JOB CONTRACTING VS. LABOR-ONLY CONTRACTING

Image Source

Published — June 1, 2022

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Read also: How to ensure legitimacy of job contracting arrangements

The case of Petron Corporation vs. ARMZ CABARETE et. al, G.R. No. 182255, June 15, 2015 discussed the difference between Job Contracting vs. Labor-only Contracting.

Job contracting, legitimate job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

1. the contractor carries on a distinct and independent business and partakes the contract work on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of his work except as to its result;
2. the contractor has substantial capital or investment; and
3. the agreement between the principal and the contractor or subcontractor assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits.

Labor-only contracting, on the other hand, is defined under Article 106 of the Labor Code. It refers to an arrangement where the contractor, who does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, supplies workers to an employer and the workers recruited are performing activities which are directly related to the principal business of such employer.

Is there a significance of knowing the difference between Job contracting and Labor-only contracting? THERE IS.  Job contracting is valid and recognized by law while Labor-only contracting is a prohibited act. A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee relationship between the principal and the employees of the labor-only contractor. In such a case the labor-only contractor shall be responsible to the workers in the manner and extent as if said workers were directly employed by him.

---

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

All rights reserved.

---

SUBSCRIBE NOW FOR MORE LEGAL UPDATES!

[email-subscribers-form id=”4″]