September 29, 2016

Juan A. Presidente
Service Provider Inc.
123 Maykaya St.,
Makati City

Dear Juan A. Presidente:

As for your request, here is the firms legal opinion you

requested with regards to your queries. The facts, gathered from
you and your documents, are as follows:
In lieu of the newly elected Presidents pronounced that he
will put an end to contractualization and the practice of putting
employees on an End of Contract (ENDO) arrangement every five
months. The Department of Labor and Employment (DOLE) is
supportive of the said initiative and in the meantime, suspended
the grant of accreditation to job contractors.
Your company, Service Providers Inc. (SPI) is a business
process outsourcing company (BPO) which has full facilities and
equipment as a BPO and capitalized P10M. Your clients, ABC
Insurance Corp. And XYZ Hospital Inc., outsourced some aspects
of their business like scanning, storage of documents, call center
work, claims processing, etc.
Moreover, SPI has 30 regular employees engaged on a
project basis The regular employees are assigned to the scanning

and storage and claims processing, while the special project

employees are assigned to call center work, particularly those
where SPI is engaged to do marketing and sales call for a period
of 1 year.
The issue here is how the prounouncement of the President
will affect your company, specifically:
1. Whether or not the services rendered may be legitimately
subcontracted to the clients as a job contractor.
2. Wheter or not SPIs job contractor arrangement with its
clients covered by such contractualization and ENDO prohibition,
hence, will now become illegal.
3. Whether or not SPI can still engage employees on a per
project basis or does it have to employ all employees as regular
employees concurring with the prounouncement of the President.

The firms opinions are as follows:

1. As for contractualiztion, job contracting is allowed under
Art. 82 of the Labor Code of the Philippines.
It has been ruled that, except as limited by special laws, an
employer is free to regulate, according to his own discretion, al
aspects of employment. These include hiring, work assignments,
working methods, time, place, and manner of work, etc. So long
as the complanys prerogatives are exercised in good faith for the
advancement of the employers interest and not for the purpose
of defeating or circumventing the rights of the employees under

special laws or under valid agreements, the prerogatives will be

upheld. (Azucena, 2007)
There is job contracting when the employer (the principal)
agrees to put out or farm out with another (the contractor) the
performance or the completion of a specific job, work or service is
to be completed within or outside the premises of the principal. In
such arrangement, the principal does not engage the services of
the contractor as an employee. In undetaking the work fo rthe
principal, the contractor may hire his own employees.
ABC Hospital Corp., and XYZ Hospital Inc. may legitimately
sub-contract some aspect of their businesses like scanning and
storage of documetns, call center work, and claims processing
from SPI Global Inc.

2. The nature of business of SPI Global Inc. is business processoutsourcing. Unlike other businesses which use sub-contracting to
prevent their employees for organizing and selecting a collective
bargaining representative. SO also the motive is to rid himsled of
union, men, or to escape his statutory duty to bargain collectively
with his employees bargaining representative.
In the case of SPI Inc., the Supreme Court held in Gadia v.
Sykes ( G.R. 209499) the principal test for determining whether a
particular employees are properly characterized as projectbased from regular employee is whether or not the employees
were assigned to carry out a specific project or undertaking.
The project could either be (1) a particular job or undertaking is

within the regular or usual business of the employer company; or

(2) a particular job undertaking that is not within the regular
business of the corporation.
Clearly, SPI Inc. has the discretion of ending the contract of
their employees which by nature are project-based workers.

3. Project employment, by virtue of Article 280 of the Labor

Code, is allowed as it states that:
an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of
which has been determine at the time of the engagement of the
employee o where the work or services to be performed is
seasonal in nature and the employment is for the duration of the
season.

Therefore, the client may still continue its practice of

employing project employees provided that they give their
employees full disclosure of the terms of their contract.

Having said that, the firm opines that client may still continue as
long as they adhere to Article 248 of the Labor Code of the
Philippines, which prohibits subcontracting if its motivated by a

desire to prevent the employees from organizing and selecting a

collective bargaining representatives.

Yours respectfully,
Atty. Raphael Anton Dalisay
Atty. Russell Jay Manglicmot
Atty. Clarence Jude Ramirez
Atty. Mon Francis Tolentino
Atty. John Ezra Villar