Is DOLE’s regularization program increasing unemployment in the Philippines?

  • Recent news reports show that contractors have been letting go of hundreds of workers which ironically is related to the regularization program of the Department of Labor and Employment.
  • The principal will only regularize a fraction of the number of workers deployed/assigned to it by the contractors.
  • On the other hand, DOLE wants all of the deployed/assigned personnel by the contractors to be regularized by the principal, without factoring the above business considerations.
  • Caught in between, the contractor often chooses to preserve the status quo until either the principal or DOLE makes an action.
  • The long story short of it is that the contractor is not entirely at fault for the retrenchment of deployed/assigned personnel as business necessity and legal compliance forced it in such a position.

Over three years have passed since the the crackdown by the Department of Labor and Employment (DOLE) on the end of contract practices (popular referred to as “endo”) which have been practiced by many employers, particularly contractors and subcontractors.

The regularization program has reported led to the regularization of around 500,000 workers in 2018.

However, recent news reports show that contractors have been letting go of hundreds of workers who are related or part of the regularization program.

While DOLE and labor groups called foul on the actions of these contractors, the underlying reasons that prompted these contractors to retrench their workforce is ironically primarily rooted on the regularization drive.

On the business side, many principals have terminated the service agreements of their contractors and subcontractors, especially if there is a finding of labor-only contracting as this makes the principal the employer of the deployed/assigned personnel. These principals are appealing the regularization orders of the DOLE before appellate courts aiming for a reversal. Meanwhile, some of these companies comply by regularizing a few of the deployed/assigned personnel, while the rest submit a proposed voluntary regularization program of a certain number of workers only for the DOLE to approve.

Regardless of the course of action taken by a principal, what is commonly done in these situations is that the service agreement with the contractors are pre-terminated in view of the DOLE finding on labor-contracting.

As a result, without a service agreement to rely on, and no income to pay the compensation and benefits of deployed/assigned personnel, the contractors and subcontractors are forced to let go of their employees on the ground of retrenchment. This is what is happening on the ground.

This is the irony behind DOLE’s regularization program. It is increasing unemployment.

The principal will only regularize a fraction of the number of workers deployed/assigned to it by the contractors. The principal’s primary concern is to decrease its costs/overhead and conversely increase is operational efficiencies. It is, after all, a business.

On the other hand, DOLE wants all of the deployed/assigned personnel by the contractors to be regularized by the principal, without factoring the above business considerations.

Meanwhile, the contractor is caught in between as it tends to avoid fighting with its client, the principal, and displeasing the regulator, DOLE.

Caught in between, the contractor often chooses to preserve the status quo until either the principal or DOLE makes an action. In the case of the principal, it terminates the service agreement leading to the retrenchment of the deployed/assigned personnel as discussed earlier. DOLE, on the other hand, orders the principal to regularize these deployed/assigned personnel and to which the contractor complies effectively releasing these workers to the principals, who then now decides what to do with these deployed/assigned personnel.

The long story short of it is that the contractor is not entirely at fault for the retrenchment of deployed/assigned personnel as business necessity (i.e. termination of service agreement) and legal compliance (i.e. DOLE’s order of regularization) forced it in such a position. It is no black and white matter but a paradox of sorts, i.e. the program that seeks to regularize more employees ends up increasing unemployment.