Transcript on Department Order No.

18-A Special Class Lecture

Labor Law Review Class Ateneo Law Sc!ool
Lecturer" Att#. $arlon $anuel
%ebruar# 1& '(1'
Note: This is based on the raw data or on the audio
record made on the lecture.
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For the purpose of updating you on what we have
now, and erasing whatever you have discussed in
your past classes about Dept. Order No.18. The ost
recent class would be the class last se, which
too! up the original Dept. Order No.18.
There are significant changes. O!ay let"s start
with a suary of the basic difference between a
#egitiate $ontracting %rrangeent and an
&llegitiate $ontracting %rrangeent.
&n a #egitiate $ontracting %rrangeent, there are
three parties. &n an &llegitiate $ontracting
%rrangeent, there are only two parties, because
the contractor will be considered as an agent of
the principal, and therefore he is only one person.
The principal )NCL*D+S the contractor as an agent.
&nsofar as the liabilities are concerned in a
legitiate contracting arrangeent, principal is
NOT eployer. &n &llegitiate $ontracting
%rrangeent, principal )S eployer. O!ay. &n
#egitiate $ontracting %rrangeent, the principal
is liable for wages for wor! perfored. %nd this
liability is as indirect eployer. 'hich eans that
despite that liability to pay the unpaid wages in
case of default, in case of failure on the part of
the contractor, the principal does NOT thereby
becoe the eployer of the eployees. There"s a
liitation, on the liabilities of the principal, as
indirect eployer. (phasis on the word &ND&)($T
(*+#O,(). The liability of the principal as
eployer, being an indirect eployer, is liited
only to wages, and liited only for wor! perfored
under the contract. NOT to anything else, as far as
a legitiate contracting arrangeent is concerned.
%nd that is precisely the reason for contracting,
so that the principal will not bear the burden of
anaging the eployees. -o that the principal will
not have burden of liability for eployees" wages
etc. etc. -o the principal, in a way, distances
itself fro the wor!ers. %lthough the wor!ers are
still perforing services ultiately for the
benefit of the principal. The principal shields
itself, and distances itself through the contractor
and that is the reason why the contractor ust be
legitiate. -o that there has to be a legitiate
entity that will be ade answerable for the rights
of the wor!ers under the contract. %nd because the
contractor in a legitiate contracting arrangeent
is or should be legitiate, then the principal to a
certain e.tent becoes -($OND%)&#, liable only.
/ecause the contractor, as a legitiate entity is
the real eployer of the eployees.
Now, in an &llegitiate $ontracting %rrangeent,
because the principal is eployer, then the
principal as eployer is liable for ALL liabilities
to the eployees. %s far as solidary liability is
concerned, therefore, solidary liability is NOT
iportant, is not relevant. %s far as the practical
effects are concerned, if there is an &llegitiate
$ontracting %rrangeent. 'hy0 /ecause the ob1ect of
iposing solidary liability is to go after the
principal, in case the contractor defaults. /ecause
the assuption is, the principal is ore
responsible than the contractor. %nd therefore, the
ob1ective of iposing solidary liability is to
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ensure that the rights of the wor!ers will be
guaranteed. %nd the guarantee is to hold the
principal liable also solidarily with the
contractor, for illegitiate contracting
arrangeent. -o even if the principal is NOT the
eployer, the principal is held liable ,)T- the
contractor. /ecause of that, there is no sense,
there is no relevance to such solidary liability.
/ecause in this case, the principal is the
eployer. -o the contractor defaults, that is not a
aterial event. /ecause the principal will always
be liable, as eployer. %re we saying there is no
solidary liability here0 No. 'e are not saying
that. There is solidary liability involved. /ut the
value, of the solidary liability is to hold the
eployer liable, and therefore it is valuable in
illegitiate contracting arrangeent. /ecause in a
legitiate contracting arrangeent, the principal
is not the eployer. 2ere, the solidary liability
loses its value. /ecause the presuption is, the
conclusion is that the principal is eployer and
therefore it is always liable for all rights of the
eployees. %nd the principal is priarily liable as
eployer as opposed to here 3referring to
Legitimate Contracting Arrangement4 where the
principal is secondarily liable only.
%ny 5uestions, as to the distinction0
Now that the distinction is clear, it is iportant
now to deterine when a contracting arrangeent is
legitiate and when it is illegitiate. %nd so we
now go to the rules of contracting arrangeent,
Dept. Order No.18, as aended now, well not aended
but supplanted by Dept. Order No.18-%.
Dept. Order No. 18-% is not a partial aendent, it
is a substitution. &t"s an aendent by
substitution. -o Dept. Order No.18-% erases Dept.
Order No.18. -o this is now the set of rules that
we need to follow. 'hy do we always have a change
in the set of rules governing contracting
arrangeent0 /ecause the #abor $ode itself has
provided the -ec. of #abor shall regulate
contracting arrangeents. -o the #abor $ode
sub1ected the regulation of contractors of
contracting arrangeents to the powers of the -ec.
of #abor. There is NO prohibition in the #abor $ode
for contracting arrangeents. &n fact, if you loo!
at the #abor $ode"s provision, the #abor $ode will
not even declare that #abor Only $ontracting is
prohibited. There is no prohibition in the #abor
$ode. /6T the intent clearly stated is to )(76#%T(
contracting arrangeents. %nd because of such
intent, the -ec. of Dept. of #abor is authori8ed to
regulate and even prohibit certain types of
contracting arrangeent. %nd because of that, the
-ec. of #abor had in the past and until now
prohibited #abor Only $ontracting arrangeent.
-o now, despite the absence of a categorical
prohibition in the #abor $ode against #abor Only
$ontracting arrangeent, there is a D(F&N&T&ON in
the #abor $ode of what a #abor Only $ontracting
arrangeent is. -o while there is no prohibition,
there is a definition of #abor Only $ontracting
arrangeents.
-o the #abor $ode starts the definition by saying
that a #abor Only $ontractor erely recruits
wor!ers, the contractor does not have substantial
capital, wor! is directly related to the business
of the principal. That is the basic definition of a
#abor Only $ontracting in the labor code. There are
three a1or coponents9
1. There is ere recruitent,
:. No substantial capital or investent, and
;. The wor! perfored is directly related to the
business of the principal.
Now, o!ay, let"s bac! trac! a bit. #abor Only
$ontracting arrangeent is what is considered by
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the )6#(-, not by the #abor $ode, but by the rules
3&))4 as prohibited. %nd therefore &##(7&T&*%T(. %s
opposed to what0 %s opposed to #(7&T&*%T( <ob
$ontracting %rrangeent. %nd the ters are
significant in understanding the eaning of the
contracting arrangeents, the difference of the two
types of contracting arrangeents. -o when we say
.O/ CONTRACT)N0, you are contracting out a
particular 1ob or service. 'hen you say LA/OR ONL1
CONTRACT)N0, what you are contracting out is the
wor! itself, the labor. -o you are focusing on the
wor!ers, as far as #abor Only $ontracting is
concerned. %nd therefore you are erely recruiting
persons. ,ou are erely recruiting individuals or
wor!ers. %s opposed to a .O/ contractin2, you are
contracting out a particular chun! of wor!, a set
of services or a pac!age of services. %nd that is
what 1ob contracting is about. &n the #abor $ode
you will find all these in one paragraph, or in a
single provision.
'hen D.O.=18 3the original4, cae, it defined #abor
Only $ontracting as erely recruiting and any of
the ff9
%. No substantial capital AND wor! is directly
related to the business of the principal> and
/. $ontrol is in the hands of the contractor.
&" also doing this not only for the benefit of the
students in the past classes. /ut also for the
benefits of the students in the current class,
because they did not have the opportunity to
discuss the particular D.O.=18 3the original4.
Now, what was the effect of the forulation of
definition of #abor Only $ontracting %rrangeent in
D.O.=180 The probleatic forulation cobined
substantial capital and the nature of the work. -o
& have a standard 5uestion in the past classes.
'hether 3%4 is %1 ? %:, eaning whether you need to
have both eleents in order to have #abor Only
$ontracting. &n short, if a contractor has enough
capital but wor! is directly related to the
business of the principal, will this 5ualify as
#abor Only $ontractor0 %nd the answer is ,(-.
Despite the substantial capitali8ation. /ecause the
wor! is directly related to the business of the
principal. The 5uestion now is, why are we
considering this as #abor Only $ontractor0 &f the
forulations says @any of the followingA, eaning
@%A O) @/A. %nd @%A cobines two eleents. 2ere
3referring to A24, there is only one eleent.
*eaning wor! is directly related to the business of
the principal. %nd therefore, following that
arguent, this contractor 3referring to a
contractor who satisfies A2 only4 should not be
considered a #abor Only $ontractor. /ecause only
one of the two ites are present. %nd the answer
that & have given in the past, would be an
illogical, an absurd result. &f we follow that
interpretation. 'hy0 /ec that would ean that if
wor! is NOT directly related and therefore you lose
the :
nd
eleent or the first paragraph, then even
without substantial capitali8ation, a contractor
will be considered a legitiate contractor. %nd
that is not, definitely, the intention of the
regulation. #et"s pause for a while and see if this
is clear.
-o in the past forulation, the substantial
capitali8ation and the wor!"s relationship with the
principal"s business were $O*/&N(D in one
paragraph. /ut the preliinary paragraph says @AN1
of the followingA. -o does that ean @%A O) @/A0
%nd & have always aintained, it has to be @%-1 O)
%-:A O) @/A. *eaning, if you don"t have substantial
capitali8ation, autoatically you are a #abor Only
$ontractor. (ven if you have substantial
capitali8ation, but the wor! is directly related to
the business of the principal, autoatically you
are a #abor Only $ontractor. (ven if you have
substantial capitali8ation, and even if the wor! is
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NOT directly related to the business of the
principal, if control is in the hands of the
principal, instead of in the hands of the
contractor, then you also have an &##(7&T&*%T(
#abor Only $ontracting %rrangeent. %nd what is the
reason for that arguent0 There is no change in the
definition in the #abor $ode. There is a proble
when D.O.=18 dissected the definition, the
statutory definition into two paragraphs, with the
first paragraph cobining two eleents. /ut the
regulation cannot change the statutory definition.
%nd the statutory definition as interpreted would
say @substantial capitali8ationA is not enough. &f
wor! is directly related, you can still be
considered a #abor Only $ontractor. ,ou have to
loo! at the totality of the circustances. ,ou have
to loo! at the entire picture. %nd so & have
suggested in the past, that what you have to do is
to reverse the situation. &n order to be a
L+0)T)$AT+ contractor, you need to have %## the
eleents- 314 capital, 3:4 wor! is not directly
related, 3;4 control is in the hands of the
contractor. -o for you to be legitiate, you need
to 5ualify in ALL T2)(( aspects. ,ou need to
coplete all three. /ut for you to be considered an
)LL+0)T)$AT+ #abor Only $ontractor you only need
ON+.
,ou iss one, you are #abor Only $ontractor. ,ou
iss capital, you are a #abor Only $ontractor. ,ou
iss the wor!, wor! is in short wor! directly
related to the business of the principal, then you
are a #abor Only $ontractor. Or control is in the
hands of the principal, then you are a #abor Only
$ontractor. %ny 5uestions about these, before we go
to the new rule0
Now what did D.O.=18 do 3referring to the NEW one40
&t recobined the different eleents. -o if you
have your copy of the D.O=18 3new one4, can you
please refer to the definition under -ection B.
'hat -ec.B did was to put @erely recruits, no
substantial capital, wor! is directly related to
the business of the principal,A cobined as one
paragraph. That"s paragraph 1. %nd then paragraph
:, is siilar to the paragraph two of the old
Dept.Order., referring to control being in the
hands of the principal. %nd a!ing the two
connected by the dis1unctive @O)A. 'here does that
lead us0 &t leads us bac! to the statutory
definition, plus the eleent of control. -o binali!
fortunately. Fortunately, the new Dept.Order
abandoned this dissecting 3referring to A1A2 of
the old !.".4. & did not say this @forulationA.
/ecause the forulation is the sae, siilar.
(.cept that it has divided. &t is the dissection
that the confusion cae about. &n short, binali!
lang ulit sa definition. +inagsaa-saa na ulit,
para hindi na tayo alito !ung alin ba yan, @1A ba
yan @:A ba yan, or @;A ba yan. %ny 5uestions0
-o hindi na tayo alilito about this 3referring to
A1A2 of the old !.".4, about the copound
paragraph in the old Dept. Order. 'ala na yung
copound paragraph. (ven yung erely recruits na
ina!yat ng D.O=18 3old4, doon sa introductory
paragraph, at hiniwalay doon sa paragraph 1,
nilagay niya sa preliinary stateent yung @erely
recruitsA, ngayon 3with the new D.O.18-%4 binali!
na ulit, sinaa-saa na niya. 'hich is consistent
with the statutory definition, the definition in
the #abor $ode. Today"s hope in the Dept. of #abor.
%side fro that, te!a una, ai ga na!i!ita pa a!o
na ga parang nalilito.
-o how do we treat that0 The sae interpretation.
To be an &##(7T&*%T( #abor Only $ontractor, you
iss ON( positive 5ualification, you are
&##(7&T&*%T(. ,ou don"t have substantial capital,
you are illegitiate. (ven if you have substantial
capital, but wor! is directly related to the
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business of the principal, you are illegitiate.
(ven if you have substantial capital, even if wor!
is not directly related to the business of the
principal, but if the control is surrendered to the
principal, and not retained by the contractor, you
are engaged in illegitiate #abor Only $ontracting
arrangeent. Cuestions0 %ny 5uestions0 $lear0 -o
far0 O!ayD
The new D.O.=18, aside fro bringing bac! the
forulation in the law 3#abor $ode4, adds a
definition of what is a #egitiate contracting
arrangeent. 'hich is good, because in D.E.18
3old4, we did not have a definition of a #egitiate
$ontractor or a #egitiate $ontracting %rrangeent.
%nd in the past, whenever & would discuss
Dept.Order =18, & would say that in the old rules,
in the old &)), before the D.O.18, we used to have
a definition of an independent contractor, which
would siply reverse the definition of a #abor Only
$ontractor, and would enuerate the 5ualifications
of an &ndependent $ontractor. Now, in the 3new4
D.O.18, that definition is bac!. This tie, not a
definition of &ndependent $ontractor, but a
definition of a #(7&T&*%T( contracting, and that is
in -ection F of D.O.18-%.
+art of the definition of a #egitiate $ontractor,
is the re5uireent of )(7&-T)%T&ON. -ection F
states @the contractorGA, ah o!ay, wait, the
preliinary stateent is very iportant9
@$ontracting or -ubcontracting shall be #(7&T&*%T(,
if all the following circustances $ON$6). Nuber
One, the contractor ust be registered in
accordance with the rules, and carries a D&-T&N$T
and &ND(+(ND(NT business, and underta!es to perfor
a 1ob, wor!, or service, on its own responsibility
according to its own anner and ethod and free
fro the control and direction of the principal.A
This is the sae definition that used to be in the
old &)) as a definition of an independent
contractor. The second eleent is the substantial
capitali8ation. %nd the third eleent is the
service agreeent that ensures copliance with all
the rights and benefits under labor laws.
&t would have been better if -ection F included the
5ualification that wor! should not be directly
related to the business of the principal. /ecause
in that case, we would really have two definitions-
one the converse of the other. /ut even without
that, we still adopt the sae interpretation. One
should be the converse or the reverse of the other.
For L+0)T)$AT+ contracting, you need to have ALL
the 5ualifications. The 5ualification of the
entity3the contractor4, the 5ualification of the
wor! 3the wor! should not be directly related4,
and control. On the other hand, )LL+0)T)$AT+ #abor
Only $ontracting arrangeent, need only to $)SS ON+
of the 5ualifications. (ither the contractor is
dis5ualified because of the absence of substantial
capitali8ation, O) the wor! is dis5ualified,
eaning it is not supposed to be contracted out
because it is directly related to the business of
the principal, O) the contractor surrenders control
over the wor! to the principal.
#$uestion is raised. %orry& it can't be heard(
%tty. *anuel9 O!ay, that is the proble with
D.O.=18-%. &" not sure if they iss this, or it
was deliberate. & never too! part in any of the
discussions. /ut &" 5uite happy with how it went
out. 'hy0 &n -ection F, it says that the following
circustances concur, and it includes, ah, it
starts the enueration with the registration. &f
you go to -ection 1F, and while -ection 1F starts
with @andatory registration and registry of
legitiate contractorsA it still includes the sae
provision in the old, in the original D.O=18.
-aying that @failure to register, shall give rise
to the presuption, that the contractor is engaged
in #abor Only $ontracting.A That is NOT consistent
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with -ection F. &f you say in -ection F, that @all
the following circustances ust concurA, and
therefore there ust be registration. Therefore the
absence of registration, you cannot be legitiate.
/ut unfortunately -ection 1F says, @only gives rise
to the presuption that the contractor is engaged
in #abor Only $ontacting arrangeent. -o that is
one probleatic area of D.O.=18-%.
#$uestion is raised) %orry& it can't be heard(
%tty. *anuel9 %h, that is a different ite all
together, we will go to service agreeent later
because that is one additional prohibited activity.
%ny 5uestions0
Cuestion9 -ir the re5uireent that the contractor
does not e.ercise HHHHH control, is it found in the
#abor $ode0
%tty. *anuel9 No. That is not part of the
definition. %nd that was precisely what D.O.=18
erely added to the definition.
#*ollow+u, $uestion is raised(
%tty. *anuel9 ,es, because that is 1urisprudential.
That is siply following the 1urisprudence on the
four-fold test. /ecause the Four-fold test is not
even in the $ode. ,ou will not find the four-fold
test in the #abor $ode. /ut that had been enshrined
in 1urisprudence- that control is what deterines
the (ployer-(ployee relationship. %nd the general
proposition is, whoever has control is T2(
eployer. -o it"s 1ust an incorporation of that
principle in the rules. /ut that is not in %rticle
1EB. That is not in the definition in the #abor
$ode. &n the sae way that the four-fold test, you
cannot find that in the 3#abor $ode4
Cuestion9 -o sir if we are as!ed what is legitiate
labor contracting arrangeent, we answer only
HHHHHHH or do we add control re5uisite, no control
by the principalG
%tty *anuel9 The best way is to cobine both. %nd
to sa# #ou !ave to be le2itimate under Section 3
and #ou s!ould not be ille2itimate under Section 4.
That"s why & was saying earlier, it would have been
better if all the eleents in -ection B, had been
reversed and included in -ection F. +ara !upleto
!a talaga. 'ala !ang lusot. /ut in this case, ai
iniwan. /ut that"s pardonable. 'e"ve seen worse
Departental Orders of the DO#(. -o there has been
an iproveent even in the forulation of
departent orders. (ven in the process.
%ny 5uestions0 /efore we proceed to other ites in
the new Departent OrderG
O!ayD One significant innovation introduced by
D.O.=18-%, is the definition of CA5)TAL. 'hat is
@substantial capitali8ationA0 %nd this is a very
good regulation. 7ood in the sense that
@substantialA is now really very substantial. 'hat
do you ean by that0 6nder -ection ;, definition of
ters, subparagraph #, substantial capital refers
to 5A)D-*5 capital. +aid-up capital stoc!s, or
shares of AT L+AST Three *illion pesos paid-up
capital. -o what is the reason for this0 To avoid
fly by night #abor Only $ontractors. To avoid
recruiters, contactors who do not have capital and
erely recruits wor!ers and pass the off as
eployees or pass the off as fi.ed ter eployees
to wor! for a principal. ,un yong iniiwasan. %nd
so there is a high capitali8ation re5uireent.
'hich eans you need to -A6+ t!ree million pesos to
be a contractor, to be a legitiate contractor.
That"s for corporations, partnerships,
cooperatives, and even single proprietors. *ag!aiba
lang yung ters used, because for single
proprietors, its not capital stoc!. -o it says @net
worthA, parang -%#N, @net assetsA. %t least ;*
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pesos, parehong ;* pesos. -o that weeds out fly by
night contractors.
Ta!e note that the definition of @contractorsA
under subparagraph D, specifically states
@including a cooperativeA, and this is in reaction
to any cooperatives set up to act as contractors.
%nd you have encountered any cases where wor!ers
will be terinated and then the copany will
facilitate, will help the organi8e a cooperative,
and then they will be rehired but this tie not as
regular eployees, but as cooperative ebers,
supplied by the cooperative, to wor! for their
forer eployer. Nasilip na yan. %nd any cases had
been decided and so now in the rules, ginawa ng
categorical, including @cooperativesA. There"s no
pretension now. 'hether you are a corporation or
cooperative, you are considered a contractor, as
long as you are engaged in this type of wor!.
%nother significant provision in so far as the
substantial capital re5uireent is concerned, is a
new ter, a new concept now called 7Net %inancial
Contractin2 Capacit# 8N%CC9:. That is under
subparagraph 7. %gain in the hope of ensuring that
contractors will be substantially capitali8ed,
there is now a re5uireent that in the service
agreeent, and you have a odel service agreeent,
there is a re5uireent to include the @capacity to
carry out a contractA. %nd that is the NF$$. &t"s a
atheatical forula. The current assets inus the
current liabilities, ultiplied by the contract
duration. &n the contract duration, there are
nubers assigned9 1E for 1 year or less> 1I for
ore than 1 year up to : years> and :E for ore
than : years. *inus the value of all outstanding or
ongoing pro1ects, including contracts to be
started.
'hat is the reason for that0 &n addition to the
substantial capitali8ation, the Net Financial
$ontracting $apacity ust be +;*)6AL+NT to the wor!
contracted out. &n short you are atching the
capacity with the wor!. 'hy is that needed on top
of the substantial capitali8ation0 /ecause you
ight have substantial capitali8ation but you are
over-e.posed. %nd therefore your net financial
capacity will be lower than the actual value of the
contract that you have coitted to carry out. -o
that"s an additional re5uireent- substantial
capitali8ation iniu but there is an additional
re5uireent that your Net Financial $ontracting
$apacity will be at least be e5uivalent to the
value of the contract you want to carry out. %nd
that is a re5uireent for the contract. That is
under subparagraph /3F4 of -ection J9 @The service
agreeent between the principal and the contractor
shall include the following9GA That includes a
provision on the Net Financial $ontracting $apacity
of the contractor which ust be e5ual to the total
contract cost. &t"s a atheatical forula. %nd
that aount should be e5uivalent to the cost of the
contract with a particular principal. %ny
5uestions0 %ny 5uestions about the substantial
capitali8ation re5uireent0
Now we go to the prohibited activities. &n D.O.18
3old4, there are two instances when the principal
will be considered as the eployer, the direct
eployer. One is when you have #abor-Only-
$ontracting %rrangeent. The principal shall be the
eployer. That"s not new. That is what"s stated in
the $ode. -econd, when there is a coission of a
prohibited activity. %nd D.O.18 3old4 has a list of
the prohibited activities. 'e will go to that
later. & 1ust want to copare it now with D.O.18-%.
-o in D.O.18-%, when is the principal the eployer0
-ae with D.O.18, D.O.18-% says of course when
there is #abor Only $ontracting, the principal
shall be considered the direct eployer. Two,
siilar to D.O.18, D.O.18-% now also says that the
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principal shall be the eployer if prohibited
activities are coitted. 'hy do we need two0 'hy
do we need two ites0 /ecause you can be a
legitiate contractor, eaning you are not falling
into the definition of a #abor Only $ontractor, but
you engage in prohibited activities. %nd so your
coission of the prohibited activity will not a!e
you a #abor-Only $ontractor, but will a!e the
principal liable as eployer.
#et"s give a siple e.aple. %s!ing the eployees
of your contractor to sign an undated resignation
letter. That"s a prohibited activity. 'ill that
a!e a contracting arrangeent a #abor Only
$ontracting0 NoD /ecause #abor Only $ontracting
shall be deterined by the definition. ,ou fall
outside the definition, you are not a labor-only
contractor. /ut if eployees are re5uired to subit
signed undated resignation letters, that"s a
coission of a prohibited activity, even if that
will not 5ualify, even if that will not a!e the
contracting arrangeent as #abor Only $ontracting,
it will a!e the principal liable as direct
eployer. -o sae effect. -ae effect as a #abor
Only $ontracting arrangeent.
Now, D.O.18-% adds to that. %dds to instances when
the principal shall be considered as the direct
eployer. %nd that is in -ection I of D.O.18-%. The
last paragraph9 @The principal shall be deeed the
direct eployer of the contractor"s eployee in
cases where there is a finding by a copetent
authority of #abor Only $ontracting.A -o that"s
one. @Or coission of prohibited
activities.A3That"s4Two. @GOR a violationA- that"s
the additional. Or a violation of either -ections 8
or J of the )ules. 'hich brings us to -ection 8
and J. -ection 8 refers to rights of contractor"s
eployees. 6nder D.O.18 3old4, that was not
e.plicitly enuerated, as one of the grounds for
the principal to be liable as a direct eployer.
Now, it is stated, it is included by reference.
-ection I a!es a cross-reference to -ection 8,
that is violation of the rights of the eployees.
%nd -ection J, which refers to the contract and the
re5uireent of the contract. So t!e principal
aside <rom t!e pro!ibited activities s!ould now
be accountable o< violations o< t!e ri2!ts o< t!e
emplo#ees and violations o< t!e re=uirements <or
t!e contract. %nd violations will have the sae
effect as the enuerated prohibited activities.
That eans the principal becoes liable as
eployer.
Cuestion9 -ir in here, when you were coparing
illegitiate and legitiate contracting, we said
that in illegitiate contracting, they becoe
priary liable for all, while in #egitiate only
for HHHHHHHHH. -o -ir, in this case, if you don"t
do prohibited activity, you"re still #egitiate
$ontractor0
%tty. *anuel9 ,es. ,ou are still #egitiate
$ontractor, because you do not fall under the
definition of #abor Only $ontracting. /ut despite
that, the principal becoes liable as eployer.
-ae liability as a #abor Only $ontractor, but the
contracting arrangeent itself is not a #abor Only
$ontracting arrangeent. /ut the sae effect.
+rincipal becoes liable as direct eployer.
'hat is the reason for that0 'e are holding the
principal liable for the ista!es of the
contractor. 'hy are we doing that0 /ecause we want
the principal to be very choosy before entering
into contracts with the contractor. -o the
principal should ensure that the contractor it will
enter into contract with will be a legitiate
contractor, and a contractor that does NOT deprive
eployees of their rights under the labor code. %ny
5uestions0
8
Cuestion9 -ir, is that a valid provision0 /ecause,
you"re iposing a liability on the principal, when
the contract is between the eployees and the
contractor, -ir. &sn"t that a violation of the
privity of contracts, -ir0
%tty. *anuel9 %gain, you are saying that you are
a!ing the principal liable for the liabilities of
the contractor0 %h, in a way, yes, but again, as &
said, that is suppose to ensure that the principal
will ensure that the rights of the eployees are
guaranteed by the contractor. -o you pass on to the
principal the burden. Otherwise, the principal will
not be interested. /ahala !a !ahit hindi o
binabayaran ang ga eployees o. /asta i!aw
binabayaran !o. Kahit hindi o binabayaran ng taa,
wala a!ong pa!iala. That could be the attitude of
the principal. /ut not this tie. -o instead of
1ust being solidarily liable, the principal is now
declared to be eployer.
Cuestion9 -ir what if po !ung ai violation for
-ection 8 and J HHHHHHH0
%tty. *anuel9 For -ection 8, rights of contractual
eployees. The contractor. /ecause the (ployer-
(ployee relationship originally, before the
violation, or not before the violations 3because
the situation could be that the violation was
coitted fro the very start4. /ut in the general
schee of things, the eployent contract or the
eployent relationship is between the contractor
and the wor!ers. %nd therefore, who coits the
violations of labor rightsLlabor laws0 The
contractor.
#et"s loo! at the e.aples. 3%ir referring to
%ection -#b(#iii( of !."..1/+A4-afe and healthful
wor!ing conditions 3occupational safety4, #abor
-tandards, +ayent of service incentive leave,
Overtie pay, holiday pay. -ino nagbabayad nun0 The
contractor. /ecause the contractor is the eployer.
/ut the effect of that, pag hindi nagbabayad ng
taa ang contractor, the principal becoes liable
as eployer. 'hat is the effect of that0 The
principal should now ensure that the contractor
pays the eployees properly. &t adds that burden to
the principal. /ecause otherwise, the principal
would be a disinterested party, as far as
copliance with labor laws is concerned.

Cuestion9 -ir, does the principal have a reedy
against the violating contractor0
%tty. *anuel9 The bond. %nd that is specifically
entioned in subparagraph 3b4 of -ection J-
)e5uired contracts and its rules. % provision on
the issuance of the bond as defined in -ection ;
and renewable every year. 6nder -ection ;, there is
a definition of the bond. %nd that is referred to
in -ection J, subparagraph 3b4, subparagraph 3v4
but there is a ista!e in the identification of the
ite nuber, the letter. &t refers to ;34 when
under -ection ;, bond is letter 3a4, not letter
34. Di na siguro nila nagalaw.
Cuestion9 -o -ir, a bond is now re5uired0 -ince in
y own understanding of the $ode it says the
eployer *%, be re5uiredG
%tty. *anuel9 That"s right. &t 3the bond4 is a
re5uireent as part of the contract.
O!ay let"s address the 5uestion on whether the
-ecretary of #abor can do it when the #abor $ode
does not ipose it. %nd the answer to that is the
-ecretary of #abor was given by the #abor $ode a
wide discretion to regulate contracting
arrangeent. %nd that is part of the powers given
to the -ecretary of #abor- to hold the principal
liable as eployer.
9
Ta!e not that under -ection I, and this only states
the obvious. That will only happen if there is a
finding by a copetent authority that there is a
violation. -o you need to have a D+CLARAT)ON
because of a violation the principal becoes liable
as a direct eployer.
-o sae plus violation of the rights of the
eployees. %nd violations of the provisions
concerning the contract. %ny other 5uestions on
this0
There is a difference in the enueration of the
prohibited activities. &f you copare your list in
the D.O.=18 3old4, with the list of the prohibited
activities under D.O.=18-%, there is a difference
in the forulation. There is a paragraph % 3of
%ection 0& !."..1/+A4, saying that @contracting-out
of 1obs, wor!s or services, when not done in good
faith and not 1ustified by the e.igency of the
business.A That is a general introductory paragraph
for a list of prohibited activity. &n the old or
original Departent Order, that is only part of one
ite, or part of one paragraph. & will not consider
it as a significant change. The interpretation
should reain the sae.
-ubparagraph M, is a significant ite of the
prohibited activities enueration under D.O.=18-%.
That states @repeated hiring of eployees under an
eployent contract of short duration, or under a
service agreeent of a short duration, with the
sae or different contractors.A -ubparagraph J, in
the enueration, now a!es @refusal to provide a
copy of the service agreeent in the eployent
contracts between the contractor and the eployees
to the certified bargaining agent 3in the
bargaining unit4.A &t is now a prohibited activity.
&n the original, there is a stateent that it
should also be given to the certified e.clusive
bargaining agent. /ut a violation of that provision
was not ade a prohibited activity. Now, it was
elevated, it was transferred to the enueration of
the prohibited activities, which eans that, t!e
principal will now be liable as emplo#er i< t!e
union t!e certi<ied bar2ainin2 a2ent re=uested <or
a cop# o< t!e contracts and was re<used. T!e
principal will a2ain be liable as t!e direct
emplo#er. %ny 5uestions0
-ubparagraph 1E is also significant. &t refers to
the $ollective /argaining %greeent 3$/%4 and the
provisions concerning what can be contracted out.
/ecause a $/% can say that only 1E percent of the
total wor! force can be contracted out. There is
now a pending bill, liiting by percentage of the
total nuber wor! force, what can be contracted
out. /ut &" not sure if that will be approved and
enacted into law before the end of the current
congress. /ut the idea is to liit the percentage
or the ratio of the regular eployees or directly
hired eployees and the eployees hired through
contracting arrangeent.
-ubparagraph 3/4Nof %ection 0& !."..1/+A1 is an
addition of a catch-all phrase saying analogous to
the foregoing. @$ontracting out of 1obs, wor!s,
services analogous to the above.A %nalogous to any
of the enuerated ites, @when not done in good
faith and not 1ustified in the e.igencies of the
business.A %ny 5uestions0
-ection 8, rights of the contractors-eployees is
an attept to cover different terinologies used.
-o you will find reliever, seasonal, wee!ender,
teporary, proo 1obbers. %aah & haven"t
encountered proo 1obbers in the past, but reliever
definitely, ginagait yan. The idea is to include
all the different category of eployees. /asta you
are hired by a contractor, you are insured on paper
of the rights that you should en1oy, as an
eployee. (ven if you are NOT an eployee of the
10
principal. ,ou are an eployee of the contractor,
you should be guaranteed the rights available to
all eployees. &ncluding the right to self-
organi8ation, collective bargaining and peaceful
concerted activities.
There are a nuber of provisions concerning
terination. There are no new provisions. /ut let
e 1ust caution you that the provisions on
terination on the procedure for terination will
only be significant if the terination will happen
,)T-)N the contract of eployent. &n short,
tatanggalin !a bago atapos yung 1-year contract
o, then the provisions on terination will apply.
/ut if the end of the ter of your contract is the
reason for the end of your eployent, then the
provisions on the terination would be useless. &t
is not even a disissal but an ending of a ter. %n
e.piration of a ter. /ecause you are fi.ed ter
eployees.
-o what do & ean by that0 On paper it is good to
have all these provisions concerning terination of
eployent, the rights of an eployee about to be
disissed but in reality you are a fi.ed ter
eployee. %nd therefore if your ter is fi.ed to
one year, at the end of 1 year, you"re out. %nd you
will NOT even have that right to a notice in that
case, because in decisions of the -upree $ourt,
the end of a fi.ed ter eployent is NOT a
disissal. &t is an e.piration of a ter. %nd
therefore you are not even entitled to be notified
that your ter will e.pire. /ecause you should have
!nown it by signing that eployent contract.
Ta!e not that we are still aintaining or D.O.=18-%
is still aintaining the re5uireent that the two
contracts should be COT+R$)NO*S. That if the
contract between the principal and the contractor
is for two years, the contract between the
contractor and the eployees should also be for two
years. 6nless the 1ob contract can be divided into
separate phases, and the phases will re5uire
different s!ills. &n which case, the contract
between the principal and contractor ay be for two
years. /ut there can be two phases. +hase 1- and
therefore your 1 year eployent contract> and
phase :- another 1 year eployent contract, this
tie for a different set of eployees, with
different set of s!ills. Otherwise, the contracts
should be coterinous.
&s that protection enough0 %h, & don"t thin! so.
/ecause the principal and the contractor can always
liit their contract to short period of 1 year, or
even less than B onths, or B onths. /ut again
there is a provision that repeated hiring of
eployees for short ter periods will be considered
as one of the prohibited activities.
There are provisions concerning cancellations of
the registration. %nd there is a provision saying
that despite the cancellation, or the registration
of a contractor, because of a probleatic
contracting arrangeent with respect to a
particular principal, the other contracts will not
be adversely affected. %nd the other contracts
shall reain, at least until the e.piration. 2indi
autoatic na nababaliwala ang !ontrata, especially
with other principals. %nd that is stated in
-ection :B, (ffects of $ancellation of
)egistration. @% final order of cancellation shall
divest the contractor of his legitiate status, to
engage in contracting or subcontracting.A $an you
re-register under a different nae0 No because part
of the re5uireents for registration of the new
entity, would be a stateent that you had not been
part, that the officers are not the sae as the
officers of a past contractor. -o dapat ai history
!a naG aah, dapat agpapa!ita !a ng history, and
they are suppose to chec! that. &n order to avoid
re-registration, under a different nae, of a
11
contractor whose registration has been previously
cancelled.
%ny 5uestions0 & thin! those are the significant
changes introduced by Departent Order No.18-%.
O!ay, uh, what changes can be e.pected as a result
of the Departent Order No. 18-%0 & a thin!ing of
the case of 2osewood, for e.aple. &f you reeber
in the case of )osewood, there is a liitation, the
-upree $ourt liited the liability of the
eployer, the principal for the conse5uences of an
unlawful disissal, or an illegal disissal. %nd
the -upree $ourt said, in the )osewood case, an
obiter dictu that eventually was repeated in other
cases. The court said that the liability of the
principal, under %rt. 1EJ, for other violations,
for violation of any provision of the labor code
shall be liited, to situations where the principal
was at fault. (ither it connived with the
contractor, or it actively participated in the
illegal disissal. That was the case of )osewood.
'ill that change with D.O.=18-%0 &f the -upree
$ourt will read the D.O.=18-% properly, it should
abandon the )osewood forula. 'hy0 /ecause -ection
8 says, )ights of $ontractor (ployees, )ight to
-ecurity of Tenure. -o if there is an illegal
disissal, done by a contractor, that is a
violation of the right of security of tenure under
-ection 8. /ut under -ection I, the effect of a
violation of -ection 8 will be to a!e the
principal liable as direct eployer.
%nd therefore, unli!e in the case of )osewood, the
conclusion now should be, because there was a
violation of the right of the security of tenure
done by the contractor, R+0ARDL+SS of whether or
not the principal was at fault, it should now be
considered L)A/L+ for the reedies available,
including the separation pay, bac!wages etc.
/ecause by virtue of -ection I, it is considered
the direct eployer. %nd that is also repeated in
-ection :M of D.O.=18-%, (ffects of finding of
#abor-Only $ontracting andLor Oiolation of -ection
M, 8 or J of the rules. % finding of coission of
any of the prohibited activities under -ection M,
or violation of -ection 8 3rights of eployees4, or
-ection J 3provision concerning contracts4, shall
render the principal the D)R+CT eployer of the
eployees of the contractor or subcontractor,
pursuant to %rt. 1EJ of the #abor $ode, as aended.
&f the court will interpret it that way. That
should be the proper interpretation.
%ny 5uestionsG0 & hope the Departent Order will
stay for a few years. %nd that if ever it will be
changed, it will be for the better.

3(ND OF T)%N-$)&+T4
12
Department Order No. 18-A
Series o< '(11
R*L+S )$5L+$+NT)N0 ART)CL+S 1(4 TO 1(> O% T-+ LA/OR COD+ AS A$+ND+D
/y virtue of the power vested in the -ecretary of
#abor and (ployent under %rticles I and 1EB to
1EJ of the #abor $ode of the +hilippines, as
aended, the following regulations governing
contracting and subcontracting arrangeents are
hereby issued9
Section 1. Guiding principles. $ontracting and
subcontracting arrangeents are e.pressly allowed
by law and are sub1ect to regulations for the
prootion of eployent and the observance of the
rights of wor!ers to 1ust and huane conditions of
wor!, security of tenure, self-organi8ation and
collective bargaining. #abor-only contracting as
defined herein shall be prohibited.
Section '. Coverage. These )ules shall apply to all
parties of contracting and subcontracting
arrangeents where eployer-eployee relationships
e.ist. &t shall also apply to cooperatives engaging
in contracting or subcontracting arrangeents.
$ontractors and subcontractors referred to in these
)ules are prohibited fro engaging in recruitent
and placeent activities as defined in %rticle
1;3b4 of the #abor $ode, whether for local or
overseas eployent.
Section ?. Definition of terms. The following ters
as used in these )ules, shall ean9
3a4 @3ond4sA refers to the bond under %rticle 1E8
of the #abor $ode that the principal ay re5uire
fro the contractor to be posted e5ual to the cost
of labor under contract. The sae ay also refer to
the security or guarantee posted by the principal
for the payent of the services of the contractors
under the -ervice %greeent.
3b4 @CaboA refers to a person or group of persons
or to a labor group which, in the guise of a labor
organi8ation, cooperative or any entity, supplies
wor!ers to an eployer, with or without any
onetary or other consideration, whether in the
capacity of an agent of the eployer or as an
ostensible independent contractor.
3c4 @ContractingA or @%ubcontractingA refers to an
arrangeent whereby a principal agrees to put out
or far out with a contractor the perforance or
copletion of a specific 1ob, wor! or service
within a definite or predeterined period,
regardless of whether such 1ob, wor! or service is
to be perfored or copleted within or outside the
preises of the principal.
3d4 @ContractorA refers to any person or entity,
including a cooperative, engaged in a legitiate
contracting or subcontracting arrangeent providing
either services, s!illed wor!ers, teporary
wor!ers, or a cobination of services to a
principal under a -ervice %greeent.
3e4 @Contractor's em,loyeeA includes one eployed
by a contractor to perfor or coplete a 1ob, wor!,
or service pursuant to a -ervice %greeent with a
principal. &t shall also refer to regular eployees
of the contractor whose functions are not dependent
on the perforance or copletion of a specific 1ob,
wor! or service within a definite period of tie,
i.e., adinistrative staff.
3f4 @5n+house agencyA refers to a contractor which
is owned, anaged, or controlled directly or
indirectly by the principal or one where the
principal ownsLrepresents any share of stoc!, and
which operates solely or ainly for the principal.
3g4 @Net *inancial Contracting Ca,acity #N*CC(1A
refers to the forula to deterine the financial
capacity of the contractor to carry out the 1ob,
wor! or services sought to be underta!en under a
-ervice %greeent. NF$$ is current assets inus
current liabilities ultiplied by K, which stands
for contract duration e5uivalent to9 1E for one
year or less> 1I for ore than one 314 year up to
two 3:4 years> and :E for ore than two 3:4 years,
inus the value of all outstanding or ongoing
pro1ects including contracts to be started.
1 )efers to the forula set out in the &pleenting
)ules and )egulations of )epublic %ct No. J18F, or
%n %ct +roviding for the *oderni8ation,
-tandardi8ation and )egulation of the +rocureent
%ctivities of the 7overnent and For Other
+urposes.
3h4 @6rinci,alA refers to any eployer, whether a
person or entity, including governent agencies and
governent-owned and controlled-corporations,
whoLwhich puts out or fars out a 1ob, service or
wor! to a contractor.
3i4 @2ight to controlA refers to the right reserved
to the person for who the services of the
contractual wor!ers are perfored, to deterine not
only the end to be achieved, but also the anner
and eans to be used in reaching that end.
314 @%er7ice AgreementA refers to the contract
between the principal and contractor containing the
ters and conditions governing the perforance or
copletion of a specific 1ob, wor! or service being
fared out for a definite or predeterined period.
3!4 @%olidary liabilityA refers to the liability of
the principal, pursuant to the provision of %rticle
1EJ of the #abor $ode, as direct eployer together
with the contractor for any violation of any
provision of the #abor $ode.
&t also refers to the liability of the principal,
in the sae anner and e.tent that heLshe is liable
to hisLher direct eployees, to the e.tent of the
wor! perfored under the contract when the
contractor fails to pay the wages of hisLher
eployees, as provided in %rticle 1EB of the #abor
$ode, as aended.
3l4 P%ubstantial ca,italA refers to paid-up capital
stoc!sLshares of at least Three *illion +esos
3+;,EEE,EEE.EE4 in the case of corporations,
partnerships and cooperatives> in the case of
single proprietorship, a net worth of at least
Three *illion +esos 3+;,EEE,EEE.EE4.
34 @Trilateral 2elationshi,A refers to the
relationship in a contracting or subcontracting
arrangeent where there is a contract for a
specific 1ob, wor! or service between the principal
and the contractor, and a contract of eployent
between the contractor and its wor!ers. There are
three 3;4 parties involved in these arrangeents9
the principal who decides to far out a 1ob, wor!
or service to a contractor> the contractor who has
the capacity to independently underta!e the
perforance of the 1ob, wor! or service> and the
contractual wor!ers engaged by the contractor to
accoplish the 1ob, wor! or service.
Section 3. Legitimate contracting or
subcontracting. $ontracting or subcontracting shall
be legitiate if all the following circustances
concur9
3a4 The contractor ust be registered in accordance
with these )ules and carries a distinct and
independent business and underta!es to perfor the
1ob, wor! or service on its own responsibility,
according to its own anner and ethod, and free
fro control and direction of the principal in all
atters connected with the perforance of the wor!
e.cept as to the results thereof>
3b4 The contractor has substantial capital andLor
investent> and
3c4 The -ervice %greeent ensures copliance with
all the rights and benefits under #abor #aws.
Section @. Trilateral relationship in contracting
arrangements; Solidary liability. &n legitiate
contracting or subcontracting arrangeent there
e.ists9
3a4 %n eployer-eployee relationship between the
contractor and the eployees it engaged to perfor
the specific 1ob, wor! or service being contracted>
and
3b4 % contractual relationship between the
principal and the contractor as governed by the
provisions of the $ivil $ode.
&n the event of any violation of any provision of
the #abor $ode, including the failure to pay wages,
there e.ists a solidary liability on the part of
the principal and the contractor for purposes of
enforcing the provisions of the #abor $ode and
other social legislation, to the e.tent of the wor!
perfored under the eployent contract.
2owever, the principal shall be deeed the direct
eployer of the contractor"s eployee in cases
where there is a finding by a copetent authority
of labor-only contracting, or coission of
prohibited activities as provided in -ection M, or
a violation of either -ections 8 or J hereof.
Section 4. Prohibition against laboronly
contracting. #abor-only contracting is hereby
declared prohibited. For this purpose, labor only
contracting shall refer to an arrangeent where9
3a4 The contractor does not have substantial
capital or investents in the for of tools,
e5uipent, achineries, wor! preises, aong
others, and the eployees recruited and placed are
perforing activities which are usually necessary
or desirable to the operation of the copany, or
directly related to the ain business of the
principal within a definite or predeterined
period, regardless of whether such 1ob, wor! or
service is to be perfored or copleted within or
outside the preises of the principal> or
3b4 The contractor does not e.ercise the right to
control over the perforance of the wor! of the
eployee.
Section &. !ther Prohibitions. Notwithstanding
-ection B of these )ules, the following are hereby
declared prohibited for being contrary to law or
public policy9
%. $ontracting out of 1obs, wor!s or services when
not done in good faith and not 1ustified by the
e.igencies of the business such as the following9
314 $ontracting out of 1obs, wor!s or services when
the sae results in the terination or reduction of
regular eployees and reduction of wor! hours or
reduction or splitting of the bargaining unit.
3:4 $ontracting out of wor! with a @$aboA.
3;4 Ta!ing undue advantage of the econoic
situation or lac! of bargaining strength of the
contractor"s eployees, or underining their
security of tenure or basic rights, or
circuventing the provisions of regular eployent,
in any of the following instances9
3i4 )e5uiring the to perfor functions which are
currently being perfored by the regular eployees
of the principal> and
3ii4 )e5uiring the to sign, as a precondition to
eployent or continued eployent, an antedated
resignation letter> a blan! payroll> a waiver of
labor standards including iniu wages and social
or welfare benefits> or a 5uitclai releasing the
principal, contractor or fro any liability as to
payent of future clais.
3F4 $ontracting out of a 1ob, wor! or service
through an in-house agency.
3I4 $ontracting out of a 1ob, wor! or service that
is necessary or desirable or directly related to
the business or operation of the principal by
reason of a stri!e or loc!out whether actual or
iinent.
3B4 $ontracting out of a 1ob, wor! or service being
perfored by union ebers when such will interfere
with, restrain or coerce eployees in the e.ercise
of their rights to self-organi8ation as provided in
%rt. :F8 3c4 of the #abor $ode, as aended.
3M4 )epeated hiring of eployees under an
eployent contract of short duration or under a
-ervice %greeent of short duration with the sae
or different contractors, which circuvents the
#abor $ode provisions on -ecurity of Tenure.
384 )e5uiring eployees under a subcontracting
arrangeent to sign a contract fi.ing the period of
eployent to a ter shorter than the ter of the
-ervice %greeent, unless the contract is divisible
into phases for which substantially different
s!ills are re5uired and this is ade !nown to the
eployee at the tie of engageent.
3J4 )efusal to provide a copy of the -ervice
%greeent and the eployent contracts between the
contractor and the eployees deployed to wor! in
the bargaining unit of the principal"s certified
bargaining agent to the sole and e.clusive
bargaining agent 3-(/%4.
31E4 (ngaging or aintaining by the principal of
subcontracted eployees in e.cess of those provided
for in the applicable $ollective /argaining
%greeent 3$/%4 or as set by the &ndustry
Tripartite $ouncil 3&T$4.
/. $ontracting out of 1obs, wor!s or services
analogous to the above when not done in good faith
and not 1ustified by the e.igencies of the
business.
Section 8. "ights of contractor#s employees. %ll
contractor"s eployees, whether deployed or
assigned as reliever, seasonal, wee!-ender,
teporary, or proo 1obbers, shall be entitled to
all the rights and privileges as provided for in
the #abor $ode, as aended, to include the
following9
3a4 -afe and healthful wor!ing conditions>
3b4 #abor standards such as but not liited to
service incentive leave, rest days, overtie pay,
holiday pay, 1;th onth pay, and separation pay as
ay be provided in the -ervice %greeent or under
the #abor $ode>
3c4 )etireent benefits under the --- or retireent
plans of the contractor, if there is any>
3d4 -ocial security and welfare benefits>
3e4 -elf-organi8ation, collective bargaining and
peaceful concerted activities> and
3f4 -ecurity of tenure.
Section >. "e$uired contracts under these "ules.
3a4 (ployent contract between the contractor and
its eployee.
Notwithstanding any oral or written stipulations to
the contrary, the contract between the contractor
and its eployee shall be governed by the
provisions of %rticles :MJ and :8E of the #abor
$ode, as aended. &t shall include the following
ters and conditions9
i. The specific description of the 1ob, wor! or
service to be perfored by the eployee>
ii. The place of wor! and ters and conditions of
eployent, including a stateent of the wage rate
applicable to the individual eployee> and
iii. The ter or duration of eployent that ust
be co-e.tensive with the -ervice %greeent or with
the specific phase of wor! for which the eployee
is engaged.
The contractor shall infor the eployee of the
foregoing ters and conditions of eployent in
writing on or before the first day of hisLher
eployent.
3b4 -ervice %greeent between the principal and the
contractor. The -ervice %greeent shall include the
following9
i. The specific description of the 1ob, wor! or
service being subcontracted.
ii. The place of wor! and ters and conditions
governing the contracting arrangeent, to include
the agreed aount of the services to be rendered,
the standard adinistrative fee of not less than
ten percent 31EQ4 of the total contract cost.
iii. +rovisions ensuring copliance with all the
rights and benefits of the eployees under the
#abor $ode and these )ules on9 provision for safe
and healthful wor!ing conditions> labor standards
such as, service incentive leave, rest days,
overtie pay, 1;th onth pay and separation pay>
retireent benefits> contributions and reittance
of ---, +hilhealth, +ag&big Fund, and other welfare
benefits> the right to self-organi8ation,
collective bargaining and peaceful concerted
action> and the right to security of tenure.
iv. % provision on the Net Financial $ontracting
$apacity of the contractor, which ust be e5ual to
the total contract cost.
v. % provision on the issuance of the bondLs as
defined in -ection ;34 renewable every year.
vi. The contractor or subcontractor shall directly
reit onthly the eployers" share and eployees"
contribution to the ---, ($$, +hilhealth and
+agibig.
vii. The ter or duration of engageent. The
-ervice %greeent ust confor to the DO#( -tandard
$oputation and -tandard -ervice %greeent, which
for part of these )ules as %nne.es @%A and @/A.
Section 1(. Duties of the principal. +ursuant to
the authority of the -ecretary of #abor and
(ployent to restrict or prohibit the contracting
of labor to protect the rights of the wor!ers and
to ensure copliance with the provisions of the
#abor $ode, as aended, the principal, as the
indirect eployer or the user of the services of
the contractor, is hereby re5uired to observe the
provisions of these )ules.
Section 11. Security of tenure of contractor#s
employees. &t is understood that all contractor"s
eployees en1oy security of tenure regardless of
whether the contract of eployent is co-terinus
with the service agreeent, or for a specific 1ob,
wor! or service, or phase thereof.
Section 1'. !bservance of re$uired standards of due
process; re$uirements of notice. &n all cases of
terination of eployent, the standards of due
process laid down in %rticle :MM3b4 of the #abor
$ode, as aended, and settled 1urisprudence on the
atter:, ust be observed. Thus, the following is
hereby set out to clarify the standards of due
process that ust be observed9
: King of Kings Transport, &nc., $laire dela
Fuente, and *elissa #i, vs. -antiago O. *aac,
7.). No. 1BB:E8, 3:J <une :EEM4> and Feli. /. +ere8
and %ante 7. Doria v. +hilippine Telegraph and
Telephone $opany and <ose #uis -antiago, 7.). No.
1I:EF8, 3M %pril :EEJ4, 3en banc Decision4.
&. For terination of eployent based on 1ust
causes as defined in %rticle :8: of the $ode, the
re5uireent of two written notices served on the
eployee shall observe the following9
3%4 The first written notice should contain9
314 The specific causes or grounds for
terination>
3:4 Detailed narration of the facts and
circustances that will serve as basis for the
charge against the eployee. % general description
of the charge will not suffice>
3;4 The copany rule, if any, that is violated
andLor the ground under %rt. :8: that is being
charged against the eployee> and
3F4 % directive that the eployee is given
opportunity to subit a written e.planation within
a reasonable period.
@)easonable periodA should be construed as a period
of at least five 3I4 calendar days fro receipt of
the notice to give the eployee an opportunity to
study the accusation, consult a union official or
lawyer, gather data and evidence, and decide on the
defenses against the coplaint.
3/4 %fter serving the first notice, the eployer
should afford the eployee aple opportunity to be
heard and to defend hiselfLherself with the
assistance of hisLher representative if heLshe so
desires, as provided in %rticle :MM3b4 of the #abor
$ode, as aended.
@%ple opportunity to be heardA eans any
eaningful opportunity 3verbal or written4 given to
the eployee to answer the charges against hiLher
and subit evidence in support of hisLher defense,
whether in a hearing, conference or soe other
fair, 1ust and reasonable way. % foral hearing or
conference becoes andatory only when re5uested by
the eployee in writing or substantial evidentiary
disputes e.ist or a copany rule or practice
re5uires it, or when siilar circustances 1ustify
it.
3$4 %fter deterining that terination of
eployent is 1ustified, the eployer contractor
shall serve the eployee a written notice of
terination indicating that9 314 all circustances
involving the charge against the eployees have
been considered> and 3:4 the grounds have been
established to 1ustify the severance of their
eployent. The foregoing notices shall be served
on the eployee"s last !nown address.
&&. For terination of eployent based on
authori8ed causes defined in %rticle :8; of the
#abor $ode, the re5uireent of due process shall be
deeed coplied with upon service of a written
notice to the eployee and the appropriate regional
office of the Departent of #abor and (ployent at
least thirty days before the effectivity of the
terination, specifying the ground or grounds for
terination.
&&&. &f the terination is brought about by the
copletion of the contract or phase thereof, no
prior notice is re5uired. &f the terination is
brought about by the failure of a probationary
eployee to eet the reasonable standards of the
eployer, which was ade !nown to the eployee at
the tie of hisLher eployent, it shall be
sufficient that a written notice is served upon the
eployee within a reasonable tie prior to the
e.piration of the probationary period.
Section 1?. %ffect of termination of employment.
The terination of eployent of the contractor
eployee prior to the e.piration of the -ervice
%greeent shall be governed by %rticles :8:, :8;
and :8F of the #abor $ode.
&n case the terination of eployent is caused by
the pre-terination of the -ervice %greeent not
due to authori8ed causes under %rticle :8;, the
right of the contractor eployee to unpaid wages
and other unpaid benefits including unreitted
legal andatory contributions, e.g., ---,
+hilhealth, +ag-ibig, ($$, shall be borne by the
party at fault, without pre1udice to the solidary
liability of the parties to the -ervice %greeent.
'here the terination results fro the e.piration
of the service agreeent, or fro the copletion of
the phase of the 1ob, wor! or service for which the
eployee is engaged, the latter ay opt for payent
of separation benefits as ay be provided by law or
the -ervice %greeent, without pre1udice to hisLher
entitleent to the copletion bonuses or other
eoluents, including retireent benefits whenever
applicable.
Section 13. &andatory "egistration and "egistry of
Legitimate Contractors. $onsistent with the
authority of the -ecretary of #abor and (ployent
to restrict or prohibit the contracting out of
labor to protect the rights of wor!ers, it shall be
andatory for all persons or entities, including
cooperatives, acting as contractors, to register
with the )egional Office of the Departent of #abor
and (ployent 3DO#(4 where it principally
operates.
Failure to register shall give rise to the
presuption that the contractor is engaged in
labor-only contracting.
%ccordingly, the registration syste governing
contracting arrangeents and ipleented by the
)egional Offices of the DO#( is hereby established,
with the /ureau of 'or!ing $onditions 3/'$4 as the
central registry.
Section 1@. "e$uirements for registration. The
application for registration as a contractor shall
be filed at the DO#( )egional Office in the region
where it see!s to principally operate. The
applicant shall provide in the application for the
following inforation9
3a4 The nae and business address of the applicant
and the areas where it see!s to operate>
3b4 The naes and addresses of officers, if the
applicant is a corporation, partnership,
cooperative or a labor organi8ation>
3c4 The nature of the applicant"s business and the
industry or industries where the applicant see!s to
operate>
3d4 The nuber of regular wor!ers and the total
wor!force>
3e4 The list of clients, if any, the nuber of
personnel assigned to each client, if any, and the
services provided to the client>
3f4 The description of the phases of the contract,
including the nuber of eployees covered in each
phase, where appropriate> and
3g4 +roof of copliance with substantial capital
re5uireent as defined in -ection ;3l4 of these
)ules.
The application shall be supported by9
3a4 % certified true copy of a certificate of
registration of fir or business nae fro the
-ecurities and (.change $oission 3-($4,
Departent of Trade and &ndustry 3DT&4, $ooperative
Developent %uthority 3$D%4, or fro the DO#( if
the applicant is a labor organi8ation>
3b4 % certified true copy of the license or
business perit issued by the local governent unit
or units where the contractor operates>
3c4 % certified listing, with proof of ownership or
lease contract, of facilities, tools, e5uipent,
preises ipleents, achineries and wor! preises,
that are actually and directly used by the
contractor in the perforance or copletion of the
1ob, wor! or service contracted out. &n addition,
the applicant shall subit a photo of the office
building and preises where it holds office>
3d4 % copy of audited financial stateents if the
applicant is a corporation, partnership,
cooperative or a labor organi8ation, or copy of the
latest &T) if the applicant is a sole
proprietorship> and
3e4 % sworn disclosure that the registrant, its
officers and owners or principal stoc!holders or
any one of the, has not been operating or
previously operating as a contractor under a
different business nae or entity or with pending
cases of violations of these )ules andLor labor
standards, or with a cancelled registration. &n
case any of the foregoing has a pending case, a
copy of the coplaint and the latest status of the
case shall be attached.
The application shall be verified. &t shall include
a DO#( certification of attendance to orientation
seinar on these )ules and an underta!ing that the
contractor shall abide by all applicable labor laws
and regulations.
Section 14. 'iling and processing of application.
The application with all supporting docuents shall
be filed in triplicate in the )egional Office where
the applicant principally operates. No application
for registration shall be accepted unless all the
re5uireents in the preceding -ection are coplied
with.
Section 1&. (erification inspection. 'ithin two 3:4
wor!ing days upon receipt of the application with
coplete supporting docuents, the authori8ed
representative of the )egional Director shall
conduct a verification inspection of the
facilities, tools, e5uipent, and wor! preises of
the applicant.
Section 18. )pproval or denial of the application.
The )egional Office shall deny or approve the
application within one 314 wor!ing day after the
verification inspection.
%pplications that fail to eet the re5uireents set
forth in -ection 1I of these )ules shall be
denied.
Section 1>. "egistration fee. +ayent of
registration fee of Twenty-Five Thousand +esos
3+:I,EEE.EE4 shall be re5uired upon approval of the
application.
6pon registration, the )egional Office shall return
one set of the duly-staped application docuents
to the applicant, retain one set for its file, and
transit the reaining set to the /ureau of 'or!ing
$onditions 3/'$4 within five 3I4 days fro
registration.
Section '(. (alidity of certificate of registration
of contractors. The contractor shall be deeed
registered only on the date of issuance of its
$ertificate of )egistration.
The $ertificate of )egistration shall be effective
for three 3;4 years, unless cancelled after due
process. The sae shall be valid in the region
where it is registered.
&n case the contractor has -ervice %greeents or
operates outside the region where it is registered,
it shall re5uest a duly authenticated copy of its
$ertificate of )egistration fro the registering
)egional Office and subit the sae to the DO#(
)egional Office where it see!s to operate, together
with a copy of its -ervice %greeentLs in the area,
for purposes of onitoring copliance with these
)ules.
Section '1. "enewal of registration. %ll registered
contractors shall apply for renewal of their
$ertificates of )egistration thirty 3;E4 days
before the e.piration of their registration to
reain in the roster of legitiate service
contractors. The applicant shall pay a registration
renewal fee of Twenty-Five Thousand +esos
3+:I,EEE.EE4 to the DO#( )egional Office.
$opies of all the updated supporting docuents in
letters 3a4 to 3e4 of -ection 1I hereof shall be
attached to the duly accoplished application for,
including the following9
3a4 $ertificate of ebership and proof of payent
of ---, +hilhealth, /&), ($$ and +ag-&big
contributions for the last three 3;4 years, as well
as loan aorti8ations> and
3b4 $ertificate of pending or no pending labor
standards violation caseLs with the National #abor
)elations $oission 3N#)$4 and Departent of #abor
and (ployent 3DO#(4. The pendency of a case will
not pre1udice the renewal of the registration,
unless there is a finding of violation of labor
standards by the DO#( )egional Director.
Section ''. Semiannual reporting. The contractor
shall subit in triplicate its subscribed sei-
annual report using a prescribed for to the
appropriate )egional Office. The report shall
include9
3a4 % list of contracts entered with the principal
during the sub1ect reporting period>
3b4 The nuber of wor!ers covered by each contract
with the principal>
3c4 +roof of payent of reittances to the -ocial
-ecurity -yste 3---4, the +ag-&big Fund,
+hilhealth, (ployees $opensation $oission
3($$4, and /ureau of &nternal )evenue 3/&)4 due its
eployees during the sub1ect reporting period and
of aorti8ation of declared loans due fro its
eployees> and
3d4 % certified listing of all cases filed against
the contractor before the N#)$
The )egional Office shall return one set of the
duly-staped report to the contractor, retain one
set for its file, and transit the reaining set to
the /ureau of 'or!ing $onditions 3/'$4 within five
3I4 days fro receipt thereof.
Section '?. Grounds for cancellation of
registration. The )egional Director shall, upon a
verified coplaint, cancel or revo!e the
registration of a contractor after due process,
based on any of the following grounds9
3a4 *isrepresentation of facts in the application>
3b4 -ubission of a falsified or tapered
application or supporting docuents to the
application for registration>
3c4 Non-subission of -ervice %greeent between the
principal and the contractor when re5uired to do
so>
3d4 Non-subission of the re5uired sei-annual
report as provided in -ection :: 3-ei-annual
reporting4 hereof>
3e4 Findings through arbitration that the
contractor has engaged in labor-only contracting
andLor the prohibited activities as provided in
-ection M 3Other +rohibitions4 hereof>
3f4 Non-copliance with labor standards and wor!ing
conditions>
3g4 Findings of violation of -ection 8 3)ights of
contractor"s eployees4 or -ection J 3)e5uired
contracts4 of these )ules>
3h4 Non-copliance with ---, the 2D*F, +ag-&big,
+hilhealth, and ($$ laws> and
3i4 $ollecting any fees not authori8ed by law and
other applicable rules and regulations.
Section '3. Due process in cancellation of
registration. $oplaintLs based on any of the
grounds enuerated in the preceding -ection against
the contractor shall be filed in writing and under
oath with the )egional Office which issued the
$ertificate of )egistration.
The coplaintLs shall state the following9
3a4 The naeLs and addressLes of the
coplainantLs>
3b4 Nae and address of the contractor>
3c4 The groundLs for cancellation>
3d4 'hen and where the action coplained of
happened>
3e4 The aount of oney clai, if any> and
3f4 The reliefLs sought.
6pon receipt of the coplaint, the )egional
Director shall direct the contractor, with notice
to the coplainant, to file a verified
answerLcounter affidavit within ten 31E4 calendar
days without e.tension, incorporating therein all
pertinent docuents in support of hisLher defenses,
with proof of service of a copy to the coplainant.
Failure to file an answerLcounter affidavit shall
constitute a waiver on the part of the respondent.
No otion to disiss shall be entertained.
The )egional Director or his duly authori8ed
representative ay conduct a clarificatory hearing
within the prescribed ten 31E4 calendar days within
which to file a verified answerLcounter affidavit.
'ithin the said ten 31E4 calendar days period, the
contractor shall a!e the necessary
correctionsLrectifications on the violations that
are iediately rectifiable upon its own initiative
in order to be fully copliant.
The )egional Director ay avail hiself of all
reasonable eans to ascertain the facts of the
case, including conduct of inspection, where
appropriate, and e.aination of infored persons.
The proceedings before the )egional Office shall be
suary in nature.
The conduct of hearings shall be terinated within
fifteen 31I4 calendar days fro the first scheduled
clarificatory hearing. The )egional Director shall
resolve the case within ten 31E4 wor!ing days fro
the date of the last hearing. &f there is no
necessity to conduct a hearing, the case shall be
resolved within ten 31E4 wor!ing days fro receipt
of the verified answerLcounter affidavit.
%ny otion for reconsideration fro the Order of
the )egional Director shall be treated as an
appeal.
Section '@. )ppeal. The Order of the )egional
Director is appealable to the -ecretary within ten
31E4 wor!ing days fro receipt of the copy of the
Order. The appeal shall be filed with the )egional
Office which issued the cancellation Order. The
Office of the -ecretary shall have thirty 3;E4
wor!ing days fro receipt of the records of the
case to resolve the appeal. The Decision of the
-ecretary shall becoe final and e.ecutory after
ten 31E4 days fro receipt thereof by the parties.
No otion for reconsideration of the Decision shall
be entertained.
Section '4. %ffects of cancellation of
registration. % final Order of cancellation shall
divest the contractor of its legitiate status to
engage in contractingLsubcontracting.
-uch Order of cancellation shall be a ground to
deny an application for renewal of registration to
a contractor under the )ules.
The cancellation of the registration of the
contractor for engaging in labor-only contracting
or for violation of any of the provisions of these
)ules involving a particular -ervice %greeent will
not, however, ipair the validity of e.isting
legitiate 1obcontracting arrangeents the
contractor ay have entered into with other
principals prior to the cancellation of its
registration. %ny valid and subsisting -ervice
%greeent shall be respected until its e.piration>
thereafter, contracting with a delisted contractor
shall a!e the principal direct eployer of all
eployees under the -ervice %greeent pursuant to
%rticles 1EB and 1EJ of the #abor $ode.
Section '&. %ffects of finding of laboronly
contracting and*or violation of Sections +, - or .
of the "ules. % finding by copetent authority of
labor-only contracting shall render the principal
1ointly and severally liable with the contractor to
the latterRs eployees, in the sae anner and
e.tent that the principal is liable to eployees
directly hired by hiLher, as provided in %rticle
1EB of the #abor $ode, as aended.
% finding of coission of any of the prohibited
activities in -ection M, or violation of either
-ections 8 or J hereof, shall render the principal
the direct eployer of the eployees of the
contractor or subcontractor, pursuant to %rticle
1EJ of the #abor $ode, as aended.
Section '8. "etaliatory measures. +ursuant to
%rticle 118 of the #abor $ode, as aended, it shall
be unlawful for the principal, contractor, or any
party privy to the contract or services provided to
refuse to pay or reduce the wages and benefits, and
discharge or in any anner discriinate against any
wor!er who has filed any coplaint or instituted
any proceeding on wages 3under Title &&, /oo! &&&
of the #abor $ode4, labor standards violation, or
has testified or is about to testify in such
proceedings.
Section '>. %nforcement of labor standards and
working conditions. $onsistent with %rticle 1:8
3Oisitorial and (nforceent +ower4 of the #abor
$ode, as aended, the )egional Director through
hisLher duly authori8ed representatives, shall
conduct routine inspection of establishents
engaged in contracting arrangeent regardless of
the nuber of eployees engaged by the principal or
by the contractor.
They shall have access to eployer"s records and
preises at any tie of the day or night whenever
wor! is being underta!en therein, and the right to
copy therefro, to 5uestion any eployee and
investigate any fact, condition or atter which ay
be necessary to deterine violations or which ay
aid in the enforceent of the #abor $ode and of any
labor law, wage order, or rules and regulations
issued pursuant thereto.
The findings of the duly authori8ed representative
shall be referred to the )egional Director for
appropriate action as provided for in %rticle 1:8,
and shall be furnished the collective bargaining
agent, if any.
/ased on the visitorial and enforceent power of
the -ecretary of #abor and (ployent in %rticle
1:8 3a4, 3b4, 3c4, and 3d4, the )egional Director
shall issue copliance orders to give effect to the
labor standards provisions of the #abor $ode, other
labor legislation, and these )ules.
Section ?(. Duty to produce copy of contract
between the principal and the contractor. The
principal or the contractor shall be under an
obligation to produce a copy of the -ervice
%greeent in the ordinary course of inspection. The
contractor shall li!ewise be under an obligation to
produce a copy of any contract of eployent when
directed to do so by the )egional Office Director
or hisLher authori8ed representative.
Section ?1. Tripartite implementation and
monitoring of compliance; /se of registration fees.
% region-based tripartite onitoring tea on the
observance of labor standards in contracting and
subcontracting arrangeents shall be constituted as
a subcoittee of the )egional Tripartite
&ndustrial +eace $ouncil 3)T&+$4 within fifteen
31I4 days fro the effectivity of these )ules. &t
shall subit a 5uarterly regional onitoring report
to the DO#( -ecretary and to the National
Tripartite &ndustrial +eace $ouncil 3NT&+$4. The
/ureau of 'or!ing $onditions 3/'$4 shall ensure the
ipleentation of this provision, and shall conduct
capacity building to the ebers of the regional
tripartite onitoring tea.
For this purpose, a portion of the collected
registration fees shall be used in the operation of
the region-based tripartite onitoring tea,
including in the developent of an internet-based
onitoring syste and database. &t shall li!ewise
be used for transittal of the onthly report of
all registered contractors to the /ureau of #ocal
(ployent 3/#(4, and in generating labor ar!et
inforation.
Section ?'. !versight function of the 0ational
T1PC. The National Tripartite &ndustrial +eace
$ouncil 3NT&+$4 as created under (.ecutive Order
No. FJ, -eries of 1JJ8, as aended, shall serve as
the oversight coittee to verify and onitor the
following9
3a4 (ngageent in allowable contracting activities>
and
3b4 $opliance with adinistrative reporting
re5uireents.
Section ??. Collective bargaining and*or 1ndustry
Tripartite Council 21TC3. Nothing herein shall
preclude the parties in collective bargaining
agreeents 3$/%s4 to deterine the functions that
can or cannot be fared out or contracted out to a
legitiate contractor, including the ters and
conditions of the wor!ers" engageent under the
arrangeent, provided the provisions of these )ules
are observed.
&n industries with established &ndustry Tripartite
$ouncils 3&T$s4, the tripartite partners ay agree,
through a voluntary code of good practices, on the
functions or processes that can or cannot be
contracted out to a legitiate contractor.
Section ?3. 'inancial "elief Program; Tripartite
Co"egulation %ngagement. % Financial )elief
+rogra or 6neployent %ssistance Fund shall be
established for eployees under a -ervice %greeent
or eployees in transition fro one -ervice
%greeent to the ne.t. For this purpose, the
National Tripartite &ndustrial +eace $ouncil
3NT&+$4, upon the effectivity of this issuance,
shall constitute a #ocal -ervice +rovider
Tripartite 'or!ing 7roup 3#-+-T'74 coposed of
representatives of the sta!eholders in the
industry. The #-+-T'7 shall9
3a4 )ecoend the echanics and details in setting
up the Financial )elief +rogra or 6neployent
%ssistance Fund with proposed funding sources
before end of <une :E1:> and
3b4 Draw-up the ters of a Tripartite $o-)egulation
(ngageent in ensuring full copliance with labor
laws for approvalLendorseent by the NT&+$,
including a proposed Table of +rogressive )ate of
&ncreases in the iniu capitali8ation re5uireent
at reasonable intervals to ensure that only
legitiate contractors can engage in subcontracting
arrangeent.
Section ?@. %nrollment in D!L% programs on
improving compliance with labor standards. For
purposes of ensuring copliance with labor
standards, the principal and subcontractors covered
by these )ules are encourage to enroll and
participate in the DO#( Kapatiran 'or! &proveent
for -all (nterprise 3'&-(4-T%O +rogra 3Departent
%dvisory No. EB, dated EM *arch :E114 andLor in the
&ncentivi8ing $opliance +rogra 3Departent Order
No. 11I-114.
Section ?4. Contracting or subcontracting
arrangements in the Construction and !ther
1ndustries. $ontracting or subcontracting
arrangeents in the $onstruction &ndustry, under
the licensing coverage of the +hilippine
$onstruction %ccreditation /oard 3+$%/4, shall be
covered by the applicable provisions of these )ules
and shall continue to be governed by Departent
Order No. 1J, -eries of 1JJ; 37uidelines 7overning
the (ployent of 'or!ers in the $onstruction
&ndustry4> Departent Order No. 1;, -eries of 1JJ8
37uidelines 7overning the Occupational -afety and
2ealth in the $onstruction &ndustry4> and DO#(-
D+'2-D&#7-DT& and +$%/ *eorandu of %greeent-
<oint %dinistrative Order No. 1, -eries of :E11
3on coordination and haroni8ation of policies and
progras on occupational safety and health in the
construction industry4.
&n industries covered by a separate regulation of
the DO#( or other governent agency, contracting or
subcontracting therein shall be governed by these
)ules unless e.pressly provided otherwise.
Section ?&. Prohibition on D!L% officials or
employees. %ny official or eployee of the DO#( or
its attached agencies is prohibited fro engaging
or having any interest in any contracting or
subcontracting business.
Section ?8. 0onimpairment of e4isting contracts;
0ondiminution of benefits. -ub1ect to the
provisions of %rticles 1EB to 1EJ of the #abor
$ode, as aended, the applicable provisions of the
$ivil $ode and e.isting 1urisprudence, nothing
herein shall ipair the rights or diinish the
benefits being en1oyed by the parties to e.isting
contracting or subcontracting arrangeents.
The effectivity of $ertificates of )egistration
ac5uired under Departent Order No. 18, -eries of
:EE:, issued on :1 February :EE:, shall be
respected until e.piration.
Section ?>. Supersession. %ll rules and regulations
issued by the -ecretary of #abor and (ployent
inconsistent with the provisions of these )ules are
hereby superseded.
Section 3(. Separability Clause. &f any provision
or portion of these )ules are declared void or
unconstitutional, the reaining portions or
provisions hereof shall continue to be valid and
effective.
Section 31. %ffectivity. This Departent Order
shall be effective fifteen 31I4 days after
copletion of its publication in a newspaper of
general circulation.
*anila, +hilippines, 1F Noveber :E11.