April 9, 1997

JOINT DAR-CDA-DA ADMINISTRATIVE ORDER NO. 02-97

SUBJECT : Rules and Regulations Governing Membership Issues and Concerns of Farmworkers and Employee Beneficiaries in Agrarian Reform Plantation-Based Cooperatives

I.

PREFATORY STATEMENT

Plantations, haciendas or commercial farms are large estates planted to plantation crops such as rubber, sugar, bananas, pineapple, coconut and palm oil that are centrally managed and employ large numbers of farmworkers. The transfer of these lands to Agrarian Reform Beneficiaries (ARBs) is done through the issuance of individual or collective Certificate of Land Ownership Award (CLOA) issued in the name of the cooperative or association with the ARBs listed on the CLOAs, at the option of the ARBs.
aIDHET

Issuance of collective CLOA to cooperatives is based on the following provisions of the Comprehensive Agrarian Reform Law (CARL or Republic Act No. 6657) and the Cooperative Code (Republic Act No. 6938). Section 29 of R.A. 6657 provides:

"In general, lands shall be distributed directly to the individual worker-beneficiary. In case it is not economically feasible and sound to divide the land, then it be owned collectively by the worker-beneficiaries who shall form a workers" cooperative or association which shall deal with the corporation or business association."
On the other hand, Article 90 of the Cooperative Code of the Philippines (R.A. 6938) reads:

"Landholdings like plantations, estates or haciendas acquired by the State for the benefit of the workers in accordance with the Comprehensive Agrarian Reform Program shall be owned collectively by the worker-beneficiaries who shall form a cooperative at their option."

Procedures of the Department of Agrarian Reform and the Land Registration Authority require that the names of the ARBs are annotated on the back of the CLOA. Land transfer of plantation through collective CLOAs gives rise to peculiar issues and problems not existing in individual CLOAs. After land transfer, changes occur in the composition of farmworkers and in the membership of the cooperative/association. The original farmworkers are retired, resigned or dismissed from employment and are replaced by new ones. However, the former remain as ARBs on the CLOAs while the latter are generally landless workers. In time these changes will lead to a return of absentee landlordism, which is the very social problem sought to be resolved by CARL. Hence, the law requires that DAR should periodically review and renew the list of ARBs noted on the CLOA. Section 22 of R.A. 6657 provides:

"A basic qualification of a beneficiary shall be his willingness, aptitude and ability to cultivate and make the land as productive as possible. The DAR shall adopt a system of monitoring the record of performance of each beneficiary, so that any beneficiary guilty of negligence or misuse of the land or any support extended to him shall forfeit his right to continue as such beneficiary. The DAR shall submit periodic reports on the performance of the beneficiary to the PARC."
Section 27 provides further:

"If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or conveyed with prior approval of the DAR to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance shall cultivate the land himself ."
To safeguard the integrity of the CLOA, any changes affecting the composition of the ARBs should undergo quasi-judicial proceedings. Moreover, the concept of an agrarian reform plantation-based cooperative is an interplay of pertinent provisions of the Cooperative Code (R.A. 6938), the Labor Code, and the CARL (R.A. 6657), which define and regulate

cooperative membership, employment and beneficiary entitlement, respectively. The three distinctive roles of member, farmworker and beneficiary otherwise an anomally takes place when ARBs are not actual farmworkers and cooperative members. The three basic laws regulating agrarian reform plantation-based cooperatives should be interpreted in a manner so as to keep ownership of the land with the actual farmworkers, at least, during the period of amortization of the land payment and until the land is fully paid for. Only then can the beneficiaries have the full freedom to dispose of the land and deal with the various complications of agrarian reform in plantations as full owners without any intervention from DAR. Hence, there is need for the issuance of a Joint Administrative Order by the Department of Agrarian Reform, Cooperative Development Authority and Department of Agriculture. These rules address the various issues and concerns on membership, employment and beneficiary entitlement that arise when plantations are transferred to ARBs through the issuance of collective CLOAs. SCOPE These rules shall cover plantations, estates and haciendas transferred to farmworkers through the issuance of a collective CLOA in the name of the cooperative or association bearing the names of individual beneficiaries until such time that the land is fully paid. DEFINITION OF TERMS For purposes of the implementation of these rules and regulations, the following terms are herein defined as follows: A. Agrarian Reform Plantation-Based Cooperative refers to a special cooperative composed exclusively of ARBs awarded a collective CLOA. B. Agrarian Reform Plantation-Based Association refers to an association composed exclusively of ARBs awarded a collective CLOA. C. Leaseback Arrangement is one where ownership of the land is transferred to a cooperative or association which in turn leases back the land to the former landowner or agribusiness firm operating the plantation. (This arrangement is now under Section 3 of R.A. 7905). D. Non-Leaseback Arrangement is one where the landowning cooperative or association directly operates and manages the land. E. Tillage is the collective effort by various types of workers who are employed to make the land productive. It shall not be limited only to employees engaged in actual cultivation of the land but also those involved in processing, administrative, operation, medical and technical work (technical farmworkers) based on the principle that all individuals who contribute to making the land productive are considered tillers.

Managerial or Supervisory Employee is natural person who is employed by an agricultural enterprise who is vested with powers or prerogatives: (1) to lay down and execute management policies; (2) to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees; and/or (3) to effectively recommend such managerial actions. F.
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G. Technical Farmworker is a natural person employed by an agricultural enterprise or farm, who is highly educated and trained, and performs functions in scientific, engineering, medical, teaching and other fields, but who is vested with managerial or supervisory functions. Examples of such employees are chemists, agronomists, veterinarians, soil analysts, and the like. H. Abandonment is any willful or deliberate failure by an ARB to personally till the land for a continuing period of two (2) years with no intent or prospect of returning to work the land within the same period. IV. POLICY STATEMENTS A. Agrarian Reform Plantation Based Cooperative is a special cooperative whose membership is exclusive to ARBs, established for the principal purpose of holding a collective CLOA. Such cooperative may likewise directly manage and operate the land or lease the land to another party who shall then operate, manage and employ the ARBs to work on the leased land. Another cooperative may be organized to include ARBs and non-ARBs for the purposes of undertaking other activities. B. The nature and purpose of an Agrarian Reform Plantation Based Cooperative require the blending of the beneficiary's distinctive roles as cooperative member, employee/farmworkers and ARB in one and the same person. Membership in cooperative is defined by the Cooperative Code (R.A. 6938), while beneficiary status is determined by the CARL (R.A. 6657), and employment relation is regulated by the Labor Code and related legislation. C. Loss of employment with the cooperative/association or lessee (in the case of leaseback arrangements) and loss of membership with the cooperative shall not result automatically in the forfeiture of status as an ARB. However, cessation of employment and membership must combine with circumstances amounting to abandonment of tillage in order to disqualify an ARB. D. Listing and Delisting of ARBs shall be undertaken periodically by the Department of Agrarian Reform (DAR) every two (2) years, until full payment of the land by the ARBs. A list of proposed qualified and disqualified ARBs shall be submitted by the Board of Directors of the Cooperative, subject to approval by the General Assembly, to the DAR PARO once a year. The PARO shall file a petition with the Provincial/Regional Agrarian Reform Adjudicator (RARAD) which shall be published two times

within a period of one (1) month in a newspaper of general circulation within the province or region concerned prior to the hearing. The expenses for the publication shall be shouldered by the DAR. Any interested ARB may intervene in the petition. The RARAD shall hear and decide on the petition. Any party who is aggrieved by the decision may appeal to the DAR Adjudication Board at the Central Office. E. The cooperative shall establish a procedure for admitting proposed ARBs as prospective (associate) members who shall become full-fledge members upon approval by DARAB of the petition for the listing of new members. Such prospective (associate) members shall possess all the qualifications and none of the disqualifications for membership in an agrarian reform plantation-based cooperative or association at the time the petition is filed. In the listing of qualified ARBs, the DAR shall be guided by the following order of priority: A.) Regular Farmworkers; B) Seasonal Farmworkers; and other farmworkers. Workers involved in the processing and technical work shall be deemed to form part of the term "regular farmworkers, as provided for in Section 22 (b) of R.A. 6657. Only those workers who are actually employed at the time of the award of the CLOA shall be qualified as original farmer beneficiaries. Workers employed after the award of the CLOA may qualify as additional farm beneficiaries, entitled to become members of the CARP beneficiaries' cooperative who own the land, provided, they comply with the requirements of law, the rules and regulations implementing the law, and the cooperative article of cooperative and By-laws. Refusal to be listed as an agrarian reform beneficiary and provide pertinent information as requested by the DAR within six months from notice, shall be construed as unwillingness on the part of potential beneficiaries to be listed and they shall be dropped from the list of qualified farmer beneficiaries. G. The minimum number of beneficiaries shall not be less than the proportion of one (1) ARB to three (3) hectares, which is the maximum award ceiling as provided by Section 25 of R.A. 6657. The maximum number of beneficiaries shall not exceed such number that could have gainful, productive and sustainable employment or livelihood on the awarded land. V. GROUNDS FOR DELISTING F.

Any of the following shall be a ground for delisting of an ARB: 1. 2. Death or permanent total incapacity;

Disqualification as an ARB under R.A. 6657 as provided for in Administrative Order No. 2, Series of 1994, namely:

a.

Misuse or diversion of financial and support services extended to the ARBs (Section 37, R.A. 6657); b. Misuse of the land (Section 22 of R.A. 6657);

c. Material misrepresentation of the ARB's basic qualifications as provided under Section 22 of R.A. 6657, P.D. 27, and other agrarian laws; d. Illegal conversion by the ARB (Section 73, paragraph C, and E of R.A. 6657);

e. Sale, transfer, lease, or other forms of conveyance by the beneficiary of the right to use or any other usufructuary right over the land acquired by virtue of being a beneficiary, in order to circumvent the provisions of R.A. 6657, P.D. 27, and other agrarian laws (except the leaseback allowed under Section 3 of R.A. 7905); f. Default in the obligation to pay an aggregate of three (3) consecutive amortizations in case of voluntary land transfer/direct payment scheme, except in cases of fortuitous events and force majeure; g. Failure of the ARBs to pay for at least three (3) annual amortization to the LBP, except in cases of fortuitous events and force majeure (Section 26 of R.A. 6657); h. Neglect or abandonment of the awarded land continuously for a period of two (2) calendar years as determined by the Secretary or his authorized representative (Section 22 of R.A. 6657); and
EScAID

i.

Other grounds that will circumvent laws related to the implementation of agrarian reform program.

3. Expulsion for violation of membership duties and responsibilities in the cooperative as provided in its Articles of Cooperation and By-Laws and Article 31 of R.A. 6938; 4. Resignation/Withdrawal of membership from the cooperative combined with the circumstances amounting to abandonment of tillage in order to disqualify as an ARB; 5. 6. Gainful employment in other companies, plantations or cooperatives combined with non-involvement in the affairs of the cooperative; Loss of Filipino citizenship or acquisition of a permanent residency status in another country; or employment in a foreign country; and 7. Sale of his share of stocks or aliquot part of the land. VI. TRANSFERABILITY OF RIGHTS

1. In general, both the direct share capital and land share capital including the accruing interests thereof of the outgoing or terminated member shall be valued and paid to him. 2. A member can only transfer his share to the cooperative. The cooperative, in turn, shall be responsible for the distribution of shares to qualified agrarian reform beneficiaries as determined by the Department of Agrarian Reform. In case the land is covered by leaseback arrangement, the cooperative shall distribute the shares to the eligible workers of the leaseback operator who are qualified agrarian reform beneficiaries. In cases of permanent total incapacity, retirement or resignation or separation from the company of member, he/she has the option (either to monetize) to sell his/her share capital to the cooperative (or nominate his/her successor to the cooperative). In case of death, his/her heirs have the option either to monetize his/her share capital or nominate his/her successors to the cooperative. In both cases, the nominated successor should be qualified as an ARB, and approved by the cooperative and the DAR. 3. The terms and conditions for the transfer of shares and its valuation shall be provided for in a separate DAR-CDA-DA Administrative Order. VII. LEASEBACK ARRANGEMENT In the case of leaseback arrangements, the principle of abandonment as defined in Section III (H) shall not be applicable. However, in the event that the leaseback arrangement is terminated, and the management and administration of the farm is returned to the farmerbeneficiaries (e.g. contract growing) then the principle of abandonment shall be applicable as ground for delisting of farmer-beneficiaries. VIII. NON-LEASEBACK ARRANGEMENT A. Landowning cooperatives or associations who operate and manage their own land shall give priority to ARBs in securing employment, provided that the financial viability of the cooperative to provide productive, gainful and sustainable employment shall not be compromised. B. ARBs who are not employed by the cooperative/association may be allowed to till uncultivated portions of the land to temporary cash crops, provided that the latter does not jeopardize the principal plantation crop and shall surrender the area cultivated to the cooperative within (60) days from notice. The cooperative may issue rules on this matter. C. IX. The cooperative/association may allocate employment to ARB members on a rotation basis.

CERTIFICATES OF LAND OWNERSHIP AWARDS (CLOAs) ISSUED TO ASSOCIATIONS

In cases where the CLOA has been issued in the name of an association and not of the cooperative, the ARBs shall (decide whether or not to) form a cooperative. Thereafter, (should the ARB decide to form an agrarian reform cooperative) the CLOA issued in the name of the association shall be canceled and reissued in the name of the cooperative. X. ROLE DELINEATION

1. In both leaseback and non-leaseback arrangements, identified worker-beneficiaries in a cooperative who were promoted to managerial or supervisory positions in the plantation company (for leaseback arrangements) or the cooperative itself (for non-leaseback arrangements) after land transfer shall remain as ARBs even without giving up their position. 2. So as to prevent any conflict of interest, the General Manager of the cooperative cannot also be a member of the board of directors of the cooperative pursuant to Article 43 of R.A. 6938.

3. Pursuant to Article 47 of R.A. 6938, membership in the board of directors shall be elective, service-oriented and non-remunerative except for reasonable per diems. Their remuneration is based on their being employees of the cooperative, or the corporation-lessee and not on their being a director of the cooperative. XI. DISPOSITION OR ALLOCATION OF NET SURPLUS UNDER LEASEBACK ARRANGEMENT

The cooperative as an organization receives the lease rentals. In turn, after deducting the annual amortization on the land as well as other operating costs, the cooperative, based on its by-laws and in accordance with Articles 86 and 87 of R.A. 6938, and Rule 4 of the Rules and Regulations Implementing Certain Provisions of R.A. 6938, shall distribute the net surplus among the members or utilize them for purposes as the membership may so decide. XII. ENFORCEMENT Within one (1) year after the effectivity of this Joint DAR-CDA-DA Administrative Order, all cooperatives that fall within this category shall harmonize their Articles of Cooperation and By-laws in accordance herewith. XIII. REPORTING AND MONITORING The DAR, CDA and DA through their respective field offices shall monitor compliance to these guidelines and render quarterly report (for DAR) to PARO, with a copy for the RARO and BARBD and (for CDA) to CDA provincial offices, with a copy for the Regional and Central Offices.
CSHEAI

XIV. EFFECTIVITY/REPEALING CLAUSE

This Joint Administrative Order shall take effect fifteen (15) days after its publication in newspaper of general circulation, pursuant to Section 49 of R.A. 6657 and Section 13 of R.A. 6969. All orders, circulars, memorandum, rules and regulations or parts thereof which are inconsistent herewith are hereby revoked, amended or modified accordingly. XV. SEPARABILITY CLAUSE If any section or paragraph of this Administrative Order shall be held invalid, the other portions of the order shall not be affected thereby. XVI. CERTIFICATION OF PUBLIC HEARING The CDA hereby certifies that this Administrative Order has undergone public hearings on September 6, 1996, in Manila, Iloilo, and Cagayan de Oro, pursuant to the requirements of Article 123, paragraph 3 of R.A. 6938. Diliman, Quezon City ________________, 1997.
(SGD.) ERNESTO D. GARILAO H. ESCUDERO III Secretary Department of Agrarian Reform Agriculture (SGD.) JOSE C. MEDINA, JR. Chairman Cooperative Development Authority Approved: By the President: (SGD.) RUBEN D. TORRES Executive Secretary (SGD.) SALVADOR Secretary Department of