DOMINGUEZ, Jeah Maureen P.

Labor Paper Outline

Labor II Atty. Azucena
May 03, 2017

Labor Service and Workers Cooperatives:

The Misuse of an Instrument of Inclusive Growth for the
Philippine Economy

I. Introduction
a. What is a Workers Cooperative?
i. According to the Cooperative Code of the Philippines, a Workers
Cooperative is one organized by workers, including the self-
employed, who are at the same time the members and owners of
the enterprise. Its principal purpose is to provide employment and
business opportunities to its members and manage it in accordance
with cooperative principles.1
b. Structure of Labor Cooperatives
i. Through a workers cooperative, the members are enabled to render
work or labor as the product, service or business thereof, and in
return, not only do these individual members earn from their own
labor, but also benefit from the labor or work of the other
members.2
c. Governing Laws
i. Cooperative Code of the Philippines (R.A. No. 6938)
1. Amended by The Philippine Cooperative Code of 2008
(R.A. No. 9250)
ii. The Labor Code of the Philippines (B.P. 442)
iii. Issuances of the Department of Labor
1. Department Order No. 18-A, Series of 2011: Rules
Implementing Articles 106 109 of the Labor Code, As
Amended
a. Superseded by Department Order No. 174, Series of
2017
iv. Issuances of the Cooperative Development Authority

1 An Act Amending the Cooperative Code of the Philippines [PHILIPPINE

COOPERATIVE CODE], Republic Act No. 9250, art. 23 (t) (2008).
2 Bernardo M. Villegas, The increasing role of workers cooperatives, PHIL. DAILY
INQ., Nov. 25, 2011, available at http://business.inquirer.net/31985/the-increasing-
role-of-workers-cooperatives (last accessed Apr. 30, 2017).
 1. Memorandum Circular No. 2016-03: Guidelines in the
Implementation of Capital Build-Up and Savings
Mobilization for Labor Service Cooperatives

II. History
a. Workers cooperatives have been in existence since the 1930s,
initially formed by hat makers, bakers and garments workers.3
b. The Intention of the Law
i. Workers Cooperatives are clearly contemplated in the 1987
Constitution of the Philippines, which recognizes the rights of
workers to form organizations, associations or cooperatives for their
common benefit.4
ii. The Labor Code does not recognize such evolving relationships.
1. In the already antiquated Labor Code, there is an almost
exclusive focus on the relationships between employers and
employees, failing to take into account situations in which
entities and institutions enter into commercial agreements
with laborers who are self-employed workers. 5

III. Current Practices

a. State of Labor Service and Workers Cooperatives in the Philippines
i. More than 44.1% of establishments nationwide engage workers
through contractors and subcontractors.6
ii. Nearly 31.2%of those who are engaged in contracting or
subcontracting do so for their janitorial and security needs. The
rest are spread across construction work and other labor service
providers.7
b. Misuse: Workers Cooperatives as Labor-Only Contracting
i. Labor-Only Contracting
1. Labor-only contracting exists where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,

3 Id.
4 PHIL. CONST. art. XIII, 5.
5 A Decree instituting a Labor Code thereby Revising and Consolidating Labor and
Social Laws to Afford Protection to Labor, Promote Employment and Human
Resources Development and insure Industrial Peace based on Social Justice [LABOR
CODE], Presidential Decree No. 442.
6 Nicanor V. Bon, Compliance of Labor Service Contractors to Labor Laws and
Regulations ,avaliable at http://www.cda.gov.ph/images/Downloads/Other-
Information/LSC_Cluster_Congress/04-Compliance-of-Labor-Service.pdf (last
accessed May 1, 2017).
7 Id.
 equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him.8
2. For an organization to have substantial capital, an amount
of Five Million Pesos (Php 5,000,000.00) must comprise its
paid-up capital stocks/shares in the case of corporations.9
ii. Diamond Farms Inc. v DARBMUPCO
1. In the case at hand, the cooperative, although owning the
land they worked on, was still held to be a labor-only
contractor.10
2. That DARBMUPCO owns the awarded plantation where
the respondent-contractors and respondent-workers were
working is immaterial. This does not change the situation
of the parties. As correctly found by the CA, DFI, as the
principal, hired the respondent-contractors and the latter,
in turn, engaged the services of the respondent-
workers.11
iii. The on-going Tanduay Workers Case
1. One of the Philippines biggest rum distributors, Tanduay
Distillers, is facing a law suit as its contractual workers,
whove worked for more or less six (6) years with the rum-
giant, are calling for regularization. Some of these workers
come from Cooperatives, which they are now claiming to
be labor-only contractors.12

IV. Doing Good: Workers Cooperatives in the Philippines

a. Although the concept of Labor Service Cooperatives is young and
still emerging the Philippines, there do exist several Workers

8 Id. art. 106, (1974).

9 Department of Labor and Employment, Department Order 174, Series of 2017
[DO No. 174] (Mar. 16, 2017]
10 Diamond Farms Inc. v. DARBMUPCO, G.R. No. 173254-55 & 173263, January 13,
2016.
11 Id.
12 Maricar Cinco, DOLE finds labor violations in Tanduay workers case, PHIL. DAILY
INQ., Jun. 1, 2015, available at http://newsinfo.inquirer.net/695096/dole-finds-labor-
violations-in-tanduay-workers-case#ixzz4fkDiAhS0 (last accessed Apr. 30, 2017).
 Cooperatives that are paving the way and inspiring others to do the
same.
i. Kaakbay Entre Workers Cooperative
1. Entre-Worker Cooperative (EWC) is an autonomous
association of persons who voluntarily pool their resources
and work skills in order to own and operate a stable
enterprise which will enable them to provide for
themselves benefits from secure employment, generate
new jobs and, together with their families, become lifelong
partners in fostering their human, economic and social
development.13
ii. Asiapro Cooperative
1. Asiapro Cooperative has pioneered the concept of self-
employed worker-cooperative by modifying and
eliminating the disadvantages brought about by the
current status of employer-employee relationship. It
introduces the concept of transforming from "employees"
to becoming "entrepreneurs," or more appropriately, what
they call as "coopreneurs," having bonded together in a
cooperative enterprise.14

V. Practices Abroad
a. The Mondragon Cooperative of Spain
b. Emerging Global Perspective in Job Contracting
i. Now, more than ever, the challenges for cooperatives in
general, and for labor service cooperatives in particular, are
greater in number and magnitude. Unless we hold hands
together and fight for the interest and survival of cooperatives,
we will wake up one day to find that cooperatives are even more
decimated and marginalized by rent-seeking capitalists. Let our
collective voices be heard far and wide, until our aims are
achieved and our gains preserved. If we dont help ourselves, no
one else will.15

13 Cielo A. Bueno, Kaakbay Entre-worker Cooperative ,avaliable at

http://www.cda.gov.ph/images/Downloads/Other-
Information/LSC_Cluster_Congress/02-Kakbay-Entreworkers-Coop.pdf (last accessed
Apr. 30, 2017).
14Asiapro Cooperative: An ingenious development in Philippine labor and
management, PHILSTAR, Jan. 22, 2007, available at
http://www.philstar.com/business-usual/381215/asiapro-cooperative-ingenious-
development-philippine-labor-and-management (last accessed Apr. 30, 2017).
VI. Moving Forward
a. Potential of Inclusive Growth
b. Proposed Amendments to the Labor Code
i. In view of the growing demand for and supply of this form of
contractual relationship, it is necessary to amend certain
provisions of the Labor Code to effectively include, recognize and
protect the rights of these self-employed laborers who rightfully
belong to a workers cooperative.

VII. Conclusion

15 Ernie Cecilia, Emerging Global Perspective in Job Contracting, available at

http://www.cda.gov.ph/images/Downloads/Other-
Information/LSC_Cluster_Congress/03-%20Emerging-Global-Perspective.pdf (last
accessed Apr. 30, 2017).