Department Order No. 18-02 RULES IMPLEMENTING ARTICLES 106 TO 109 OF THE LABOR CODE, AS AMENDED

DEPARTMENT ORDER NO. 18 - 02
(Series of 2002)
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RULES IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, AS AMENDED
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By virtue of the power vested in the Secretary of Labor and Employment under Articles 5 (Rule-making) and 106 (Contractor or Subcontractor) of the Labor Code of the Philippines, as amended, the following regulations governing contracting and subcontracting arrangements are hereby issued:
Section 1. Guiding principles. - Contracting and subcontracting arrangements are expressly allowed by law and are subject to regulation for the promotion of employment and the observance of the rights of workers to just and humane conditions of work, security of tenure, self-organization, and collective bargaining. Labor-only contracting as defined herein shall be prohibited.
Section 2 . Coverage. - These Rules shall apply to all parties of contracting and subcontracting arrangements where employer-employee relationship exists. Placement activities through private recruitment and placement agencies as governed by Articles 25 to 39 of the Labor Code are not covered by these Rules.

Section 3. Trilateral Relationship in Contracting Arrangements. - In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job work or service.

Section 4. Definition of Basic Terms. - The following terms as used in these Rules, shall mean:

(a) "Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.
(b) "Contractor or subcontractor" refers to any person or entity engaged in a legitimate contracting or subcontracting arrangement.

(c) "Contractual employee" includes one employed by a contractor or subcontractor to perform or complete a job, work or service pursuant to an arrangement between the latter and a principal.

(d) "Principal" refers to any employer who puts out or farms out a job, service or work to a contractor or subcontractor.

Section 5. Prohibition against labor-only contracting. - Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C ) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

Section 6. Prohibitions. - Notwithstanding Section 5 of these Rules, the following are hereby declared prohibited for being contrary to law or public policy:

(a) Contracting out of a job, work or service when not done in good faith and not justified by the exigencies of the business and the same results in the termination of regular employees and reduction of work hours or reduction or splitting of the bargaining unit;
(b) Contracting out of work with a "cabo" as defined in Section 1 (ii), Rule I, Book V of these Rules. "Cabo" refers to a person or group of persons or to a labor group which, in the guise of a labor organization, supplies workers to an employer, with or without any monetary or other consideration whether in the capacity of an agent of the employer or as an ostensible independent contractor;

(c) Taking undue advantage of the economic situation or lack of bargaining strength of the contractual employee, or undermining his security of tenure or basic rights, or circumventing the provisions of regular employment, in any of the following instances:

(i) In addition to his assigned functions, requiring the contractual employee to perform functions which are currently being performed by the regular employees of the principal or of the contractor or subcontractor;
(ii) Requiring him to 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, contractor or subcontractor from any liability as to payment of future claims; and

(iii) Requiring him to sign a contract fixing the period of employment to a term shorter than the term of the contract between the principal and the contractor or subcontractor, unless the latter 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;

(d) Contracting out of a job, work or service through an in-house agency which refers to a contractor or subcontractor engaged in the supply of labor which is owned, managed or controlled by the principal and which operates solely for the principal;
(e) Contracting out of a job, work or service directly related to the business or operation of the principal by reason of a strike or lockout whether actual or imminent;

(f) Contracting out of a job, work or service being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self organization as provided in Art. 248 (c) of the Labor Code, as amended.

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or

(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

Section 8. Rights of Contractual Employees. - Consistent with Section 7 of these Rules, the contractual employee shall be entitled to all the rights and privileges due a regular employee as provided for in the Labor Code, as amended, to include the following:
(a) Safe and healthful working conditions;
(b) Labor standards such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay and separation pay;
(c) Social security and welfare benefits;
(d) Self-organization, collective bargaining and peaceful concerted action; and
(e) Security of tenure.
Section 9. Contract between contractor or subcontractor and contractual employee. - Notwithstanding oral or written stipulations to the contrary, the contract between the contractor or subcontractor and the contractual employee, which shall be in writing, shall include the following terms and conditions:
(a) The specific description of the job, work or service to be performed by the contractual employee;
(b) The place of work and terms and conditions of employment, including a statement of the wage rate applicable to the individual contractual employee; and

(c) The term or duration of employment, which shall be coextensive with the contract of the principal and subcontractor, or with the specific phase for which the contractual employee is engaged, as the case may be.

The contractor or subcontractor shall inform the contractual employee of the foregoing terms and conditions on or before the first day of his employment.
Section 10. Effect of Termination of Contractual Employment. - In cases of termination of employment prior to the expiration of the contract between the principal and the contractor or subcontractor, the right of the contractual employee to separation pay or other related benefits shall be governed by the applicable laws and jurisprudence on termination of employment.

Where the termination results from the expiration of the contract between the principal and the contractor or subcontractor, or from the completion of the phase of the job, work or service for which the contractual employee is engaged, the latter shall not be entitled to separation pay. However, this shall be without prejudice to completion bonuses or other emoluments, including retirement pay as may be provided by law or in the contract between the principal and the contractor or subcontractor.

Section 11. Registration of Contractors or Subcontractors. - Consistent with the authority of the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration system to govern contracting arrangements and to be implemented by the Regional Offices is hereby established.

The registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor market information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.

Section 12. Requirements for registration. - A contractor or subcontractor shall be listed in the registry of contractors and subcontractors upon completion of an application form to be provided by the DOLE. The applicant contractor or subcontractor shall provide in the application form the following information:

(a) The name and business address of the applicant and the area or areas where it seeks to operate;
(b) The names and addresses of officers, if the applicant is a corporation, partnership, cooperative or union;

(c) The nature of the applicant's business and the industry or industries where the applicant seeks to operate;

(d) The number of regular workers; the list of clients, if any; the number of personnel assigned to each client, if any and the services provided to the client;

(e) The description of the phases of the contract and the number of employees covered in each phase, where appropriate; and

(f) A copy of audited financial statements if the applicant is a corporation, partnership, cooperative or a union, or copy of the latest ITR if the applicant is a sole proprietorship.

The application shall be supported by:
(a) A certified copy of a certificate of registration of firm or business name from the Securities and Exchange Commission (SEC), Department of Trade and Industry (DTI), Cooperative Development Authority (CDA), or from the DOLE if the applicant is a union; and
(b) A certified copy of the license or business permit issued by the local government unit or units where the contractor or subcontractor operates.

The application shall be verified and shall include an undertaking that the contractor or subcontractor shall abide by all applicable labor laws and regulations.
Section 13. Filing and processing of applications. - The application and its supporting documents shall be filed in triplicate in the Regional Offices where the applicant principally operates. No application for registration shall be accepted unless all the foregoing requirements are complied with. The contractor or subcontractor shall be deemed registered upon payment of a registration fee of P100.00 to the Regional Office.

Where all the supporting documents have been submitted, the Regional Office shall deny or approve the application within seven (7) working days after its filing.

Upon registration, the Regional Office shall return one set of the duly-stamped application documents to the applicant, retain one set for its file, and transmit the remaining set to the Bureau of Local Employment. The Bureau shall devise the necessary forms for the expeditious processing of all applications for registration.

Section 14. Duty to produce copy of contract between the principal and the contractor or subcontractor. - The principal or the contractor or subcontractor shall be under an obligation to produce a copy of the contract between the principal and the contractor in the ordinary course of inspection. The contractor shall likewise be under an obligation to produce a copy of the contract of employment of the contractual worker when directed to do so by the Regional Director or his authorized representative.

A copy of the contract between the contractual employee and the contractor or subcontractor shall be furnished the certified bargaining agent, if there is any.

Section 15. Annual Reporting of Registered Contractors. - The contractor or subcontractor shall submit in triplicate its annual report using a prescribed form to the appropriate Regional Office not later than the 15th of January of the following year. The report shall include:

(a) A list of contracts entered with the principal during the subject reporting period;
(b) The number of workers covered by each contract with the principal;

(c) A sworn undertaking that the benefits from the Social Security System (SSS), the Home Development Mutual Fund (HDMF), PhilHealth, Employees Compensation Commission (ECC), and remittances to the Bureau of Internal Revenue (BIR) due its contractual employees have been made during the subject reporting period.

The Regional Office shall return one set of the duly-stamped report to the contractor or subcontractor, retain one set for its file, and transmit the remaining set to the Bureau of Local Employment within five (5) days from receipt thereof.
Section 16. Delisting of contractors or subcontractors. - Subject to due process, the Regional Director shall cancel the registration of contractors or subcontractors based on any of the following grounds:

(a) Non-submission of contracts between the principal and the contractor or subcontractor when required to do so;
(b) Non-submission of annual report;

(c) Findings through arbitration that the contractor or subcontractor has engaged in labor-only contracting and the prohibited activities as provided in Section 6 (Prohibitions) hereof; and

(d) Non-compliance with labor standards and working conditions.

Section 17. Renewal of registration of contractors or subcontractors. - All registered contractors or subcontractors may apply for renewal of registration every three years. For this purpose, the Tripartite Industrial Peace Council (TIPC) as created under Executive Order No. 49, shall serve as the oversight committee to verify and monitor the following:
(a) Engaging in allowable contracting activities; and
(b) Compliance with administrative reporting requirements.

Section 18. Enforcement of Labor Standards and Working Conditions. - Consistent with Article 128 (Visitorial and Enforcement Power) of the Labor Code, as amended, the Regional Director through his duly authorized representatives, including labor regulation officers shall have the authority to conduct routine inspection of establishments engaged in contracting or subcontracting and shall have access to employer's records and premises at any time of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of the Labor Code and of any labor law, wage order, or rules and regulations issued pursuant thereto.
The findings of the duly authorized representative shall be referred to the Regional Director for appropriate action as provided for in Article 128, and shall be furnished the collective bargaining agent, if any.

Based on the visitorial and enforcement power of the Secretary of Labor and Employment in Article 128 (a), (b), (c) and (d), the Regional Director shall issue compliance orders to give effect to the labor standards provisions of the Labor Code, other labor legislation and these guidelines.

Section 19. Solidary liability. - The principal shall be deemed as the direct employer of the contractual employees and therefore, solidarily liable with the contractor or subcontractor for whatever monetary claims the contractual employees may have against the former in the case of violations as provided for in Sections 5 (Labor-Only contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also be solidarily liable in case the contract between the principal and contractor or subcontractor is preterminated for reasons not attributable to the fault of the contractor or subcontractor.

Section 20. Supersession. - All rules and regulations issued by the Secretary of Labor and Employment inconsistent with the provisions of this Rule are hereby superseded. Contracting or subcontracting arrangements in the construction industry, under the licensing coverage of the PCAB and shall not include shipbuilding and ship repairing works, however, shall continue to be governed by Department Order No. 19, series of 1993.

Section 21. Effectivity. - This Order shall be effective fifteen (15) days after completion of its publication in two (2) newspapers of general circulation.

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Manila, Philippines, 21 February 2002.
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PATRICIA A. STO. TOMAS
Secretary

GUIDELINES GOVERNING THE EMPLOYMENT AND WORKING CONDITIONS OF SECURITY GUARDS [Department Order No. 14 Series of 2001]

DEPARTMENT ORDER NO. 14
(Series of 2001)
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GUIDELINES GOVERNING THE EMPLOYMENT AND WORKING CONDITIONS
OF SECURITY GUARDS AND SIMILAR PERSONNEL IN THE PRIVATE SECURITY INDUSTRY.
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For the purpose of ensuring the private security personnel of their rights to the minimum benefits mandated by law, these guidelines are hereby issued for compliance of all concerned.
SECTION 1. Coverage. - This issuance shall apply to all private security agencies or operators, their principals or clients, all companies allowed to directly employ security guards and to all security guards, whether agency or company employees, for compliance and entitlement, respectively, to existing labor standards laws and benefits.

Sec. 2. Definition of terms. - For the purpose of this Guidelines, the following terms are defined:

a. "Principal" refers to any employer, company or establishment to whom a security job, service or work is provided by a security service contractor, whether or not the arrangement is covered by a written contract.
b. "Security service contractor" is synonymous with a private security agency which means any person, association, partnership, firm or private corporation, who contracts, recruits, trains, furnishes or posts any security guard or similar personnel to individuals, corporations, offices and organizations, whether private or public, for their security needs as the Philippine National Police may approve.

Sec. 3. Employment status. -
3.1 Employer-employee relationship. - The security service contractor is the employer of its security guard and similar personnel. The principal where the security guards are as-signed is considered an "indirect employer" for unpaid wages and other wage related benefits based on the joint and several liability of the principal with the service contractor under the Labor Code, unless the private security agency is owned, managed or controlled by the prin-cipal or the facts show that the principal controls the manner by which the security service is performed or where the security guard is directly hired by the establishment.
3.2 Probationary employment. - The probationary period of a newly hired security guard or similar personnel in the private security industry shall not exceed six (6) months. While engaged on probationary basis, his/her services may be terminated for failure to meet the reasonable standards or criteria made known by the security agency/employer to the guard at the time of engagement or for just cause/s.

3.3 Regular employment. - Any security guard or similar personnel in the private se-curity industry who is allowed to work after the probationary period shall be considered a regular employee.

Sec. 4. Service contracts. - The security service contractor and/or the principal shall produce or submit the original copy of their service contract when directed to do so by the Regional Director or his/her duly authorized representative. The service contract shall stipulate, among others:
a. A statement that the security guards/personnel shall be paid not less than the minimum wage and other benefits under the Labor Code and other existing laws;
b. An escalation clause to immediately effect the common provision in the wage orders that the prescribed increase in the wage rates of the workers shall be borne by the principal or client of the service contractors and the contracts shall be deemed amended accordingly.

c. A statement that security service contractor and/or the principal shall comply with Social Security, Employees Compensation, Philippine Health Insurance Corporation and Home Development Mutual Fund laws on employees' coverage or membership.

d. The kind or nature of security service.

e. The schedule of payment of 13th month pay per P. D. 851 and re-tirement pay per R. A. 7641.

Sec. 5. Employment contracts. -
5.1 The security service contractor shall provide his security guards, detachment commanders/supervisors and other security personnel, a copy of the employment contract duly signed by the parties which shall contain the terms and conditions of employment, such as those provided under Section 5 hereof.
5.2 For every assignment of a security guard/personnel to a principal, the duty detail order shall contain the following, among others:

a. Description of job, work or service to be performed
b. Hours and days of work, work shift and applicable premium, overtime and night shift pay rates.

Sec. 6. Terms and conditions of employment. -
6.1 The security guards and similar personnel in the employ of any private security agency or company should be duly licensed and must have passed the physical and neuro-psychiatric examinations required by the PNP. They are entitled to the mandatory benefits under the Labor Code and other existing laws, including coverage by SSS, ECC, Philhealth and HDMF.
6.2 The basic wage rate of a security guard/personnel shall not be less than the minimum wage rate for the non-agricultural sector in the Region where he/she is assigned, regardless of the nature of business of the principal, or in the Region where the security guard has been engaged, whichever is higher.

Where a security guard/personnel is recruited through a branch office in another Region where the principal is likewise located, the non-agricultural minimum wage rate applicable in the workplace of the principal shall govern.

Security guards or other personnel employed and/or assigned by a security service contractor in one Region but who are transferred, moved or assigned to another Region shall be paid based on the more beneficial wage rate.

In case of transfer or reassignment to another principal within a Region, the wage rates may be adjusted provided that the same shall not be less than the applicable regional minimum wage rate.

6.3. Statutory Benefits. - The security guards/personnel are entitled to not less than the following benefits depending on the working hours, work shift and workdays under the given conditions, which benefits should be included in the cost distribution in the service contract:

a. Basic salary for all actual workdays and for the ten regular holidays (as holiday pay) which must not be lower than the minimum wage rates above described and to be computed by using the factors recommended herein or by more favorable practice of the employer. In addition, one hundred percent (100%) of the basic salary is due whenever work is rendered on a regular holiday.
b. Allowance in addition to the basic salary, if any, is prescribed by the applicable Regional Wage Order.

c. Premium pay of 30% of the daily rate for work on special days and rest days, which is increased to 50% whenever work is performed on coinciding rest days and special days.

d. Overtime pay for work rendered in excess of eight (8) hours a day, equivalent to at least 25% of the regular wage rate on ordinary days and 30% on regular holidays, special days and rest days.

e. Night shift pay equivalent to 10% of the regular hourly rate for work rendered between 10:00 pm to 6:00 am of the following day.

f. Five (5) day service incentive leave for every year of service which benefits can be availed of during days of absence and, if not used, are convertible into its cash equivalent. A proportionate leave benefit per month may be derived by dividing 5 days by 12 months times the daily rate.

g. Paternity leave of seven (7) days with full pay. This leave shall be granted before, during or after childbirth or after spontaneous miscarriage by his legal spouse. The paternity leave with pay is granted for only four deliveries, including miscarriage.

h. 13th month pay which is 1/12 of the total basic salary earned within a calendar year.

6.4 Recommended Computation of Equivalent Monthly Rates
Using the applicable daily wage rate (ADR) and a factor representing the number of paid days in a year, the following procedures are recommended to facilitate computation of equivalent monthly rates (EMR).

For those who are required to work everyday including Sundays or rest days, special days and regular holidays:

EMR = (ADR x 391.5) / 12
where 391.5 is derived from:
302.0 - ordinary working days
18.0 - 9 regular holidays x 200%
2.6 - a regular holiday on last Sunday
of August x 200% + (30% of 200%)
66.3 - 51 rest days x 130%
2.6 - 2 special days x 130%
391.5 days considered paid in a year

For those who are considered paid on all days including unworked Sundays or rest days, special days and regular holidays:
EMR = (ADR x 365) / 12
where 365 days derived from:

302 - ordinary working days
2 - special days
51 - rest days
10 - regular holidays
365 days

For those who do not work and are not considered paid on Sundays/ rest days:
EMR = (ADR x 314.6) / 12
where 314.6 is derived from:
302.0 - ordinary working days
2.6 - 2 special days (if worked) x 130%
10.0- regular holidays
314.6 days considered paid in a year

For those who do not work and are not considered paid on Saturdays and Sundays or rest days
EMR = (ADR x 262.6) / 12
where 262.6 is derived from:

250.0 - ordinary working days
2.6 - 2 special days (if worked) x 130%
10.0 - regular holidays
262.6 days

By using the above indicated factors, the basic wage for the worked days and holiday pay for the 10 regular holidays are included in the monthly rates. Thirty percent (30%) rest day premium has been integrated in factor 391.5 for all the Sundays/rest days in a year includ-ing the last Sunday of August and in factors 314.6 and 262.6 for the two special days (November 1 and December 31) under Executive Order No. 203 of 1987.
Not included in the above formula is the premium pay due an employee whenever work is rendered on an ordinary working day proclaimed by the President as a special day (that is other than Nov. 1 and Dec. 31).

6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar per-sonnel are entitled to the mandatory benefits as listed below, although the same may not be included in the monthly cost distribution in the contracts, except the required premiums for their coverage:

a. Maternity benefit as provided under the SS Law;
b. Separation pay if the termination of employment is for authorized cause as provided by law and as enumerated below:

Half-Month Pay Per Year of Service, but in no case less than One Month Pay, if separation is due to:
1. Retrenchment or reduction of personnel effected by management to prevent serious losses;
2. Closure or cessation of operation of an establishment not due to serious losses or financial reverses;

3. Illness or disease not curable within a period of 6 months and continued employment is prohibited by law or prejudicial to the employee's health or that of co-employees; or

4. Lack of service assignment for a continuous period of 6 months.

One Month Pay Per Year of Service, if separation is due to:
1. Installation of labor-saving device, such as replacement of employees by equipment/machinery;
2. Redundancy, as when the position of the employee has been found to be surplusage or unnecessary in the operation of the agency;

3. Impossible reinstatement of the employee to his/her former position or to a substantially equivalent position for reasons not attributable to the fault of the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of op-erations of the establishment/employer, or the position to which the employee is to be reinstated no longer exists and there is no substan-tially equivalent position to which he/she can be assigned.

c. Cash income benefits under the State Insurance Fund in case of work-related sickness or other contingencies.
d. Retirement pay granted by R. A. 7641 to any security guard/personnel who retires under an applicable employer plan or policy.

For this purpose, the security service contractor shall create or put up a trust fund for retirement benefit. The Trust Fund Agreement shall be executed by and between the trustor and trustee in favor of the employee-beneficiary for payment of re-tirement benefit in accordance with R. A. 5487 and R. A. 7641.

The Fund shall be administered and maintained by a trust company, bank, in-vestment house, pre-need company or corporation duly authorized to perform trust function exclusively for collective investment or re-investment of certain money received in its capacity as trustee, or similar arrangement as may be agreed upon in ac-cordance with law.

As such, any payment for retirement benefits collected in advance by the contractor from the principal/s shall be deposited by the contractor/trustor to the trustee in favor of the security guard as benefit upon retirement or when his/her employment is terminated due to authorized causes.

e. Other benefits granted by law, individual or collective agreement or company policy or practice.

Sec. 7. Deductions from salary, - No deduction shall be made from the salary of the security guards/personnel, except for:
a. SSS contribution
b. EC contribution
c. HDMF contribution
d. Philhealth contribution
e. Withholding tax from income, provided a proper withholding tax receipt is issued to the employee before the filing of income tax return every year
f. Union dues, if applicable
g. Other deductions authorized by
Sec. 8. Liability and responsibilities of contractors and clients/principals. -
8.1 Joint and several liability. - When the security service contractor fails to pay the wages of its security guards/personnel, the principal shall be jointly and severally liable with the security service contractor to the extent of the work performed by such em-ployees under the contract, in the same manner and extent that the principal is liable to its direct employees.
If there are wage increases or adjustments after the execution of the service contract, the prescribed increases in the wage rates of guards shall be borne by the principal and the service contract shall be deemed amended accordingly. In the event that the principal fails to pay the prescribed increases, the security service contractor shall be jointly and severally liable with the principal.

The security guards' contractual relationship is with their employer, the security ser-vice contractor. Thus, their immediate recourse for payment of wage increase before litigation is with their direct employer, the security service contractor. In order for the security service contractor to comply with the new rates, the consideration paid by the principal for the security guards' wages has to be adjusted in conformity with the mandated wage increase.

In case of finding of violations on wages and other labor standards due the security guards, the DOLE Regional Director shall serve summons to both the security service con-tractor and the principal to determine the extent of liability of the parties.

8.2 Solidary liability. - For purposes of immediate relief, the principal shall be deemed as the direct employer of the security guard/personnel in any of the following cases, and therefore shall be solidarily liable for whatever monetary claims the security guard/personnel may have against his employer:

a. When the security service contractor is found to be engaged in labor-only contract-ing; contracting out of work which will either displace its employees or reduce their regular work hours or any other prohibited activity;
b. When the security service contractor is declared guilty of unfair labor practice, i.e., contracting out of a job, work or service being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization; or

c. When a violation of the relevant provisions of the Labor Code has been established by the Regional Director in the exercise of his/her enforcement powers.

The principal shall also be deemed solidarily liable with the security service contractor to the extent of accrued claims and benefits that the latter may owe to its security guards/personnel in the following instances:

a. When the license or business permit of the security service contractor is cancelled, revoked or not renewed by the competent authority, or
b. When the contract between the principal and the security service contractor is preterminated for reasons not attributable to the fault of the latter.

8.3. Responsibilities and Obligations of Security Service Contractors and Principals in the Execution of Service Contracts. - The service contracts or agreements between a security service contractor and its principal/s shall ensure compliance with the minimum wage and other labor standards under the laws, including the mandatory coverage by the SSS, EC, Philhealth and HDMF.
Government agencies or instrumentalities engaging security services from private security agencies shall likewise observe compliance with all labor laws and shall require the security service contractor to submit, among others requirements and as part of their bid, an under-taking to pay their workers the above benefits.

8.4. Keeping of records. - The principals as indirect employers shall keep and maintain their own separate records or files on the assignment of security guards in their premises during the period of the service contract, which shall be open for inspection and verification by this Department. The security agency, however, as the direct employer shall observe the rule on general record keeping under the Labor Code, as amended.

Sec. 9. Right to security of tenure and due process. -
9.1 Security guards and similar personnel who have become regular employees shall enjoy security of tenure in their employment as provided by law. Their services can only be terminated for just or authorized causes after due process.
Termination for a just cause or causes as stated in Art. 281 of the Labor Code does not entitle the security guard/personnel to separation pay, unless otherwise provided in the em-ployer policy or individual contract or collective agreement.

9.2 Notice of Termination. - In case of termination of employment due to authorized causes provided in Art. 283 and 284 of the Labor Code and in the succeeding subsection, the employer shall serve a written notice on the security guard/personnel and the DOLE at least one (1) month before the intended date thereof.

9.3 Reserved Status. - A security guard or similar personnel may be placed in a workpool or on reserved status due to lack of service assignments after expiration or termination of the service contract with the principal where he/she is assigned, or due to the temporary suspension of agency operations.

No security guard or personnel can be placed in a workpool or on reserved status in any of the following situations: (a) after expiration of a service contract if there are other principals where he/she can be assigned; (b) as a measure to constructively dismiss the security guard; and (c) as an act of retaliation for filing complaints against the employer on violations of labor laws, among others.

If, after a period of 6 months, the security agency/employer cannot provide work or give an assignment to the reserved security guard, the latter can be dismissed from service and shall be entitled to separation pay as described in subsection 5.6.

Security guards on reserved status who accept employment in other security agencies or employers before the end of the above six-month period may not be given separation pay.

9.4. Preventive suspension. - Subject to the constitutional rights of the workers to security of tenure and the right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Art. 282 of the Labor Code, a security guard/personnel may be preventively suspended if his continued employment poses a serious and imminent threat to life or property of the employer, its principal or the guard's co-workers.

No preventive suspension shall last longer than thirty (30) days. The security agency shall thereafter reinstate the security guard/personnel in his/her former position or it may extend the period of suspension, provided that during the period of extension, the agency pays the wages and other benefits due the guard/personnel.

The employer shall designate a day, time and place within the period of preventive suspension, with notice to the employee, to hold a fact-finding investigation thus enabling the suspended employee to be heard and assisted by a counsel or representative, if he/she so desires, of the charge against him/her and thereby be exonerated; or, upon the employee's failure to vindicate himself/herself, to find the employee guilty and thereby, to terminate his/her employment. Such termination, however, shall not prejudice the right of the employee to ques-tion the severance of relationship in the appropriate forum.

The above procedure shall likewise be observed by the employer/agency in case the employment is terminated due to any of the just causes.

9.5. Report of dismissal, termination or retirement. - The security service contractor shall submit a monthly report of all dismissals or termination, including retirement, effected during the month to the DOLE Regional Office having jurisdiction over its main or branch office using the prescribed form and indicating all information as required by DOLE for policy and statistical purposes.

Sec. 10. Right to self-organization and collective bargaining. -
The security guards and other personnel employed by the security service contractor shall have the right to form, join or assist in the formation of a labor organization of their own choosing for purposes of collective bargaining and to engage in concerted activities which are not contrary to law including the right to strike.

Sec. 11. Penal provision. - Violation of any of the provisions of this Guidelines which are declared unlawful or punishable by law shall be punished accordingly.

Sec. 12. Effect on existing issuances and agreements. -

This issuance shall serve as a guide for the DOLE and its agencies in the administration and enforcement of applicable labor and social legislations and their implementing regulations.

Nothing herein shall be construed to authorize diminution or reduction of benefits being enjoyed by the security guards and similar personnel at the time of issuance hereof.

This Guidelines supersedes Department Order No. 40 s. 1994 and other existing orders which are inconsistent hereto and shall take effect immediately.


Manila, Philippines, December 18, 2001.



PATRICIA A. STO. TOMAS
Secretary

REPUBLIC ACT 5487, AS AMENDED OTHERWISE KNOWN AS THE PRIVATE SECURITY AGENCY LAW

REPUBLIC ACT No. 5487

AN ACT TO REGULATE THE ORGANIZATION AND OPERATION OF PRIVATE DETECTIVE, WATCHMEN OR SECURITY GUARDS AGENCIES.
(Rep. Act No. 5487, as amended by Presidential Decree No. 11.)

Section 1. Short Title of Act. This Act shall be known as "The Private Security Agency Law."

Section 2. Scope of this Act. The organization, operation, business and activities of private detectives, watchmen or security guards agencies shall be governed by the provisions of this Act.

Section 3. Definition of Terms. (a) Person. As used in this Act, person shall include not only natural persons but also juridical persons such as corporation, partnership, company or association duly registered with the Securities and Exchange Commission and/or the Bureau of Commerce. (b) Private Detective Agency. A private detective agency is any person, who, for hire or reward or on commission, conducts or carries on or holds himself or itself out as conducting or carrying on a detective agency, or detective service. (c) Private Detective. A private detective is any person who is not a member of a regular police agency of the Armed Forces of the Philippines who does detective work for hire, reward, or commission. (d) Watchman or Security Guard, Watchman or Security Guard Agency. Any person who offers or renders personal service to watch or secure either residential or business establishment, or both, or any building, compound, or area including but not limited to logging concessions, agricultural, mining or pasture lands for hire or compensation, or as an employee thereof shall be known as watchman or security guard; and any person, association, partnership, or corporation, who recruits, trains, muster, furnishes, solicits individuals or business firms, private or government-owned or controlled corporations to engage his service or those of its watchmen, shall be known as Watchman of Security Guard Agency. (As amended by Pres. Decree No. 11, October 3, 1972.)

Section 4. Who May Organize a Security or Watchman Agency. Any Filipino citizen or a corporation, partnership, or association, with a minimum capital of five thousand pesos, one hundred per cent of which is owned and controlled by Filipino citizens may organize a security or watchman agency: Provided, That no person shall organize or have an interest in, more than one such agency except those which are already existing at the promulgation of this Decree: Provided, further, That the operator or manager of said agency must be at least 25 years of age, a college graduate and/or a commissioned officer in the inactive service of the Armed Forces of the Philippines; of good moral character; having no previous record of any conviction of any crime or offense involving moral turpitude and not suffering from any of the following disqualifications:

(1) Having been dishonorably discharged or separated from the Armed Forces of the Philippines;

(2) Being a mental incompetent;

(3) Being addicted to the use of narcotic drug or drugs; and

(4) Being a habitual drunkard.1awphil.net

For purposes of this Act, elective or appointive government employees who may be called upon on account of the functions of their respective offices in the implementation and enforcement of the provisions of this Act and any person related to such government employees by affinity or consanguinity in the third civil degree shall not hold any interest, directly or indirectly in any security guard or watchman agency. (As amended by Pres. Decree No. 11.)

Section 5. Qualifications Required. No person shall be employed as security guard or watchman or private detective unless he is: (a) a Filipino citizen; (b) a high school graduate; (c) physically and mentally fit; (d) not less than 21 nor more than 50 years of age; (e) at least 5 feet and 4 inches in height; and (f) suffering none of the disqualifications provided for in the preceding section: Provided, That foreigners who are already employed as watchmen or security guards prior to the approval of this Act shall not be subject to the above-mentioned requirements: Provided, further, That veterans shall be given priority in employment as security guard, watchman or private detective: And provided, finally, That person convicted of any crime involving moral turpitude shall not be employed as security guard, watchman or private detective.

Section 6. License Necessary. No person shall engage in the business of, or act either as a private detective, or detective agency; and either engage in the occupation, calling or employment of watchman or in the business of watchman's agency without first having obtained the necessary permit from the Chief, Philippine Constabulary which permit as approved is prerequisite in obtaining a license or license certificate: Provided, That all existing private detective or watchman or security guard agencies shall have a period of one (1) year from the approval of this Act to secure the said license: Provided, further, That existing agencies, and any new agency which may hereafter apply for a license, certify under oath that their private detectives, watchmen or security guards, have received the appropriate training from either the Philippine Constabulary, the National Bureau of Investigation, any local police department, or any other public institution duly recognized by the government to conduct police training.

Section 7. Application for License. The application shall be made in writing and shall be filed with the Chief, Philippine Constabulary. It shall contain the full name of the applicant, his age, civil status, his residence, and location of business. If the applicant is a corporation, association or partnership, a copy of the certificate of registration with the Securities and Exchange Commission together with its by-laws and articles of incorporation, with the Bureau of Commerce.

Section 8. Fees to be Paid and Bonds. When all requisites for the issuance of the license have been complied with, the Chief of the Philippine Constabulary or his duly authorized representative shall issue a permit for the issuance of such license and register the same in his office, upon payment by the applicant of the fee in accordance with the following schedule:

(a) the sum of one hundred pesos per annum as national license;

(b) the sum of fifty pesos per annum as municipal license fee in any city where it may operate, the said fee to be payable to the city treasurer concerned;

(c) the sum of twenty-five pesos per annum as municipal license fee for any municipality where it may operate, the said fee to be payable to the municipal treasurer concerned;

(d) the private Detective and Watchman Agency shall in addition to the above pay a fixed Internal Revenue Tax of one hundred pesos per annum in lieu of percentage taxes;

(e) the individual private detective and/or watchman shall pay for Mayor's Permit, Health and/or Sanitary fee an amount not exceeding three pesos per annum and the agency shall pay the sum not exceeding ten pesos for the Mayor's Permit and Health and/or Sanitary fees; and

(f) the Chief of the Philippine Constabulary or his duly authorized representative shall issue an appointment over his signature and affix the seal of his office, to each license and for each such appointment, the sum of one peso shall be paid.1awphil.net

The application shall further be accompanied by a bond issued by any competent or reputable surety or fidelity or insurance company duly accredited by the office of the Insurance Commissioner in the sum of not less than five thousand pesos nor more than ten thousand pesos in the discretion of the Chief, Philippine Constabulary, which bond shall answer for any valid and legal claim against the agency by its clients or employees: Provided, That licenses issued in the province of an authorized representative of the Chief of Constabulary is subject to review by the Chief of Constabulary.

Any provision of this or other law to the contrary notwithstanding, the Chief of Constabulary may, at any time suspend or cancel the licenses of private watchman or security guard agency found violating any of the provisions of this Act or of the rules and regulations promulgated by the Chief of Constabulary pursuant thereto. (This paragraph was inserted by Sec. 3, Pres. Decree No. 11.)

Other provisions of Pres. Decree No. 11

Any person who commit any act in violation of Republic Act No. 5487 and of this Decree, and the implementing rules and regulations already promulgated which are not in conflict herewith, and those to be promulgated by the Chief of Constabulary pursuant hereto, shall, on conviction thereof, suffer imprisonment of from ten to fifteen years and a fine of not less than ten thousand pesos nor more than fifteen thousand pesos as a military court/tribunal or commission may direct.

The Chief of Constabulary shall promulgate the necessary rules and regulations to carry out the provisions of this Decree.

Section 9. Employees Need Not be Licensed. Every person operating, managing, directing or conducting a licensed private detective or watchmen agency shall also be considered licensed private detective, or watchman and no person shall be employed or used in a private detective work unless he be a licensed private detective or watchman: Provided, That nothing in this section shall be construed as requiring detective license for persons employed solely for clerical or manual work.

Section 10. Display of License. The license shall be displayed at all times in a conspicuous and suitable place in the agency office or headquarters of the agency and shall be exhibited at the request of any person whose jurisdiction is in relation with the business of the agency or the employees thereof, or of the Chief of the Philippine Constabulary or his duly authorized representative or any peace officer.

Section 11. Supervision of the Philippine Constabulary. Upon approval of this Act, the Philippine Constabulary shall exercise general supervision over the operation of all private detective and watchman or security guard agencies.

Section 12. Powers of City or Municipal Mayors in Cases of Emergency. In case of emergency or in times of disaster or calamities where the services of such agencies arise, the City or Municipal Mayor, as director of Civil Defense, may muster or incorporate the services of the agency nearest the area where such emergency, disaster or calamity arises and its duly licensed personnel to help maintain peace and order; and/or the prevention or apprehension of law violators and in the preservation of life and property. Deputized private detectives, watchmen or security guards shall take direct orders from the Chief of Police for the duration of the fire, inundation, earthquakes, riots or other emergencies.

Section 13. Issuance of Firearms. A watchman or security agency shall be entitled to posses firearms after having satisfactorily passed the requirements prescribed by the Chief, Philippine Constabulary pertinent to the possession of firearm of any caliber not higher than 45 caliber in a number not exceeding one firearm for every two watchmen or security guards in its employ: Provided, however, That a watchman or security agent shall be entitled to possess not more than one riot gun or shotgun in order to provide adequate security when circumstances so demand: Provided, further, That all the firearms mentioned herein shall be carried by the watchman or security guard only during his tour of duty in proper uniform within the compound of the establishment except when he escorts big amounts of cash or valuables in and out of said compound.

Section 14. Uniform. The uniform of watchman or security guard as well as those organized, maintained or under the employment of the government or any government-owned and/or controlled corporations, agencies or entities, shall be different from the uniform worn and prescribed for members of the Armed Forces of the Philippines, City and Municipal Police Force. The Chief, Philippine Constabulary, through his duly authorized representative shall prescribed the uniform or ornaments, equipment and paraphernalia to be worn by the security guards and watchmen throughout the Philippines.

Section 15. Compensation of Watchmen or Security Guards. Watchmen or security guards shall receive a salary not lower than that prescribed in the Minimum Wage Law.

Section 16. Limitations and Prohibitions. 1. On Membership: (a) No agency operating in the City of Manila and suburbs may employ more than 1,000 watchmen or security guards; (b) no agency operating in other cities and first class municipalities may employ more than 500 watchmen or security guards; (c) no agency operating in municipalities other than first class may employ more than 200 watchmen or security guards.

2. On Organization: No person, corporation, partnership or association may organize more than one agency in any one city or municipality.

3. On Service: No agency shall offer, render or accept its services to gambling dens or other illegal enterprises. The extent of the security service being provided by any security agency shall not go beyond the whole compound or property of the person or establishment requesting the security service except when they escort big amount of cash.

Section 17. Rules and Regulations by Chief, Philippine Constabulary. The Chief of the Philippine Constabulary, in consultation with the Philippine Association of Detective and Protective Agency Operators, Incorporated and subject to the provisions of existing laws, is hereby authorized to issue the rules and regulations necessary to carry out the purpose of this Act.

Section 18. Penal Provisions. Any violation of this Act or the rule or regulation issued hereunder shall be punished by suspension, or fine not exceeding P200.00 or cancellation of his or its licenses to operate, conduct, direct or manage a private detective, watchman or security guard agency and all its members in the discretion of the court together with the forfeiture of its bond filed with the Philippine Constabulary.

If the violation is committed by those persons mentioned under paragraph two, section four of this Act the penalty shall be imprisonment ranging from one to four years and fine ranging from one to four thousand pesos in the discretion of the court.

Section 19. Repealing Clause. All laws, rules, resolutions, municipal ordinances, regulations and administrative orders contrary or inconsistent with the provisions hereof are hereby repealed.

Section 20. Effectivity. This Act shall take effect upon its approval.

Approved, June 21, 1969.