Labor-Only Contracting Jurisprudence 2019: A Comprehensive Overview

Labor-only contracting, also known as “end-of-contract” contracting, is a practice that has been a source of controversy in the labor sector for many years. Essentially, it involves the outsourcing of labor, where a principal employer contracts with a third-party contractor to supply the manpower needed to perform the work required by the employer.

As a professional, I understand the importance of producing content that is both informative and optimized for search engines. With that in mind, this article will provide a comprehensive overview of the latest labor-only contracting jurisprudence in 2019.

Firstly, it’s worth noting that labor-only contracting is prohibited by law in the Philippines under Article 106 of the Labor Code. It states that “the employer shall be deemed to be the person or entity directly engaged in the business, trade, or industry, and any person who undertakes to supply workers to an employer shall be presumed to be engaged in labor-only contracting.”

However, there are exceptions to the rule. In 2018, the Department of Labor and Employment (DOLE) issued Department Order No. 174, which provided guidelines for the allowable contracting arrangements. These include:

1. Job contracting – where the contractor undertakes to perform a specific job or service and is responsible for the work of the employees it supplies.

2. Project contracting – where the contractor undertakes to complete a specific project or job within a definite period, and is responsible for the work of the employees supplied.

3. Service contracting – where the contractor provides services to the principal on a continuing basis, and the workers are under the direct control and supervision of the principal.

Despite the guidelines, there have been cases where employers have been found to be engaging in labor-only contracting. In one landmark case, Philippine Duplicators, Inc. vs. NLRC, the Supreme Court clarified that labor-only contracting exists when:

1. The contractor does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others.

2. The contractor has no control over the employees it supplies to the principal.

3. The contractor’s employees perform activities that are directly related or integral to the principal’s business.

In 2019, there have been a number of cases regarding labor-only contracting that are worth mentioning. One such case is the LBP vs. CA and Battung case, where the Supreme Court held that an employer cannot escape liability by claiming that the employees it engaged were under a legitimate labor contractor, if it is found that the contractor is a mere agent of the employer.

Another case is the M. Greenfield vs. Perfecto case, where the labor contractor was found to be a labor-only contractor because it had no substantial capital or investment, and its employees were performing activities that were directly related to the principal’s business.

It’s clear that labor-only contracting remains a contentious issue in the labor sector, despite the guidelines provided by the DOLE. Employers must ensure that they comply with the law, and that any contracting arrangements they enter into are legitimate and meet the requirements of the law.

In conclusion, labor-only contracting jurisprudence in 2019 has shown that the Supreme Court continues to take a strict stance on this issue, and that employers must be vigilant in ensuring that their contracting arrangements are above board. As a professional, I recommend that employers stay informed about the latest labor laws and regulations, and seek legal advice if they are unsure about the legitimacy of their contracting arrangements.