Primer on Department Order No.

18-A in the Philippines

Created: 2012-09-25
Ecumenical Institute for Labor Education and Research, Inc. (EILER), Philippines

What is Department Order No. 18-A?

D.O. 18-A is the latest department order released by the Department of Labor and Employment
to further implements contracting and subcontracting. It was issued and signed by the Secretary
of the Department of Labor and Employment on the 14 thof November 2011 and was rendered
effective on the 5thof December 2011.
What is Contracting and Subcontracting?
There is contracting or subcontracting when an employer, referred to as the principal, farms out
the performance of a part of its business to another, referred to as the contractor or subcontractor.
For the purpose of undertaking the principals business that is farmed out, the contractor or
subcontractor then employs its own employees.
Another version of contracting and subcontracting is called outsourcing. In outsourcing, a
company contracts with another company to provide services that might otherwise be performed
by in-house employees. Often the tasks that are outsourced could be performed by the company
itself, but due to the financial advantages gained from outsourcing, the latter option is sustained.
The Philippines is considered to be one of the top labor outsourcing hubs for the global
outsourcing industry.
What are D.O. 18-As salient provisions?
The employee-employer relationship between the contractor and the contracted worker
Under the D.O. 18-A, there exists an employee-employer relationship between the contractor
and contracted worker. Meanwhile, a contractual relationship exists between the contractor and
the principal, which is being reflected in the service agreement signed by both. However, there
exists no relationship between the contracted worker and principal. Under the D.O. 18-A, the
responsibility of the principal towards the contracted workers is omitted. The contractor is the
one responsible to the contracted worker in terms of wage, benefits, and other basic work
standards. D.O. 18-A conceals the changes made in the employee-employer relationship in the
guise of trilateral relationship.
In the context of multiple subcontracting - which is widely practiced in the construction sector,
the principal employer can easily evade the contracted workers under the D.O. 18-A. Based on
the explanation by DOLE, the trilateral relationship cascades even to the lowest level of

contracting, making the employee-employer relationship applicable between the lowest level
of contractor and the contracted worker.
D.O. 18-A mentions the rights of contractual workers to whitewash contractualization
There is a provision in D.O. 18-A which states the rights of contractual workers such as the right
to a safe workplace, 13thmonth pay, and retirement benefits among others. However, it is clear
that it only reiterates the basic rights of workers whether regular or contractual, as stated in the
Labor Code and International Convention on Labor. The D.O. did not create any new workers
rights for the contractuals and penalties for violations.
Even though the D.O. reiterates the rights of contractual workers, D.O. 18-A remained mute on
the issue of granting minimum wage to contractual workers. It only proves that the D.O. does not
intent to resolve the pressing down of wages which characterizes contractualization. Adding to
this, D.O. 18-A does not stipulate the contractual workers right to benefits as mandatory due to
the reason that the benefits of contractual workers is dependent on the service agreement that
will be signed.
About the administrative requisites on being a legitimate contractor
D.O. 18-A mentions a few administrative requisites for a contractor to be considered as
legitimate. An example is the 3 million pesos as substantial capital needed to be considered as
a legitimate contractor. If a contractor is proven to have less than 3 million pesos as substantial
capital, it will be considered as labor-only contracting, which is illegal.
Also included in D.O. 18-A is the mandatory registration of the legitimate contractors in the
regional offices of the Department of Labor and Employment. Contractors need to pay 25,000
pesos to register and to obtain a Certification of Registration which will be valid for three years.
To renew the certification, contractors just need to pay another 25,000 pesos. If a contractor is
not registered, it will be considered involved in labor-only contracting.
Even though there are requisites to be considered as a legitimate contractor, there are no penalties
for those who will be charged with labor-only contracting, aside from the simple cancellation of
their registration. Adding to this, the requisite only protects the principal employers from fly-bynight contractors and leave them with no responsibilities with the contracted workers.
It relies on Collective Bargaining Agreements or its bestowed arbitrary authority to the TIPC to
determine core and non-core functions that may be farmed-out or outsourced
Non-core functions are defined as those functions that may be legitimately contracted or
outsourced by a company. Under the Philippine Labor Code and D.O. 18-2002, determining core
and non-core functions are management prerogatives. However, in D.O. 18-A determination of
core and non-core functions are no longer management prerogative but instead fall under the
authority of the TIPC or are reliant on what will be negotiated in the CBA.
Cooperatives are now considered as employers

While cooperatives are employees who compete with non-cooperative members by farming out
cheaper labor, requiring of them registration and registration fee and a standardized substantial
capital of at least 3 million pushes the cooperatives to exhaust the business-side of the
undertaking and pursue more profit, transforming them into real, legitimate contractors.
However, as discussed by the Bureau of Labor Relations on D.O. 18-A, the workers in a
cooperative are not allowed to form unions, contrary to the stipulations on the department order
of the rights granted to them, as this would create an absurdity where employees are bargaining
with their co-employees.
In what ways does D.O. 18-A strengthen tripartism? What are its implications?
Given that only a very small part of the Philippine labor force is unionized, doubt is cast on the
effectivity of tripartism as a means of representing the workers. Because unions are few, and a
smaller number are federated and consolidated, discriminately calling on a few unions to speak
for the vast majority of other unionized and non-unionized workers do not seem
representative.
Tripartism is in fact, often used to coax workers to believing that their rights and interests are
voiced-out. When all workers are provided for in tripartite councils are just token
representations. At the end of the day, it is the interests of those big companies or capitalists that
are taken into consideration, much like what happened in drafting the department order. Also, the
unions who are allowed to engage in the dialogue are unions who upon their assessment are
willing and capable of capitulating or compromising the rights of the workers they claim to
represent in favor of the employers. Tripartism creates nothing but a dangerous illusion that
unities achieved through it have the seal and approval of workers despite its blatant disparity
from what the workers truly desire.
Given such a situation, reliance and provisioning of ambiguous authority to the TIPC as
stipulated in Section 33 and other sections is highly troublesome as we are not alien to the fact
that at the height of Bangko Sentral ng Pilipinas (Central Bank of the Philippines) Circular No.
268, the Banking Industry Tripartite Council was more than liberal in their interpretation of what
inherent functions were and enforced the farming-out of every single one of them. Affirming
the oversight power of TIPCs and legitimizing it through this department order, will only provide
TIPCs with more elbow room to assign liberal and pro-employer interpretations of this
department order. Affirming the role of the regional/industrial TIPCs gives them the power to
lord over ways of implementing wider contractualization in favor of employers at the dire
expense of workers.
How do we stand against D.O. 18-A?
Contractualization will remain to be the hand of the government in trying to maximize labor
flexibilization coalescing with deregulation, privatization, and liberalization. Labor flexbilization
requires work organization and employment schemes to maximize profit gain. Contractualization
is the main aid in the fulfillment of this goal. Labor flexibilization through contracting,
subcontracting, and outsourcing produces a cheap and abundant labor force which is essential in
neo-liberal globalization.

Therefore, there is no good contractualization. Labor flexibilization in fulfilling the neo-liberal

agenda of the ongoing imperialist crisis can never be neutral. It is highly biased and protects only
one interest, and that is the interest of the imperialists. It will always be executed at the expense
of workers in various countries and various industries who fall prey to their governments who act
in cahoots with big capitalists to depress labor. The Department of Labor and Employments
issuance of D.O. 18-A is nothing but mere politicking to coax workers into believing that in
contractualization, their rights can be protected.
Therefore the task at hand as workers, members of workers associations and unions, allies of
labor organizations, and labor advocates remains to be the wager of a steadfast and vigilant fight
against labor flexibilization and all its schemes. We must:
Demand the repeal of D.O. 18-A
Lobby for a law that will illegalize contracting and subcontracting, support the Regular
Employment Bill (House Bill 5110)
Amend the Labor Code in such a way that will repeal the over and extensive power of the
Secretary of the Department of Labor and Employment to issue department orders that are
substantive in nature and assume the force of the Law
Unionize more industries and sectors
Launch fora and symposia on the effects of D.O. 18-A and contractualization
Join mobilizations against contractualization
It is the task of every union member, employee, and organizer to see the perils that D.O. 18-A
hold, to see through its pretenses and expose it for what it is for, a ploy to deceive workers into
thinking that contractualization is not the enemy, to settle for meager benefits, to relinquish the
fight for security of tenure and to serve and secure the profit-gaining interests of employers.
While the Department of Labor and Employment launches more elaborate tactics to put the
workers in the dark, so must we be more vigilant and persevering in attempting to shed light on
the matter.#