__ March 2016

MAKATI DEVELOPMENT CORPORATION

1st Floor, Bonifacio Technology Center,
31st St. corner 2nd Ave.,
Taguig City

Attn: MR. DANTE M. ABANDO

President

Re: DOLE Department Order No. 174

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Gentlemen:

Upon the request of our client, Asiapro Multi-Purpose Cooperative,

(Asiapro) We write in response to your request for our opinion with respect to the
impact of the recently issued DOLE Department Order No. 174, series of 2017 (the
DO) with the owner-members deployed by Asiapro to Makati Development
Corporation (MDC).

At the outset, the DO was issued to supersede the former Department Order
No. 18-A and other regulations on contracting/subcontracting and to provide more
stringent rules with respect to contracting and subcontracting arrangements.

The DO prohibits labor-only contracting arrangements which is defined as an

arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job or work for a principal, and the elements under
Section 5 of the said DO are present.

Under Section 5 of the DO, there is labor-only contracting in the following

cases:

a) The contractor or subcontractor does not have substantial capital or the

contractor or subcontractor does not have investments in the form of
tools, equipment, machineries, supervision, work premises, among
others, and, the contractors or subcontractors employees recruited and
placed are performing activities which are performing activities which
are directly related to the main business operation of the principal

Or
 b) The contractor or subcontractor does not exercise the right of control
over the performance of the work of the employee.

The aforesaid DO likewise enumerates in Section 6 thereof other prohibited

forms of employment arrangements, thus:

a. When the principal farms our work to a Cabo;

b. Contracting out of job or work through an in-house agency;
c. Contracting out of a job or work through an in-house cooperative which
merely supplies workers to the principal;
d. Contracting out of a job or work by reason of a strike or lockout whether
actual or imminent;
e. 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;
f. Requiring the contractors/subcontractor/s employees to perform
functions which are currently being performed by the regular employees
of the principal;
g. Requiring the contractors/subcontractors employees 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 or contactor from liability as to payment of future claims; or
require the employees to become member of a cooperative;
h. Repeated hiring by the contractor/subcontractor of employees under an
employment contract of short duration;
i. Requiring employees under a contracting/subcontracting arrangement to
sign a contract fixing 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
j. Such other practices, schemes or employment arrangements designed to
circumvent the right of workers to security of tenure.

Notably, the said DO also raised the substantial capital requirement from
Php3,00,000.00 under old DO 18-A to Php5,000,000.00 under the current DO. If
there is a finding that the contractor or subcontractor is engaged in labor-only
contracting or prohibited activities as provided for above, then the principal, in this
case, MDC, may be considered as the direct employer of the owner-members
deployed by Asiapro to MDC.

Notwithstanding the foregoing notable requirements under the DO however,

please note that Asiapro is fully compliant with the DO and is not a labor-only
contractor, pursuant to its provisions. First, it has substantial capital. Financial
Statements of Asiapro as of 2015 would show that it reflected Asiapros total asset
of One Billion Five Hundred Fifteen Million Eight Hundred Seventeen Thousand
Eighty One Pesos (Php1,515,817,081) with net surplus of Fourteen Million Two
Hundred Forty Seven Thousand Seven Hundred Fifty Three Pesos (Php14,247,753)
for the year 2014, way above the Php5,000,000.00 requirement under the DO. It
likewise has substantial investment in the form of tools and equipment which it uses
when it is contracted by different principals. Furthermore, with respect to MDC, the
jobs which the owner-members of Asiapro are performing for MDC are not directly
related to the main business of MDC. Lastly, MDC does not exercise the right of
control over the owner-members deployed in MDC. It is Asiapro who dictates the
means to the end needed to be accomplished while MDC only provides Asiapro with
the aforesaid ends. Asiapro is registered with the Cooperative Development
Authority and has entered into a valid service agreement with MDC even under the
new DO.

Furthermore, as can be attested to by its transactions with MDC, the activities

of Asiapro does not fall under any of the prohibited acts under Section 6 of the DO.

Notably, the Supreme Court of the Philippines, the Court of Appeals, as well
as the National Labor Relations Commission have already decided in numerous
cases that Asiapro is not a labor-only contractor and is a legitimate job contractor.1
Thus, it is indubitable that Asiapro is a legitimate contractor. Even with the onset of
the new DO, Asiapro is still compliant with the same.

In sum, the issuance of the new DO should have little or no impact on

Asiapros relationship with MDC as Asiapro remains to be compliant with the newly
issued DO.

We trust that the foregoing is sufficient for your purposes. Should you have
questions or need clarification, please let us know.

Very truly yours,

GINO ANGELO P. BATALLONES

IGNACIO SAMUEL N. AOVER

For the Firm

1See Republic v. ASIAPRO (GR No. 172101, 23 November 2007), Ernesto S. Gementiza, et al. v. Social
Security System, et al. (GR SP No. 115221 27 April 2012), Asiapro Cooperative v. The Social Security
Commission and Social Security System (CA GR SP No. 115223, 30 April 2013), Alaska Milk
Corporation v. National Labor Relations Commission, et al. (CA GR SP No. 135845, 31 May 2016), Joel
Rosales, et al. v. Alaska Milk Corporation (NLRC LAC No. 08-002402-16, 6 February 2017), Bersalona
v. Alaska Milk Corporation, et al. (NLRC-LAC No. 08-002063, 9 December 2016), among others.
Copy furnished:

GARY QUEMADO
Asiapro Multi-Purpose Cooperative
#70 San Rafael St.,
Bo. Kapitolyo, Pasig City