Labor Secretary signs DO 174, allows “permissible” contracting

 DOLE Secretary Silvestre Bello III signs DO 174 to supersede DO 18-A. Photo by Ben Nabong/Rappler

DOLE Secretary Silvestre Bello III signs DO 174 to supersede DO 18-A. Photo by Ben Nabong/Rappler

After nine months of dialogue and consultation with management representatives and labor groups, the Department of Labor and Employment (DOLE) Secretary Silvestre L. Bello III finally signed on Thursday, March 17, the Department Order 174 whose provisions include new rules on contractualization.

To replace the controversial Department Order 18-A, DO 174 seeks to diminish, if not eradicate, the end of contract (ENDO) scheme and other forms of illegal contracting arrangements.

Labor-Only vs. Permissible Contracting

Under the new policy, Labor-Only contracting or the arrangement when a contractor "merely recruits or supplies workers to perform a job or work" for an employer is absolutely prohibited. However, it allows “Legitimate” contracting provided that (1) contractors and subcontractors register themselves every two years, (2) they must have substantial capital/investment of at least Five Million Pesos (Php 5,000,000), and (3) the service agreement is in compliance with the provisions of the Labor Law.

In addition, DO 174 prohibits the following:

  • Farming out work to a “Cabo” or a labor group disguised as labor cooperative or any entity

  • Requiring workers to sign in a precondition releasing a contractor from any future claims

  • Contracting out of work through an in-house agency

  • Contracting out of job that is necessary or related or directly related to the operation of the principal because of strike and lock-out whether actual or imminent

  • Contracting work performed by union members when such will interfere employees in exercising their right to self-organization

  • Repeated hiring of employees under a short duration of service agreement

  • Other schemes which circumvent the workers' security of tenure

The new labor policy applies to all parties in an arrangement where employer and employee exist and prohibits all illicit forms of employment arrangement.