(The original version of this article titled, “Implications of Employee Contractualization,” was first published on the Bedan Management Professional, True Red, the official publication of San Beda University Graduate School of Business, September 2016 issue, vol. XIII.)
A promise to end endo under the Duterte government has given proletariats a flicker of hope since the presidential campaign trail started. The then-mayor of Davao City now President Rodrigo Duterte passionately promised to end endo or contractualization. Such a motherhood statement has since become a mainstream issue and cast fears among Philippine companies.
Contractualization is hiring employees on a contractual basis. It deprives employees of security of tenure even if the job they are hired for requires them to do a regular type of work. It debilitates the chance for long-term employment. It leads to a rise of casual employment so rampant in the industrial and government labor (Sicat, 2007).
Duterte’s promise to end endo appears to browbeat companies by canceling permits and closing down their businesses once these companies are found lackadaisical against contractualization. Such a stance like hiring employees for five months in an attempt to circumvent labor laws is more sounding like “don’t mess with the President’s directive.”
Complying the President’s directive, labor executive Silvestre Bello III issued Department Order (DO) 162 (s. 2016) to suspend processing applications for labor contractors and subcontractors.
But before the issuance of the DO, in Rappler’s report, Bello said that he considers requiring all companies to regularize at least 80% of their employees. He would do that as the first marching order of the President, Bello said according to the report.
Ending Endo with Exceptions
Despite Duterte’s promise to end endo without compromise, Bello seemed to digress from it by saying, “There will be no total abolition of contractualization under Duterte administration as there will be exceptions.” And to sustain the equilibrium, he promised to provide adequate protection to businesses to generate unwavering support in his self-imposed social legislation.
The prohibition extends to labor-only contracting and not to job contracting or subcontracting arrangements. If that is so, it still allows contractualization under the pretext of job contract and subcontracting employment.
Labor-only contracting, according to DO 174-2017 of the Department of Labor and Employment, refers to an arrangement where contractors or subcontractors merely recruit, supply, or place workers to perform a job for a principal—any natural or juridical entity.
Job contracting or subcontracting, on the other hand, refers to an arrangement where a principal agrees to farm out to contractors the performance of a job in a definite or predetermined period.
Allowing it so, employers may still hire employees for specific purposes or short-term periods, such as apprenticeship, project-based, seasonal employment, or consulting engagements.
Such employment arrangement, unfortunately, may cause labor exploitation by engaging in a precarious employment scheme. One of the most exploited employment schemes is employing a contractual laborer directly from an agency for the work, which is essential to the conduct of the business.
Following the state policy in affirming labor as a primary social economic force, isn’t that matter for the companies involved in much of their business in operations of manufacturing and production of goods to adhere to regularization of the majority of their employees to promote and protect workers’ rights?
Abolishing Endo in Toto Doesn’t Work
Although abolishing endo or contractualization can neither be desirable nor feasible, prudence dictates that both the employers and the government must enact laws, policies, rules, and regulations that may guarantee full protection to labor and promote adequate employment and equal opportunity.
By doing so, the government must, likewise, enact laws that give paramount consideration to promoting doing business by lowering corporate income tax and granting incentives to corporate taxpayers.
In hindsight, abolishing contractualization may result in more stringent employment requirements for hiring not to mention the rise of job contracting and subcontracting. This may also give rise to unemployment numbers.
The Labor Force Survey of the Philippine Statistical Authority estimated unemployed Filipinos by October 2020 to reach 3.8 million. If abolishing endo would be pursued, this estimated number would have gone as high as the Ayala and BGC skyscrapers combined.
In conclusion, while the rationale of Duterte’s promise to end endo positively declares the basic policies in favor of labor, the implementation remains ambiguous and the probability is highly unlikely as there are loopholes on both sides of the coin.
It must be noted that companies may exhaust remedies on the doctrine of management prerogative. As it establishes company employers’ inherent right to regulate according to their discretion all aspects of employment (Rural Bank of Cantilan, Inc. v. Julve, G.R. No. 169750, February 2007). ▲
Jade P. Manzano is a law graduate from the Philippine Law School. He joined other Filipino delegates in the 2022 International Model United Nations held in Indonesia. He was a former PR head of The Bedan and former College Editors Guild of the Philippines area coordinator, back in college. Jade finished a Marketing & Corporate Communications degree and a master’s in business administration at San Beda University – Manila. At present, he works as a legal researcher in a government agency.