New order to eradicate ‘fly-by-night’ service contractors

Thursday, January 19, 2012

CITY OF SAN FERNANDO -- The Pampanga Chamber of Commerce and Industry (PamCham) and the Department of Labor and Employment (Dole) here held a symposium on the Department Order (DO) 18-A, which aims to eliminate “fly-by-night” contractors and protect workers employed by service contractors and subcontractors.

During the event held at the King’s Royale Hotel here, Dole Assistant Regional Director Geraldine Panlilio said the DO 18-A, otherwise known as the “Rules Implementing Articles 106 to 109 of the Labor Code, as amended,” strictly defines primarily where the practice of contracting and subcontracting are considered legitimate.

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The new order, which was issued by Labor Secretary Rosalinda Dimapilis-Baldoz on November 14, 2011, was a result from a consensus-based approach from several years of tripartite consultations and separate sectoral and organizational sittings.

According to Panlilio, the new DO recognizes subcontracting as a legitimate business undertaking; however, it tightens the requirement to ensure that only legit subcontractors can subcontract jobs or services.

It also reiterates the prohibition on labor-only contracting and the test for legitimate engagement as set in the previous DO 18-02, she added.

Contracting or subcontracting shall also be allowed if the contractor has substantial capital or investment, and the service agreement ensures compliance with all the rights and benefits under labor laws.

On top of these criteria, all contractors must be registered with regional offices of the Department of Labor and Employment where they principally operate, Panlilio said.

Companies (whether a corporation, partnership, or cooperative) engaging in subcontracting, therefore must at least have a minimum fully paid up capital of P3 million, as a requirement. A single proprietorship on the other hand must have net worth of at least P3 million.

Aside from the mandatory registration of legitimate contractors, including cooperatives with the regional offices of the Dole, the order establishes the registration system governing contracting arrangements that are implemented by the Dole regional offices, with the Bureau of Working Conditions as the central registry.

In the previous order (DO 18-02, series of 2002), contractors or subcontractors were required to transmit a copy of their application documents to the Bureau of Local Employment, which will then devise the necessary forms for the expeditious processing of all applications for registration.