DO 174-17 showcased former President Duterte’s thrust towards the stricter implementation of laws on contracting arrangements. While there have been cases on contracting arrangements prior to 2017, from this year onwards, the country saw an uptake in routine and complaint inspections.
Meanwhile, Section 5 of DO 174-17 states that there is labor-only contracting when the contractor: does not have substantial capital or investments in the form of tools, equipment, and machineries and the contractor’s employees perform activities which are directly related to the main business of the principal; or the contractor does not exercise the right to control the performance of work of the employee.
Relevantly, there has also been much issue regarding the requirement of substantial capitalization or investments via tools and machineries. Particularly, must these two requirements be present?the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction ‘or.
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