The End of ENDO – Labor-Only Contracting Now Banned

On March 16, Labor Secretary Silvestre H. Bello issued a Department Order which totally bans ‘endo’ or labor-only contracting.

As stated in the DOLE website:


Bello signed Department Order 174, or the Rules Implementing Articles 106-109 of the Labor Code, after months of consultations with both labor and management, pursuant to the promise of President Rodrigo R. Duterte to end illegal contracting and ‘endo.’ The new DO supersedes the much assailed D.O. 18-A which was oftentimes circumvented to allow various forms of contractual arrangements and end-of-contract schemes.

“Given the impasse and taking into consideration the social and economic impact of prolonged policy uncertainties, we think that it will be for the benefit of the greater public if the Department, through the Secretary of Labor, would finally put closure to this issue, and exercise the power and discretion given him under the law,” said Bello, prior to the signing of the new order at the DOLE office in Manila.

He said D.O. No. 174: 1) Reaffirms the Constitutional and statutory right to security of tenure of workers; 2) Applies to all parties in an arrangement where employer-employee relationship exists; 3) Absolutely prohibits labor-only contracting, and specifies other illicit forms of employment arrangements; 4) Allows only permissible contracting and subcontracting as defined; 5) Re-enforces the rights of workers to labor standards, self-organization, collective bargaining and security of tenure; and 6) Requires mandatory registration of contractors and subcontractors and provides clear procedures for cancellation of registration.

The new department order prohibits the following: labor-only contracting; farming of work through “cabo”; contracting out of job or work through an in-house agency; contracting out of job or work through an in-house cooperative which merely supplies workers to the principal; contracting out of a job or work by reason of a strike or lockout, whether actual or imminent; and contracting out of a job or work being performed by union members and such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization as provided in Article 259 of the Labor Code, as amended.

It also prohibits contractors and subcontractors to require their employees to perform functions which are currently being performed by the regular employees of the principal; sign, as a precondition to employment or continued employment, an antedated resignation letter; a blank payroll; a waiver of labor standards including minimum wages and social or welfare benefits; or a quitclaim releasing the principal or contractor from liability as to payment of future claims; or require the employee to become member of a cooperative; repeated hiring of employees under an employment contract of short duration.

The D.O. also prohibits the signing of a contract that fixes the period of employment to a term shorter than the term of the service agreement, unless the contract is divisible into phases for which substantially different skills are required and this is made known to the employee at the time of engagement; and such other practices, schemes or employment arrangements designed to circumvent the right of workers to security of tenure.

The new DOLE Department Order on Contracting and Subcontracting also shortens the validity of the certificate of registration of contractors and subcontractors from three years to two years and increases the registration fee from P25,000.00 to P100,000.00.

To ensure the effective implementation of D.O. 174, the Labor Secretary directed Undersecretaries Joel Maglunsod and Bernard Olalia to review the enforcement framework of labor laws and standards under Department Order No.131-B, Series of 2016, or the Revised Rules on Labor Laws Compliance System.

He also requested President Duterte for the creation of 200 plantilla positions for Labor Laws Compliance Officers which will be deployed in the DOLE Regional Offices. Undersecretaries Maglunsod and Olalia will supervise these regional inspection teams.

Bello said that the Department will push through its plan to deputize labor groups to take an active part in inspection, thus assessing the more than 90,000 establishments in the country targeted this year.

“Kahit na anong ganda ng department order kung hindi naman ito maipapatupad nang maayos ay wala rin itong halaga,” said Bello.