The Department of Labor and Employment (“DOLE”) issued on 16 March 2017 the new Department Order (“D.O.”) No. 174, Series of 2017 which revisited the existing rules and regulations implementing Articles 106 to 109 of the Labor Code on contracting and subcontracting. D.O. No. 174 effectively supersedes D.O. No. 18-A which was issued in 2011.
The regime under D.O. No. 174 provides stricter guidelines for contractors. Among the notable changes is the increase in the requirement of substantial capital of contractors from Three Million Pesos (PhP 3,000,000) under D.O. No. 18-A to Five Million Pesos (PhP5,000,000) in paid-up capital stock or shares for corporations, partnerships and cooperatives, or in the net worth for single proprietorship. Registration fees for contractors are likewise increased from Twenty-Five Thousand Pesos (PhP25,000) to One Hundred Thousand Pesos (PhP100,000). Once issued, the Certificate of Registration is now only valid for two (2) years, instead of the three (3) years validity period under the previous D.O. Those applying for a Certificate of Registration are now required to file a verified application. D.O. No. 174 also provides a three (3)-month period wherein a contractor/ subcontractor’s regular employee may wait for re-employment within three (3) months from the expiration of the Service Agreement or from completion of the phase of the job or work for which the employee is assigned.
The prohibition against Labor-only contracting were substantially retained in D.O. No. 174, as well as the required contracts and stipulations between the parties.
It appears from the foregoing changes and amendments that contracting has not completely ended. The new DOLE D.O. reinforces the prohibition against labor-only contracting under the Labor Code. Legitimate contracting or subcontracting arrangements remain permissible under the law, albeit now, with stricter guidelines.