Labor-only Contracting


▪ Labor-only contracting is prohibited.

▪ It refers to an arrangement that violates the laws and regulations on contracting and job contracting.

▪ All contractors are presumed to be labor-only contractors by default.

▪ Finding of labor-only contracting results in the principal being declared as the employer.

▪ There are illicit forms of employment arrangements that are prohibited in contracting and subcontracting.

1. Concept

Under Department Order No. 174, series of 2017 (DO-174), issued by the Department of Labor and Employment (DOLE), labor-only contracting is prohibited.

Labor-only contracting refers to an arrangement whereby:

1) The contractor or subcontractor does not exercise the right to control over the performance of the work of the employee; or

2) The contractor’s or subcontractor’s employees recruited and placed are performing activities which are directly related to the main business operation of the principal, plus: (a) the contractor or subcontractor does not have substantial capital; or (b) the contractor or subcontractor does not have investments in the form of tools, equipment, machineries, supervision, work premises, among others. (Section 5, DO-174)

“Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal and any of the following elements are present:

1) The contractor or subcontractor does not have substa...


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