occurs because there is no more to do or their services are no longer needed in that phase (Section 3.2).
Project employees with aggregate period of continuous employment in a construction company of at least one year are considered regular employees in the absence of a “day certain” agreed by the parties for termination (Section 3.3).
The issuance defines that a “day” means that which must necessarily come, though the exact time may not be known, and thus a project employee may not be treated as regular if final completion is in fact determinable and the expected completion is made known (Section 3.3).
Completion is determined by the date originally agreed upon, the date indicated on the contract, or, if extended, the date of termination of project extension (Section 3.3).

Reinstatement and backwages remedies

If the project or phase is not yet completed and the employee’s services are unsatisfactory, the project employee is entitled to reinstatement with backwages to the former position or a substantially equivalent position (Section 3.3).
If reinstatement is no longer possible, the employee is entitled to salaries for the unexpired portion of the agreement (Section 3.3).

Completion bonus and completion-based separation

Project employees separated due to completion of the project or any phase are entitled to pro-rata completion bonus if there is an undertaking to grant such bonus (Section 3.4).
An employer undertaking to pay a completion bonus is treated as an indicator of project employment (Section 3.4).
The pro-rata completion bonus may be based on industry practice using at least one-half (1/2) month salary for every 12 month service (Section 3.4).
The bonus may be put into effect for any project bid (bid projects) or tender (negotiated projects) thirty (30) days from the date of issuance of these Guidelines (Section 3.4).

Statutory benefits for construction employees

Construction employees, whether project or non-project, enjoy all benefits due under law, both monetary and non-monetary, during the period of employment (Section 3.5).

Payment by results wage floor

When payment is by results (e.g., piece rate or “pakiao”), the rate must be determined on the basis of not less than the minimum wage applicable in the region where the construction project is located (Section 3.6).
DOLE Regional Office may determine minimum wage rates for workers paid by results on its initiative or upon request of interested parties (Section 3.6).

Preventive suspension limits and process

Subject to Article 277 (b) of the Labor Code, project and non-project employees may be preventively suspended when continued employment poses a serious and imminent threat to the life or property of the employer or co-workers (Section 4).
Preventive suspension must not last longer than fifteen (15) days (Section 4).
After the fifteen (15) days, the employer must reinstate the worker to the former or substantially equivalent position or extend the suspension while paying wages and other benefits due during the extension (Section 4).
The employer must designate a day, time, and place within the preventive suspension period and give notice to the employee to hold a fact-finding investigation where the suspended employee can be heard and assisted by counsel or representative if desired (Section 4).
If the investigation results in exoneration, the process must proceed accordingly; if the employee is found guilty, the employer may terminate employment (Section 4).
Termination during this process must not prejudice the employee’s right to question the severance of the relationship in the appropriate forum (Section 4).

Self-organization and collective bargaining encouragement

The Department encourages formation of “trade” unions in the construction industry to recognize employees’ right to self-organization and collective bargaining (Section 5).
Formation or activities of recognized trade unions must not prejudice existing bargaining units, subject to existing laws (Section 5).
Trade unions are defined as a combination of workers of the same trade or several allied trades organized to secure, through united action, the most favorable conditions regarding wages, hours of labor, and other terms and conditions of employment for members (Section 5).

Employer and worker responsibilities

The construction company and the general contractor and/or subcontractor under Section 2.5 must be responsible for workers in compliance with existing laws and regulations on: hours of work, wages, wage-related benefits, health, safety, and social welfare benefits, including required reports to DOLE such as Work Accident/Illness Report, Monthly Report on Employees' Terminations/Dismissals/Suspensions, and other reports (Section 6.1(a)).
The prime/general contractor must exercise sound judgment and discretion in contracting out projects to ensure compliance with labor standards (Section 6.1(a)).
Employees must observe requirements of labor and social legislations and reasonable company rules and regulations concerning their obligations (Section 6.1(b)).

Occupational safety and health enforcement

The Department, through the Regional Offices, must strictly enforce the Occupational Safety and Health Standards, as amended, particularly:
- Rule 1005 on Duties of Employers, Workers and Other Persons, and
- Rule 1410 on Construction Safety (Section 6.2).
Through the Bureau of Working Conditions, the Department may issue a code of practice on Occupational Safety and Health for the construction industry (Section 6.2).

Wage increases: who bears and contract effect

For wage increases, whether mandated or agreed upon, the prescribed increase in wage rates of workers in construction projects must be borne by the principals or clients of construction contractors, and contracts are deemed amended accordingly (Section 6.3).
Wage rates of project employees depend on the skills or level of competence of project employees as determined by NMYC Trade and Standards subscribed to by the Philippine Construction Industry under the Five Year Construction Manpower Development Plan dated November 1991 (Section 6.3).
Established rates must not be lower than those prescribed by the appropriate wage order and regulations (Section 6.3).
Liability in subsequent mandated wage increases and/or allowances is determined according to the provisions of the applicable wage legislations or orders (Section 6.3).

Effect on existing issuance and agreements

The guidelines serve as guides for DOLE and its agencies in the administration and enforcement of applicable labor and social legislations and their implementing regulations (Section 7).
Nothing in the guidelines authorizes reduction or diminution of benefits enjoyed by employees at the time of issuance (Section 7).
Policy Instructions No. 20 of 1977 is superseded, and the order takes effect immediately (Section 7).