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House Bill No. 7036: Another attempt to end ENDO

Undeniably, the COVID-19 pandemic impacted the lives of everyone. Yet, among those who have been affected to a much greater degree are contractual workers, who, during these uncertain times, earnestly hope for the regularization of their jobs. Amid the crisis, the issue of the security of one’s tenure becomes more relevant.

To recall, the 17th Congress passed Senate Bill No. 1826 which endeavored to end contractualization in May 2019 after President Rodrigo Duterte certified the bill as urgent. Senate Bill No. 1826 provides that there is labor-only contracting when either:

1. The contractor does not have substantial capital or investment OR the contractor’s employees recruited and placed are performing activities which are directly related to the main business operation of the principal; or,

2. The contractor does not exercise control over the performance of the work of the employee recruited and placed.

By amending the conjunction to “or,” the insufficiency of capitalization by a contractor and the employees’ performance of activities which are directly related to the main business of the principal each became sufficient for the contractor to be classified as engaged in labor-only contracting under the proposed law. Senate Bill No. 1826, however, was vetoed by President Rodrigo Duterte.

In his veto message, President Rodrigo Duterte declared that the proposed law, “unduly broadens the scope and definition of prohibited labor-only contracting, effectively proscribing forms of contractualization that are not particularly unfavorable to employees involved.”;

President Duterte’s vetoing of the much anticipated measure received criticism from workers and labor unions, yet said act was lauded by various groups of employers.

In view of the denial of Senate Bill No. 1826, various lawmakers refiled their respective versions seeking to finally put a stop to the abusive forms of contractualization. Hope seemed to reveal itself in the form of House Bill No. 7036, or the Security of Tenure Act.

On Dec. 1 this year, the House of Representatives approved in its third and final reading the House Bill No. 7036. The House Bill was supported by 204 lawmakers, while seven voted against it, and three abstained from voting.

Under House Bill No. 7036, labor-only contracting exists when the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machinery, work premises, among others, OR has no control over the workers’ methods and means of accomplishing their work; OR the workers recruited and placed by such person are performing activities which are directly related and necessary to the principal business of such employer.

As such, the presence of any of the three indicators is sufficient for a contractor to be deemed to be engaged in labor-only contracting. Under the Labor Code, these contractors shall be treated as mere agents of the employer who shall be responsible to the workers as if the latter were directly employed by him. Moreover, employers are made jointly and severally liable with the contractor should the latter fail to pay the wages, allowances, and benefits of the employees.

Aside from the foregoing, House Bill No. 7036 seeks to prohibit fixed-term employments, except in cases of: (i) overseas Filipino workers; (ii) workers on probation; (iii) relievers who are temporary replacements of absent regular employees whose engagement shall not exceed six months; (iv) project employees; and, (v) seasonal employees.

The House Bill further introduced amendments in the Labor Code to expound on the employment and rights of reliever, project, and seasonal employees. Accordingly, reliever, project, and seasonal employees are given the right of first refusal to the task, work, or project which is the subject matter of their employment and as well as in the hiring for open regular positions.

Notably, the proposed law is categorical in stating that clauses in employment contracts providing for a fixed term or definite period of employment are void, and that workers under these arrangements are deemed regular employees reckoned from the first day of their employment.

Whether the said bill will be passed into law, and whether the same may adequately answer the clamor of employees and labor unions, while at the same time safeguard the rights of the employers to legitimate contractualization, still remain to be seen.

The law is fair and just to both labor and management. Hence, while the Philippine Constitution is inexorably committed towards the protection of the working class from exploitation and unfair treatment, it nevertheless mandates the policy of social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other (Homeowners Savings and Loan Association, Inc. v. NLRC, G.R. No. 97067, Sept. 26, 1996).

We could only long and hope for that time when the government can finally find and strike the balance.

This article is for informational and educational purposes only. It is not offered as and does not constitute legal advice or legal opinion.


Shiela Vae A. Hoylar is an Associate of the Cebu Branch of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

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