Text of the provision
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, 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.
Labor Code of the Philippines, Presidential Decree No. 442, as amended. Reproduced in full from the official enactment and verified against the LawPhil and ChanRobles renderings.
What this article means
Where an employer contracts out work, the contractor’s and subcontractor’s employees must be paid according to this Code, and if the contractor fails to pay them the employer is jointly and severally liable to the extent of the work performed. The Secretary of Labor and Employment may restrict or prohibit contracting-out and distinguish labor-only contracting from job contracting. “Labor-only” contracting exists where the person supplying workers has no substantial capital or investment in tools, equipment, machinery or work premises and the workers perform activities directly related to the principal business — in which case that person is merely an agent of the employer, who is responsible to the workers as if he had hired them directly.
Questions about this provision
- Am I still an employee of the client company even if my paycheck comes from the manpower agency?
- Can I go after the client company if the manpower agency doesn't pay my wages?
- Is it a red flag that my staffing agency has no equipment or capital of its own?
- Is the client company's liability for my unpaid wages limited to the project I worked on, or does it cover everything I'm owed?
Related provisions
- Article 105 — Direct Payment Of Wages.
- Article 107 — Indirect Employer.
A note on article numbers. The articles of the Labor Code have been administratively renumbered, so the same provision is often cited under a different number. Supreme Court decisions write both, in the form “Article 297 [282]” — the new number first, the original in brackets. The text on this page is published under its original number, which is the numbering both source texts use. When citing, check which numbering your source follows.
Cases interpreting this article
- Authorities on this article will be added here as each is verified against primary sources.