A bill pending before the Senate Committee on Labor and Employment that proposes to radically amend Labor Code provisions on contracting and subcontracting will wreak havoc on the economy by forcing out of business independent contractors and service providers.

The Employers Confederation of the Philippines (ECOP) issued the warning in the wake of Senate Bill (SB) 2212, authored by Sen. Jinggoy Estrada, which introduces amendments in Articles 106 and 106-A to 106-E of the Labor Code by making it unlawful for employers to:

* maintain subcontracted employees in excess of 10% of its total workforce;
* contract out a job, work or service when the same results in the termination of regular employees and reduction of work hours or reduction or splitting of the collective bargaining unit; and
* contract out a job, work or service being performed or previously performed by regular employees and/or members of the bargaining unit.

ECOP President Sergio Ortiz-Luis, Jr. charged that these proscriptions constitute an abridgment of management prerogative to contract out based on the exigencies of business operations, and in the process, to dismiss employees on the ground of redundancy or retrenchment.

Ortiz-Luis said the bill, once enacted into law, would virtually outlaw job contracting and outsourcing and force of out business independent contractors and service providers

The Estrada bill also envisions to amend Article 248 of the Labor Code by prohibiting employers to engage a labor-only contractor or to contract out services or functions being performed by members of, or positions covered by the bargaining unit and/or regular rank-and-file and supervisory employees.

“Contracting out the performance of work by the employer/principal to a legitimate job contractor has been determined by case law as a constitutional right of the employer, so long as it is done in good faith, based on the exigencies of business and not intended to bust a union,” Ortiz-Luis argued.

In addition, SB 2212 makes it unlawful to deny the existence of employer-employee relationship and/or to classify as casual, contractual, subcontracted employees, agency employees, or other non-regular classification those employees who are regular by virtue of Article 280 of the Labor Code.

The ECOP leadership said such provision is “arbitrary” in the sense that it would penalize employers with the commission of unfair labor practice when the need arises to interpose as defense the non-existence of employer-employee relationship in justiciable cases, adding that this constitutes a denial of constitutional due process.