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Philippines

Looking Ahead 2025: Philippines

1. Pending Bills on Freelance Workers' Rights: A Step Toward Fairer and Safer Work Conditions

Authors: Rashel Ann C. Pomoy and Honey Kyle Patrice A. Ledesma

 

On 20 August 2024, three key Senate bills—Senate Bill No. 2107,[1] Senate Bill No. 2006,[2] and Senate Bill No. 1998[3]—underwent Joint Committee Meetings and Hearings in the Philippine Senate. These bills aim to introduce significant reforms in the freelance work sector, enhancing protections for freelancers and setting clear guidelines for fair and secure working conditions. If passed, these measures could transform the landscape of freelance labour in the country, ensuring that freelance workers are afforded the same fundamental rights and protections as their full-time counterparts.

One of the main provisions of the bills mandates the execution of written contracts between freelancers and their clients. These contracts must clearly outline the services to be provided, compensation details, the duration of employment, and the grounds for breach of contract. This provision is intended to reduce misunderstandings and ensure transparency between both parties. By formalizing the work arrangement, these contracts will serve as a legal safeguard for freelancers, ensuring they are compensated fairly and in accordance with agreed terms.

A key feature of the proposed legislation is the requirement for an initial partial payment of at least 30% of the contract price upon signing the contract. This provision ensures that freelancers are not left in precarious financial positions when starting a project and provides them with a fair advance for their services.

Moreover, the bills mandate the payment of night shift differential and hazard pay for freelance workers who work during night time or in hazardous conditions. This reflects the growing recognition of the challenges that freelancers face, particularly those working in industries such as delivery, healthcare, and creative sectors, where the nature of the work can involve late hours or high risks.

The bills also take strong steps to prohibit several common unfair practices that freelancers often encounter. These include delayed payments, coercive reductions of agreed compensation, retaliation, and other exploitative actions by hiring parties. In doing so, the legislation aims to curb the power imbalance that often exists between freelancers and clients, ensuring that freelancers are not forced to accept unfavourable terms or face financial hardship due to non-payment or unjust deductions.

To ensure compliance with these new provisions, the bills include a range of penalties for violations. Clients or companies found guilty of breaching the terms of the contract, delaying payments, or engaging in any unfair practices will be penalized with fines ranging from PHP 50,000 to PHP 500,000. These financial penalties are intended to serve as a deterrent to prevent exploitative behaviour and encourage companies to honour their agreements with freelancers.

Beyond payment protections, these bills also seek to establish a comprehensive set of minimum rights for freelancers. These include:

Right to Just Compensation: Freelancers will be guaranteed fair pay for their services, in line with industry standards.

Right to Safe and Healthy Working Conditions: Freelancers, particularly those in physically demanding or hazardous fields, will have the right to work in conditions that prioritize their safety and well-being.

Right to Self-Organize and Collectively Bargain: Freelancers will be empowered to form unions or associations to advocate for better working conditions, negotiate higher pay, and address systemic issues within their industry.

Right to Education and Skills Training: The bills recognize the importance of continuous learning and provide freelancers with access to skills development programs to improve their expertise and enhance their marketability.

 

The bills lay out clear responsibilities for various government agencies. The Department of Labour and Employment (DOLE) will play a central role in enforcing compliance, investigating violations, and mediating disputes between freelancers and their clients. In addition, other agencies, such as the Department of Information and Communications Technology (DICT), TESDA, Bureau of Internal Revenue (BIR), and PhilHealth, will also be tasked with supporting the implementation of the law. These agencies will work together to monitor and safeguard the rights of freelancers, ensuring access to benefits such as health insurance, tax services, and social security.

The bills establish a robust mechanism for freelancers to file complaints regarding breaches of their contracts or violations of their rights. Freelancers can seek assistance from DOLE, which will investigate complaints, mediate disputes, and, where necessary, take enforcement actions. The bills also provide legal remedies, including civil and administrative actions, for aggrieved freelancers.

Furthermore, the proposed legislation mandates DOLE to conduct educational campaigns that inform freelancers of their rights and responsibilities under the law. These campaigns are intended to empower freelancers with the knowledge they need to protect themselves and advocate for better work conditions.

In addition to Senate Bill Nos. 2107, 2006, and 1998, House Bill No. 6718 also plays a crucial role in enhancing the rights and protection of freelancers in the Philippines. Filed on December 16, 2022, and approved by the House of Representatives on February 6, 2023, this bill seeks to address critical issues such as late or non-payment of fees for freelance services. It mandates that hiring parties execute written contracts with freelancers before work begins, ensuring clarity on compensation, benefits, employment duration, and breach of contract conditions. The bill also requires the payment of night shift differentials and hazard pay where applicable. Furthermore, it enumerates unlawful practices by employers, including retaliation and unjust termination, and imposes penalties for violations. Notably, House Bill No. 6718 also offers tax relief for freelancers, providing them with more accessible tax benefits under the National Internal Revenue Code and the Barangay Micro Business Enterprises (BMBEs) Act. The establishment of a special assistance desk at the Bureau of Internal Revenue (BIR) ensures that freelancers are properly supported in managing their tax obligations.

The legislative efforts embodied in Senate Bill Nos. 2107, 2006, 1998, and House Bill No. 6718[4] mark a crucial step in protecting the rights of freelancers in the Philippines. By establishing clear contractual obligations, payment protections, and minimum rights, these bills aim to create a more transparent and equitable freelance labour market. With provisions addressing fair compensation, safety, and access to benefits, the proposed pieces of legislation not only empower freelancers but also hold hiring parties accountable. As these bills continue to progress through the legislative process, they have the potential to transform freelance work into a more secure and respected sector, ensuring that freelancers are treated fairly and equitably across all industries.

2. Ruling on Employee Status in the Gig Economy: The Supreme Court's Decision in Borromeo vs. Lazada E-Services Philippines, Inc.

The case of Borromeo vs. Lazada E-Services Philippines, Inc. promulgated by the Philippine Supreme Court in April 2024 presents a significant development in the classification of workers in the gig economy in the Philippines. The Philippine Supreme Court revisited jurisprudence on employer-employee relationship, emphasizing the criteria for determining whether workers classified as independent contractors may actually be employees entitled to the full range of labour protections.

The petitioners had been working as delivery riders for Lazada, an online retail platform, under two separate third-party contractors. Both petitioners provided pick-up and delivery services for Lazada from 2015 to 2016. However, after the expiration of their contracts with the manpower agencies, they entered into Independent Contractor Agreements with Lazada itself. Despite the title of “independent contractors” in their agreements, the petitioners argued that they were, in fact, employees of Lazada and were wrongfully dismissed.

The Supreme Court ruled that the petitioners were, in fact, employees of Lazada. The Court emphasized several key points in its ruling.

First, it explained that an employer-employee relationship exists when four elements are present: (1) the employer controls the manner and means of work, (2) the worker is paid for services rendered, (3) the employer has the power to dismiss the worker, and (4) the worker performs services that are integral to the employer’s business. In this case, the Court found all four elements to be present. According to the Court, Lazada exercised significant control over the petitioners’ work, including assigning tasks, monitoring their performance, and requiring real-time updates on deliveries. The petitioners were paid a fixed daily wage, which indicated an employment relationship rather than a business-to-business arrangement. Lazada also retained the right to terminate the petitioners’ contracts at its discretion, further reinforcing the employer-employee relationship. Moreover, the Court noted that the petitioners’ delivery services were central to Lazada’s business model, making their work essential to the company’s operations.

Second, the Court applied the “economic reality test,” which examines whether the worker is economically dependent on the employer. The Court found that the petitioners had no control over their own profits or losses, as they were paid a fixed daily rate and had no opportunity to earn more based on their performance. Additionally, the petitioners had no freedom to work for other companies during their engagement with the respondent, highlighting their economic dependence on the respondent for their livelihood.

The ruling in Borromeo vs. Lazada reinforces several important principles regarding worker classification in the gig economy. First, it reaffirms the idea that the mere use of labels like “independent contractor” does not determine the true nature of the relationship between the worker and the company. The Supreme Court focused on the actual work arrangement and the degree of control exercised by the company in determining the existence of an employer-employee relationship. Second, the decision aligns with previous rulings, particularly in Ditiangkin, where the Court emphasized the need to examine the “economic reality” of the relationship. In this case, the petitioners’ dependence on Lazada for income, combined with their lack of control over profits and losses, weighed heavily in favour of classifying them as employees. Lastly, the ruling has significant implications for gig economy workers, particularly those in delivery services, where companies often classify workers as independent contractors to avoid labour law obligations. This decision underscores the importance of looking beyond contractual terms to assess the true nature of the working relationship and ensure that workers are afforded the benefits and protections they are entitled to under Philippine labour laws.

[1] Filed on 3 May 2023 by Go, Christopher Lawrence T.

[2] Filed on 14 March  2023 by Ejercito, Joseph Victor G.

[3] Filed on 14 March 2023 by Lapid, Manuel “Lito” M.

[4] Filed on 16 December 2022 by De Venecia, Christopher V.P., et. al.

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