Labor Law and Social Legislation: Rights of Contractor’s/Subcontractor’s Employees

The Labor Code of the Philippines, Department Order No. 174, s. 2017, Executive Order No. 51, and Department Circular No. 1, s. 2017 provide a comprehensive legal framework for labor relations in a trilateral work setup, particularly focusing on the rights of contractor's and subcontractor's employees. Below is a meticulous breakdown of the rights afforded to these employees:

1. Security of Tenure

Employees of contractors and subcontractors enjoy security of tenure in relation to their employer (the contractor or subcontractor). This means:

They cannot be dismissed except for just or authorized causes as prescribed under the Labor Code.
The engagement of the contractor or subcontractor cannot be used as a basis for the termination of employment.

2. Payment of Wages

The contractor or subcontractor’s employees are entitled to:

Timely payment of wages, as prescribed by law.
The wage must not be less than the minimum wage set by the Regional Tripartite Wages and Productivity Board (RTWPB) for the area where the work is performed.

Under Department Order No. 174, s. 2017, the principal is jointly and severally liable with the contractor for the payment of unpaid wages, wage-related benefits, and other monetary claims, if the contractor fails to pay.

3. Statutory Benefits

Contractor or subcontractor employees are entitled to receive all statutory benefits, including:

13th-month pay, as mandated by Presidential Decree No. 851.
Overtime pay, night shift differential, and holiday pay under the Labor Code.
Service incentive leave (SIL), which is at least five days annually for employees who have rendered one year of service.
Social security benefits, including SSS, PhilHealth, and Pag-IBIG contributions.

4. Right to Self-Organization and Collective Bargaining

Under Article 13 of the Labor Code and the 1987 Constitution, contractor and subcontractor employees have the right to:

Form, join, or assist labor unions of their own choosing.
Bargain collectively with their employer (contractor or subcontractor).
Engage in peaceful concerted activities, including strikes, provided they comply with procedural requirements.

This right is further reinforced by the principle of no interference from the contractor, subcontractor, or the principal.

5. Right to a Safe and Healthy Workplace

Contractor and subcontractor employees are entitled to a workplace that complies with the standards set under the Occupational Safety and Health Standards (OSHS) and related laws, which include:

Availability of personal protective equipment (PPE) at no cost to the employee.
Adequate safety training and orientation.
Medical facilities and emergency procedures.

Department Order No. 174, s. 2017, places accountability on the principal and contractor to ensure workplace safety in a trilateral arrangement.

6. Prohibition Against Labor-Only Contracting

Labor-only contracting is explicitly prohibited under the Labor Code and Department Order No. 174, s. 2017. This ensures the protection of contractor and subcontractor employees from abusive arrangements. Indicators of labor-only contracting include:

The contractor does not have substantial capital or equipment.
The workers recruited and placed are performing activities that are directly related to the principal business.

When labor-only contracting is found, the principal is deemed the direct employer of the contractor's employees, and they enjoy the same rights as regular employees of the principal.

7. Equal Treatment and Non-Discrimination

Contractor or subcontractor employees must be treated equally with the principal’s employees concerning:

Working conditions, including hours of work and occupational safety.
Compensation and benefits, provided the job nature and complexity are comparable.

Discrimination on the grounds of gender, age, religion, political affiliation, or union membership is strictly prohibited.

8. Joint and Solidary Liability of the Principal

Under Article 106 of the Labor Code and Department Order No. 174, s. 2017, the principal and contractor are jointly and solidarily liable for any violations of labor standards, such as:

Non-payment of wages.
Non-remittance of statutory benefits.
Non-compliance with occupational safety and health standards.

This ensures the contractor’s employees have a direct recourse to the principal in case of default.

9. Protection Against Premature Termination or Displacement

When the contractor's contract with the principal is terminated, the contractor’s employees must:

Be absorbed by the contractor for other projects.
Be paid separation pay if no redeployment is possible, in compliance with the Labor Code.

10. Redress Mechanisms

Contractor or subcontractor employees have access to:

Filing complaints with the Department of Labor and Employment (DOLE) for labor standards violations.
Remedies under alternative dispute resolution (ADR) mechanisms, if available.
Legal recourse before the National Labor Relations Commission (NLRC) or courts for claims related to unlawful termination, unpaid wages, or benefits.

11. Provisions Under Executive Order No. 51 (EO 51)

Signed in 2018, EO 51 strengthens the implementation of laws against illegal contracting and subcontracting. Key provisions include:

Emphasis on prohibiting labor-only contracting.
Strict monitoring of compliance with DOLE regulations.
Higher accountability standards for principals and contractors.

12. Responsibilities Under Department Circular No. 1, s. 2017

This circular provides guidance for enforcement:

Contractors must register with DOLE, proving substantial capital and capability to operate independently.
Principals must ensure their contractors and subcontractors are DOLE-registered to avoid liability.

13. Compliance and Enforcement

DOLE is tasked with ensuring compliance through:

Labor inspections conducted by authorized labor inspectors.
Suspension or cancellation of registration for contractors and subcontractors violating regulations.
Imposition of administrative penalties, including fines.

Conclusion

The rights of contractor’s/subcontractor’s employees under Philippine labor law are well-established, ensuring their protection and welfare in a trilateral employment relationship. Both the contractor and principal are held to high standards of accountability to safeguard these rights.