End of contract, end to misery?

Even before he got elected, President Rodrigo Duterte committed to abolish the existing practice of “End of Contract” or Endo which characterizes all the familiar contractual arrangements which bind temporary, projects-based, or intermittent workers.

Citing blatant acts of avoiding the cost implications of regularization, owners of businesses were warned that their illegal and exploitative activities shall be stopped. Endo for workers, Endo for capitalists.

Consistent with his call, the Department of Labor and Employment issued DO 174-17, a regulation that tightened elements of permissible contracting or subcontracting, registration of contractors, consequences of non-compliance, provided wider visitorial inspection powers to its personnel and reiterated the solidary liability of “direct” and “indirect” employers. DO 174-17, in addition to the Labor Code provisions prohibiting “labor only” contracting plus various Department of Labor and Employment (DOLE) orders, really drove the message that the government is serious about protecting our laborers’ right to security of tenure.

The effects were tremendously felt and many big companies, especially in the retail sector, telecoms, and food chains, were compelled to regularize their staff who were performing non-core jobs, presumably under the test of “not necessary or desirable” to the business of these employers. Millions of pesos were spent to comply with the law. It was painful and their financial results demonstrated such agony. Even the local stock market reacted.

But it did not end there. In 2018, our President certified the anti-endo bill as urgent. Expectations were high on the part of the working class, but as far as management was concerned, it was another threat of a cost escalation that could impact their bottom line.

The recent veto by Malacañang of the Endo bill is not a signal that the President has forgotten his commitment. I believe that there is a realization on the part of the administration to more carefully formulate an effective balance that would protect our laborers while at the same time keep the economy and businesses as vibrant as possible for the long term.

Business interests must be given a premium too in order to create that right balance between labor and capital. The central argument of the business sector is that temporary, seasonal, flexible working arrangements where people are fairly compensated for tasks, treated humanely and equitably during such periods, coupled with a complement of regular staff doing the core jobs, stimulates the employment market. In other words, the success of business enterprises translates to a bigger labor force with presumably, sustainable benefits for everyone.

It is a fact that many Filipinos, especially the young graduates and millennials, desire more non-structured work options that give them more choices. Tying them down to a regular contract limits their flexibility and affects quality of life decisions. The opportunities created by encouraging independent contractors and entrepreneurs revitalizes the market, it moves them to improve their craft/competence/technical or manual skills. Bigger participation in the labor market is enhanced. The net effect is to lower labor costs and makes our companies more competitive and profitable in the long run.

Different jurisdictions outside of the Philippines have encouraged short-term hiring through limited deregulation and the effects on direct foreign investments have been good. Competitiveness is central to economic development.

But let’s do a quick objective review of the facts and the history of this issue. Are we indeed adding further to the misery of our toiling masses by not passing this law or are we just not realizing that even without this law, there is a sufficient legal anchor for our workers to hold on to?

A check on the various issuances regarding the matter will reveal that there is a plethora of legal measures that seek to curb the evils of labor-only contracting and agreements that seek to frustrate workers’ rights to security of tenure. Consider our Labor Code, its implementing rules, various DOLE orders and advisories (Nos. 3, 10, 18-02, 18-A, 174-17, Circular No. 01 and EO No. 51.) and add to this a bulk of jurisprudential pronouncements from our Supreme Court.

We have a lot in the realm of law to protect our workers from the evils of labor-only contracting. What we need are sensible changes in enforcement, authentic and stronger tripartite relationships of labor, management, and government, and an end to flip-flopping court decisions.

More law does not mean more improvements in the lives of our citizens. Let’s begin with really building up the economy and arming it with a true social conscience. Balance is essential.

Ariel F. Nepomuceno is a management consultant on strategy and investment.