Legal Aspect of My Job in the HR World

Written by Tracy Piamonte

Human Resources has many aspects other than what we might already know — Recruitment, Employee Engagement, Employee Relations, CompenBen, Labor Relations, Compliance, and many others. John Clements Consultants, one of the largest HR consulting firms in the country, deals with some of these HR aspects heavily.

Most of my colleagues have Human Resource, if not Psychology, as their undergraduate course. This made me ask myself, “What am I doing here, a Political Science graduate? Am I sort of a mismatch?” Nevertheless, I didn’t let that issue bother me so much since my mantra from the beginning has always been “Bloom where you are planted.” An inspirational blogger, Smita Malhotra, mentioned in her article that “we may not want to be where we are in life just yet, like a flower that grows through a crack in the concrete, but sometimes we have to make the best of our situation and bloom where we have been planted.

I finished my law degree while working in the Executive Recruitment Division of John Clements. The organization was generous enough to allow me flexible working hours so that I’d be able to attend to my schooling. During those times, I always wondered how it would fit my work situation.

I had been with Executive Recruitment for the longest time until an opportunity within the organization presented itself. It was not an easy decision to leave a group that already became my family and my comfort zone. But something had to change and I needed to embrace it. It led to a welcome change.

Moving to Staffbuilders Asia was both scary and exciting. I feared failure, the need to adjust to the new role, the new team, and the new environment. However, this fear was overshadowed by excitement — I was about to be a part of the market leader in outsourcing, staff augmentation, and project-based hiring. I was excited to try different things, test my skills and develop new ones, and there’s the legal aspect of the job!

Now let me touch on it and share some important issues that we are facing. Our business is governed by The Labor Code, specifically on contracting and subcontracting arrangements. Under Articles 106 to 109 of the labor code, labor-only contracting is absolutely prohibited and job contracting is restricted.

From the time the Duterte administration stepped in, things had been exciting for the industry. During the earlier months we heard terms like “endo”, “contractualization”, and the like all over the news. Then came, DO 174 which superseded DO 18-A. The business sector was alarmed because of the uncertainties as to its applicability. They started revisiting current practices, determining whether or not they are aligned with the new department order.

True to the nature of the legal profession, varying interpretations of the law came up — our law subject “Legal Construction” would come in handy. Some companies decided to be on the safe side and opted to hire the employees directly. On the other hand, others decided to continue with their existing business models, while strictly following the law to the letter. That’s fine. We should all be one with the government in protecting the labor sector. Now, the question is — how can we maintain a good balance between the labor and the business sectors so that both are protected?

I found this article written by Atty. Ma. Clarissa Excelsis S. Villanueva, “DO 174: More than Meets the Eye,” which was published in the Amicus Curiae publication of ACCRALAW last May 12, 2017. In the article, the author shared a brilliant and practical way of interpreting the department order without deviating from the law.

One of the many issues employers face when entering into an outsourcing arrangement is trying to reconcile existing functions done by regular employees vis-à-vis similar functions to be done by outsourced employees. The article shared a very good point, supported by case laws and, hopefully, addressed the confusion and varying interpretations.

“The strict and literal interpretation of Section 6 (f) on contracting out of regular functions will wield to the conclusion that as long as the functions are currently being performed by regular employees, they can no longer be outsourced to contractors regardless of the good faith of the company and the presence of any business exigencies that may justify one’s resort to contracting.
This interpretation, however, seems to contradict the Supreme Court’s ruling in De Ocampo v. NLRC, Asian Alcohol v. NLRC, Serrano v. NLRC and Aliviado v. P&G. These cases readily reveal that it is a valid exercise of management prerogative to avail of the services of an independent contractor to promote economy and efficiency in the business regardless of whether the activity to be contracted out is peripheral or core in nature.”

Still referring to the same article, the author believes that the prohibition under Section 6 (f) should not be interpreted in a strict and absolute manner and gave three main reasons.

“First, Article 106 of the Labor Code does not distinguish as to the kind of services that can be contracted out. It only mentions of “performance of work” without any distinction as to whether such work is peripheral or core in nature. As such, DO 174 which supposedly implements the same must not also make any distinction. Needless to say, an administrative issuance cannot extend nor amend a legislative enactment.
Second, the definition of labor-only contracting under the Labor Code effectively recognizes that even core functions or services can be contracted out. In fact, even if the contracted services are directly related to the business of the principal, an entity may still be deemed legitimate and not a labor-only contractor if it has substantial capitalization and exercises control over its employees.
Lastly, we must consider the policy behind the issuance of DO 174: to avoid the displacement of workers and to prevent employers from resorting to contractualization.
If we are to strictly apply the prohibition then, this might just aggravate the problem of contracting in the country because employers will no longer regularize positions and just contract them out altogether. Such situation will definitely not guarantee industrial peace and prosperity in the long run.”

I hope this clears the matter with regard to maintaining a balance between the labor and business sectors on the issue of contractualization, particularly in terms of job security and unfair labor practices, without having to set aside the need for business growth. These two cannot exist without the other and keeping their harmony is important for nation building.

The legal aspect of my job revolves around this, it is a small part — aside from the usual employee disciplinary measures, contract reviews and similar matters — but the mandate is clear and strong, that is to adhere to the law and ensure that the interests of the employees and the business alike are protected. I find it very interesting and I am looking forward to a more expanded legal function in the future.

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About the author:

Tracy is the Director and Business Unit Head of Staffbuilders Asia, a division of John Clements Consultants, Inc.