Scope and Coverage
- Rules apply where employer-employee relationships exist in contracting arrangements.
- Placement activities via recruitment agencies under other Labor Code provisions are excluded.
Trilateral Relationship in Contracting
- In legitimate contracting, three parties exist: principal, contractor/subcontractor, and contractual employees.
- Principal farms out specific jobs; contractor undertakes and employs workers.
Definitions
- Contracting/subcontracting: arrangement to farm out specific jobs with a set time frame.
- Contractor/subcontractor: entity engaged in legitimate contracting.
- Contractual employee: employed by contractor to perform work for principal.
- Principal: employer farming out the job.
Prohibition of Labor-only Contracting
- Labor-only contracting involves contractors merely supplying workers without substantial capital or investment.
- Contractor must have substantial capital or investment and control over work performance.
Specific Prohibitions
- Contracting out work not in good faith causing termination or reduction of regular employees is prohibited.
- No contracting involving "cabo" labor groups.
- Exploiting contractual employees by assigning regular employees' functions or requiring unfair conditions is forbidden.
- In-house agencies owned by principal cannot supply labor.
- Contracting during strikes, lockouts, or involving union members to interfere in labor rights is disallowed.
Employer-Employee Relationship
- Contractor is employer for labor law purposes; principal is liable jointly for violations.
- Principal deemed employer where labor-only contracting or prohibited arrangements exist.
Rights of Contractual Employees
- Entitled to safe working conditions, labor standards, social benefits, right to self-organization, and security of tenure.
Contract Requirements
- Written contract must specify job description, work site, terms including wages, and duration aligned with principal-contractor contract.
Termination of Contractual Employment
- Separation pay governed by law unless termination is due to contract expiration or job completion.
- Completion bonuses and retirement pay as per law or contract may apply.
Registration of Contractors/Subcontractors
- Registration mandated for effective labor market monitoring.
- Non-registration presumed labor-only contracting.
Registration Requirements
- Application with detailed business and financial information.
- Supporting documents: SEC/DTI registration, local permits.
- Undertaking to comply with labor laws required.
Application Procedure
- Submit in triplicate to Regional Offices.
- Registration fee of P100 applies.
- Processing within seven working days.
Duty to Produce Contracts
- Principal, contractor must produce contracts upon inspection.
- Contract of employment must be produced when directed.
- Certified bargaining agents entitled to contract copies.
Annual Reporting
- Contractors submit reports listing contracts, workers, and social benefits remittances.
- Reports submitted by January 15 annually.
Delisting and Cancellation
- Grounds: failure to submit contracts or reports, found engaging in labor-only contracting, non-compliance with standards.
Renewal of Registration
- Every three years.
- Tripartite Industrial Peace Council oversees compliance.
Enforcement Powers
- Regional Directors and officers may conduct inspections anytime.
- Authority to access records, question employees, and issue compliance orders.
Solidary Liability
- Principal solidarily liable with contractor for labor violations, wage claims, and pre-termination issues.
Supersession of Prior Rules
- New rules override inconsistent prior regulations.
- Construction industry contracting governed separately.
Effectivity
- Effective 15 days after publication in two newspapers.