Corporate Securities Info

Clarify ‘endo’ interpretation

The controversy over job contractualization continues to simmer.

For labor organizations, President Duterte has failed to live up to his campaign promise to put an end to “endo” or the decades-old practice by some employers of making their employees work in five-month periods to avoid their conversion to regular employment status after six months.


The solution offered by the administration to the problem —Department of Labor and Employment Order No. 174 (DO 174)—does not sit well with the labor sector because it merely shifted the burden of ensuring the employees’ security of tenure (and the rights and privileges that go with it) to the service contractors rather than to their direct employers.

The service contractors are obliged to keep the contractual employees in their payroll as regular employees as long as they have existing service contracts, and give them vacation and sick leave privileges, among others.


Unable to meet the labor organizations’ demands, the administration washed its hands of the issue and asked them to go to Congress for the enactment of a law that will declare illegal any form of job contractualization.

Citing DO 174 as authority, several DOLE regional officials have ordered some companies under their jurisdiction, e.g., Jollibee Foods Corp. PLDT and NutriAsia, Inc., to convert to regular employment status their contractual employees.

In the meantime, the Employers Confederation of the Philippines (Ecop) has called on DOLE to clarify the interpretation of DO 174 in the wake of complaints by some Laguna-based electronics and garment companies that they have been tagged by DOLE regional officials as engaged in illegal job contracting. A consequent regularization order was issued based on the presence of contractual workers in the work premises. The companies, however, claimed that these workers were sourced from licensed service contractors and therefore do not violate DO 174.

In a nutshell, DO 174 states that if contractual employees are sourced from service contractors that, among others, have a paid-up capital or net worth of P5 million depending on their organizational structure, treat those employees as their regular employees, and are duly licensed by the DOLE to engage in that business, that form of job contracting is perfectly legal.

If the conditions mentioned are not met, the provisioning of temporary employment service by a service contractor is considered as “job-only contracting,” which is illegal.

Thus, the crux in any job contracting issue is the service contractor. If it is duly licensed, there is no legal basis to compel the employer to grant the contractual employees regular employment status; if it is not, regularization may come as a matter of course.

Judging from the wording of DO 174, it is apparent that DOLE assumes the employees provided by licensed service contractors are assured of security of tenure if they are treated as the latter’s regular employees.


Whether or not this assumption (or better still, wish) is credible is a big question mark. In theory, it looks plausible, but the difference in financial condition between the service contractor and the direct employer does not inspire confidence that the affected employees will be better off than where they were before DO 174.

Until Congress enacts a law, the controlling authority on this contentious labor issue is DO 174. It should be scrupulously complied with by the business entities concerned and, most importantly, its issuer, the DOLE. Its regional offices cannot and should not be left to their own accord in its interpretation.

Any error in its implementation would invariably result in adverse consequences. The last thing that should be avoided from happening is using DO 174 as an instrument to coerce employers into paying under the table to avoid the issuance of regularization orders.

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TAGS: Business, Contractualization, Endo, job
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