Expectations on contractualization

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Amelia H. C. Ylagan

Corporate Watch

Expectations on contractualization

On Labor Day, May 1, President Duterte finally released Executive Order 51 stopping illegal contractualization, as he warned firms involved in the practice that their days were “numbered (ABS-CBN News, May 2, 2018).” The President added that he has ordered the Department of Labor to “submit to my office a list of all the companies engaged in or suspected to be engaged in labor-only contracting (Ibid.).”

But the labor groups were not happy.

They complained that the version of the EO that prevailed was the one submitted by the employers’ groups and the Department of Trade and Industry.

In their version of the EO, the labor groups wanted the inclusion of a provision stating that “direct hiring of the employee by the principal employer shall be the general norm in employment relations… (with) direct hiring meaning that all jobs should be presumed regular jobs; employees go through a probationary period and after 6 months of probationary period, they should be hired as regular employees, Akbayan Party-list Rep. Tom Villarin said on Karen Davila’s Headstart (ANC, May 4, 2018).

Wasn’t that, exactly, the campaign promise?

President Rodrigo Duterte’s newly issued Executive Order against “illegal” contractualization merely recycles existing laws and issuances that do not in any way mandate the regularization of all workers, according to the Gabriela partylist (, May 1, 2018). The Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) said that Duterte has made no changes and has merely maintained the status quo, spokesperson Alan Tanjusay said on Unang Balita (GMA News, May 2, 2018).

Based on the 2016 Integrated Survey on Labor and Employment, there were 1.19 million non-regular workers in the country, including probationary, casual, contractual/project-based and seasonal workers (Cebu Daily News, May 2, 2018). One million contractual hires of a total work force of 44 million, 94.7% of whom are employed (albeit 18% underemployed) — that is about 2.7% unhappy workers, or to be exact, workers who could be happier, according to their labor leaders.

For his part, Leyte Rep. Vicente Veloso, a retired Court of Appeals justice, explained that banning all forms of contractualization is in violation of Section 3, Article XIII of the 1987 Constitution, which recognizes the rights of both employees and employers. (Manila Bulletin [MB], Jan 30, 2018).

When he was newly appointed, Department of Labor and Employment (DoLE) Secretary Silvestre Bello III (Justice Secretary in Corazon Aquino’s presidency and Solicitor General in Fidel Ramos’s term) said he was considering requiring all companies in the Philippines to regularize at least 80% of their employees. “I will do that. Because that is the first marching order of the President (Duterte) to me,” Bello promised (“Timeline: Duterte’s promise to abolish endo,” Rappler, May 1, 2018).

The labor groups wanted full banning of contractualization, as promised by Duterte. Through 2017, labor, management and government held tripartite talks on what to do. Bello pointed out that for labor contractualization to be completely banned, Congress needed to amend laws. Prohibition of all forms of contractualization is beyond the powers of the Secretary of Labor. DoLE can only regulate contracting and subcontracting,” he said (Ibid.). Major labor unions Kilusang Mayo Uno (KMU) and TUCP joined forces to draft an executive order (EO) as an alternative to Bello’s DO 174. Meantime, DoLE received an additional P15 million to hire more labor law compliance officers, which will help the government’s campaign against labor-only contracting.

The focus of Bello has since been against labor-only contracting, which is really only what is illegal.

In its year-end report, DoLE says it regularized at least 125,000 of the 200,000 contractual workers it had targeted to regularize for 2017. Still too little of the estimated 1.3 million contractual employees in the country, Rappler says (Ibid.).

But both Congress and the Senate are not saying anything new about the plight of contractual workers, which situation is allowed but protected under the Constitution and in the Labor Code — precise provisions just must be implemented and regulated — Sec. Bello knows that, for sure, and for sure he must have reminded President Duterte not once. Still, Mr. Duterte could not resist the opportunity for bragging points on Labor Day to claim “an end to Endo,” while deftly hedging on his limitations vis-à-vis Congress to actually outlaw contractualization (when they cannot, without amending the Constitution and the Labor Code).

What the double-talk on contractualization has done is to galvanize and unify labor against management, and now, ironically against the government. Or is it just the now-emasculated unions seeking reinvigorated recognition? Sec. Bello has been known for all his political and legal career to be a defender of labor and now he is caught in between the many interested publics, including the confused onlookers-for the common good. The fact of life is that time has moved by rapid speed of thought in the age of technology and near-perfect communication: the new economics of human resources has changed radically in the now variedly-canted imbalance of supply and demand. Perhaps labor has re-defined the meaning of “security of tenure,” preferring their individual option to stay or leave a job rather than cling to the one-sided obligation of the employer to keep them, pay them retirement — which the in-demand, well-paid can actually save for, with no fears for “non-compete” separation clauses in employment contracts. Perhaps business process outsourcing (BPO) workers: 450,000 and overseas Filipino workers (OFW): 2.3 million (as of PSA Sept. 2017) live this kind of attitude towards work.

Best for government to stop promising and bragging — and raising expectations of workers on an unreachable total ban on contractualization. DoLE and government regulators must just do their work based on provisions of current laws and regulations.


Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.