Legal basis and relationship to law
- The guidelines operate in the context of the Labor Code and its Implementing Regulations, including rules on employment classification, termination, and contracting/subcontracting.
- The order recognizes that job contracting is permissible under the Labor Code and its Implementing Regulations under certain conditions.
- The guidelines tie project employment and separation rules to the Labor Code provisions on security of tenure and just/authorized causes.
- The order ties preventive suspension rules to Article 277 (b) of the Labor Code.
- The order uses and applies Article 280, Article 282, and Article 283 of the Labor Code for security of tenure, just causes, and authorized causes.
- The guidelines require enforcement of Occupational Safety and Health Standards, as amended, including Rule 1005 and Rule 1410.
Policy purpose for construction workers
- The issuance aims to stabilize and promote harmonious employer-employee relations in the construction industry.
- The issuance aims to ensure the protection and welfare of workers employed in the construction industry.
Coverage and covered construction activities
- The guidelines apply to all operations and undertakings in the construction industry and its subdivisions.
- Covered undertakings include 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 issuance applies to companies and entities involved in demolition works.
- The issuance applies to entities “falling within the construction industry” as determined by the Secretary of Labor and Employment.
- The guidelines cover both project employees and non-project employees working in the covered setting.
Employee status: project vs non-project
- Employees in the construction industry are generally categorized as (a) project employees and (b) non-project employees.
- Project employees are employed in connection with a particular construction project or phase and their employment is co-terminus with the project or phase to which they are assigned.
- Non-project employees are employed without reference to any particular construction project or phase.
- Indicators that an employee is a project employee include all of the following among others:
- The duration of the specific/identified undertaking is reasonably determinable.
- The duration and the specific work/service are defined in an employment agreement and are made clear to the employee at hiring.
- The work/service is in connection with the particular project/undertaking.
- While not employed and awaiting engagement, the employee is free to offer services to any other employer.
- The termination reported to DOLE Regional Office having jurisdiction over the workplace occurs within 30 days from separation, using the prescribed form on employees’ terminations/dismissals/suspensions.
- The employer undertakes to pay a completion bonus to the project employee as practiced by most construction companies.
- Upon completion, project employees are treated according to project/phase completion rules:
- Project employees are not separated at the same time because phases complete at different times; completion of a phase is treated as completion of the project for an employee assigned to that phase.
- Employees in a phase are not separated at the same time; fewer employees are typically required as the phase nears completion.
- Project employees may be rehired for another undertaking upon completion or phase completion, provided rehiring conforms to law and the issuance, and the last day of service with the employer in the preceding project is indicated in the employment.
- Non-project employees are categorized into three (3) types:
- Probationary employees: after completion of the probationary period, they become entitled to regularization; upon engagement they must be informed of the reasonable standards for regularization.
- Regular employees: appointed as regular, or those who completed the probationary period, or those appointed to fill regular positions vacated due to death, retirement, resignation, or termination of employment of regular holders.
- Casual employees: employed to perform work not related to the employer’s main line of business; casual employees employed for at least one year, whether continuous or broken, become regular with respect to the activity and continue as long as the activity exists, unless terminated sooner for a just or authorized cause or voluntarily by the employee.
- Contracting and subcontracting rules are recognized:
- Contracting out certain phases is recognized by law (including wage legislations and wage orders) and by industry practices.
- Where permissible under the Labor Code and Implementing Regulations, construction workers are generally considered employees of the contractor or sub-contractor, subject to Art. 109 of the Labor Code, as amended.
Security of tenure and separation pay
- Project employees that become regular enjoy security of tenure as provided under Article 280 of the Labor Code, as amended.
- Where regular project employees are terminated for a cause/causes, they are not entitled by law to separation pay.
- Just causes for terminating employment are enumerated under Article 282 of the Labor Code.
- Where regular employees are terminated for authorized causes under Article 283 (distinguished from just causes), they are entitled to separation pay.
- Project employees are not entitled to separation pay when separated as follows:
- When services are terminated due to completion of the project or any phase where they are employed.
- When services are terminated because there is no more work or services are no longer needed in the particular phase.
- Project employees become entitled to separation pay in these situations:
- Project employees with at least one year aggregate period of continuous employment in a construction company become regular employees absent a “day certain” agreed upon for termination of the relationship; these employees are entitled to separation pay.
- A “day certain” is understood as that which must necessarily come, although the exact time may not be known.
- If final completion of the project/phase is in fact determinable and expected completion is made known to the employee, the employee may not be treated as regular notwithstanding the one-year duration of two or more employments in the same project/phase.
- Completion is determined on the date originally agreed upon, or the date indicated on the contract, or if extended, the date of termination of project extension.
- Reinstatement/backwages and salary for unexpired term:
- If the project or phase is not yet completed and the employee is terminated without just cause or authorized cause, with no showing that services are unsatisfactory, the project employee is entitled to reinstatement with backwages to the former or substantially equivalent position.
- If reinstatement is no longer possible, the employee is entitled to salaries for the unexpired portion of the agreement.
- Completion of project/phase and completion bonus:
- Project employees separated due to completion of the project/phase are entitled to pro-rata completion bonus when there is an undertaking for such bonus.
- An undertaking by the employer to pay a completion bonus is an indicator of project employment.
- When there is no undertaking, the employee may be considered a non-project employee.
- The pro-rata completion bonus may be based on industry practice which is at least one-half (1/2) month salary for every 12 month service.
- The bonus may be applied for any project bid (if bid projects) or tender submitted (if negotiated projects) thirty (30) days from the date of issuance of these Guidelines.
Statutory benefits and payment by results
- All construction employees, whether project or non-project, must enjoy all benefits due under law, both monetary and non-monetary, during the period of employment.
- For payment by results (including piece rate or “pakiao”):
- The rate must be determined based on not less than the minimum wage applicable in the region where the construction project is located.
- Minimum wage rates for workers paid by results may be determined by the appropriate DOLE Regional Office on its initiative or upon request of interested parties.
Preventive suspension procedures and limits
- Subject to Article 277 (b) of the Labor Code, project and non-project employees may be preventively suspended if continued employment poses a serious and imminent threat to life or property of the employer or co-workers.
- Preventive suspension must not last longer than fifteen (15) days.
- After the period, the employer must either:
- Reinstate the worker to the former or substantially equivalent position, or
- Extend the period of suspension, but only if during the extension the employer pays the wages and other benefits due.
- The employer must designate a day, time, and place within the preventive suspension period.
- Notice to the employee must be provided for a fact-finding investigation where the employee must be heard and assisted by counsel or representative if the employee desires.
- The employer must conduct the investigation to allow exoneration or to determine guilt and then termination.
- Termination during this process must not prejudice the employee’s right to question the severance in the appropriate forum.
Self-organization and trade union formation
- The Department encourages formation of “trade” unions in the construction industry.
- Trade union formation or activities must not prejudice existing bargaining units and must remain subject to existing laws.
- “Trade unions” mean a combination of workers of the same trade or several allied trades organized to secure by united action the most favorable conditions regarding wages, hours of labor, and other terms and conditions of employment for members.
Employer and worker liabilities in enforcement
- Construction companies and general contractors and/or subcontractors must be responsible for workers in matters of compliance with existing laws and regulations on:
- hours of work,
- wages,
- wage-related benefits,
- health,
- safety, and
- social welfare benefits.
- Employers must submit required reports to the DOLE Regional Office, including:
- Work Accident/Illness Report,
- Monthly Report on Employees’ Terminations/Dismissals/Suspensions,
- and other reports.
- The prime/general contractor must exercise sound judgment and discretion in contracting out projects to ensure compliance with labor standards.
- Project and non-project employees must observe labor and social legislation requirements and reasonable company rules and regulations on obligations.
Safety and health standards enforcement
- The Department, through Regional Offices, must strictly enforce the Occupational Safety and Health Standards, as amended, especially:
- Rule 1005 on Duties of Employers, Workers and Other Persons, and
- Rule 1410 on Construction Safety.
- Through the Bureau of Working Conditions, the Department may issue a code of practice on Occupational Safety and Health for the construction industry.
Wage increases and who bears liability
- For wage increases, whether mandated or agreed upon:
- the prescribed increase in wage rates for workers in construction projects is borne by the principals or clients of construction contractors.
- construction contracts are deemed amended accordingly.
- The wage rates of project employees depend on the skills or level of competence determined by NMYC Trade and Standards subscribed to by the Philippine Construction Industry under the Five Year Construction Manpower Development Plan dated November 1991.
- Wage rates established for project employees must not be lower than those prescribed by the appropriate wage order and regulations.
- Liability for subsequent mandated wage increases and/or allowances is determined under the applicable wage legislations or orders.
Effect on issuances and agreements
- The guidelines serve as guides for the Department and its agencies in administering and enforcing applicable labor and social legislations and their implementing regulations.
- The issuance must not be construed to authorize diminution or reduction of benefits enjoyed by employees at the time of issuance.
- Policy Instructions No. 20 of 1977 is superseded.
- The order takes effect immediately.