9/14/2016

PrintBid

RepublicofthePhilippines
DepartmentofLaborandEmployment
Intramuros,Manila
QANDAonDOLEDEPARTMENTORDERNO.18A,s.2011
20120831
Whatisalegitimatesubcontractor?
Itisanindependentemployerwhomeetsthefollowing:

1)MinimumcapitalizationofatleastP3Million
fullypaidupcapitalforcorporation,partnershipandcooperative
networthforsingleproprietorship
2)Proofofownershiporleaseagreementontools,equipment,machineriesandworkpremises

3)PaymentofP25,000.00registrationfee
4)ProofoffinancialcapacitytopaythewagesandbenefitsofitsworkersusingtheNetFinancialContracting
Capacity(NFCC)formulaingovernmentprocurement
5)Controlovertheperformanceoftheworkoftheemployeedeployedorassignedtorenderthecontracted
workorservices
6)NotengagedinlaboronlycontractingarrangementasprovidedinSection6
CertificateofBankDeposits
7)NotengagedinprohibitedactivitiesenumeratedinSection7
8)ObservestherightsoftheworkersasprovidedinSection8
9)ObservestherequiredcontractsunderSection9
10)Notdelistedfromtheregistryoflegitimatecontractor/subcontractor

WhatisthecapitalrequirementforCorporations,PartnershipsorCooperatives?
PaidupCapital:subscribedandfullypaidupcapitalstocks
AcceptableProof:

1.auditedfinancialstatements
2.incometaxreturn
3.SECCertificationofCapitalization
4.CDACertificationofCapitalization
EXCLUDEcorporateassetsorproperties
Whatisthesubstantialcapitalrequirementforsingleproprietors?

NETWORTH:TotalAssetsminusTotalLiabilities
AcceptableProof:

1.Auditedfinancialstatements
2.Incometaxreturn
3.BIRCertificateoftitle/proofofownershipofrealpropertywithassessedfairmarketvalue
4.StockCertificateonitsfacevalue
5.CertificateofBankDeposits
6.DTICertificateofCapitalization
http://www.ro1.dole.gov.ph/print.php?retsamlakygee=300&resource=d9681d05860552e9c3113da381f916fc

1/4

9/14/2016

PrintBid

Isthereadifferenceoflegitimatesubcontractingfromlaboronlycontracting?

Legitimatesubcontractingisallowedwhilelaboronlycontractingisnotallowed.
Definitionoflaboronlycontracting(LOC)?

Contractor/subcontractormerelyrecruits,suppliesorplacesworkerstoperformajob,work
orserviceforaprincipal,andthefollowingelementsarepresent:

a)contractororsubcontractordoesnothavesubstantialcapitalorinvestmenttoactuallyperformthejob,workor
serviceunderitsownaccountandresponsibilityand

b)employeesrecruited,suppliedorplacedareperformingactivitiesdirectlyrelatedtothemainbusinessofthe
principalor
c)contractordoesnotexercisetherighttocontrolovertheperformanceoftheworkoftheemployees.
Effectoflaboronlycontracting?

1.Thesubcontractorwillbetreatedastheagentoftheprincipal,andrepresentationsbythesubcontractortothe
employeeswillbindtheprincipal.
2.Theprincipalwillbecometheemployerasifitdirectlyemployedtheworkers,andwillberesponsibleforalltheir
entitlementsandbenefitsunderthelaborlaws.
3.Theprincipalandthesubcontractorwillbesolidarilytreatedastheemployer.
4.Theemployeeswillbecomeemployeesoftheprincipal,subjecttotheclassificationsofemployeesunderArticle
280of
theLaborCode.

Differencebetweenasubcontractorandaprivaterecruitmentandplacementagency(PRPA)?
PRPAmerelyrecruitsworkersforplacingthemwithanemployerorcompany.Itisnottheemployeroftheworkers
itrecruitedandplaced.

Asubcontractordirectlyundertakesaspecificjoborserviceforaprincipal,andemploysitsownworkers.Thefour
fold test of EE relationship should be satisfied by the subcontractor in relation to the employees it engages. The
subcontractorisalsoreferredtoasindependentcontractor.

Isthereadifferencebetweenanordinaryemployeremployeerelationshipandsubcontracting?

In an ordinary EREE relationship, two parties involved are the employer (directly hires the employee), and the
employee.

Insubcontracting,threepartiesareinvolved:theprincipal,thesubcontractor,andtheemployees.

WhatIfthelegitimateSubcontractorcannotpaythewagesofitsemployees?

Aprincipalhastwotypesofliabilityinrelationtotheemployeesofthesubcontractor.

1.limitedliability: The mere inability of the subcontractor to pay wages will only make the principal jointly and
severally liable with the subcontractor for payment of the employees' wages to the extent of the work
performedunderthecontract.

2.absolute&directliability:Ariseswhenthereislaboronlycontracting.Theprincipalshallberesponsibletothe
workersinthesamemannerandextentasifitdirectlyemployedtheseworkers.

Whatisthehiringpracticeofrepeated"555"or"endo"workersthatareprohibitedbyDO18A,S.
2011?

http://www.ro1.dole.gov.ph/print.php?retsamlakygee=300&resource=d9681d05860552e9c3113da381f916fc

2/4

9/14/2016

PrintBid

Itisthehiringpracticedeliberatelyresortedtopreventworkersfromacquiringregularstatusdonethroughrepeated
shorttermarrangements(e.g.,5months,5months,555,orless)
a)byoneprincipalthroughthesamecontractor,orunderdifferentcontractors,or
b)throughaServiceAgreementofshortdurationunderthesamecontractor,ordifferentcontractors.
Repeatedhiringofthesameworkersshowsthathe/sheisperformingfunctionsthatisusualandnecessarytothe
tradeorbusinessoftheemployer.

Ontheotherhand,the555workingarrangementthatisnotrepeatedhasbeendeclaredasaviolationofpublic
policyasithasbeenshowntohavebeenresortedtopreventregularemployment.
WhoarecoveredbyDO18A?
1.manpowerservicecooperatives
2.janitorialandsecurityagencies

Whataretherightsofanemployeeofthecontractor?
Acontractorsemployees,whetherdeployedorassignedasreliever,seasonal,weekender,temporary,orpromo
jobbers,areentitledtoall
(a)safeandhealthfulworkingconditions
(b) labor standards such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay,
andseparationpayasmaybeprovidedintheServiceAgreementorundertheLaborCode
(c)retirementbenefitsundertheSSSor
retirementplansofthecontractor,ifthereareany
(d)socialsecurityandwelfarebenefits
(e)selforganization,collectivebargainingandpeacefulconcertedactivitiesand
(f)securityoftenure.

RemedyofworkeragainstasubcontractororprincipalwhoviolatestheprovisionsofDO18A?
TheycanfileacomplaintforcancellationofthecontractorsregistrationbeforetheDOLERegionalOffice.DO18A
providesforgroundsforcancellationofcontractorscertificateofregistration,andtheprocedure.
How will DO18A eliminate the practice of contractors of race to the bottom when bidding for
servicecontracts?
Itsetsastandardadministrativefeeofatleasttenpercent(10%)topreventtheracetothebottomcompetitionto
thedetrimentofworkerswagesandbenefits.
Thestandardadministrativecostisbasedonthetotalcontractcost,andnotthetotalcontractprice.Itisisderived
by first computing the amount required for the payment of wage and wagerelated benefits including
employeessocial welfare benefits. Next, the standard administrative cost is obtained by computing 10% of total
contract cost. The resulting summary of the total contract cost PLUS the standard administrative fee of 10%
accountsforthetotalcontractprice.VATandothertaxesareNOTincludedintotalcontractprice.
If the Regional Wage Board issues a Wage Order at any time of a subsisting Service Agreement,
whoisresponsiblefortheresultingwagedifferentials?
Theprincipal/clientshallbearthecostofanyrequiredwageincreasesplusthestandard10%administrativecost.
Butiftheprincipal/clientfails,thecontractorisdeemedjointlyandseverallyliable.

FORFURTHERCLARIFICATION,pleasecontactthenearestDOLEFieldOfficeortheRegionalOffice:
IlocosNorte:(077)7720727
http://www.ro1.dole.gov.ph/print.php?retsamlakygee=300&resource=d9681d05860552e9c3113da381f916fc

3/4

9/14/2016

PrintBid

IlocosSur:(077)6320022
LaUnion:(072)7003122
EasternPangasinan:(075)5148098
CentralPangasinan:(075)5152590
WesternPangasinan:(075)5514525
RegionalOffice:(072)7002520

http://www.ro1.dole.gov.ph/print.php?retsamlakygee=300&resource=d9681d05860552e9c3113da381f916fc

4/4