Jollibee Foods Corporation’s Contractualization Issue in the

Philippines
End of contract or endo refers to the scheme that corrupt companies exercise to abuse their
workers. In the Philippines, the law requires companies to regularize their workers after six
months. Unfortunately, some corporations terminate their workers a month or two before
their sixth month of employment.
DEPARTMENT ORDER NO. 174, SERIES OF 2017: RULES IMPLEMENTING ARTICLES 106 TO
109 OF THE LABOR CODE
DO 174 reiterates the absolute prohibition under the Philippine Labor Code and jurisprudence against
labor-only contracting.

Under DO 174, labor-only contracting refers to the following arrangements:

 The contractor or sub-contractor does not have substantial capital. DO 174-17 increased
the amount of substantial capital, from at least PHP3 million to at least PHP5 million in
case of corporations, partnerships, and cooperatives. As for a single proprietorship, the
owner must have a net worth of at least PHP5 million.
 The contractor or subcontractor does not have investments in the form of tools,
equipment, machineries, and supervision work premises, among others.
 The contractor’s or subcontractor’s employees recruited and placed are performing
activities which are directly related to the main business operation of the principal.
 The contractor or subcontractor does not exercise the right to control over the
performance of the work of the employee, then it is also considered labor-only
contracting under DO 173-14.
 HR who wants to avoid any problem in dealing with contractors may instead employ a
fixed-term contract engagement with the employees. Fixed-term employment directly
facilitated by the employer is not prohibited. Nowhere in the DO 174 prohibits it.The
Court thus laid down the criteria under which fixed-term employment could not be said to
be in circumvention of the law on security of tenure, thus:
(1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
(2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.

The illegal practice of hiring employees under a six-month contract is no longer exercised in the
Philippines, according to Jollibee Foods Corp. (JFC).

“Regarding the issue ... there’s no more contractual, not only in fastfood but I think in the whole
Philippines ... ” JFC chairman Tony Tan Caktiong said during the company’s stockholders’
meeting in Quezon City.

“The issue now is about outsourcing. What kind of role can be outsourced or not?” Tan Caktiong
said.
However, Sentro ng mga Nagkakaisa at Progresibong Manggagawa secretary general Josua Mata
disapproved of Tan Caktiong’s statement.

“I don’t know which alternative reality he is in,” Mata said.

On the sidelines of the stockholders’ meeting, Tan Caktiong told reporters that employees of the
company are either regular with the JFC or regular in their hired service providers. He said the
company knew that employees working under a service provider were contractuals, “because
everybody is doing that ... But now this President is no longer allowing it.”

Jollibee topped the list of 20 companies engaged in labor-only contracting released by the
Department of Labor and Employment (DOLE) last month.

In labor-only contracting, the contractor or subcontractor merely recruits, supplies, or places

workers to perform a job for a principal. Tan Caktiong noted that Jollibee outsourced or
contracted its manpower needs because it gave them the flexibility to deploy personnel.

“We are looking to outsource because service providers are more flexible. When we hire regular
employees, we cannot redeploy them as fast as providers ... but the cost is more or less the same.
So the advantage really is on flexibility,” Tan Caktiong said.

“If you ... outsource, they can deploy all their manpower anywhere. Kami, if we have full-time,
we cannot deploy them anymore ... They have more flexibility. If we say we need more workers
for December, they can give you those workers. Then by January, if you say you just need a little
bit they can redeploy. So it’s more on flexibility,” he said.

In April, the Labor department ordered JFC to regularize more than 7,000 contractual
workers deployed under its contractors or service providers. JFC is appealing the order. It said
the company is committed to complying with the law and Department Order 174, which allow
contracting arrangements with legitimate service providers.

“The fact is, tens of thousands of workers ordered by the DOLE to be regularized has yet to be
actually regularized,” Mata said.

Tan Caktiong noted that Jollibee is now working closely with the Labor department on the issue
and to clarify which roles are allowed to be contracted or outsourced.

“In compliance with regulations, we only deal with reputable service contractors that have been
duly accredited and registered with DOLE,” the company said.